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Special Update #22 - WAR ON TERROR - NEXT STOP IRAQ

INTRODUCTION

In this Special Update, we will analyze the escalating military situation in the Middle East. As this is written, Secretary of State Colin Powell has managed to negotiate neither a cease-fire nor a new peace initiative and is on his way home. As I will discuss below, this may have been precisely the outcome the Bush administration wanted.

The Bush administration has taken a great deal of heat from its conservative base for criticizing Israel and appearing to have a double standard when it comes to fighting terrorism - one standard for the US and another for Israel. The media was quick to jump on the Bush administration for being "unengaged" and "waffling" on its Mid-East policy. But as I will lay it out for you, this may all be part of a very craftily planned strategy to pave the way for removing Saddam Hussein.

If some of the sources I quote in this Special Update are correct, there is no chance for peace anytime soon, and there is at least the possibility that a more serious Arab-Israeli war may follow. As you will read below, there are reportedly strategic military movements going on in Iraq, Iran and Syria which could be preparations for a broader conflict.

There are those who believe Iraq and Iran may be planning a broader attack on Israel, specifically to stave-off the expected US attack on their regimes. If the Arabs launch a broader attack on Israel just ahead, then everything changes. Also, if the war scenario plays out, we could very likely be looking at a new oil embargo on the West.

As usual, what you will read below is not what you are hearing in the mainstream media. But what else is new? Anyway, let's jump right in.

THE BUSH ADMINISTRATION'S "DISJOINTED" MID-EAST POLICY

The media has been thrilled the last few weeks. Finally, they had something about which they could criticize the president and his administration. First, they criticized Bush for being "disengaged" and all but silent over the last few months as the violence in Israel and the West Bank escalated.

Then Bush gave his April 4 "enough is enough" speech in the Rose Garden when he demanded that Israel "immediately withdraw" from the West Bank. The media praised Bush, briefly, for criticizing Israel but quickly resumed clamoring that the administration had waited too long, let things get out of control and was "incoherent" and "incompetent." Meanwhile, many conservatives lambasted Bush for his "double-standard" position on Israel and its war on terror.

Israel, of course, did not withdraw from the West Bank, and Bush had to back off of his demand for an immediate pullback of troops. The media had another field day, calling this a "reversal" in the administration's "disjointed" Mid-East policy. Bush then announced that he would dispatch Colin Powell to the area to negotiate a cease-fire and try to set a date for new peace talks. The media immediately declared that Powell's trip would be fruitless.

Apparently it was. As this is written, Powell is on his way home with neither a withdrawal of Israeli troops nor a date for new peace talks. As expected, the media is calling the Powell trip a "failure" and a humiliation for the Bush administration. But has the media gotten it all wrong?

DOES BUSH HAVE A MUCH MORE SOPHISTICATED PLAN IN PLACE?

Sources I read believe he and his team do. Let's not forget that while President Bush was only a governor in the past (with relatively little foreign policy experience), he has wisely put together one of the most experienced foreign policy teams (Cheney, Powell, Rumsfeld, Wolfowitz, etc.) in history.

My sources believe that the Bush administration remained purposely disengaged early-on in the Israel/Palestinian escalation of violence as a part of a much larger plan. Bush and his advisors looked at the president's still soaring approval ratings and decided that they had the luxury of allowing the president to appear to be disengaged initially.

They also decided that it would be in our best interest to let the world see that Arafat is the terrorist that he is, once and for all. They wanted to let the world see, once again, that Arafat and his top aides do not want peace; they only want the destruction of Israel. Conveniently, Bush's apparent disengagement gave the Israelis time to squash Palestinian terrorist compounds and arrest or kill the ringleaders in the area.

Okay so far, but why was it necessary for Bush to criticize the Israelis at all? First, the Bush team knew they had the political capital and approval ratings to take this step and endure what they knew would be some temporary fallout from conservatives. Second, what Bush's speech did was to take the heat off America for essentially supporting Ariel Sharon's war. By publicly haranguing Sharon, by pressing him to do something most American officials knew wouldn't happen, the White House got some credibility for even-handedness in the Middle East, while at the same time appeasing the Europeans.

The next question is, why would the Bush team send Colin Powell on a mission that was doomed to failure? Maybe they wanted it to fail. Now they can say, "Look, we gave it our best shot (Colin Powell); we tried; it failed; there's no way to deal with these people; so we're moving on."

The current Bush strategy is not centered on solving the Arab-Israeli conflict. The Bush people are far too intelligent to believe that such a solution is even faintly feasible in the near-term. What it IS about is demonstrating to the world that no level of engagement is likely to achieve anything worthwhile under current conditions. As a result, the US is not going to get further involved; we have to let the Israelis and the Palestinians work it out or fight it out, at least for now; because we have other business to tend to. Specifically, the war on terror needs to move on.

THEN AGAIN, THERE'S THE CONSERVATIVES' CRITICAL VIEW OF BUSH'S LATEST MID-EAST POLICY

As noted, the strategy discussed above is only one view of the Bush administration's recent actions, or lack thereof, with regard to Mid-East policy. Many conservatives are outraged, as mentioned above, that Bush stopped short of calling Arafat a terrorist and, even worse, sent Colin Powell to meet with him.

Some in the conservative camp who have been staunch supporters of the war in Afghanistan now believe President Bush has reverted to Clinton-era politics with its latest handling of the Mid-East crisis. I can only hope that the Bush Mid-East strategy outlined above is accurate, and that the analysis in the following Wall Street Journal editorial is off-base.

Read it and decide for yourself.

The conservative analysis of Bush's latest Mid-East policy.

NEXT STOP: IRAQ

As discussed above, the latest Bush strategy in the Mid-East may have been part of a larger plan to advance the war on terror. In Special Updates #20 and #21, I provided you specific information and analysis that strongly suggests the administration has some troubling intelligence, presumably something about more serious terrorist attacks. I have not been able to uncover any additional information about the nature or the seriousness of the threat.

It would seem reasonable to assume that the list of candidates thought to be the source of the threat would be fairly short. No doubt, Iraq would be at or near the top of that list. My sources believe the US is definitely planning to take out Saddam Hussein, perhaps very soon.

America has been quietly moving the bulk of its military operations from Saudi Arabia to the more stable base in Qatar and elsewhere, just so the war on Iraq is not contingent on Saudi approval. We have also quietly intensified our forces and military equipment in Kuwait and placed them on highest alert. We are also repositioning our air power around the region.

If you are among those who think the recent flurry of diplomacy is a sign that President Bush has gone wobbly on terrorism, or has been distracted from the war on terror, I believe you are very mistaken. Bush and his team know that the bottom-line assessment of the Mid-East is this:

Until Iraq and Iran have been dealt with, no peace in Israel will be possible.

Those who think that settling the Arab-Israeli conflict is the key to solving the problems in the Middle East have it exactly the wrong way around.

Iraq and Iran are the financial, ideological and military instigators of the current intifada. They intensified the Arab-Israeli conflict precisely to derail the coming war against them.

Only when the terrorist regimes in Tehran and Baghdad are defeated will there be any chance for a free Palestine alongside Israel. Until then, all the diplomacy in the world is just "noise."

NEW REGIONAL WAR IN THE MIDDLE EAST?

The following story was posted on DEBKA.COM's website last Friday, April 12. I have not yet determined how reliable, or unreliable, Debka is as a news source. They have broken some stories that have later been proven to be accurate, but they have also had a few bloopers.

As a result, I cannot speak to the accuracy of the following story, but as you will read, they quote a lot of very detailed information that I have not seen elsewhere. Whether this story is true or not, we should know for sure pretty soon.

If my Special Updates #20 and #21 troubled you, prepare to be troubled again.

QUOTE - Debka.com April 12

"The minute Secretary of State Colin Powell departs the region empty-handed, Washington's Middle East foes - Iran, Iraq, Syria, Hezbollah and the Palestinians - are set to initiate a coordinated military action with a view to reducing the United States to a powerless spectator.

Powell meets Israeli Prime Minister Ariel Sharon and Palestinian leader Yasser Arafat today and tomorrow. His chances of bringing them anywhere near a cease-fire are generally rated nil - hence the pessimistic scenario seen by DEBKAfile's sources.

By now it is clear that President George W. Bush's continuous calls for Israel to end its Operation Defense Shield against terror strongholds in Palestinian cities are no more than lip-service to America's putative Arab allies. Even if Sharon pulls the army back all the way to pre-Sept. 28, 2000 lines - which he has promised not to do until `every last grain of terror is swept away' - Washington is under no illusion that the Palestinian leader will lift a finger to stop the suicide attacks against Israel, or that Hezbollah will desist from its hourly mortar-rocket barrages.

While openly slamming Sharon, the Bush team has not missed the burgeoning operational partnership between Palestinians and Hezbollah and their combined buildup with Iraq and Iran - with Syria's tacit blessing - for military action. This bloc's first goal is to ward off a U.S. military assault on Iraq, while at the same time rocking pro-American Arab regimes by rousing violent anti-government demonstrations in their cities.

After that, according to DEBKAfile's U.S. and Israeli intelligence sources, Iran and Iraq mean to stoke Middle East tensions, making sure that they strike first before America fires a shot in its campaign against Baghdad. This strike is expected to take the form of an Iraqi missile attack on Israel.

Yesterday [April 11], hours before Powell's landing in Israel, the Iranian foreign minister turned up in Damascus. At about the same time, Sharon was telling a Fox TV interviewer that Arafat is keeping an open channel of communication to Saddam, whom he accused of smuggling weapons to the Palestinians through Jordan and across the Dead Sea.

The point of maximum danger will arrive at the end of April. The countdown towards that moment begins Monday [April 15] when the Iranian army and [Iraq's] Revolutionary Guards start a large-scale five-day military exercise called "Wadat," or "Unity" in the Persian Gulf.

Iranian naval and air units will rehearse the seizure of the strategic Straits of Hormuz and impose a mock blockade on Gulf oil shipping bound for Western and Japanese ports through the Indian Ocean and the Mediterranean. They also will practice amphibious landings on the islands of Abu Musa, Greater Tunb and Lesser Tunb in the mouth of Straits of Hormuz.

About 50,000 soldiers - paratroops, marines, naval commandos and members of amphibious armored units - are gathered at the port of Bandar Abbas, with a fleet of landing craft, fast missile boats, submarines and aircraft at their disposal. These units will rehearse the forcible seizure of the Gulf islands.

Iran's spiritual leader Ayatollah Khamenei and its president, Mohammed Khatami, will use the occasion of a visit to the troops to announce Iran is joining the Iraqi oil embargo announced this week against pro-Israeli countries, primarily the United States. They also will place the Iranian units exercising in the Gulf on supreme alert to meet any regional military threat, explaining that the ongoing Palestinian-Israel showdown may call for a response.

According to DEBKAfile's military sources, Iran last week secretly opened a permanent military liaison office in Baghdad to align Iranian military movements in the Gulf with the Iraqi general staff. Iraq also granted passage through its airspace to Iranian military aircraft heading to Syria. The Tehran-Damascus route via Iraqi air space has been operating now for nearly a month. Iranian military flights have been granted landing and refueling rights at Iraqi air bases in case Syria or Hezbollah come under Israeli or U.S. attack.

There are angles to the new partnership between the former foes, Iraq and Iran, aside from the use of Baghdad as a coordination center or transit point for Iranian military flights to Damascus.

DEBKAfile's military sources report that right after U.S. Vice President Dick Cheney phoned Syrian President Bashar Assad earlier this week - to ask him to persuade Hezbollah to call off its daily attacks against Israeli forces and towns - Iraqi Vice President Taha Yassin Ramadan popped up in the Syrian capital. Assad and Ramadan put their heads together on a division of tasks in the event of a regional war and ways of implementing the secret Syrian-Iraqi military pacts signed last summer.

Under one key provision, Syrian air force units may transfer to Iraqi air bases if their own facilities are attacked by Israel, and vice versa.

Assad's next secret visitor was Hezbollah Secretary-General Sheikh Hassan Nasrallah. He came to Damascus with an Iranian mandate to petition the Syrian leader for permission to escalate the assault on Israel - first by switching to the heavier 120mm artillery, more advanced Katyusha rockets and eventually also short-range Iranian surface-to-surface missiles to replace the anti-tank missiles and mortars Hezbollah has been fielding.

The Hezbollah leader also requested permission to shoot missiles from Lebanon at Israeli targets on the Israeli side of the Golan Heights, which Syria lost in the 1967 war.

Assad, who told Cheney he had no influence with Hezbollah, granted its leader both requests, according to DEBKAfile's sources.

Nasrallah was therefore able to break a long-standing rule. Never before has territory claimed by Syria come under missile attack from Lebanon. Washington and Israel can hardly complain if the Lebanese attack the Golan with permission from Damascus. They also were being told that the Shiite extremist group, self-declared champion of Lebanese national interests and the Palestinian cause, has committed itself totally to fighting in Syria's wars.

No sooner was Nasrallah back in Beirut than his heavy artillery began pounding Israel and rockets flew over the northern Golan Heights.

DEBKA file's military and intelligence sources describe the Tehran-Baghdad-Damascus-Beirut-Palestinian bloc's alignment as planned down to the smallest detail.

Iran will wrap up its military exercise and declare an oil embargo - as arranged - after which Iranian transports will begin ferrying ammunition, shells and missiles to Hezbollah, via the military section of Damascus international airport. These deliveries will keep the daily war against Israel well fueled. At the same time, the Palestinians will step up their suicide attacks against Israel, either directly or with outside help.

When the violence has been wound to its highest pitch, Iraq will step in with a dramatic and dangerous move. From April 24, Israel stands in grave danger of an Iraqi missile attack, launched for the sake of saving the Palestinians. This threat was signaled by Qusai Hussein, Saddam's son and commander of the elite Republican Guards, when he declared on Wednesday: `The Iraqi people is ready to fight Israel alongside the Palestinians, but its geographical location makes it hard to join the struggle. . Still, the Jews know that their doom will come from Babylon.'

Now more than ever, with the Palestinians in dire straits, Iraqi leaders must make good on their high-flown pledges of aid, or else the Palestinian option in which Saddam has invested and held as a reserve resource will be dissipated. The level of rhetoric has escalated in the last couple of days. Sharon appears to be aware of Saddam's decision. He therefore is laying stress on exposing Arafat's operational links with Hezbollah and with Baghdad.

The top item on the agenda of his talks today [April 12] with secretary Powell is most likely to be how Israel will retaliate for an Iraqi missile strike or, put another way, the strength of Israel's deterrent."

END QUOTE [Emphasis (bold) added, GH.]

MY PROBLEM WITH DEBKA'S SCENARIO: WHY HASN'T IT HAPPENED ALREADY?

Debka presents a great deal of detailed information regarding a plan by Iraq, Iran and others to mount a major attack on Israel, a plan which, if true, has been in the making for many months. Here's my question.

If such a plan was in place, why didn't they launch it when Israel invaded the West Bank? That would have seemed to be the perfect time for two reasons.

First, Israel was entirely preoccupied with retaliating against Arafat and the PA, so what better time to launch an attack? Second, world opinion was very negative toward Israel at that time, including the US as discussed above.

If Iraq, Iran and others in the region were preparing for the regional war Debka describes above, it would seem they missed the golden opportunity. This raises a question as to the validity of Debka's scenario.

IF THIS IS TRUE, ALL HELL IS ABOUT TO BREAK LOOSE!

As noted before I quoted this latest Debka piece, I don't know how accurate it is. I have not been able to find other sources to corroborate their various positions and statements. Yet they do detail an awful lot of troubling information. If it is false, they certainly went to a lot of trouble.

If what you've just read is accurate, or even partly accurate, we have to assume our government knows about it. Maybe this is the threat that has our leaders scared (as discussed in Special Updates #20 and #21).

If the scenario Debka describes remotely comes to pass, the region could quickly explode (literally and figuratively) in violence and widespread bloodshed. Even nations such as Egypt and Saudi Arabia could be drawn into such a conflict. And that means the US would also be drawn in, perhaps in a major way (unless we are prepared to see Israel use its nukes).

If the Debka scenario is remotely accurate, we would almost certainly be facing an oil embargo in the West. Unlike the embargo in the early `70s, we now have more and greater sources for oil including Mexico, Venezuela, Russia and others. While it is possible the US could import all its oil needs from these non-Middle East countries, it will not happen instantly.

If Debka's story unfolds, you can bet the markets will go CRAZY! Skyrocketing oil prices, and serious fighting in the Mid-East, most likely involving the US, will NOT be good news for the US and international stock markets.

While those who trade in the commodities markets could get rich, given all the potentially huge moves in the markets, stock market investors could take it on the chin again (unless they are in market timing programs that can get them out).

I will continue to follow this story closely, and if additional details surface from other sources, I will update you ASAP.

* * * * *

Have a great weekend! I'll be coaching baseball all weekend in a tournament. My son's team is 6-1-1 on the season and in 1st place in our division. I don't know who's having more fun - him or me!

Gary D. Halbert

SPECIAL ARTICLES

War On Terror - after Powell trip to Mid-East.

Optimistic view of Powell trip.

U.N. supports terrorism.


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Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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