Thursday, April 24, 2008

Commercial Banks Heading for Huge Derivatives Losses- Credit Crisis Turning into Credit Armageddon

Commercial Banks Heading for Huge Derivatives Losses- Credit Crisis Turning into Credit Armageddon

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While most investors are focused on the latest stock market rally, hidden from view is a monumental change that few recognize and fewer understand: Unprecedented amounts of old debts are coming due in America, and many are not getting refinanced.

Even worse, borrowers are going into default, lenders are taking huge losses, and outstanding loans are turning to dust.

The numbers are large; the government's response is equally massive. So before you look at one more stock quote or any other news item, I think it behooves you to understand what this means and what to do about it ...

New Evidence of A Credit Crack-Up

Until recently, economists have had only anecdotal evidence of credit troubles.

They knew that individual banks were taking losses. They knew that many banks were tightening their lending standards. And they realized that there were hiccups in the credit markets.

So they called it the "credit crunch" — essentially a slowdown in the pace of new credit growth.

But we didn't buy that. Earlier this year, we warned that America's credit woes involved much more than just a slowdown. We wrote that it was actually a credit crack-up — an outright contraction of credit the likes of which had never been witnessed in our lifetime.

Wall Street scoffed. No one had seen anything like this happen before, and almost everyone assumed that it would not happen now.

They were wrong.

Indeed, three new official reports are now telling us, point blank, that the credit crack-up is already beginning!

First, the Federal Reserve is reporting a big contraction in short-term debts.

The specifics: Based on its Flow of Funds Report (pdf page 18), we can clearly see that ...

  • Just in the third quarter of last year, "open market paper" (mostly short-term commercial loans) was slashed at the annual rate of $682 billion ...
  • In the fourth quarter, it shrunk again — at the rate of $337 billion per year, and ...
  • This shrinkage doesn't even begin to reflect the impact of the Bear Stearns failure or the huge additional bank losses announced so far this year.

I repeat: This is not a mere "slowdown" in new lending, which would be relatively routine. This is an actual reduction in the short-term loans outstanding, which is anything but routine ... which implies a rupture in the nation's credit spigots ... and which could deliver a new shock to the U.S. economy.

If this represented a planned and voluntary effort by lenders to begin trimming America's debt excesses, it might actually be a good thing.

But that's not the case here, not even close. Rather, this debt reduction is almost exclusively forced on lenders by the pressure of events — the plunging value of mortgages, the surging defaults by debtors, and the huge losses that have caught both banks and regulators off guard.

Second, the Comptroller of the Currency (OCC) is reporting havoc in the derivatives market.

Derivatives are bets and debts placed by banks and others.

In recent decades, derivatives have grown far beyond any semblance of reason. But in its latest report , the OCC reveals that in the fourth quarter of 2007 ...

  • For the first time in history, the notional value of derivatives held by U.S. commercial banks plunged dramatically — by $8 trillion ...
  • For the first time in history, U.S. banks suffered a massive overall loss on their derivatives — $9.97 billion, and, again ...
  • These numbers do not yet reflect this year's disasters at Bear Sterns and other institutions.

The OCC's chart below illustrates the magnitude and drama of the decline:

The chart shows that, until the third quarter of last year, U.S. commercial banks had been making consistent profits from their derivatives quarter after quarter.

Their total revenue from these and related transactions (red line) never dipped into negative territory ... rarely suffered a significant decline ... and was even making brand new highs through the first half of 2007.

Then, suddenly, in the fourth quarter of last year, we witnessed a landmark game-changing event: For the first time ever, U.S. commercial banks lost big money in derivatives in the aggregate ( as you can plainly see by the sharp nosedive of the red line).

Again, if this were part of a planned retreat by the banks to more prudent trading approaches, it would be a positive. But it's anything but!

Indeed, the OCC specifically states in its report that the sudden and unusual reduction in derivatives was due entirely to the turmoil in the credit markets.

And ironically, nearly all of that turmoil was concentrated in "credit swaps" (blue line in the chart) — the one sector that was designed to protect investors from this precise situation.

These credit swaps were supposed to act as insurance policies that big banks and others bought to help cover their risk in the event of defaults and failures. But they're not working out as planned: Just in the fourth quarter, U.S. banks had a net loss (after all profitable trades) of $11.8 billion on credit swaps alone, according to the OCC.

Those losses helped wipe out all the profits they made in other derivatives, leaving a net overall loss of $9.97 billion.

Third, the International Monetary Fund (IMF) predicts that this crisis is barely ONE-THIRD over!

In its Global Financial Stability Report(see Executive Summary ), the IMF predicts that the total losses from the subprime and related credit crises could reach $945 billion, or more than triple the already-huge losses that have been announced so far.

The IMF further warns that ...

  • "There has been a collective failure to appreciate the extent of the leverage taken on by a wide range of institutions — including banks, monoline insurers, government-sponsored entities, and hedge funds — and the associated risks of a disorderly unwinding." Now, both the OCC and the Fed reports confirm that this "disorderly unwinding" is already beginning.
  • "The transfer of risks off bank balance sheets was overestimated. As risks have materialized, this has placed enormous pressures back on the balance sheets of banks." Now, the OCC report confirms that "the transfer of risk" (with credit swaps) has often failed.
  • "Notwithstanding unprecedented intervention by major central banks, financial markets remain under considerable strain, now compounded by a more worrisome macroeconomic environment, weakly capitalized institutions, and broad-based deleveraging." This is precisely what we have been warning you about. Now, it's happening!

Looking ahead, the IMF also warns about...

  • "Deep-seated balance-sheet fragilities and weak capital bases, which mean the effects [of the crisis] are likely to be broader, deeper and more protracted."
  • "A serious funding and confidence crisis that threatens to continue for a significant period."

The U.S. Government's Response

You've seen what the Fed has already done — six rate cuts since August of last year ... unprecedented broker bailouts ... and massive new amounts of liquidity pumped into the banking system.

You've seen where a lot of that money has gone — into foreign currencies, gold and oil.

And you've seen the dramatic market surges which that money can generate. Case in point: The latest jump in crude oil to $117 per barrel.

Now, get ready for more of the same:

  • More rate cuts, with the next expected as soon as April 30 ...
  • More Fed bailouts ...
  • Even wilder money printing, and ...
  • Larger surges in foreign currencies and commodities, despite intermediate setbacks.

But also start preparing for the day when the credit crack-up temporarily overwhelms the Fed, driving the U.S. economy into a far deeper recession than most people expect.

The Bottom Line for You Right Now

The three official reports support several related conclusions:

First, whether the stock market goes up or down in the near term, this crisis is far from over — and it's likely to get a lot worse.

Bottom line:It's far too soon to waver from a path of safety.

Second, credit is already scarcer and is probably going to be even harder to get as this crisis progresses.

Bottom line: If you're looking forward to a future day when you can buy properties at bargain prices, don't count on doing so with a lot of borrowed money. Instead, be prepared to put up substantial amounts of cash.

Third,some banks won't survive this crisis.

Bottom line: Be sure to keep your bank accounts — including principal, accrued interest and checks outstanding — under the FDIC's $100,000 insurance limit. (Amounts that run above the limit could be at risk.) Plus, for maximum safety, use U.S. Treasury bills or money market funds invested exclusively in short-term Treasuries.

Fourth,for protection and profit from a falling dollar, invest in the strongest foreign currencies plus other assets that naturally rise with the falling dollar.

Crisis in Food Prices Threatens Worldwide Starvation: Is it Genocide?

Crisis in Food Prices Threatens Worldwide Starvation: Is it Genocide?

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Rising worldwide food prices are resulting in shortages, riots and protests, promises by governments to expand food aid, expressions of concern by international bodies like the World Bank, and stress on household budgets even in developed countries like the U.S. Did this just “happen” or is there a plan?

Plenty of commentators think they have it figured out and blame such factors as greater demand for high-end protein menus by the increasingly upscale populations of China and India , weather factors relating to global warming such as drought in Australia , and the diversion of animal feed crops such as corn and soybeans to ethanol production. L.H. Teslik of the Council on Foreign Relations speaks of “bubbling inflation and rising oil prices.”

There is also the question of whether a role is being played by commodity speculation. The idea is that faced with the global financial crisis and the collapse of mortgage-based securities, investors are flocking to resource-based tangibles as a hedge against recession and the decline of the U.S. dollar. Hence gold is at record levels with oil keeping the same pace. How else to explain, for instance, the doubling of the price of rice in Asian markets in less than two months? Standard Chartered Bank food commodities analyst Abah Ofon says, “Fund money flowing into agriculture has boosted prices. It’s fashionable. This is the year of agricultural commodities.”

But the idea that speculation is at fault is disputed by no less than New York Times columnist Paul Krugman, one of the world’s leading monetary economists, who writes:

“My problem with the speculative stories is that they all depend on something that holds production — or at least potential production — off the market. The key point is that the spot price equalizes the demand and supply of a commodity; speculation can drive up the futures price, but the spot price will only follow if the higher futures prices somehow reduce the quantity available for final consumers. The usual channel for this is an increase in inventories, as investors hoard the stuff in expectation of a higher price down the road. If this doesn’t happen — if the spot price doesn’t follow the futures price — then futures will presumably come down, as it turns out that buying futures produces losses.”

Solid data in this area is hard to come by. Probably the chief common denominator among commentators, especially those advocating a supply and demand or global warming perspective, is that they have so little solid information. Thus it is refreshing to find a study that contains meaningful statistics such as one appearing on the Executive Intelligence Report website entitled, “To Defeat Famine: Kill the WTO” by Marcia Merry Baker. One particularly telling item is that after global food supplies were boosted through the Green Revolution and related programs lasting into the 1970s, more recently, world food production has actually declined.

Baker writes, “World per-capita output of grains of all kinds (rice, wheat, corn, and others) has been falling for twenty years. Whereas in 1986 it was 338 kilograms per person, it went down to 303 by 2006. This decline in no way has been made up for by increasing amounts of other staple foodstuffs—tubers, legumes, or oil crops, which likewise are in insufficient supply.”

Further, “In twelve of the last twenty years, less grain has been produced than utilized that year (for all purposes—direct human consumption, livestock feed, industrial and energy uses, and reserves). Accordingly, the amount of carryover stocks of grain from year to year has been declining to extreme danger levels. The diversion of food crops into biofuels is the nail in the coffin. The latest estimate is that worldwide stockpiles of cereal crops of all kinds are expected to fall to a twenty-five-year low of 405 million tons in 2008. That is down twenty-one million tons, or five percent, from their already reduced level in 2007.”

Further, an increasing proportion of food crops is being produced by large multinational corporations whose power and reach has ballooned under the World Trade Organization and spin-offs like NAFTA even as small family-run farms have lost the protection of parity pricing and been priced out of business. But the data suggest that a) the output of agribusiness has failed to match the older, more diversified systems of farming; and b) as nations lose their ability to feed themselves, agricultural pricing becomes more subject to monopolization.

The loss of agricultural self-sufficiency has been exacerbated in much of the developing world by International Monetary Fund lending policies. Under the “ Washington consensus,” entire nations have been forced to give up agricultural self-sufficiency and convert farmland to export commodities while displaced rural populations migrate to the slums of large cities such as Lagos , Nigeria . Today those populations are the ones most grievously threatened with starvation.

Then what is really going on?

First of all, let’s get rid of the idea that we are seeing “impersonal market forces” at work. “Supply and demand” is not a “law”—it’s a policy. If a seller has an article in demand it’s a matter of choice whether he charges a premium when he offers it for sale. If he’s a decent, honest soul, maybe he won’t necessarily charge all the market will bear, particularly if the item is a necessity of life, such as food. Or maybe there will be a responsible public authority around that will prohibit price gouging or else subsidize the purchaser, as often happens in credit markets. Of course public spirited action like this is itself a declining commodity in a world afflicted with the kind of market fundamentalism and rampant privatization that has been the rage since the 1980s Reagan Revolution.

Second, let’s ask the question which any competent investigator should pose when starting out on the trail of a possible crime: “Who benefits?” Indeed we may be speaking of a crime on the scale of genocide if the events in question are a) avoidable; in which case the crime is one of negligent homicide; or b) planned, where we obviously have a conspiracy among the contributing parties.

Those who benefit are obviously the ones who finance agricultural operations, those who are charging monopoly prices for the commodities in demand, the various middlemen who bring the products to market after they leave the farm, and the owners or mortgagees of the land, retail space, and other assets required to conduct the production/consumption cycle.

In other words, it’s the financial elite of the world who have gained complete control of the most basic necessity of life. This includes not only the international financiers who provide capitalization, including the leveraging of trading in commodity futures up to the 97 percent level, but even organized crime groups which the U.S. Department of Justice says have penetrated world materials markets.

And is all this part of a long-term strategy by international finance to starve much of the world’s population in order to seize their land, control their natural resources, and enslave the rest who fear a similar fate? Already millions of people are losing their homes to housing inflation and foreclosure. Is actual or threatened physical starvation the next part of the scenario?

And where are the governmental authorities whose job it is to protect the public welfare both at the national and international levels? These authorities long ago allowed a situation to develop, including in developed nations like the U.S. , where people in localities no longer have the simple ability to feed themselves, even in emergencies. And not one of the candidates remaining in the U.S. presidential election—John McCain, Hillary Clinton, nor Barack Obama—has addressed the food pricing issue. Indeed, all three are part of a government that has gone so far as to exclude much of the rising cost of food from measurements of inflation, an innovation that took place on Bill Clinton’s watch.

It is now April. Already food has run out in some parts of the world. In a few months winter will come, at least in the Northern Hemisphere. What will happen then? Are you certain food will be on your table?

And suppose you wanted to make a contribution to your own well-being and to that of your family and community by going into farming. In most parts of North America you can look around and see plenty of underutilized land.

But could you do it? Could you buy or lease land and pay taxes on it after the galloping inflation of the real estate bubble? Could you get bank loans for equipment and operating expenses under today’s constrained credit conditions? Could you afford fuel for your equipment when petroleum costs over $115 a barrel? Is water readily available from developed supplies and is electricity available at regulated prices? Could you purchase anything other than genetically-modified seed? Would local supermarkets buy your produce when your prices are undercut by massive corporate distributorships importing food from abroad? Does the system even exist in your home town for marketing of local farm products?

And does anyone in power even care?

Well, whether they do or not, “We the People” should care. One of the worst aspects of the consumer society is the separation between the individual and the products of the earth we utilize. We always assume that whatever we need will be there so long as we have money in our bank account or the ability to charge on a credit card and pay later.

Such assumptions are losing their validity. Back in the 1960s people who were starting to understand these things began a modest “back to the land” movement. Today it is time to start one again. Except this time we need to do it right by demanding government policies that support it. This means low-cost credit, price supports, affordable utilities, favorable tax policies, and decisions by government and businesses to “buy local.” Food production cannot safely be left in the hands of agribusiness and international finance capitalism any longer.

Richard C. Cook is a former U.S. federal government analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, NASA, and the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared on numerous websites. His book on monetary reform entitled We Hold These Truths: The Promise of Monetary Reform is in preparation. He is also the author of Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age, called by one reviewer, “the most important spaceflight book of the last twenty years.” His website is at www.richardccook.com.

Wal-Mart's Sam's Club limits rice purchases

Wal-Mart's Sam's Club limits rice purchases

By Nicole Maestri

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Wal-Mart Stores Inc's (WMT.N: Quote, Profile, Research) Sam's Club warehouse division said on Wednesday it is limiting sales of several types of rice, the latest sign that fears of a rice shortage are rippling around the world.

Sam's Club, the No. 2 U.S. warehouse club operator, said it is limiting sales of Jasmine, Basmati and long grain white rice "due to recent supply and demand trends."

U.S. rice futures hitting an all-time high Wednesday on worries about supply shortages.

On Tuesday, Costco Wholesale Corp (COST.O: Quote, Profile, Research), the largest U.S. warehouse club operator, said it has seen increased demand for items like rice and flour as customers, worried about global food shortages and rising prices, stock up.

Sam's Club, the No. 2 U.S. warehouse club operator, is limiting sales of the 20-pound (9 kg), bulk bags of rice to four bags per customer per visit, and is working with suppliers to ensure the products remain in stock.

Warehouse clubs cater to individual shoppers as well as small businesses and restaurant owners looking to buy cheaper, bulk goods.

With prices for basic food items surging, customers have been going to the clubs to try to save money on bulk sizes of everything from pasta to cooking oil and rice.

Sam's Club said the large-sized bags of rice subject to the limits are typically purchased by its restaurant owner or food service customers.

Sam's Club said is not limiting sales of flour or cooking oil at this time. Costco said some of its stores have put limits on sales of items such as rice and flour, but it was trying to modify those restrictions to meet customer demand.

Costco Chief Executive James Sinegal told Reuters that he believed the recent surge in demand was being driven by media reports about rising global demand and shortages of basic food items in some countries.

Food costs have soared worldwide, spurred by increased demand in emerging markets like China and India; competition with biofuels; high oil prices and market speculation.

The situation has sparked food riots in several African countries, Indonesia, and Haiti. United Nations Secretary-General Ban Ki-moon has warned that higher food prices could hurt global growth and security.

Rice prices have risen 68 percent since the start of 2008.

Trade bans on rice have been put in place by India, the world's second largest exporter in 2007, and Vietnam, the third biggest, in hopes of cooling domestic prices. Rice is a staple in most of Asia.

On Tuesday, Tim Johnson, president-CEO of California Rice Commission, which represents growers and millers of rice in the state, said: "Bottom line, there is no rice shortage in the United States. We have supplies."

Wal-Mart shares were up 0.4 percent to $56.80 in afternoon trading, while Costco shares rose 1.7 percent to $69.26.

Sheriff Candidate Believes Crime Is Terrorism

Sheriff Candidate Believes Crime Is Terrorism

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The blurring of lines between crime and terrorism continues. According to section 802 of the Patriot Act, minor criminal offenses can be interpreted as terrorism by government officials. The recent implementation of Operation Sudden Impactin Memphis and surrounding areas had various people from federal, state and local law enforcement agencies go on a fishing expedition searching for terrorists. The operation resulted in the issuance of several traffic tickets, the confiscation of a small amount of drugs but failed to catch any terrorists. It was nothing more than a martial law training operation because the real terrorists are actually funded by high level government black operations. The U.S. House of Representatives last year passed HR 1955 the Violent Radicalization and Homegrown Terrorism Prevention Act of 2007 which if gets signed into law will give the government a blank check to potentially classify certain belief systems as terrorism. As horrible as all of these things are, we now have a candidate running for Sheriff in Florida’s Orange County using the slogan “Crime is Terrorism”. Malone Stewart proudly displays this slogan on his web site and in his campaign signs. There is no question that the lines between criminality and terrorism are quickly being erased and if this continues the government will just accuse people who don’t like what they are doing of being terrorists and haul them away to FEMA run death camps.

Below is a photo of one of Mr. Stewart’s campaign signs a reader sent to us which shows clearly that he is running his campaign using the slogan “Crime is Terrorism”.

Obviously crime is not terrorism, but if we have people in positions of authority that buy into the terror war fraud and believe that crime is terrorism, we are in a great deal of trouble. The Military Commissions Act which was passed into law in 2006 allows the government to strip people of their citizenship and hold them indefinitely with no due process if they are accused of being a terrorist. What better way to hold American citizens who are protesting against the government than by utilizing the powers in the Military Commissions Act combined with what’s in the Patriot Act and eventually with what’s in HR 1955. Assuming HR 1955 gets passed, the government will literally have the power to jail American citizens indefinitely for having a belief system that the government disapproves of.

Mr. Stewart’s campaign slogan automatically disqualifies him from being taken seriously as a candidate for Sheriff. The war on terror is a fraud designed to setup a police state and to get everybody spying on one another with the notion that everybody is a potential terrorist. It is clear that Mr. Stewart has bought into this idea with this ridiculous campaign slogan. If anybody reading this resides in Florida’s Orange County we encourage you not to support this man for Sheriff. Crime is not terrorism.

Breaking the Silence - Israeli Soldiers Speak

Breaking the Silence - Israeli Soldiers Speak

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They're called "Refuseniks" but not for refusing to serve. They've done it proudly and courageously, and here's how "Courage to Refuse" members state their position:

"We, reserve officers and soldiers of the Israel Defense Forces (IDF)....have always served in the front lines....were first to carry out any mission, light or heavy, (and we did it) to protect the State of Israel and strengthen it.

We....served....long weeks every year, in spite of dear cost to our personal lives, have been on reserve duty all over the Occupied Territories, and were issued commands and directives that had nothing to do with the security of our country (but were only given to perpetuate) our control over the Palestinian people. We('ve)....seen the bloody toll this Occupation exacts from both sides.

....the commands issued to us in the Territories (have) destroy(ed) all the values (we learned) growing up in this country.

....the (way) the Occupation (undermines the) IDF's human character and (exposes) the corruption of the entire Israeli society.

We....know that the Territories are not Israel, and that all settlements are bound to be evacuated in the end.

We hereby declare that we shall not continue to fight this War of the Settlements.

We shall not continue to fight beyond the 1967 borders to dominate, expel, starve and humiliate an entire people.

We hereby declare that we shall continue serving the Israel Defense Forces in any mission that serves Israel's defense.

The missions of occupation and oppression do not serve this purpose - and we shall take no part in them."

These are courageous men and some women, hundreds of them. Their "Courage to Refuse - Combatant's Letter" web site lists 550 by name. There are hundreds more as well. Their numbers are growing, and their resistance is firm. There are five separate refusenik groups. They're listed below. Courage to Refuse is one of them.

Yesh Gvul (There is A Limit)

Yesh Gvul combats the "misuse of the IDF for unworthy ends" that includes the occupation of Palestine. It was established during Israel's 1982 Lebanon invasion that they denounced as a "naked (act of) aggression in which they wanted no part." It supports imprisoned members and their families, holds vigils where they're held, informs the public of their status, and embraces a peace agenda. They state that "as responsible citizens (they) declare that (they) will take no part in the continued oppression of the Palestinian people (nor will they) participate in policing actions or in guarding the settlements."

They further say that as "an Israeli peace group" they oppose the occupation and support soldiers who refuse to be part of it. They call the Israeli army's role "brutal" and "subjugating." It places servicemen "in a grave and moral and political dilemma (because it requires them) to enforce policies they deem illegal, immoral and ultimately harmful to Israeli interests." Many of their members are combat officers, they've served with distinction, and they rank from sergeant to major. They hold different political views, support peace but no one specific program, and they back a "two-state" solution they believe is "key to (peacefully resolving) the Israeli-Palestinian conflict."

The Shministim

The Shministim is made up of high school seniors approaching age 18 after which Jewish and Druze men and women face mandatory military service, except for exemptions on religious, health and other accepted grounds. The organization no longer maintains a web site.

Courage to Refuse (The Combatants Letter)

The organization was founded in 2002 by a group of 50 combat officers and soldiers after its members realized that their missions had nothing to do with defending Israel. They're to colonize Palestine and oppress its people. They further believe that many commands issued them harm Israel's strategic interests and they refuse to obey them.

They've served their country and support it, but they determined that "fighting in Gaza and....West Bank (was counterproductive): by obeying orders they would not be protecting the lives of their dear ones." They believe "the Occupation poses a threat to the security of Israel." They stated their beliefs openly in "The Combatant's Letter." Hundreds of IDF members signed it and joined "Courage to Refuse." New members join weekly, and Yaffee Center for Strategic Studies surveys show that over 25% of Israelis sympathize with their struggle.

They continue to perform reserve duty, but won't serve in the Occupied Territories. Over 280 of them have been court-martialed and jailed for up to 35 days. Yet they've "won a warm place for the movement in the hearts of many Israelis" who support their self-sacrifice and willingness to be imprisoned for their beliefs.

Hundreds of Israeli professors signed petitions for them. Sami Michael is acting chairman of the Israeli Association for Human Rights. He said that refusing the occupation is not just a moral act, it's the purest form of patriotism in Israel today. Their reasons for not serving are stated above.

The Pilots Group

The Pilots Group maintains a web site in Hebrew only, so it can't be monitored by non-Hebrew readers. In September 2003, 27 of their members (including reserve Brigadier General Yiftah Spector) published their statement for the first time. It declared they would no longer fly missions against West Bank and Gaza civilians, that doing so is illegal and immoral, and they denounced targeted assassinations.

On Israeli television, one pilot said: "We veteran pilots and active pilots alike....are opposed to carrying out illegal and immoral attacks, of the type carried out by Israel in the Territories. We....love the State of Israel (but) refuse to take part in air force attacks in civilian populations centers. We refuse to continue harming innocent civilians."

They knew they could be punished for their stance and for their "illegitimate" and "forbidden" statement, according to Israel's chief of army staff, Moshe Ya'alon. Israeli Air Force (IAF) chief Dan Halutz downplayed their action, said announcing it on national television was "inappropriate," and called it "the mother of all dangers to our people."

Because of it, they were expelled from the IAF, denounced as traitors, and went public again two months later to explain further. One captain's comment was typical: "In the beginning, we were pilots who believed our country would do all it could to achieve peace. We believed in the purity of our arms and that we did all we could to protect unnecessary loss of life. Somewhere in the last few years it became harder and harder to believe that is the case."

A single incident changed them. It was the bombing of Hamas military leader Salah Shehade's home that killed him and 14 members of his family, nine of whom were children. One pilot called it "murder," another "state terrorism," still another "vengeance," and all agreed they could no longer perform these missions.

Lt. Colonel Avner Raanan was one of them. He's one of Israel's most respected and decorated pilots. He signed the letter and stated: "If you look at the past three years, you see that, if we had a suicide bombing, the Israeli air force made a big operation in which civilians were killed, and that looks to innocent eyes like revenge. You hear it in the streets of Israel; people want revenge. But we should not behave like that. We are not a mafia."

Referring to an attack on Gaza's Nuseirat refugee camp, another pilot added: "Is it legitimate to take F-15s and helicopters designed to destroy enemy tanks, and use them against cars and houses in one of the most heavily populated places in the world....we have become blinded by the blood on our own faces. We cannot see that on the other side....is a whole nation of innocent people."

The pilots' action and statements shook Israeli society. Their superiors condemned them, but over 500 supportive letters disagreed, including one from a holocaust survivor and others from fellow pilots. In addition, former left wing cabinet ministers also praised their courage.

Sayeret Matkal

This is an elite IDF commando unit that maintains no web site. In December 2003, 13 of its reservists and officers (including one major) wrote the Prime Minister declaring their refusal to serve henceforth in the Territories. Their statement read: "We say to you today, we will no longer give our hands to the oppressive reign in the territories and the denial of human rights to millions of Palestinians, and we will no longer serve as a defensive shield for the settlement enterprise."

Members of this commando group carried out the 1976 Entebbe, Uganda airport raid that rescued 100 hostages on an Air France hijacked plane. They rarely serve in the Territories, but their announcement was significant because of the group's standing in Israeli society. Former Prime Minister Ehud Barak once commanded them and led a raid against a 1972 hijacked Sabena plane at Tel Aviv airport. He asked the signers to reconsider, called their letter a grave mistake, and said "it's not too late to correct it...." Other officials also condemned them, but Meretz Knesset Member (MK) Roman Bronfman believed they acted bravely, and Labor MK Ophir Pines said it requires that serious discussion be held.

In May 2004, Haaretz journalist Gideon Levy was supportive. He urged more soldiers to speak out, discuss their actions in the Territories, and ask why they serve there "to protect groups of delusional settlers (and) what their systematic abuse of the Palestinians has to do with security....how many innocent people (have) they killed and (keep on) killing."

He noted that Israelis don't know what goes on in the Territories, so it's up to soldiers to "lift this screen....The Palestinians aren't believed, the Israeli press (keeps) its distance from the Territories and the international press is perceived as hostile. Only the soldiers can break the vicious circle....No one (can) deny their accounts....it's time (for them) to stand up and speak out....how they killed and jailed and humiliated for no good reason."

Excerpts From Soldiers Breaking the Silence

Breaking the Silence (Shovrim Shtika) dedicates itself to two purposes:

-- exposing IDF oppression in occupied Palestine; and

-- providing discharged Israeli soldiers and reservists a platform to explain what they were ordered to do on the ground.

In their own words, hundreds of their testimonies tell shocking stories - the ordeal they faced, its moral price, and the corrupting erosion it had on their values. They focus on orders gotten, rules of engagement and operational procedures that include frequent illegal commands:

-- firing at civilians posing no risk;

-- revenge operations for collective punishment; and

-- intentionally attacking Palestinian rescue forces, including ambulances.

Their accounts are disturbing. They portray institutionalized moral corruption, universal contempt for Arabs, and how it affects everyone from new recruits to commanders. Rules of engagement are unrestrained, government oversight is non-existent, so reporting abuse is urgent. They want it stopped and demand an independent body to do it.

It goes on everywhere in occupied Palestine with Hebron a prominent example because it's the only Palestinian city with an Israeli settlement in its center. Sixty-four soldiers from the Nachal brigade spoke out, they were there during the Second Intifada, and their testimonies recount horrors on the ground they were ordered to commit.

They call their experiences "shocking" with photos for confirming evidence. Their collective statement says: "In coping daily with the madness of Hebron, we couldn't remain the same people beneath our uniforms. We saw our buddies and ourselves slowly changing....

We were exposed to the ugly face of terror....an innocent family killed while at the Sabbath table. Countless engagements, bereaved families, innocent civilians injured, chase and arrests.

The settlers....rioted, occupied houses, and confronted the police and army....The constant curfew made Hebron into a ghost town....The school in Jebl Ju'ar has been an army post....We asked ourselves why an army platoon prevents children from going to school. We found no answers.

We decided to speak out....to tell....Hebron isn't in outer space....But it's light years away from Tel Aviv....Come, see, hear and understand what's happening there."

Here are more paraphrased comments:

We man checkpoints, stop people from going somewhere, humiliate them, but "I'm doing my duty (and) inflicting pain on people, harming them unnecessarily." It affects your mind, your sleep the longer you serve there. Jews do as they please. There are no laws. Anything goes, breaking into shops, occupying Palestinian homes. Your judgment gets impaired when everyday your enemy is an Arab. You don't look at them as people. But they're not dogs, not animals, not inferior, yet they simply don't count, and since they're your enemy you can kill them.

At checkpoints, our job was don't let them pass. It was absurd, there were old ladies who had to get through to go home. Why was it forbidden to pass? It was collective punishment. "You're not allowed to pass because you're not allowed to pass." Then there are the curfews. "I'm certain that 80% of the time there was a curfew." We closed all the stores and sent everyone home.

I'm ashamed of myself because I realized I enjoy the feeling of power. I'm the Law. It's a mighty feeling. It's because you have a weapon, because you're a soldier, it's addictive. You can do whatever you want, unsupervised, enter people's homes, conduct random searches. Tell them what you want and they'll do it because they're afraid. Palestinians feel you don't let them walk in the streets, work, live or breathe.

I have a machine gun, it's loaded, the safety catch is off. I can shoot you any time, for any reason, split your head open with the gun butt and my commander will pat me on the back and say good job. It's crazy, I'm just a kid, but Hebron hardens you. I say to myself I'm doing something I don't believe in, and I'm putting myself in a position where someone wants to kill me because of it. You see things that couldn't possibly happen in your own home and shouldn't happen. But here everything is different.

Any time of day or night, whenever we feel like it, we pick a house, any house, and we go in. We move all the men into one room, the women in another, and place them under guard. We can do whatever we want. There's no justification for it. It shouldn't be happening.

Then there are the settlers. They run wild. There's no law. They do what they please. So they burn another shop, trash another home, occupy another one, no big deal, happens all the time. We just watch and do nothing.

If someone is sick and needs to go to the hospital, I ask my commander if I can let her pass. No way if there's a curfew. She's not going anywhere no matter how sick. All these stories are my daily routine for over six months. When it ended, I questioned whether I protected myself or my country. I began watching out for myself because I didn't believe in the ideology.

Serving in Hebron made me feel there's something different about being a Jew. I can't explain it. I'm supposed to guard the settlers who don't have the kind of morality I was raised to believe. I reached a point where I didn't know who the enemy was anymore, Jews or Arabs. Maybe I need to protect the Arabs, not the Jews who attack them. I feel emotionally injured. If someone's caught breaking curfew, we can let them have it aggressively. Hold them, make them wait eight hours with no water, sit and wait. "Why? Because he walked outside. Because he dared go buy something. Because he dared send his kid to school." We can even shoot them.

Selected Israeli Organizations Supporting Refuseniks

Several important ones are covered below:

New Profile

New Profile is a pluralistic feminist organization that includes men and women. It's goal is to transform Israel from a militaristic to a civil society. It opposes occupation and supports all conscientious objectors - from pacifists opposed to war to refuseniks who won't serve in occupied Palestine. Its charter states that "Israel is capable of a determined peace politics. It need not be a militarized society." It understands that "the words 'national security' have often masked calculated decisions to choose military action for the achievement of political goals."

It no longer is "willing to take part in such choices. We are no longer willing to go on being mobilized, raising our children for mobilization....while those in charge of the country go on deploying the army easily, rather than building other solutions."

It's "hard to express this type opinion in Israel today....An attitude that dares question the fundamental principle of willing enlistment is almost incomprehensible in a soldiers' state." We reject perpetuating war. We prioritize and protect life.

"We oppose the use of the army, police, (and) security forces in the ongoing oppression and discrimination of the Palestinian citizens of Israel (and in the Occupied Territories)," in demolishing their homes, "denying them building and development rights, (and) using violence" against them. Thousands of young Israelis are opting out and refuse to serve. They reject military service in Israel today. The IDF states that only one-third of reserve forces in fact serve actively.

Israeli law doesn't recognize conscientious objection. "We regard Israeli conscription law as discriminatory and non-democratic, and call for" recognizing every person's right to act according to his or her conscience. They should have the right to fulfill their social commitment by alternative civic or community means, including through non-governmental, voluntary organizations.

The Refuser Solidarity Network (RSN)

It was founded in 2002 to support Israel's growing "Refuser Movement." RSN supports Courage to Refuse, Combatants for Peace, Yesh G'vul, the Shiministim, New Profile and other Israeli organizations advocating peaceful conflict resolution in Occupied Palestine.

Its original 2002 "Call to Action" declaration said: "The time has come" to act against growing violence. Increasing numbers of Israeli soldiers reject serving in Occupied Palestine. They've seen what goes on, it has nothing to do with security, and its sole purpose is "perpetuating our control over the Palestinian people." They now declare they no longer will help "dominate, expel, starve and humiliate an entire people."

The time has come "to listen to our consciences," summon our courage, and publicly support them. Israel can never have peace and security unless it withdraws from Occupied Palestine. This is a "crucial moment, a potential turning point." Their campaign was initiated from Chicago, but it resonates across the country as a "portal" in support of the Refuser Movement in Israel.

Combatants for Peace

Former Palestinian and Israeli cycle of violence participants are the founders - IDF soldiers and Palestinian resistance fighters. They believe their actions were futile, decided another way is crucial, and now work together for peace. Henceforth, they "refuse to take part (in further) bloodletting." They will only act non-violently through dialogue and reconciliation and work together cooperatively to understand each other's aspirations.

Their goal - end the occupation, halt the settlement project, and establish a Palestinian state with its capital in East Jerusalem alongside the State of Israel. They want to raise consciousness, educate both sides, and create political pressure to establish a constructive dialogue for resolution.

They hold meetings, conduct educational lectures and public forums, undertake joint projects, have bi-national media teams to get out their message, and participate in non-violent demonstrations against the occupation. It's motto reads: "Only by joining forces, will we be able to end the cycle of violence."

Israeli Laws Affecting Conscientious Objection and Refuseniks

Conscription existed since Israel became a state in 1948. Today, its legal basis comes under the country's 1986 National Defence Service Law. It requires all Israeli citizens and permanent residents (men and women) to serve. However, the Ministry of Defence has discretion under Article 36 to exempt all non-Jews, except the Druze. Israeli Arabs may volunteer, but they're not encouraged, and very few do it. Reserve service is also required up to age 51 for men and 24 for women.

Exemptions are possible for reasons of:

-- educational requirements,

-- religion (orthodox Jews are exempted),

-- health,

-- family considerations,

-- married or pregnant women or those with children,

-- persons convicted of crimes,

-- the undereducated (until they complete at least eight years of school), and

-- other considerations at the Ministry of Defence's discretion.

Israeli law rejects conscientious objection rights for men and only partly accepts them for women on the basis of religion. Those who cite it and refuse to serve are in trouble. They're subjected to unfair procedures and hearings that may, and most often do, recommend prosecution and imprisonment.

Israel signed the United Nations Charter and must, under its provisions, comply with the UN International Covenant on Civil and Political Rights. Its Article 18 guarantees everyone "the right to freedom of thought, conscience and religion." So does the Universal Declaration of Human Rights under Article 18 where it repeats that "Everyone has the right to freedom of thought, conscience and religion..." By denying refuseniks this right, Israel violates international law and a fundamental human right afforded everyone under it.

No official figures exist, but refusenik numbers have grown since the Second Intifada began in September 2000. Most opt out in the Territories, and estimates of their numbers range from 1100 well-documented cases to as many as double that number. Here's what they face.

Article 35 (a) (2) of the National Defence Service Law states that:

-- failure to fulfill a duty under the law is punishable by up to two years imprisonment;

-- evading military service is subject to five years in prison;

-- refusing to perform reserve duties calls for up to a 56 day sentence that's renewable if the objector refuses repeatedly;

-- helping someone avoid military service is punishable by a fine and up to two years in prison;

-- disobeying call-up orders means facing up to five years imprisonment, although most often sentences rarely exceed 12 months.

Refuseniks are generally sentenced on one of the following charges:

-- refusing to obey an order;

-- absence without leave;

-- desertion; or

-- refusing to be mobilized.

Where exemption applications are denied, individuals are ordered to perform military or reserve duty. Continued refusal can mean discipline or court-martial, and repeat offenders face re-imprisonment in violation of Article 14, paragraph 7 of the International Covenant on Civil and Political Rights. It states: "No one shall be liable to be tried or punished again for an offence for which he (or she) has already been finally convicted or acquitted in accordance with the law and penal procedure of each country."

Summary Comments

Peace activists, people of conscience and most notably Israeli refuseniks are in the front lines of a valiant struggle:

-- to free Palestinians from 41 illegal occupation years,

-- end decades of abuse,

-- achieve a just and lasting peace, and

-- protect everyone's fundamental human rights and freedoms that are guaranteed by the Universal Declaration of Human Rights for "all members of the human family...."

Israel must no longer be exempted from international law, from being allowed to flaunt it brazenly, from ignoring over five dozen UN Resolutions going back decades. Peace activists and refuseniks condemn the Jewish state for its actions, deplore it for committing them, and demand, call on and insist Israeli governments end them. Its lawlessness must end, and collective resistance can achieve it. It's no longer an option. It's an obligation to assure that everyone has equal dignity and the right to life, liberty, security and freedom under universal international law.

May 14 is the 60th anniversary of Israel's founding. Commemorations there and in the West will celebrate it. People of conscience won't participate. Refuseniks may not either. Use this time to demand an illegal occupation end and that Israel no longer be allowed a pass on the international law it disdains.

Documents suggest CIA stonewalled Congress

CIA has 7,000 documents relating to rendition, detention, torture programs, filing show

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The Central Intelligence Agency has acknowledged having 7,000 pages of documents pertaining to President George W. Bush's secret rendition and detention programs, according to three international human rights groups.

Amnesty International USA, the Center for Constitutional Rights and the International Human Rights Clinic at NYU School of Law made the claim following a summary judgment motion by the agency this week to avoid a lawsuit that seeks to force the nation's top spy outfit to make the documents public under a Freedom of Information Act lawsuit.

"Among other assertions, the CIA claimed that it did not have to release the documents because many consist of correspondence with the White House or top Bush administration officials, or because they are between parties seeking legal advice on the programs, including guidance on the legality of certain interrogation procedures," the groups wrote in a release. "The CIA confirmed that it requested—and received—legal advice from attorneys at the Department of Justice Office of Legal Counsel concerning these procedures."
“For the first time, the CIA has acknowledged that extensive records exist relating to its use of enforced disappearances and secret prisons,” Curt Goering, AIUSA senior deputy executive director, said in a statement. “Given what we already know about documents written by Bush administration officials trying to justify torture and other human rights crimes, one does not need a fertile imagination to conclude that the real reason for refusing to disclose these documents has more to do with avoiding disclosure of criminal activity than national security.”

RAW STORY was the first news outlet to identify the exact location of one of the sites in the CIA's secret prison network, which was revealed first by the Washington Post. Raw Story identified a prison in northeastern Poland, Stare Kiejkuty, that was used as a transit point for terror suspects.

Once a Soviet-era compound once used by German intelligence in World War II, Stare Kiejkuty is best known as having been the only Russian intelligence training school to operate outside the Soviet Union. Its prominence in the Soviet era suggests that it may have been the facility first identified – but never named – when the Washington Post’s Dana Priest revealed the existence of the CIA’s secret prison network in November 2005.

The groups say that they're not the only ones being stonewalled. Congress, they say, is getting the short end of the stick as well.

"Documents released to plaintiffs by the CIA demonstrate that many within the government itself have been unable to obtain accurate information from the CIA," the groups said. "These documents, which include letters from Members of Congress to the CIA, demonstrate a pattern of withholding information from Congress. In a pointed bipartisan letter on Oct. 16, 2003, then-Chair and Ranking Member of the House Select Committee on Intelligence requested that CIA Director George Tenet provide senior level briefings on the treatment of, and information obtained by, three men known to be held in secret CIA detention, admonishing the CIA by stating that the committee was 'frustrated with the quality of the information' provided in past briefings."

Additional elements of the release, issued jointly by the three human rights groups, follows. The documents in the lawsuit can be viewed here.

The CIA’s admission that it possesses at least 7000 documents relating to rendition, secret detention and torture generated renewed calls by the human rights groups for transparency and accountability from the government.

“The Freedom of Information Act is one of the major checks on government criminality in this country,” said CCR Executive Director Vincent Warren. “The CIA has acknowledged that it has well over 7000 documents that relate to the torture and disappearance of men. These include some of our clients, like Majid Khan, who were known to be in the program. The public needs to know what crimes were committed in our name and how they were justified. This has been the most secretive, least transparent administration in history, and it is well past time for accountability.”

AIUSA, CCR, and NYU IHRC have filed FOIA requests with several U.S. government agencies, including the CIA. These FOIA requests sought information about individuals who are—or have been—held by the U.S. government or detained with U.S. involvement, and about whom there is no public record. The requests also sought information about the government’s legal justifications for its secret detention and extraordinary rendition program. Comprehensive information about the identities and locations of prisoners in CIA custody—as well as the conditions of their detention and the specific interrogation methods used against them— has never been publicly revealed. This lack of transparency continues to prevent scrutiny by the public or the courts and leaves detainees vulnerable to abuse and torture.

Although the CIA did release a paltry number of documents in response to the FOIA request, most were already in the public domain, such as newspaper articles and a single copy of the Fourth Geneva Convention which governs the treatment of civilians in times of war. The limited relevant documents that were released were documents pertaining to briefings demanded by the House and Senate Intelligence Committees regarding various aspects of the overseas detention and interrogation program.
....
The CIA appears to have avoided answering detailed requests for specific information, responding instead with form letters and references to briefings. These practices led to a forceful letter from Senator Carl Levin, Current Chairman of the Senate Committee on Armed Services, (then the Ranking Member) who was attempting to investigate CIA involvement in detainee deaths. In a letter dated Oct. 24, 2005, Senator Levin noted that “[t]he lack of CIA cooperation with the investigations to date has left significant omissions in the record.” The CIA’s failure to cooperate with members of Congress demonstrates the need for public scrutiny of the secret detention and extraordinary rendition program under FOIA.

“The CIA has employed illegal techniques such as torture, enforced disappearances, and extraordinary rendition,” said Meg Satterthwaite, Director of the NYU IHRC. “It cannot use FOIA exemptions as a shield to hide its violations of U.S. and international law.”

In its legal filings, the CIA acknowledged that this program “will continue.” Some prisoners have been transferred to prisons in other countries for proxy detention where they face the risk of torture and where they continue to be held secretly, without charge or trial. Human rights reports indicate that the fate and whereabouts of at least 30 people believed to have been held in secret U.S. custody remain unknown.

In September 2006, President Bush publicly acknowledged the existence of CIA-operated secret prisons. At the same time, 14 detainees from these facilities were transferred to Guantánamo and several more have arrived since. The administration has admitted to using so-called “alternative interrogation procedures” on those held in the CIA program, including waterboarding. The international community and the United States, in other contexts, have unequivocally deemed these techniques torture.

What the Family Would Let You See, the Pentagon Obstructs

What the Family Would Let You See, the Pentagon Obstructs

By Dana Milbank

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Lt. Col. Billy Hall, one of the most senior officers to be killed in the Iraq war, was laid to rest yesterday at Arlington National Cemetery. It's hard to escape the conclusion that the Pentagon doesn't want you to know that.

The family of 38-year-old Hall, who leaves behind two young daughters and two stepsons, gave their permission for the media to cover his Arlington burial - a decision many grieving families make so that the nation will learn about their loved ones' sacrifice. But the military had other ideas, and they arranged the Marine's burial yesterday so that no sound, and few images, would make it into the public domain.

That's a shame, because Hall's story is a moving reminder that the war in Iraq, forgotten by much of the nation, remains real and present for some. Among those unlikely to forget the war: 6-year-old Gladys and 3-year-old Tatianna. The rest of the nation, if it remembers Hall at all, will remember him as the 4,011th American service member to die in Iraq, give or take, and the 419th to be buried at Arlington. Gladys and Tatianna will remember him as Dad.

The two girls were there in Section 60 yesterday beside grave 8,672 - or at least it appeared that they were from a distance. Journalists were held 50 yards from the service, separated from the mourning party by six or seven rows of graves, and staring into the sun and penned in by a yellow rope. Photographers and reporters pleaded with Arlington officials.

"There will be a yellow rope in the face of the next of kin," protested one photographer with a large telephoto lens.

"This is the best shot you're going to get," a man from the cemetery replied.

"We're not going to be able to hear a thing," a reporter argued.

"Mm-hmm," an Arlington official answered.

The distance made it impossible to hear the words of Chaplain Ron Nordan, who, an official news release said, was leading the service. Even a reporter who stood surreptitiously just behind the mourners could make out only the familiar strains of the Lord's Prayer. Whatever Chaplain Nordan had to say about Hall's valor and sacrifice were lost to the drone of airplanes leaving National Airport.

It had the feel of a throwback to Donald Rumsfeld's Pentagon, when the military cracked down on photographs of flag-draped caskets returning home from the war. Rumsfeld himself was exposed for failing to sign by hand the condolence letters he sent to the next of kin. His successor, Robert Gates, has brought some glasnost to the Pentagon, but the military funerals remain tightly controlled. Even when families approve media coverage for a funeral, the journalists are held at a distance for the pageantry - the caisson, the band, the firing party, "Taps," the presenting of the flag - then whisked away when the service itself begins.

Nor does the blocking of funeral coverage seem to be the work of overzealous bureaucrats. Gina Gray, Arlington's new public affairs director, pushed vigorously to allow the journalists more access to the service yesterday - but she was apparently shot down by other cemetery officials.

Media whining? Perhaps. But the de facto ban on media at Arlington funerals fits neatly with an effort by the administration to sanitize the war in Iraq. That, in turn, has contributed to a public boredom with the war. A Pew Research Center poll earlier this month found that 14 percent of Americans considered Iraq the news story of most interest - less than half the 32 percent hooked on the presidential campaign and barely more than the 11 percent hooked on the raid of a polygamist compound in Texas.

On March 29, a week before the raid on the polygamists' ranch, William G. Hall was riding from his quarters to the place in Fallujah where he was training Iraqi troops when his vehicle hit an improvised explosive device. He was taken into surgery, but he died from his injuries. The Marines awarded him a posthumous promotion from major to lieutenant colonel.

Newspapers in Seattle, where Hall had lived, printed an e-mail the fallen fighter had sent his family two days before his death.

"I am sure the first question in each of your minds is my safety, and I am happy to tell you that I'm safe and doing well," he wrote, giving his family a hopeful picture of events in Iraq. "I know most of what you hear on the news about Iraq is not usually good news and that so many are dying over here," the e-mail said. "That is true to an extent but it does not paint the total picture, and violence is not everywhere throughout the country. So please don't associate what you see on the news with all of Iraq.

"Love you and miss you," he wrote. "I'll write again soon."

Except, of course, that he didn't. And yesterday, his family walked slowly behind the horse-drawn caisson to section 60. In the front row of mourners, one young girl trudged along, clinging to a grown-up's hand; another child found a ride on an adult's shoulders.

It was a moving scene - and one the Pentagon shouldn't try to hide from the American public.

Shops Ration Sales of Rice as US Buyers Panic

Shops Ration Sales of Rice as US Buyers Panic

By Andrew Clark, Rory Carroll, and Julian Borger

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Restaurants stockpile to guard against soaring cost. Call to maintain exports as world food crisis grows.

New York and Caracas - The global food crisis reached the United States yesterday as big retailers began to ration sales of rice in response to bulk purchases by customers alarmed by rocketing prices of staples.

Wal-Mart's cash and carry division, Sam's Club, announced it would sell a maximum of four bags of rice per person to prevent supplies from running short. Its decision followed sporadic caps placed on purchases of rice and flour by some store managers at a rival bulk chain, Costco, in parts of California.

The world price of rice has risen 68% since the start of 2008, but in some US shops the price has doubled in weeks.

Retail experts said there was little evidence of panic hoarding by the public but that restaurants and smaller retailers were buying up stocks at wholesalers in the expectation that the cost would go even higher. Shops said Filipino residents in the US were also making large purchases to send to relatives in the Philippines, where a shortage of supplies is causing concern.

"What you're seeing is people who buy in larger quantities, who have a restaurant or a corner store, stocking up because of media reports that prices could go higher," said Dave Heylen, a spokesman for the California Grocers Association.

The price of staple foods has been rising at an accelerating rate across the world, driven by what the United Nations has called a "perfect storm" of rising demand from developing countries such as China and India, the impact of climate change and policy responses by governments.

Since the beginning of the year, rice-producing countries including China, India, Vietnam and Egypt have imposed limits on exports to keep domestic prices down. This week, a top World Bank official predicted that Thailand, the world's largest rice exporter, might follow in restricting shipments.

The EU trade commissioner, Peter Mandelson, yesterday called on the World Trade Organisation to put pressure on food-producing countries to maintain exports. "If we restrict trade, we're simply going to add food scarcity to the already large problems of food shortages that exist in different countries," he told Reuters news agency.

The director of the UN's Food and Agriculture Organisation, Jacques Diouf, said the crisis had been building for decades. "The situation we are in is the result of inappropriate policies over the past 20 years," Diouf told journalists in Paris, pointing to a halving of aid to agriculture in developing countries between 1990 and 2000, while the industrialised world maintained generous farm subsidies.

British officials say they hope the food price shock will provide impetus for a long-delayed deal on liberalising world trade, known as the Doha round. They predict a possible breakthrough in the next few weeks. They also point out that the price rise could bring much-needed income to rural areas in Africa and elsewhere in the developing world if farmers are given enough support to respond.

Diouf said: "This is not Greek tragedy where fate is decided by the gods and humans can do nothing about it. No, we have the ability to influence our futures."

In Venezuela, President Hugo Chávez yesterday announced a $100m "food security fund", at a regional summit to agree policy as the crisis spreads instability across Latin America and the Caribbean.

Looting and riots in Haiti left at least six dead and forced the resignation of the prime minister this month, leaving the hemisphere's poorest country tense and edgy. In Guyana an 80% rise in the price of rice and 50% in the cost of chicken triggered protests and a strike by sugarcane workers. The government promised to issue seeds and urged people to cultivate idle land. Surinam set up an emergency cabinet committee to seek ways to dampen food prices.

Israelis Claim Secret Agreement With US

Israelis Claim Secret Agreement With US

By Glenn Kessler

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Americans insist no deal made on settlement growth.

A letter that President Bush personally delivered to then-Israeli Prime Minister Ariel Sharon four years ago has emerged as a significant obstacle to the president's efforts to forge a peace deal between the Israelis and Palestinians during his last year in office.

Ehud Olmert, the current Israeli prime minister, said this week that Bush's letter gave the Jewish state permission to expand the West Bank settlements that it hopes to retain in a final peace deal, even though Bush's peace plan officially calls for a freeze of Israeli settlements across Palestinian territories on the West Bank. In an interview this week, Sharon's chief of staff, Dov Weissglas, said Secretary of State Condoleezza Rice reaffirmed this understanding in a secret agreement reached between Israel and the United States in the spring of 2005, just before Israel withdrew from Gaza.

U.S. officials say no such agreement exists, and in recent months Rice has publicly criticized even settlement expansion on the outskirts of Jerusalem, which Israel does not officially count as settlements. But as peace negotiations have stepped up in recent months, so has the pace of settlement construction, infuriating Palestinian officials, and Washington has taken no punitive action against Israel for its settlement efforts.

Israeli officials say they have clear guidance from Bush administration officials to continue building settlements, as long as it meets carefully negotiated criteria, even though those understandings appear to contradict U.S. policy.

Many experts say new settlement construction undermines the political standing of Palestinian Authority President Mahmoud Abbas - who is to meet with Bush today at the White House - and adds to Palestinian cynicism about the peace process. Palestinians view the settlements as an Israeli effort to claim Palestinian lands, and in a meeting yesterday with Rice, Abbas said settlement construction was "one of the greatest obstacles" to a peace deal.

U.S. and Israeli officials privately argue that Israel has greatly restricted settlement growth outside the settlements it hopes to retain in a peace deal with the Palestinians, and Olmert has said Israel has stopped building new settlements and confiscating Palestinian lands.

Housing starts - not counting the Jerusalem settlements - have declined 33 percent since 2003, according to the Israeli Central Bureau of Statistics. But officials say it is politically damaging for Olmert to admit that, so instead he publicly emphasizes that he is adding to the settlements, which now house about 450,000 Israelis.

"It was clear from day one to Abbas, Rice and Bush that construction would continue in population concentrations - the areas mentioned in Bush's 2004 letter," Olmert declared in an interview with the Israeli newspaper Yedioth Ahronoth, published Sunday. "I say this again today: Beitar Illit will be built, Gush Etzion will be built; there will be construction in Pisgat Ze'ev and in the Jewish neighborhoods in Jerusalem," referring to new settlement expansion plans. "It's clear that these areas will remain under Israeli control in any future settlement."

In a key sentence in Bush's 2004 letter, the president stated, "In light of new realities on the ground, including already existing major Israeli populations centers, it is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949."

In a companion letter to "reconfirm" U.S.-Israeli understandings, Weissglas wrote Rice that restrictions on the growth of settlements would be made "within the agreed principles of settlement activities," which would include "a better definition of the construction line of settlements" on the West Bank. A joint U.S.-Israeli team would "jointly define the construction line of each of the settlements."

Weissglas said that the letter built upon a prior understanding between then-Foreign Minister Shimon Peres and then-Secretary of State Colin L. Powell, which would allow Israel to build up settlements within existing construction lines. But Powell denied that. "I never agreed to it," he said in an e-mail.

Daniel Kurtzer, then the U.S. ambassador to Israel, said he argued at the time against accepting the Weissglas letter. "I thought it was a really bad idea," he said. "It would legitimize the settlements, and it gave them a blank check." In the end, Kurtzer said the White House never followed up with the plan to define construction lines. "Washington lost interest in it when it became clear it would not be easy to do," he said.

National security adviser Stephen J. Hadley, at a news briefing in January, suggested that Bush's 2004 letter was aimed at helping Sharon win domestic approval for the Gaza withdrawal. "The president obviously still stands by that letter of April of 2004, but you need to look at it, obviously, in the context of which it was issued," he said.

Weissglas said that in 2005, when Sharon was poised to remove settlers from Gaza, the Bush administration made a secret agreement - not disclosed to the Palestinians - that Israel could add homes in settlements it expected to keep, as long as the construction was dictated by market demand, not subsidies. He said the agreement was necessary because Sharon needed the support of municipal leaders in the main West Bank settlements. The settlement leaders, he said, focused on the "inner contradiction" of Bush's letter, mainly that it made no sense to have a settlement freeze in places that Bush said would become part of Israel.

Weissglas said he then negotiated a "verbal understanding" with deputy national security adviser Elliott Abrams that would permit new construction in those key settlements; Rice and Sharon then approved the Weissglas-Abrams deal. "I do not recall that we had any kind of written formulation," Weissglas said.

"There is no understanding," said White House National Security Council spokesman Gordon Johndroe.

Indeed, as settlement starts soared after the Middle East peace conference in Annapolis in November, Rice said "the United States doesn't make a distinction" among settlement locations.

Powell said that in 2004, he did not anticipate that Bush's letter would be perceived as a green light by Israel for adding to the settlements. "I consistently spoke against settlement growth, but as you know all I could do is talk against it," Powell said. "There would be no consequences and there still aren't."