www.charlotte.com Posted on Wed, Feb. 19, 2003 MICHAEL DOBBS Washington Post

Enough oil is stored in the deep, cone-shaped salt caverns along the Gulf of Mexico -- most of them large enough to accommodate the towers of the World Trade Center -- to replace a year's worth of imports from Saudi Arabia.

Originally conceived as a response to the oil crises of the 1970s, the Strategic Petroleum Reserve has become as much a part of the United States' strategic arsenal as the aircraft carriers, airborne divisions and spy planes converging on the Persian Gulf region.

According to the Energy Department, the 599 million barrel reserve constitutes the nation's first line of defense against disruptions in energy supplies.

As President Bush prepares for war with Iraq, he has come under pressure to use the reserve to calm an increasingly jittery market. In addition to the uncertainty caused by the Iraqi crisis, a general strike in Venezuela has helped push oil prices to new highs, and slashed inventories in many parts of the world to critically low levels.

If the past is a guide, and Bush follows the precedent set by his father in the Persian Gulf War in 1991, he probably will resist the temptation to tap into the underground storage sites in Texas and Louisiana until the onset of any hostilities.

If the attack on Iraq begins, he will order the release of some of the oil in the reserve, a move designed to signal the United States' ability to ride out any temporary panic over the oil market.

If the war went badly, and Iraqi President Saddam Hussein succeeded in torching Iraqi oil fields or hitting oil facilities in neighboring Kuwait or Saudi Arabia, the reserves would assume huge strategic importance.

The 50 or so caverns in Louisiana and Texas contain enough oil to replace 53 days of lost imports. In practice, officials say, supplies should last considerably longer, as the United States buys much of its oil from such countries as Canada and Mexico, which would unlikely be interrupted by a crisis in the Middle East.

The Strategic Petroleum Reserve is "a powerful instrument," said John Shages, one of the Energy Department officials responsible for managing the network of storage sites, pipelines and loading facilities strung out along the Gulf of Mexico coast. "It gives the president a tremendous tool to use in the event of a severe disruption to the market, from an act of God to a political-military event."

Because of the tightness of the international oil market, said Edward Porter, an economist at the American Petroleum Institute, the Strategic Petroleum Reserve might end up playing "a much more central role" in a new gulf war than it did in 1991. A decade ago, there was plenty of excess capacity in the oil market. After the war broke out in January 1991, prices quickly tumbled from more than $30 a barrel to about $20.

Today, by contrast, it is much more difficult to offset a likely loss of Middle Eastern oil, if the region became embroiled in war. Iraq alone sells 2 1/2 million barrels a day to foreign countries, including the United States, through oil for food arrangements approved by the United Nations and through smuggling. Although Venezuelan oil is slowly coming back on stream, as a general strike against populist President Hugo Chavez winds down, exports are no more than half of pre-strike levels.

According to oil analysts, the only country in the world that can significantly increase production levels practically overnight is Saudi Arabia, which has 1 million barrels a day of excess capacity.

In recent weeks, the Saudi government has boosted production to offset losses from Venezuela. But the Bush administration does not want to be held hostage to a potentially unstable Arab country rife with anti-Americanism that has previously used oil as a weapon against the United States.

worldnetdaily.com

Posted: February 19, 2003 1:00 a.m. Eastern

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By Martin Edwin Andersen © 2003 News World Communications Inc.

Yellow police tape sealed off a sixth-floor office in the exquisite headquarters of the Inter-American Development Bank, or IDB, just two blocks from the White House. The tape barred entry to the room, but it could not contain the horror within, where a former official of an IDB Central American office, reportedly distraught over misconduct at the multilateral development bank, had slashed throat and wrists. While doing so, say IDB insiders, the former official wrote in blood on an office wall: "The bank is corrupt!"

The tragedy is reported to have occurred after the official blew the whistle to superiors concerning alleged abuse of power affecting IDB projects in the field. In response, the official had been transferred back to Washington. According to a former IDB officer familiar with the case, the official's "grade [job rank] was lowered" and the whistleblower "was assigned to a small windowless office – something very important to bank staff – and given no responsibility." Then the "silent treatment" began.

Four other sources, including a highly placed bank official, have confirmed part or all of the story. Contacted at home by Insight, the recovering bank officer had been on leave since the July 18, 2002, incident and continued to be under a physician's care. The officer would not comment on what had happened, nor would the IDB.

The incident offers emblematic and tragic evidence of what some officials at the multilateral development banks, or MDBs, tell Insight are the risks they face in speaking out against wrongdoing at these institutions supported by U.S. taxpayers. Not only can doing the right thing lead to losing one's job, but foreign hires dependent on bank-sponsored work visas face additional risks.

"Everybody is afraid," a well-placed IDB source tells Insight. "Of course, they fear losing their jobs, but another way [the bank] keeps them in line is by threatening to take away their visas. If they lose their visas, they have to go home."

Similar concerns, say advocates for bank reform, are heard from inside the World Bank, the Asian Development Bank and the African Development Bank. "Experts I work with at the World Bank say that if they make comments critical of the bank's position, they do so at what they have described as 'great risk,' and they end up not being listened to anyway," says Korinna Horta, a senior economist at Environmental Defense, a citizen watchdog group. "I have firsthand knowledge that this happened in the case of the Chad-Cameroon oil-pipeline project."

According to a recent study by Northwestern University political scientist Jeffrey Winters, in the last five decades corrupt officials from Third World countries have skimmed an estimated $100 billion from World Bank loans. Not until 1996 did the World Bank institutionalize a strategy and mechanism for combating the corruption inside the institution, which next to the federal government is the largest employer in Washington. The years passed. In 2000, the bank shifted the chairs on the deck of what seemed to some like the Titanic, merging its corruption-and-fraud-investigations unit and its office of business ethics into a department of institutional integrity. That same year the General Accounting Office, the U.S. congressional watchdog, issued a report calling on the World Bank to make greater efforts to control corruption.

But the U.S. Treasury Department is the executive-branch overseer of the development banks. And in November 2000 it successfully killed recommendations to Congress proposed by the U.S. Agency for International Development that greater public disclosure of the banks' operations be mandated and a better process of external and internal review be established to prevent potentially illegal loans from being approved.

More recently, the International Financial Institution Advisory Commission, a congressionally mandated 11-member panel on the role and effectiveness of several international institutions, was created. Known as the Meltzer Commission, it was created amid growing bipartisan discomfort about the slowness of these banks to reform. Those demanding action ranged from the late Sen. Paul Wellstone, D-Minn., to former House Majority Leader Richard Armey, R-Texas. Few were surprised when the commission called for major reform to ensure a more efficient use of U.S. funds – such as the more than $1 billion provided in the fiscal 2003 foreign-operations bill.

Within the last year, allegations of endemic corruption at the IDB have been accompanied by complaints heard at sister institutions alleging gross mismanagement and violations of U.S. law. In addition, U.S. watchdog groups have charged that all the banks still are reluctant to heed calls for greater transparency and public disclosure concerning the use of public funds for development objectives such as poverty reduction.

In response, there have been increasing calls for greater congressional oversight of the banks. Proposals range from requiring the State Department and the Justice Department to review more actively MDB-funded activities and report to Congress every year, to holding the MDBs' feet to the fire by authorizing their budget only on a yearly basis, at least for the next year or two, rather than on the current three-year schedule. As one congressional source observes, "The banks come up for their money every three years, make a lot of promises, then basically thumb their noses at us until the next appropriations cycle is near."

Rep. Steve Israel, D-N.Y., a member of the House Financial Services Committee, tells Insight: "The multilateral development banks are critical instruments for reducing poverty around the world and making life better for billions of people. The U.S. makes significant contributions to these banks, and it is essential that the Congress finds out if we are getting what we pay for. These banks shouldn't be making people rich. They shouldn't be used as personal fiefdoms. They are a public trust, and the people who run them must remember that. If they don't, the Congress should remind them, in the strongest possible terms." And, according to Israel, "We must put their very existence at risk if we are going to get any results."

Senate Finance Committee Chairman Charles Grassley, R-Iowa, emphasizes: "We need to make certain that these development banks are being operated for the common good and are not above the law. Just as the banks require loan recipients to be forthcoming about information, so Congress expects the banks to be responsive and candid to requests for information."

Oversight of operations at the World Bank, says John Ruthrauff, senior policy adviser for Oxfam, is still a hit-and-miss proposition, despite improvements instituted during the 1990s by current bank president James Wolfensohn. Ruthrauff notes that the bank's directors do not see their oversight responsibilities extending to operational issues and, even if they did, they are hamstrung by small staffs and a system of rotation in which most directors last only a few years because 26 executive directors and a similar number of alternates represent 180 countries.

"They just don't have the time to look into issues themselves – there are just too many projects," Ruthrauff adds. "So oversight, where it exists, is left to the staff."

The situation is even worse at the regional development banks, insiders say. "While at the World Bank you might have a Pakistani in charge of programs in Venezuela, in the regional banks it pretty much boils down to an elite group that works with its friends," says one insider. "It is tougher to have an arms-length relationship between borrowers and bank staff, or among the latter, because the regions are smaller and there is a lot of opportunity to develop networks and special friendships."

Most observers agree that, of the international financial institutions, the World Bank appears to have the best internal-review policies, an image carefully bolstered by a first-rate press office. "The World Bank takes its fiduciary and audit responsibilities very seriously," bank spokeswoman Caroline Anstey, says. "To this end, we encourage anyone with a complaint of fraud or corruption involving a World Bank financed project to come forward and report these allegations to our fraud and corruption investigations unit. ... Our experience over the years has shown that a transparent management of public funds represents a key element of good governance, and this, in turn, is indispensable for sustained growth, poverty reduction and a country's overall development."

Treasury's role in the oversight process continues to be controversial. Sources on the IDB board tell Insight that U.S. Executive Director José Fourquet has not provided leadership needed to curb alleged corruption at that bank. Fourquet has not responded to several requests for comment.

On Feb. 3, Rep. Barney Frank, D-Mass., a longtime proponent of greater oversight of the banks and a supporter of their development mission, wrote to Rep. Jim Kolbe, R-Ariz., chairman of the House Appropriations subcommittee on Foreign Operations, complaining about Treasury's resistance to outside oversight.

"I was very disturbed to learn recently that the Treasury Department reproached some officials at the World Bank for engaging in some detailed, high-level discussions with my office about [funding issues] without Treasury's approval," Frank said. "I think these actions speak to the need for continued, assertive congressional oversight."

Critics contend that without conditions placed on the banks, passage of the omnibus appropriations bill by Congress will result in continued abdication of responsibilities in monitoring institutions that lend tens of billions of dollars each year. Not only are U.S. taxpayer dollars in danger of being squandered, they warn, but less-developed nations continue to be saddled with unwanted debt that all too often ends up in the hands of greedy local politicians or is spent on projects that exacerbate economic and environmental problems.

Martin Edwin Andersen is a reporter for Insight. He worked as an international consultant for the IDB from 1997-2001.

www.balochistanpost.com Thursday, February 20, 2003     By Donald Coxe, Macleans.ca

To a large number of Canadians and Europeans, George W. Bush is an imperialist bent on undermining the UN and making war. He is a moron, a menace, or both.

To a large number of Americans, he's the Yale and Harvard grad who grew up in back-country Texas, a serious guy who understands their concerns about Islamic terrorism. Their main reservation about him is his ability to manage the economy.

The Democrats devote at least 90 per cent of their criticism of W to his alleged mismanagement of the economy. They daily cite the sustained growth in jobs and budget surpluses in the good old days when good ol' boy Clinton ran things, compared with the sustained growth in unemployment and deficits now. Bring us back and the good times will return.

That Mr. Bush retains high poll standings despite a weak economy and the threat of war suggests that most Americans aren't convinced that Democrats deserve all the credit for the 1990s, or that Republicans deserve all the blame for this decade. But polls confirm that the public is more worried about the economy than about Iraq.

Bush's budget-busting stimulus package shows more signs of stimulating debate than growth. To the Democrats, his proposals prove he can't manage the economy. They are probably right: in a federalist democratic capitalist system, central governments have limited powers to "get the economy moving." What they can do is follow the medical rule: primum non nocere -- first do no harm. (The rare exception to that principle was the Canadian Liberals' implementation of the Tories' stimulus package -- free trade and the GST; although it took nearly three years to do its work, it put Canada on the road to the fastest growth in the G7. By breaking their election pledges, the Grits got the economy moving and the budget in balance.)

What confronts Bush is the serial operation of Murphy's Law: virtually everything that can go wrong is going wrong. Here is a partial list:

• 9/11.
• China has graduated from being a lesser contributor to the U.S. trade deficit to being No. 1 at taking away manufacturing jobs. China's rise has also taken jobs and economic growth from Mexico, which had been a fast-growing buyer of U.S. goods.
• A brutally cold winter has sent heating oil and natural gas consumption skyward. While demand soars, prices for gas and oil and gasoline for cars are up roughly 50 per cent from last year. The biggest culprit is Venezuela's Hugo Chavez, whose confrontational tactics to move his country closer to Castroism triggered a strike that slashed output from a country that supplied roughly 14 per cent of U.S. oil imports. The Iraq standoff is also worth a few dollars per barrel of oil. Combined effect on consumer discretionary incomes: roughly the same as a big tax increase -- a burden that is far more than the tax cuts Bush seeks.
• The drought across the Midwest and West threatens to become a national problem because of minimal snowfalls and rain in the nation's breadbasket, from the Rockies to Indiana. Grain futures prices are rising despite big global crop carryovers. Nightmare scenario: rising prices for food at a time of rising prices for fuels.
• The exactly opposite problem bedevils the Atlantic coast. Washington has received far more snow this winter than Chicago. From Maine to the Carolinas, winter storms have caused enormous damage.
• The technology and telecom crashes not only took US$7 trillion out of stock market values, they smashed the most dynamic job-creating sector of the 1990s economy. As this worst financial excess of all time continues to unravel, millions of Americans contemplate ravaged personal savings, and many -- if not most -- corporate pension plans contemplate serious deficits.
• Trial lawyers have become the biggest success story of any American occupational class now that tech entrepreneurs are struggling. They made billions of dollars out of tobacco litigation, and stand to make billions more from asbestos. Hundreds of U.S. companies have declared bankruptcy, and others are struggling to survive. Runaway malpractice litigation boosts costs of what is already -- by far -- the most expensive health-care system in the world, and a major contributor to the nation's declining competitive position. (Other nations, including Canada to an extent, pay health care through domestic consumption taxes; in the U.S., corporations pay their employees' and retirees' health-care costs by building those costs into their products and services. Result: a significant proportion of the cost of a ton of steel, a car, a machine or a plane is health care, and the manufacturers cannot take those expenses out when trying to sell abroad. Foreign competitors simply waive domestic sales or VAT taxes when exporting.)
• State and local governments were big winners from the 1990s boom because of soaring receipts from sales and income taxes. Most of them responded by raising expenditures as rapidly as incomes. The biggest tax winner was California's state government, which went on a spending spree, financed by huge tax gains from stock options -- US$85 billion in option-related tax liabilities in the year 2000 alone. State and local governments now face painful deficits, with California in its biggest crisis since the Depression. As the states slash expenditures, unemployment climbs. Many observers believe the states' problems will more than offset any stimulus Bush could deliver.

Bush is as unlucky as Clinton was lucky. Clinton cashed the peace dividends accruing from the Reagan victory in the Cold War, and was in power when the tech mania spawned the faith that the good times would last forever. Bush gets the unemployment and the bear market.

And Saddam, Osama, and North Korea.

Donald Coxe is chairman of Harris Investment Management in Chicago and of Toronto-based Jones Heward Investments. dcoxe@macleans.ca

Wednesday, February 19, 2003