Thursday, May 8, 2008

Bill Targets Oil Firms and OPEC

Bill Targets Oil Firms and OPEC

Democrats Would Levy Windfall Tax

By Steven Mufson

Go To Original

Democratic leaders in Congress unveiled energy legislation yesterday targeting big oil companies and members of the Organization of the Petroleum Exporting Countries. The package drew sharp criticism from Republicans, oil firms and foreign policy experts.

The legislation, dubbed the Consumers First Energy Act, features a 25 percent windfall profits tax on oil companies operating in the United States, a rollback of existing tax breaks for oil and gas companies worth $17 billion over 10 years, and an authorization for the U.S. attorney general to bring price collusion charges against OPEC members.

The bill would suspend additions to the Strategic Petroleum Reserve until the price of crude oil, now $123.53 a barrel, fell back to $75. It also would target price gouging and speculation.

Republicans countered with their own proposals for boosting U.S. oil production by opening protected areas on the Outer Continental Shelf and in Alaska to oil and gas drilling.

"Americans don't need more taxes and more investigations. They need more oil and lower prices," said Sen. Pete V. Domenici (R-N.M.), the ranking member of the Senate Energy and Natural Resources Committee. "Yet nothing in the Democrats' plan will produce a single drop of oil."

House Speaker Nancy Pelosi (D-Calif.) said the Republicans and Bush administration were pursuing a "drill and veto policy." She said the Democrats' bill would "hold OPEC accountable for price fixing."

"With analysts predicting $150-per-barrel oil by fall, efforts to rein in price gougers, speculators and OPEC couldn't come at a better time," said Dan Weiss, director of climate strategy at the Center for American Progress.

But William L. Kovacs, vice president of the U.S. Chamber of Commerce, said the Democrats' package could "have unintended consequences" for U.S. companies doing business in Saudi Arabia and other OPEC countries. And Chas W. Freeman, former U.S. ambassador to Saudi Arabia, criticized the idea of prosecuting OPEC countries, an idea also supported by Sen. Hillary Rodham Clinton (D-N.Y.) on the presidential campaign trail.

"It would probably result in OPEC dumping the dollar as the unit of account for the oil trade and throw the dollar into a collapse," he said. "It could well produce an oil embargo and much higher prices. And it would have no support internationally, where it would be seen as the epitome of unilateralism that people criticize the Bush administration for."

Tony Cudmore, a spokesman for Exxon Mobil, said that "in the past, windfall profit taxes have undermined capital investments in the U.S. oil and gas industry and reduced domestic energy supplies." He said that "imposing punitive taxes on companies, which already pay record taxes, would discourage the sustained investments needed to safeguard U.S. energy security."

Neocons and the Truth: Bitter Enemies to the End

Neocons and the Truth: Bitter Enemies to the End

By Glenn Greenwald

In a July, 2006 article in Rolling Stone — entitled “Iran: The Next War” — the superb journalist James Bamford detailed the shady activities of numerous neoconservatives inside and out of the U.S. Government to plan an attack on Iran. Bamford focused on the role played by Michael Ledeen of the American Enterprise Institute and National Review, who created and began implementing an attack scheme in coordination with the Pentagon’s then number-three official, Doug Feith, and Feith’s deputy, Larry Franklin (subsequently convicted of felonies for passing classified information to AIPAC).

A couple weeks after Bamford’s exposè was published, National Review enlisted former federal prosecutor Andrew McCarthy and talk show host Mark Levin jointly to author a defense of Ledeen and, more importantly, to savage Bamford for writing what they claimed was a pack of lies. The McCarthy/Levin article was entitled “Rolling Smear,” sub-headlined “James Bamford writes a fiction about our Michael Ledeen,” and accused Bamford of being “the latest in a growing crowd of hacks to smear our friend Michael Ledeen.”

McCarthy and Levin specifically attacked Bamford’s disclosure that Ledeen “had arranged a covert meeting in Rome with a group of Iranians [and Feith’s team] to discuss their clandestine help” in attacking Iran. Said McCarthy and Levin:

Bamford, to the contrary, wants to turn the meeting into a nefarious plot by Ledeen and the neocons to push the nation into war with Iran. Yet, anyone even vaguely familiar with Michael’s work knows that he has opposed military action against Iran — notwithstanding that he was years ahead of most experts in accurately portraying Iran’s role as the terror master at the center of the jihadist network.

So Bamford’s claim was “embarrassing” because “anyone even vaguely familiar with Michael’s work knows that he has opposed military action against Iran.” Got that?

Here’s Ledeen yesterday, writing in National Review’s Corner (h/t sysporg):

Time to Attack Iranian Terror Camps? [Michael Ledeen]
So says John Bolton, and he’s right. As you know, I have been proposing this for years. I always thought it was only a matter of time before we were compelled to take this action, which is a legitimate form of self-defense. And while we’re at it, we should do the same thing to the Syrian camps as well. It isn’t “sending a message,” it’s acting to protect our guys by fighting back in the proxy war the mullahs have been waging since 1979. Faster, please?

More amazingly, a mere two weeks before McCarthy and Levin wrote that “anyone even vaguely familiar with Michael’s work knows that he has opposed military action against Iran,” Ledeen himself wrote at The Corner that “I would insist that my soldiers have the right of ‘hot pursuit’ into Iran and Syria, and I would order my armed forces to attack the terrorist training camps in those countries.”

In late 2006, I wrote about virtually identical deceit from this same group, that time with regard to Iraq. On National Review in December of 2006, Ledeen — just as the Beltway establishment was finally turning against the war in Iraq and in the wake of a lengthy Vanity Fair article identifying the neocons who were to blame — claimed: “I opposed the military invasion of Iraq before it took place.”

In fact, Ledeen, throughout 2002 and 2003, had repeatedly and explicitly urged the invasion of Iraq in countless venues, including: The Wall St. Journal’s Op-Ed Page (”If we come to Baghdad, Damascus and Tehran as liberators, we can expect overwhelming popular support”); in an interview with David Horowitz’s Front Page (”Question #2: Okay, well if we are all so certain about the dire need to invade Iraq, then when do we do so? Ledeen: Yesterday.”); on MSNBC’s Hardball with Chris Matthews (”if President Bush is to be faulted for anything in this so far, it’s that he’s taken much too long to get on with it, much too long”); and in National Review (calling for “the desperately-needed and long overdue war against Saddam Hussein and the rest of the terror masters”).

That war-cheerleading neoconservatives of this strain are completely unbound by the truth is not news. Obviously, the war they unleashed in Iraq is the most compelling proof of that. But sometimes when the lying is so blatant, one can’t help but note it.

The same is true for the complete lack of accountability. Ledeen is a so-called “Freedom Scholar” at the revered and widely-cited American Enterprise Institute and a Contributing Editor at National Review. An intense email campaign over his Iraq comments to AEI and National Review’s Editor Rich Lowry demanding a retraction or some comment from them on Ledeen’s blatant falsehoods over his Iraq stance was simply ignored, as will be this episode concerning the article by McCarthy and Levin smearing Bamford due to Ledeen’s alleged opposition to attacking Iran.

This isn’t just a matter of documenting guilt with regard to what happened with Iraq. The Washington Post’s David Ignatius today became just the latest establishment spokesman to warn (or celebrate) that “judging from recent statements by administration officials, there is also a small, but growing, chance of conflict with Iran.”

The neoconservative war-lovers behind this effort have not changed, nor have their tactics. They realize, as many of them acknowledge, that they will have four more years in power if John McCain is elected. But they also realize that he may not be, and that their last hope for their long-desired attack on Iran lies in convincing the current administration to provoke one before its tenure ends. As much as one wishes it weren’t true, as much as the fixation on petty election issues might obscure it, the truly depraved extremist group that brought us the invasion of Iraq still exerts substantial influence and is quite busy trying to exert it.

UPDATE: It isn’t just the American neocons, but also the Israelis, who are escalating the “Attack Iran” campaign. The Jerusalem Post yesterday “reported” that “with Iran racing forward with its nuclear program, Israel now believes the Islamic Republic will master centrifuge technology and be able to begin enriching uranium on a military scale this year” (h/t quick strategy) and:

The new assessment moves up Israel’s forecasts on Teheran’s nuclear program by almost a full year — from 2009 to the end of 2008. According to the new timeline, Iran could have a nuclear weapon by the middle of next year.

According to several commenters, the Israeli Ambassador to the U.S. was on Fox News this morning making the same fear-mongering claim.

The principal tactic Israel-centric neocons have repeatedly used with Bush to induce him to attack Iran has been to tell him that history will judge him based on whether he permits Iran to obtain a nuclear weapon. From The Weekly Standard’s Irwin Stelzer, writing about a 2007 White House luncheon with Bush, historian Andrew Roberts, and a group of necons:

The closing note was a more serious one. Roberts said that history would judge the president on whether he had prevented the nuclearization of the Middle East. If Iran gets the bomb, Saudi Arabia, Egypt, and other countries will follow. “That is why I am so pleased to be sitting here rather than in your chair, Mr. President.” There was no response, other than a serious frown and a nod.

Norman Podhoretz, when telling the President to bomb Iran, used the same tactic:

“I urged Bush to take action against the Iranian nuclear facilities and explained why I thought there was no alternative,” said Podhoretz, 77, in an interview with The Sunday Times. . . .

He also told Bush: “You have the awesome responsibility to prevent another holocaust. You’re the only one with the guts to do it.” . . . .
“The president has said several times that he will be in the historical dock if he allows Iran to get the bomb. He believes that if we wait for threats to fully materialise, we’ll have waited too long — something I agree with 100%,’ Podhoretz said.

And now, magically up pops these new reports from Israel warning that the deadline to stop Iran’s nuclear bomb is the end of the year — right before George Bush leaves office. Bush has less than eight months left to fulfill his history-mandated mission “to prevent another holocaust” by attacking Iran, or else “be in the historical dock if he allows Iran to get the bomb.” They’re as transparent as they are dishonest and bloodthirsty.

Glenn Greenwald was previously a constitutional law and civil rights litigator in New York. He is the author of the New York Times Bestselling book “How Would a Patriot Act?,” a critique of the Bush administration’s use of executive power, released in May 2006. His second book, “A Tragic Legacy“, examines the Bush legacy.

Lebanon Descends Into Chaos

Lebanon Descends Into Chaos; Rival Leaders Order General Strike

By Robert Fisk

Go To Original

Burning tyres on the airport road, flights suspended, demands from the Druze leader Walid Jumblatt that Hizbollah moves secret cameras from runway 1-7 and end the militia's equally secret underground communications equipment. Across Corniche Mazraa, crowds of shrieking Sunni and Shia Muslims hurl abuse and stones at each other. A soldier comes up to my car at the crossroads. "Turn round," he shouts. "They're shooting."

Lebanon seems to feed on crisis, need crisis, breathe crisis, like a wounded man needs blood. The man who should be the president is head of the army and the man who believes he leads the resistance – Sayed Hassan Nasrallah of the Hizbollah – accuses Mr Jumblatt of doing Israel's work while Mr Jumblatt claims the head of Beirut airport security, Colonel Wafic Chucair, works for the Hizbollah and should be fired.

Yesterday, in case you hadn't guessed, was a "general strike" by opponents of the Lebanese government with all the usual chaos. Mr Nasrallah is to hold a press conference today and then we'll all find out if this latest crisis is the greatest crisis since the last great crisis. Yes, a good cup of cynicism is necessary to wash down the rhetoric and threats of the past few days. At its most serious is the incendiary language in which Lebanon's politicians now address each other, the kind of menacing words that could easily touch an assassin's heart.

Indeed, the start of this latest drama might be traced to the murder of two Phalangist officials in the Bekaa town of Zahle a few weeks ago. The murderer has been named, is linked to the pro-Syrian opposition and is still at large.

You could hear gunfire crackling across Beirut all morning. To top it all, soaring price increases – even of basic food – is creating a little revolution in the hearts of many Lebanese. Yesterday's strike was supposed to be organised by the General Labour Confederation, which is objecting to the government's new minimum wage offer of £171 a month.

The darker side of all this, of course, involves Beirut airport. Mr Jumblatt's claim that Hizbollah has installed cameras beside one of the runways appears to be correct. Lebanese army officers have apparently noticed the cameras which can monitor executive jets taking off and landing. However, the apparatus may well have been installed because the Hizbollah believes that runway 1-7 – which starts a few metres above the Mediterranean – could be used for a small seaborne landing by Israeli troops. There is a persistent rumour in Beirut that the Israelis were about to stage such an operation against the Hizbollah-controlled southern suburbs of Beirut on 28 April but that it was cancelled for equally mysterious reasons. Was this the origin of the cameras and of Hizbollah's unpleasant suggestion that Mr Jumblatt is doing Israel's work?

As usual, it was the sectarian content of the street violence which alarmed the army – a good many stones were chucked from high-rise buildings near the Cola bridge in west Beirut, the exact location of Sunni-Shia fighting in January last year. Even in the very centre of Beirut, piles of tyres were set alight, giving the city a sombre curtain of black smoke that drifted out to sea. So the capital of a country without a president – and for most of the time without a sitting parliament – is set to lose yet more international confidence.

What is it about Lebanon that creates these crises? Maybe at heart, it is the same old problem: to be a modern state, Lebanon must abandon confessionalism – the system which provides a Maronite for the presidency, a Sunni for the prime minister's seat, a Shia for the speaker of parliament, and so on. But if Lebanon abandoned confessionalism, it would no longer be Lebanon, because sectarianism is its identity; a fate which its children do not deserve but whose country was created by French masters on the ruins of the Ottoman empire. Ironically, the Lebanese Prime Minister Fouad Siniora now rules – or tries to rule – his nation from a building which was once the Beirut cavalry stables of the Ottoman army.

A Human Rights Crime by Jimmy Carter

A Human Rights Crime

The world must stop standing idle while the people of Gaza are treated with such cruelty

By Jimmy Carter

Go To Original

he world is witnessing a terrible human rights crime in Gaza, where a million and a half human beings are being imprisoned with almost no access to the outside world. An entire population is being brutally punished.

This gross mistreatment of the Palestinians in Gaza was escalated dramatically by Israel, with United States backing, after political candidates representing Hamas won a majority of seats in the Palestinian Authority parliament in 2006. The election was unanimously judged to be honest and fair by all international observers.

Israel and the US refused to accept the right of Palestinians to form a unity government with Hamas and Fatah and now, after internal strife, Hamas alone controls Gaza. Forty-one of the 43 victorious Hamas candidates who lived in the West Bank have been imprisoned by Israel, plus an additional 10 who assumed positions in the short-lived coalition cabinet.

Regardless of one's choice in the partisan struggle between Fatah and Hamas within occupied Palestine, we must remember that economic sanctions and restrictions on the supply of water, food, electricity and fuel are causing extreme hardship among the innocent people in Gaza, about one million of whom are refugees.

Israeli bombs and missiles periodically strike the area, causing high casualties among both militants and innocent women and children. Prior to the highly publicised killing of a woman and her four children last week, this pattern had been illustrated by a report from B'Tselem, the leading Israeli human rights organisation, which stated that 106 Palestinians were killed between February 27 and March 3. Fifty-four of them were civilians, and 25 were under 18 years of age.

On a recent trip through the Middle East, I attempted to gain a better understanding of the crisis. One of my visits was to Sderot, a community of about 20,000 in southern Israel that is frequently struck by rockets fired from nearby Gaza. I condemned these attacks as abominable acts of terrorism, since most of the 13 victims during the past seven years have been non-combatants.

Subsequently, I met with leaders of Hamas - a delegation from Gaza and the top officials in Damascus. I made the same condemnation to them, and urged that they declare a unilateral ceasefire or orchestrate with Israel a mutual agreement to terminate all military action in and around Gaza for an extended period.

They responded that such action by them in the past had not been reciprocated, and they reminded me that Hamas had previously insisted on a ceasefire throughout Palestine, including Gaza and the West Bank, which Israel had refused. Hamas then made a public proposal of a mutual ceasefire restricted to Gaza, which the Israelis also rejected.

There are fervent arguments heard on both sides concerning blame for a lack of peace in the Holy Land. Israel has occupied and colonised the Palestinian West Bank, which is approximately a quarter the size of the nation of Israel as recognised by the international community. Some Israeli religious factions claim a right to the land on both sides of the Jordan river, others that their 205 settlements of some 500,000 people are necessary for "security".

All Arab nations have agreed to recognise Israel fully if it will comply with key United Nations resolutions. Hamas has agreed to accept any negotiated peace settlement between the president of the Palestinian Authority, Mahmoud Abbas, and Israel's prime minister, Ehud Olmert, provided it is approved in a referendum of the Palestinian people.

This holds promise of progress, but despite the brief fanfare and positive statements at the peace conference last November in Annapolis, the process has gone backwards. Nine thousand new Israeli housing units have been announced in Palestine; the number of roadblocks within the West Bank has increased; and the stranglehold on Gaza has been tightened.

It is one thing for other leaders to defer to the US in the crucial peace negotiations, but the world must not stand idle while innocent people are treated cruelly. It is time for strong voices in Europe, the US, Israel and elsewhere to speak out and condemn the human rights tragedy that has befallen the Palestinian people.

· Jimmy Carter, a former president of the United States, is founder of The Carter Center

The Polluting Of The Environmental Protection Agency

The Polluting Of The Environmental Protection Agency

Go To Original

Former attorney general Alberto Gonzales brought disgrace to the Department of Justice, putting loyalty to the President above duty to the country, until the weight of numerous scandals forced his resignation in August 2007. As The New York Times described, he left "a Justice Department that has been tainted by political influence, depleted by the departures of top officials and weakened by sapped morale." Disturbing parallels can now be seen in Stephen L. Johnson, administrator of the Environmental Protection Agency (EPA), which President Nixon set up in 1970 to be an independent watchdog for the health of the environment and people. It has become clear that Johnson has subverted that mission, in contravention of science, ethics, and the law. In an oversight hearing yesterday on the politicization of the EPA, Sen. Sheldon Whitehouse (D-RI) directly drew the comparison, as McClatchy Newspapers reported. "The last few times Mr. Johnson has appeared before us, he has been less than forthcoming, as evasive and unresponsive as Alberto Gonzales," Whitehouse said. He added that the forced resignation of EPA regional administrator Mary Gade, who had been investigating dioxin contamination in Michigan by Dow Chemical, "smacks of the U.S. Attorney scandal at the Justice Department last summer." Like the nine fired U.S. attorneys, Gade was well-regarded and had received strong performance evaluations. As Whitehouse observed, "[H]er forced resignation reeks of political interference."

MARY GADE'S DISMISSAL: Mary Gade, the EPA's Midwest regional administrator who resigned last Thursday, laid the blame on her ongoing efforts to compel Dow Chemical to clean up its decades-old dioxin pollution from its flagship plant in Midland, MI. In an interview with the Chicago Tribune, Gade said, "There is no question this is about Dow." Committee Chair John Dingell (D-MI) has announced that he "is concerned about this and has asked his oversight staff to look into it." Sen. Dick Durbin (D-IL) has "asked for a meeting with the Administrator of EPA so that I can better understand why Ms. Gade has been placed on administrative leave." Gade is a lifelong Republican who supported President Bush's candidacy in 2000. Yet, as Center for American Progress Senior Fellow Robert Sussman describes, she was known as "one of the most seasoned and experienced environmental policy-makers in the country." Rep. Dave Camp (R-MI), in contrast, called Gade "unprofessional, vindictive and insulting." Camp represents Dow Chemical's home district and owns hundreds of thousands of dollars in Dow stock.

WHITE HOUSE CONTROL: Recent congressional investigations have exposed the degree to which the White House is exerting control over the actions of the EPA. One of the key responsibilities of the EPA is to protect Americans from exposure to toxic chemicals. Last week, Senate Environment and Public Works Committee Chairman Barbara Boxer (D-CA) released a damning report that exposed how toxic chemical "assessments are being undermined by secrecy and White House involvement." With assistance from the EPA's top scientific official, Dr. George Gray, the White House Office of Management and Budget (OMB) controls the assessment process, using the "deliberative process privilege" to prevent public oversight. Gray previously ran the Harvard Center for Risk Analysis, an industry-funded think tank founded by John D. Graham in 1990 that fights environmental regulation. Until 2006, Graham served as the Bush administration's regulatory gatekeeper in the OMB Office of Information and Regulatory Affairs where he repeatedly subverted health, safety and environmental safeguards. Johnson's EPA is riddled with officials with direct ties to the OMB, including the EPA's number-two official, Marcus Peacock, who worked in the OMB until 2005, and assistant administrator Christopher Bliley, who was OMB director Jim Nussle's chief of staff when Nussle served in Congress.

'ORWELLIAN' TACTICS: In the words of Boxer, Gray used "Alice in Wonderland" language to "defend the indefensible." She took particular offense at his claim that the EPA's regulatory process was "very transparent," considering that it involves a series of secret inter-agency reviews. Gray also repeatedly hearkened back to "scientific uncertainty" to describe Johnson's justification for setting standards for ozone and fine particulate matter pollution its scientific advisory boards said were not adequate to protect public health. However, as Dr. George Thurston testified, "In the face of uncertainty, the Clean Air Act stipulates that the Administrator must choose a more stringent standard, to ensure a margin of safety." Whitehouse -- who praised Gray "for his ability to say what I found to be preposterous things with a completely straight face" -- described Gray's treatment of toxicologist Dr. Deborah Rice as "Orwellian." In 2007, Rice was the chair of an expert peer review panel charged with setting safe exposure levels for deca-BDE, a toxic fire retardant that contaminates human blood and breast milk. The American Chemistry Council (ACC), acting on behalf of the Brominated Flame Retardant Industry Partnership, wrote to Gray to ask that he personally intervene in the process. ACC alleged that the panel is not an "independent, third-party review" because Dr. Rice is a "fervent advocate of banning deca-BDE." Rice was removed from the panel and her comments stripped because of "the perception of a potential conflict of interest."

Portrait of an Oil-Addicted Former Superpower

Portrait of an Oil-Addicted Former Superpower

How Rising Oil Prices Are Obliterating America's Superpower Status

By Michael T. Klare

Go To Original

Nineteen years ago, the fall of the Berlin Wall effectively eliminated the Soviet Union as the world's other superpower. Yes, the USSR as a political entity stumbled on for another two years, but it was clearly an ex-superpower from the moment it lost control over its satellites in Eastern Europe.

Less than a month ago, the United States similarly lost its claim to superpower status when a barrel crude oil roared past $110 on the international market, gasoline prices crossed the $3.50 threshold at American pumps, and diesel fuel topped $4.00. As was true of the USSR following the dismantling of the Berlin Wall, the USA will no doubt continue to stumble on like the superpower it once was; but as the nation's economy continues to be eviscerated to pay for its daily oil fix, it, too, will be seen by increasing numbers of savvy observers as an ex-superpower-in-the-making.

That the fall of the Berlin Wall spelled the erasure of the Soviet Union's superpower status was obvious to international observers at the time. After all, the USSR visibly ceased to exercise dominion over an empire (and an associated military-industrial complex) encompassing nearly half of Europe and much of Central Asia. The relationship between rising oil prices and the obliteration of America's superpower status is, however, hardly as self-evident. So let's consider the connection.

Dry Hole Superpower

The fact is, America's wealth and power has long rested on the abundance of cheap petroleum. The United States was, for a long time, the world's leading producer of oil, supplying its own needs while generating a healthy surplus for export.

Oil was the basis for the rise of first giant multinational corporations in the U.S., notably John D. Rockefeller's Standard Oil Company (now reconstituted as Exxon Mobil, the world's wealthiest publicly-traded corporation). Abundant, exceedingly affordable petroleum was also responsible for the emergence of the American automotive and trucking industries, the flourishing of the domestic airline industry, the development of the petrochemical and plastics industries, the suburbanization of America, and the mechanization of its agriculture. Without cheap and abundant oil, the United States would never have experienced the historic economic expansion of the post-World War II era.

No less important was the role of abundant petroleum in fueling the global reach of U.S. military power. For all the talk of America's growing reliance on computers, advanced sensors, and stealth technology to prevail in warfare, it has been oil above all that gave the U.S. military its capacity to "project power" onto distant battlefields like Iraq and Afghanistan. Every Humvee, tank, helicopter, and jet fighter requires its daily ration of petroleum, without which America's technology-driven military would be forced to abandon the battlefield. No surprise, then, that the U.S. Department of Defense is the world's single biggest consumer of petroleum, using more of it every day than the entire nation of Sweden.

From the end of World War II through the height of the Cold War, the U.S. claim to superpower status rested on a vast sea of oil. As long as most of our oil came from domestic sources and the price remained reasonably low, the American economy thrived and the annual cost of deploying vast armies abroad was relatively manageable. But that sea has been shrinking since the 1950s. Domestic oil production reached a peak in 1970 and has been in decline ever since -- with a growing dependency on imported oil as the result. When it came to reliance on imports, the United States crossed the 50% threshold in 1998 and now has passed 65%.

Though few fully realized it, this represented a significant erosion of sovereign independence even before the price of a barrel of crude soared above $110. By now, we are transferring such staggering sums yearly to foreign oil producers, who are using it to gobble up valuable American assets, that, whether we know it or not, we have essentially abandoned our claim to superpowerdom.

According to the latest data from the U.S. Department of Energy, the United States is importing 12-14 million barrels of oil per day. At a current price of about $115 per barrel, that's $1.5 billion per day, or $548 billion per year. This represents the single largest contribution to America's balance-of-payments deficit, and is a leading cause for the dollar's ongoing drop in value. If oil prices rise any higher -- in response, perhaps, to a new crisis in the Middle East (as might be occasioned by U.S. air strikes on Iran) -- our annual import bill could quickly approach three-quarters of a trillion dollars or more per year.

While our economy is being depleted of these funds, at a moment when credit is scarce and economic growth has screeched to a halt, the oil regimes on which we depend for our daily fix are depositing their mountains of accumulating petrodollars in "sovereign wealth funds"Abu Dhabi Investment Authority (ADIA), alone holds $875 billion. (SWFs) -- state-controlled investment accounts that buy up prized foreign assets in order to secure non-oil-dependent sources of wealth. At present, these funds are already believed to hold in excess of several trillion dollars; the richest, the

The ADIA first made headlines in November 2007 when it acquired a $7.5 billion stake in Citigroup, America's largest bank holding company. The fund has also made substantial investments in Advanced Micro Systems, a major chip maker, and the Carlyle Group, the private equity giant. Another big SWF, the Kuwait Investment Authority, also acquired a multibillion-dollar stake in Citigroup, along with a $6.6 billion chunk of Merrill Lynch. And these are but the first of a series of major SWF moves that will be aimed at acquiring stakes in top American banks and corporations.

The managers of these funds naturally insist that they have no intention of using their ownership of prime American properties to influence U.S. policy. In time, however, a transfer of economic power of this magnitude cannot help but translate into a transfer of political power as well. Indeed, this prospect has already stirred deep misgivings in Congress. "In the short run, that they [the Middle Eastern SWFs] are investing here is good," Senator Evan Bayh (D-Indiana) recently observed. "But in the long run it is unsustainable. Our power and authority is eroding because of the amounts we are sending abroad for energy…."

No Summer Tax Holiday for the Pentagon

Foreign ownership of key nodes of our economy is only one sign of fading American superpower status. Oil's impact on the military is another.

Every day, the average G.I. in Iraq uses approximately 27 gallons of petroleum-based fuels. With some 160,000 American troops in Iraq, that amounts to 4.37 million gallons in daily oil usage, including gasoline for vans and light vehicles, diesel for trucks and armored vehicles, and aviation fuel for helicopters, drones, and fixed-wing aircraft. With U.S. forces paying, as of late April, an average of $3.23 per gallon for these fuels, the Pentagon is already spending approximately $14 million per day on oil ($98 million per week, $5.1 billion per year) to stay in Iraq. Meanwhile, our Iraqi allies, who are expected to receive a windfall of $70 billion this year from the rising price of their oil exports, charge their citizens $1.36 per gallon for gasoline.

When questioned about why Iraqis are paying almost a third less for oil than American forces in their country, senior Iraqi government officials scoff at any suggestion of impropriety. "America has hardly even begun to repay its debt to Iraq," said Abdul Basit, the head of Iraq's Supreme Board of Audit, an independent body that oversees Iraqi governmental expenditures. "This is an immoral request because we didn't ask them to come to Iraq, and before they came in 2003 we didn't have all these needs."

Needless to say, this is not exactly the way grateful clients are supposed to address superpower patrons. "It's totally unacceptable to me that we are spending tens of billions of dollars on rebuilding Iraq while they are putting tens of billions of dollars in banks around the world from oil revenues," said Senator Carl Levin (D-Michigan), chairman of the Armed Services Committee. "It doesn't compute as far as I'm concerned."

Certainly, however, our allies in the region, especially the Sunni kingdoms of Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) that presumably look to Washington to stabilize Iraq and curb the growing power of Shiite Iran, are willing to help the Pentagon out by supplying U.S. troops with free or deeply-discounted petroleum. No such luck. Except for some partially subsidized oil supplied by Kuwait, all oil-producing U.S. allies in the region charge us the market rate for petroleum. Take that as a striking reflection of how little credence even countries whose ruling elites have traditionally looked to the U.S. for protection now attach to our supposed superpower status.

Think of this as a strikingly clear-eyed assessment of American power. As far as they're concerned, we're now just another of those hopeless oil addicts driving a monster gas-guzzler up to the pump -- and they're perfectly happy to collect our cash which they can then use to cherry-pick our prime assets. So expect no summer tax holidays for the Pentagon, not in the Middle East, anyway.

Worse yet, the U.S. military will need even more oil for the future wars on which the Pentagon is now doing the planning. In this way, the U.S. experience in Iraq has especially worrisome implications. Under the military "transformation" initiated by Secretary of Defense Donald Rumsfeld in 2001, the future U.S. war machine will rely less on "boots on the ground" and ever more on technology. But technology entails an ever-greater requirement for oil, as the newer weapons sought by Rumsfeld (and now Secretary of Defense Robert Gates) all consume many times more fuel than those they will replace. To put this in perspective: The average G.I in Iraq now uses about seven times as much oil per day as G.I.s did in the first the Gulf War less than two decades ago. And every sign indicates that the same ratio of increase will apply to coming conflicts; that the daily cost of fighting will skyrocket; and that the Pentagon's capacity to shoulder multiple foreign military burdens will unravel. Thus are superpowers undone.

Russia's Gusher

If anything demonstrates the critical role of oil in determining the fate of superpowers in the current milieu, it is the spectacular reemergence of Russia as a Great Power on the basis of its superior energy balance. Once derided as the humiliated, enfeebled loser in the U.S.-Soviet rivalry, Russia is again a force to be reckoned with in world affairs. It possesses the fastest-growing economy among the G-8 group of major industrial powers, is the world's second leading producer of oil (after Saudi Arabia), and its top producer of natural gas. Because it produces far more energy than it consumes, Russia exports a substantial portion of its oil and gas to neighboring countries, making it the only Great Power not dependent on other states for its energy needs.

As Russia has become an energy-exporting state, it has moved from the list of has-beens to the front rank of major players. When President Bush first occupied the White House, in February 2001, one of his highest priorities was to downgrade U.S. ties with Russia and annul the various arms-control agreements that had been forged between the two countries by his predecessors, agreements that explicitly conferred equal status on the USA and the USSR.

As an indication of how contemptuously the Bush team viewed Russia at that time, Condoleezza Rice, while still an adviser to the Bush presidential campaign, wrote, in the January/February 2000 issue of the influential Foreign Affairs, "U.S. policy… must recognize that American security is threatened less by Russia's strength than by its weakness and incoherence." Under such circumstances, she continued, there was no need to preserve obsolete relics of the dual superpower past like the Anti-Ballistic Missile (ABM) Treaty; rather, the focus of U.S. efforts should be on preventing the further erosion of Russian nuclear safeguards and the potential escape of nuclear materials.

In line with this outlook, President Bush believed that he could convert an impoverished and compliant Russia into a major source of oil and natural gas for the United States -- with American energy companies running the show. This was the evident aim of the U.S.-Russian "energy dialogue" announced by Bush and Russian President Vladimir Putin in May 2002. But if Bush thought Russia was prepared to turn into a northern version of Kuwait, Saudi Arabia, or Venezuela prior to the arrival of Hugo Chávez, he was to be sorely disappointed. Putin never permitted American firms to acquire substantial energy assets in Russia. Instead, he presided over a major recentralization of state control when it came to the country's most valuable oil and gas reserves, putting most of them in the hands of Gazprom, the state-controlled natural gas behemoth.

Once in control of these assets, moreover, Putin has used his renascent energy power to exert influence over states that were once part of the former Soviet Union, as well as those in Western Europe that rely on Russian oil and gas for a substantial share of their energy needs. In the most extreme case, Moscow turned off the flow of natural gas to Ukraine on January 1, 2006, in the midst of an especially cold winter, in what was said to be a dispute over pricing but was widely viewed as punishment for Ukraine's political drift westwards. (The gas was turned back on four days later when Ukraine agreed to pay a higher price and offered other concessions.) Gazprom has threatened similar action in disputes with Armenia, Belarus, and Georgia -- in each case forcing those former Soviet SSRs to back down.

When it comes to the U.S.-Russian relationship, just how much the balance of power has shifted was evident at the NATO summit at Bucharest in early April. There, President Bush asked that Georgia and Ukraine both be approved for eventual membership in the alliance, only to find top U.S. allies (and Russian energy users) France and Germany blocking the measure out of concern for straining ties with Russia. "It was a remarkable rejection of American policy in an alliance normally dominated by Washington," Steven Erlanger and Steven Lee Myers of the New York Times reported, "and it sent a confusing signal to Russia, one that some countries considered close to appeasement of Moscow."

For Russian officials, however, the restoration of their country's great power status is not the product of deceit or bullying, but a natural consequence of being the world's leading energy provider. No one is more aware of this than Dmitri Medvedev, the former Chairman of Gazprom and new Russian president. "The attitude toward Russia in the world is different now," he declared on December 11, 2007. "We are not being lectured like schoolchildren; we are respected and we are deferred to. Russia has reclaimed its proper place in the world community. Russia has become a different country, stronger and more prosperous."

The same, of course, can be said about the United States -- in reverse. As a result of our addiction to increasingly costly imported oil, we have become a different country, weaker and less prosperous. Whether we know it or not, the energy Berlin Wall has already fallen and the United States is an ex-superpower-in-the-making.

Michael Klare is a professor of peace and world security studies at Hampshire College and author of the just-released Rising Powers, Shrinking Planet: The New Geopolitics of Energy (Metropolitan Books). A documentary film based on his previous book, Blood and Oil, is available from the Media Education Foundation and can be ordered at A brief video of Klare discussing key subjects in his new book can be viewed by clicking here.

The "Surge" of Iraqi Prisoners

The "Surge" of Iraqi Prisoners

By Ciara Gilmartin

Go to Original

Amid all the talk about the U.S. military "surge" in Iraq, little has been said about the accompanying "surge" of Iraqi prisoners, whose numbers rose to nearly 51,000 at the end of 2007. Four years after the Abu Ghraib scandal, occupation forces are holding far more Iraqis than ever before and thousands more languish in horrendous Iraqi-run prisons.

The Detention Camps

Detainees are held by the U.S. command in two main locations - Camp Bucca, a 100-acre prison camp and Camp Cropper, inside a massive U.S. base near the Baghdad airport. The number of Iraqis held in these facilities has steadily risen since the early days of the occupation. In 2007, the inmate count rose 70% - from 14,500 to 24,700.

Camp Bucca, with about 20,000 inmates, is perhaps the world's largest extrajudicial internment camp. The facility is organized into "compounds" of 800 detainees each, surrounded by fences and watch towers. Most detainees live in large communal tents, subject to collapse in the area's frequent sandstorms. Water has at times been in short supply, while temperatures in the desert conditions can be scorching hot in the day and bone-chilling at night.

In October 2007, the U.S. Army Corps of Engineers awarded a contract to expand Camp Bucca's capacity from 20,000 to 30,000. While easing notorious crowding, the contract suggests Washington is preparing for even more detentions in the future.

Camp Cropper consists of more traditional cellblock buildings. Among its roughly 4,000 inmates are hundreds of juveniles. Cropper is a site of ongoing interrogation and it holds many long-term detainees who complain that they never see the light of day. Though recently expanded, the facility suffers from overcrowding, poor medical attention and miserable conditions.

Indefinite Detention

U.S. forces are holding nearly all of these persons indefinitely, without an arrest warrant, without charge, and with no opportunity for those held to defend themselves in a trial. While the United States has put in place a formal review procedure that supposedly evaluates all detainees for release on a regular basis, detainees cannot attend these reviews, cannot confront evidence against them, and cannot be represented properly by an attorney. Families are only irregularly notified of the detentions, and visits are rarely possible.

These conditions are in direct violation of international human rights law, though Washington claims that such legal constraints do not apply, because the United States considers its forces to be engaged in an "international armed conflict." The human rights community, however, firmly disagrees arguing that the conflict is not international in the traditional legal sense. Furthermore, international human rights law applies at all times, in war as well as in peace.

The detention facilities are closed to human rights monitors like Amnesty International, Human Rights Watch, or the International Federation of Human Rights. Even the United Nations Assistance Mission in Iraq, mandated by the Security Council to provide human rights reporting, is denied access by the U.S. command. Lack of such monitors greatly increases the likelihood that detainees will suffer from abuse and bad conditions, as human rights organizations have often pointed out.

Prisoners at Bucca have rioted to protest maltreatment, poor conditions and religious insults by guards. Most troubling, the military regularly confirms deaths of detainees in the facility, suggesting that excessive force is commonly used.

Iraqi Government Prisons

In addition to the U.S. detainees, the Government of Iraq is holding over 26,000 prisoners. Some of those held in Iraqi facilities have been convicted of crimes, but many others are being held in unlimited detention without charge. Some have even been tried in court and, even having been found innocent, continue to be held indefinitely. Many prisoners have been convicted in trials that do not measure up to minimal standards of legality. As the UN concludes in a recent report, "substantial improvement is required to prevent gross miscarriage of justice."

Recent UN reports have also said that the facilities are "severely overcrowded" and that they have "dire sanitation and hygiene conditions." Further, there were said to be "continuing reports of widespread and routine torture and ill-treatment of detainees." Several women inmates, interviewed by UN researchers, reported being raped and sexually abused while held in police custody. The U.S. command, with its enormous influence over the Iraqi detention system, has a large responsibility for these conditions.

Time to Speak Out

On February 13, 2008 the Iraqi Parliament passed an Amnesty Law that could apply to many thousands of detainees. The U.S. command has also recently announced a program of detainee releases. But despite this public relations offense, detainee numbers have declined only slightly since a peak in November 2007. Given the history of previous announcements of detainee releases, little change is anticipated.

It is time for the public in the United States and around the world to face the sordid reality of post-surge Iraq and do something about it - beginning with the release of all those illegally held in U.S. and Iraqi prisons. Detention facilities should be opened to national and international observers. Clear accountability must be established for U.S. officers and contractors in charge of the prisons. The whole abusive system must be thoroughly overhauled or closed down.

U.S. military and civilian leaders are not the only ones complicit in the abuse and lack of due process of Iraqi detainees. All who stay silent in the face of the Iraq gulag allow it to continue.

216 Held in Protests of Police Acquittals

216 Held in Protests of Police Acquittals

By Thomas J. Lueck

Go to Original

In the largest public protest against the acquittal of three detectives in the shooting death of Sean Bell, 216 people were arrested on Wednesday in carefully orchestrated demonstrations that halted traffic at busy intersections in Manhattan and Brooklyn, the police said.

The demonstrations, described by the Rev. Al. Sharpton as "pray-ins," played out on a bright spring afternoon as boisterous displays of civil disobedience in which people signed up to be arrested, assuring organizers and lawyers that they were carrying proper identification to show to the police.

Once positioned at the intersections, demonstrators dropped to their knees or sat and prayed briefly before hundreds of police officers escorted them to buses and police vehicles.

"We believe deeply in what we are doing today," said Hazel Dukes, the president of the New York State chapter of the N.A.A.C.P., who was one of a dozen people arrested after they knelt and blocked traffic about 4:30 p.m. on the Canal Street ramps to the Holland Tunnel.

"We have come to raise our voice for justice," she said before being placed in white plastic handcuffs and taken to a police van.

In all, it appeared that more than 1,000 people participated in the protests, although they attracted so many onlookers that it sometimes became difficult to distinguish protesters from tourists or people out for a stroll after work who had stopped to watch the commotion.

"It's good to see people stand up for their rights," said Julia Mordaunt, 27, a graphic designer from Burlington, Vt., who was on her way to buy jeans and stopped to watch about 100 demonstrators who had gathered at the southwest corner of 60th Street and Third Avenue, near an entrance to Bloomingdale's. About 3:50 p.m., that group marched east toward the Queensboro Bridge, linked arms and sat along Second Avenue, blocking traffic on and off the bridge. Thirty-six people there were arrested.

The protests were staged at six locations in the city. In the largest one, about 400 people assembled about 4:30 on the Centre Street approach to the Brooklyn Bridge and blocked Brooklyn-bound traffic for more than an hour. About 60 people in that demonstration were arrested, including Mr. Sharpton and Nicole Paultre Bell, who was to have married Mr. Bell on the day he was killed in a hail of 50 bullets fired by the officers outside a nightclub in Jamaica, Queens, in 2006.

Two friends of Mr. Bell's, Joseph Guzman and Trent Benefield, who were injured in the fusillade, were among those arrested at the Brooklyn Bridge site.

Demonstrators also stopped traffic at the Manhattan entrance to the Queens-Midtown Tunnel, where about 20 were arrested. They sat in front of cars waiting to come off the Manhattan Bridge in Brooklyn, where 23 were arrested, and blocked ramps at the Triborough Bridge at 125th Street and Second Avenue, where about 40 were arrested.

The scope of the protests on Wednesday contrasted with the relatively muted response to a state judge's acquittals of the detectives on April 25. At the time, Mr. Sharpton and other activists, politicians and community leaders praised the overall peaceful response that followed the verdict, but vowed to fight the judge's decision in strategic rather than bellicose ways.

The demonstrations in New York were mirrored by a smaller one in Atlanta, where 75 people stood on the steps of the State Capitol on Wednesday to protest the verdict in the Bell case, although no one was arrested. Mr. Sharpton has said that more New York City demonstrations are planned "to shut down" the city in the spring, though a date was not specified.

Also on Wednesday, Gov. David A. Paterson announced that he would meet privately with Mr. Sharpton and Mr. Bell's relatives on Thursday in New York City. The governor has said that he was surprised by the number of shots fired and by the acquittals of the three detectives.

Paul J. Browne, a police spokesman, said almost all of those arrested on Wednesday were charged with disorderly conduct, processed through central booking in Manhattan and issued tickets to appear in court. He said that about six demonstrators were issued summonses for less serious violations.

There were no injuries, and no arrests for violence, he said.

"As anticipated, it was not violent and there was some traffic disruption," Mr. Browne said. "But both the civil disobedience and the resulting arrests were conducted in an orderly fashion."

But the crush of the demonstrators, sometimes worsened by the pushing and shoving of photographers trying to get close to the demonstrations, led to tense moments.

In Brooklyn, the Rev. Herbert Daughtry and City Councilman Charles Barron led protesters to the foot of the Brooklyn Bridge, but were stopped by officers holding orange netting. The protesters then turned and marched on Tillary Street toward the Manhattan Bridge, but officers jogged in front of them with the netting. In the end, Mr. Daughtry simply told the group to sit cross-legged in the street and wait to be arrested.

Largest Institutional Money Manager Subprime Damages May Reach 12 Times Reserve Amount

State Street Subprime Damages May Reach 12 Times Reserve Amount

By Carlyn Kolker

Go To Original

State Street Corp., the largest money manager for institutions, may have to pay more than 12 times the $625 million it set aside for damages from lawsuits over losses from subprime-mortgage investments made for pension funds.

Prudential Financial Inc., the second-largest U.S. life insurer, is suing the Boston-based company on behalf of more than 200 retirement plans, alleging that State Street inappropriately invested their money in risky securities. Three other companies filed similar actions.

Neither side has disclosed potential losses, though State Street has reported that the value of assets ‘‘adversely affected'' by the collapse in subprime mortgages fell 56 percent to $6.1 billion at the end of 2007 from $13.9 billion on June 30. That $7.8 billion decline represents the money manager's maximum legal exposure, according to Marcia Wagner, 45, a partner at Boston-based Wagner Law Group, which specializes in retirement fund and employee-benefit law.

The cumulative loss in value serves as a ‘‘ceiling'' in these cases, and the $625 million reserve State Street put aside in December is the company's ‘‘floor,'' or minimum liability, Wagner said.

The reserve is a ‘‘lowball,'' Wagner said. ‘‘We are talking very large in terms of damages,'' though they're unlikely to reach as high as the ceiling.

‘‘To the extent plans were misled into purchasing something they were not authorized to purchase, they may have a fiduciary obligation to sue,'' said Wagner, who isn't representing the investment manager or plaintiffs. ‘‘It's sue or be sued.''

‘Bad Investments'

‘‘They allowed bad investments, so they should be attempting to make the plans whole,'' Wagner said. ‘‘State Street is quite exposed, especially if one of its affiliates rendered advice or marketed the funds to be something they were not.''

State Street will probably have to pay a minimum of $1 billion, according to William Fredericks, 46, attorney for plaintiff Unisystems Inc., a closely held New York publisher.

‘‘Based on public disclosures to date, damages should certainly be in the 10 figures,'' said the lawyer from Bernstein Litowitz Berger & Grossmann in New York.

State Street's reserve is ‘‘currently adequate to satisfy our legal exposure,'' spokeswoman Arlene Roberts said. A sum of $1 billion would represent 80 percent of the company's 2007 net income.

Three corporate retirement and welfare funds have asked the U.S. District Court in Manhattan to consider granting class- action status, which allows others with similar claims to join a case.

Companies That Sued

The companies are Nashua Corp., a maker of print-imaging products in Nashua, New Hampshire; Merrimack Mutual Fire Insurance Co., based in Andover, Massachusetts; and Unisystems.

That possibility raises the financial stakes for State Street, according to Adam Savett, a vice president at RiskMetrics Group Inc., a New York firm that studies corporate risks, including legal issues.

‘‘When you have a class action, and it's composed of hundreds or thousands of people, that starts to mean eye-opening amounts of damages,'' Savett said.

To achieve class-action status, the funds need to show that their cases have common facts, said John Coffee, a securities law professor at Columbia University in New York.

‘‘The common issue will be, did they all get the same advice?'' Coffee said. Even without class-action status, the pension plans may still sue separately because the size of the claims justifies the cost of individual cases, Coffee said.

Under Erisa

State Street is being sued under the federal Employee Retirement Income Security Act, or Erisa. Plaintiffs claim State Street breached its fiduciary duty by investing pensioners' money in high-risk securities instead of the conservative funds promised.

That kind of accusation is easier to prove than fraud, a claim non-pension plaintiffs would have to make, said Patrick DiCarlo, a lawyer at Atlanta-based Alston & Bird, which isn't involved in the case.

‘‘In your classic securities-fraud context, you have to prove a fraudulent intent,'' DiCarlo said. ‘‘Here, all you have to prove is that the investment is imprudent.''

Success against State Street might lead to similar litigation against other companies, DiCarlo said. Suits against investment advisers including Regions Financial Corp.'s Morgan Keegan unit are being studied, according to Derek Loeser of the Seattle law firm Keller Rohrback, which represents the plaintiffs seeking class-action status.

Morgan Keegan Response

‘‘With there not being any litigation in place, we don't have anything to comment on,'' Morgan Keegan spokeswoman Kathy Ridley said.

‘‘You will absolutely see something like this State Street litigation against another company,'' said RiskMetrics' Savett, who tracks securities and Erisa cases related to the subprime lending crisis. He said he knows of none so far.

Loeser said he expects State Street to become a target of more suits, particularly from public-sector pension funds.

The company was also sued over pension-fund losses by the Houston police officers' pension system, the Memorial Hermann Healthcare System in Houston and the Welborn Baptist Foundation in Evansville, Indiana. Those cases don't include Erisa claims.

Litigation makes investors uneasy about the shares, analysts said.

‘‘It's certainly a dark cloud,'' said Gerard Cassidy of RBC Capital Markets in Portland, Maine. ‘‘It's another reason why investors have to be cautious on this stock.'' He rates State Street sector perform, equivalent to a ‘‘hold'' recommendation.

Analyst Recommendations

Nine analysts label the company ‘‘buy,'' and 10 recommend holding it, according to Bloomberg data. State Street yesterday fell $1.92, or 2.5 percent, to $74 in New York Stock Exchange composite trading.

The company is up 5.8 percent for the past 12 months, versus a 7.8 percent decline in the Standard & Poor's 500 Index and a 30 percent drop in the S&P 500 Financials Index.

The cases are combined in In re State Street Bank and Trust Co. Erisa Litigation, 1:07-cv-08488, U.S. District Court, Southern District of New York (Manhattan).

Lipsky of IMF Says Inflation Is Back, Posing Threat to Economic Stability

IMF Says Inflation Back After Years of ‘Quiescence'

By Christopher Anstey

Go To Original

Inflation is emerging as a threat to economic stability after years of ‘‘quiescence,'' and officials must be wary of policies that stoke consumer prices, the International Monetary Fund's deputy chief said.

‘‘This inflation speed-up must be taken seriously as it creates potentially significant challenges to economic stability,'' John Lipsky, the IMF's first deputy managing director, said in a speech in New York today. A return to 1970s- style high inflation and rising price expectations ‘‘cannot be discarded out of hand,'' he said.

While the surge in energy and other commodity prices is the main cause of the danger, low central bank interest rates and a falling dollar are also contributing, Lipsky said. Speaking after the European Central Bank kept its main rate at a six-year high, the official said the inflation outlook ‘‘appropriately is central'' to European policy makers' priorities.

In the U.S., as growth ‘‘recovers,'' consumer-price developments will ‘‘assume greater importance'' for the Federal Reserve, said Lipsky, a former JPMorgan Chase & Co. chief economist who joined the IMF in 2006.

‘‘Low interest rates have a statistically significant impact on commodity prices'' according to preliminary evidence, the IMF official said. ‘‘Exchange-rate shifts also appear to influence commodity prices.''

$25 Cheaper

IMF research indicates that if the dollar hadn't fallen from 2002 to 2007, oil prices would be $25 a barrel lower. Crude futures surpassed $120 a barrel this week for the first time. Commodity prices excluding fuel would be 12 percent lower, Lipsky said.

Middle East and Asian countries that keep their currencies linked to the dollar are seeing inflation pressures worsen as a result, Lipsky said.

‘‘In the euro area, the sharp rise in inflation and concerns about potential deterioration in inflation expectations are dampening consumer confidence and spending,'' he said. ‘‘The inflation outlook appropriately is central to the ECB's policy considerations.''

The ECB earlier today left its benchmark interest rate at 4 percent.

‘‘Policy prospects could shift, however, if inflation expectations remain well anchored and slowing growth reduces inflation pressures,'' Lipsky said.

Record Levels

Crude oil prices have almost doubled in the past 12 months and commodities including corn, wheat, rice and soybeans have all reached records this year. In the U.S., consumer prices climbed 4 percent in March from a year before, up from a 2.8 percent rate in March 2007. Inflation in the 15-nation euro region accelerated to 3.6 percent two months ago, the fastest in almost 16 years.

‘‘Inflation rates are expected to remain high for a rather protracted period of time before gradually declining again,'' ECB President Jean-Claude Trichet said at a press conference in Athens today.

Fed officials anticipate that slowing U.S. economic growth and rising unemployment will help curb inflation. Policy makers last week signaled they're ready for a pause in cutting rates after seven reductions since September.

Lipsky urged world policy makers to encourage investment in oil production, avoid trade protectionism and reduce subsidies for biofuels to help bring down energy and commodity costs.

Biofuels Subsidies

Corn and soybean prices have risen in part because of subsidies in advanced countries for fuels derived from those commodities, Lipsky said.

The most recent jump in oil prices has been ‘‘qualitatively different'' from the previous climb since 2003, which was driven by rising world demand, the IMF's spokesman indicated at a press briefing today.

‘‘The recent increase in oil prices is going to be an additional headwind in terms of growth this year'' for the global economy, external relations director Masood Ahmed told reporters in Washington. The fund anticipates that oil markets will ‘‘remain tight in the medium term,'' he also said.