Most presidents begin being "lame ducks" sometime into their second four years. This president has basically been treated as a "dead duck" ever since his party lost the mid term elections. It is not so much that the Democrat Congress has accomplished anything meaningful, because they have not, it is simply due to opposition to the war, the negative media and press and his own inarticulateness.

If GW is to be relevant any time during the remaining period of his term in office it will have to be more than vetoing legislation which even cowardly members of his own party seem willing to vote to override.

What GW could do is stand by his own convictions and pronounced policy of preventing Iran from going nuclear before leaving office and attack them. This becomes highly doubtful with the passing of each day and with the cumulative foreign policy defeats he seems willing to endure, Lebanon being the latest.


We have the means, we have the capability but apparently GW lacks the will and certainly the support because there are those in the State Department who are unalterably opposed and probably the same can be said for those in the Pentagon. They have no relevant solution they simply believe inaction is the better course and certainly Congress remains feckless. (See 1 below.)

George Friedman and $130 oil. (See 2 below.)

CIA head Hayden discusses some pressing matter. (See 3 below.)

Olmert continues to twist in the wind but resignation is not something he will consider willingly. Barak may decide to shove him into it because Olmert will never go otherwise because. Olmert thinks of himself as indispensable. (See 4 and 4a below)

Harrop sees a silver lining if McCain can convince voters the Republican Party is dead. (See 5 below.)

Dick

1) Republicans Are in Denial
By TOM COBURN

As congressional Republicans contemplate the prospect of an electoral disaster this November, much is being written about the supposed soul-searching in the Republican Party. A more accurate description of our state is paralysis and denial.

Many Republicans are waiting for a consultant or party elder to come down from the mountain and, in Moses-like fashion, deliver an agenda and talking points on stone tablets. But the burning bush, so to speak, is delivering a blindingly simple message: Behave like Republicans.

Unfortunately, too many in our party are not yet ready to return to the path of limited government. Instead, we are being told our message must be deficient because, after all, we should be winning in certain areas just by being Republicans. Yet being a Republican isn't good enough anymore. Voters are tired of buying a GOP package and finding a big-government liberal agenda inside. What we need is not new advertising, but truth in advertising.

Becoming Republicans again will require us to come to grips with what has ailed our party – namely, the triumph of big-government Republicanism and failed experiments like the K Street Project and "compassionate conservatism." If the goal of the K Street Project was to earmark and fund raise our way to a filibuster-proof "governing" majority, the goal of "compassionate conservatism" was to spend our way to a governing majority.

The fruit of these efforts is not the hoped-for Republican governing majority, but the real prospect of a filibuster-proof Democrat majority in 2009. While the K Street Project decimated our brand as the party of reform and limited government, compassionate conservatism convinced the American people to elect the party that was truly skilled at activist government: the Democrats.

Compassionate conservatism's starting point had merit. The essential argument that Republicans should orient policy around how our ideas will affect the poor, the widow, the orphan, the forgotten and the "other" is indisputable – particularly for those who claim, as I do, to submit to an authority higher than government. Yet conservatives are conservatives because our policies promote deliverance from poverty rather than dependence on government.

Compassionate conservatism's next step – its implicit claim that charity or compassion translates into a particular style of activist government involving massive spending increases and entitlement expansion – was its undoing. Common sense and the Scriptures show that true giving and compassion require sacrifice by the giver. This is why Jesus told the rich young ruler to sell his possessions, not his neighbor's possessions. Spending other people's money is not compassionate.

Regaining our brand as the party of fiscal discipline will require us to rejoin Americans in the real world of budget choices and priorities, and to leave behind the fantasyland of borrowing without limits. Instead of adopting earmarks, each Republican can adopt examples of government waste, largess and fraud, and restart the permanent campaign against big government.

Republicans can tear up the "emergency spending" credit card and refuse to accept any new spending whatsoever, including for the wars in Iraq and Afghanistan, until Congress does its job of eliminating wasteful spending. The federal budget contains a vast unexplored area of offsets. My office alone has identified $300 billion in annual waste. Borrowing from the next generation when we haven't done our job of oversight is unconscionable.

Regaining our brand is not about "messaging." It's about action. It's about courage. It's about priorities. Most of all, it's about being willing to give up our political careers so our grandkids don't have to grow up in a debtor's prison, or a world in which other nations can tell a weakened and bankrupt America where we can and can't defend liberty, pursue terrorists, or show compassion.

John McCain, for all his faults, is the one Republican candidate who can lead us through our wilderness. Mr. McCain is not running on a messianic platform or as a great healer of dysfunctional Republicans who refuse to help themselves. His humility is one of his great strengths. In his heart, he's a soldier who sees one more hill to charge, one more mission to complete.

Mr. Coburn is a Republican U.S. senator from Oklahoma.

2)The Geopolitics of $130 Oil
May 27, 2008
Graphic for Geopolitical Intelligence Report

By George Friedman

Oil prices have risen dramatically over the past year. When they passed $100 a barrel, they hit new heights, expressed in dollars adjusted for inflation. As they passed $120 a barrel, they clearly began to have global impact. Recently, we have seen startling rises in the price of food, particularly grains. Apart from higher prices, there have been disruptions in the availability of food as governments limit food exports and as hoarding increases in anticipation of even higher prices.

Oil and food differ from other commodities in that they are indispensable for the functioning of society. Food obviously is the more immediately essential. Food shortages can trigger social and political instability with startling swiftness. It does not take long to starve to death. Oil has a less-immediate — but perhaps broader — impact. Everything, including growing and marketing food, depends on energy; and oil is the world’s primary source of energy, particularly in transportation. Oil and grains — where the shortages hit hardest — are not merely strategic commodities. They are geopolitical commodities. All nations require them, and a shift in the price or availability of either triggers shifts in relationships within and among nations.

It is not altogether clear to us why oil and grains have behaved as they have. The question for us is what impact this generalized rise in commodity prices — particularly energy and food — will have on the international system. We understand that it is possible that the price of both will plunge. There is certainly a speculative element in both. Nevertheless, based on the realities of supply conditions, we do not expect the price of either to fall to levels that existed in 2003. We will proceed in this analysis on the assumption that these prices will fluctuate, but that they will remain dramatically higher than prices were from the 1980s to the mid-2000s.

If that assumption is true and we continue to see elevated commodity prices, perhaps rising substantially higher than they are now, then it seems to us that we have entered a new geopolitical era. Since the end of World War II, we have lived in three geopolitical regimes, broadly understood:

* The Cold War between the United States and the Soviet Union, in which the focus was on the military balance between those two countries, particularly on the nuclear balance. During this period, all countries, in some way or another, defined their behavior in terms of the U.S.-Soviet competition.
* The period from the fall of the Berlin Wall until 9/11, when the primary focus of the world was on economic development. This was the period in which former communist countries redefined themselves, East and Southeast Asian economies surged and collapsed, and China grew dramatically. It was a period in which politico-military power was secondary and economic power primary.
* The period from 9/11 until today that has been defined in terms of the increasing complexity of the U.S.-jihadist war — a reality that supplanted the second phase and redefined the international system dramatically.

With the U.S.-jihadist war in either a stalemate or a long-term evolution, its impact on the international system is diminishing. First, it has lost its dynamism. The conflict is no longer drawing other countries into it. Second, it is becoming an endemic reality rather than an urgent crisis. The international system has accommodated itself to the conflict, and its claims on that system are lessening.

The surge in commodity prices — particularly oil — has superseded the U.S.-jihadist war, much as the war superseded the period in which economic issues dominated the global system. This does not mean that the U.S.-jihadist war will not continue to rage, any more than 9/11 abolished economic issues. Rather, it means that a new dynamic has inserted itself into the international system and is in the process of transforming it.

It is a cliche that money and power are linked. It is nevertheless true. Economic power creates political and military power, just as political and military power can create economic power. The rise in the price of oil is triggering shifts in economic power that are in turn creating changes in the international order. This was not apparent until now because of three reasons. First, oil prices had not risen to the level where they had geopolitical impact. The system was ignoring higher prices. Second, they had not been joined in crisis condition by grain prices. Third, the permanence of higher prices had not been clear. When $70-a-barrel oil seemed impermanent, and likely to fall below $50, oil was viewed very differently than it was at $130, where a decline to $100 would be dramatic and a fall to $70 beyond the calculation of most. As oil passed $120 a barrel, the international system, in our view, started to reshape itself in what will be a long-term process.

Obviously, the winners in this game are those who export oil, and the losers are those who import it. The victory is not only economic but political as well. The ability to control where exports go and where they don’t go transforms into political power. The ability to export in a seller’s market not only increases wealth but also increases the ability to coerce, if that is desired.

The game is somewhat more complex than this. The real winners are countries that can export and generate cash in excess of what they need domestically. So countries such as Venezuela, Indonesia and Nigeria might benefit from higher prices, but they absorb all the wealth that is transferred to them. Countries such as Saudi Arabia do not need to use so much of their wealth for domestic needs. They control huge and increasing pools of cash that they can use for everything from achieving domestic political stability to influencing regional governments and the global economic system. Indeed, the entire Arabian Peninsula is in this position.

The big losers are countries that not only have to import oil but also are heavily industrialized relative to their economy. Countries in which service makes up a larger sector than manufacturing obviously use less oil for critical economic functions than do countries that are heavily manufacturing-oriented. Certainly, consumers in countries such as the United States are hurt by rising prices. And these countries’ economies might slow. But higher oil prices simply do not have the same impact that they do on countries that both are primarily manufacturing-oriented and have a consumer base driving cars.

East Asia has been most affected by the combination of sustained high oil prices and disruptions in the food supply. Japan, which imports all of its oil and remains heavily industrialized (along with South Korea), is obviously affected. But the most immediately affected is China, where shortages of diesel fuel have been reported. China’s miracle — rapid industrialization — has now met its Achilles’ heel: high energy prices.

China is facing higher energy prices at a time when the U.S. economy is weak and the ability to raise prices is limited. As oil prices increase costs, the Chinese continue to export and, with some exceptions, are holding prices. The reason is simple. The Chinese are aware that slowing exports could cause some businesses to fail. That would lead to unemployment, which in turn will lead to instability. The Chinese have their hands full between natural disasters, Tibet, terrorism and the Olympics. They do not need a wave of business failures.

Therefore, they are continuing to cap the domestic price of gasoline. This has caused tension between the government and Chinese oil companies, which have refused to distribute at capped prices. Behind this power struggle is this reality: The Chinese government can afford to subsidize oil prices to maintain social stability, but given the need to export, they are effectively squeezing profits out of exports. Between subsidies and no-profit exports, China’s reserves could shrink with remarkable speed, leaving their financial system — already overloaded with nonperforming loans — vulnerable. If they take the cap off, they face potential domestic unrest.

The Chinese dilemma is present throughout Asia. But just as Asia is the big loser because of long-term high oil prices coupled with food disruptions, Russia is the big winner. Russia is an exporter of natural gas and oil. It also could be a massive exporter of grains if prices were attractive enough and if it had the infrastructure (crop failures in Russia are a thing of the past). Russia has been very careful, under Vladimir Putin, not to assume that energy prices will remain high and has taken advantage of high prices to accumulate substantial foreign currency reserves. That puts them in a doubly-strong position. Economically, they are becoming major players in global acquisitions. Politically, countries that have become dependent on Russian energy exports — and this includes a good part of Europe — are vulnerable, precisely because the Russians are in a surplus-cash position. They could tweak energy availability, hurting the Europeans badly, if they chose. T hey will not need to. The Europeans, aware of what could happen, will tread lightly in order to ensure that it doesn’t happen.

As we have already said, the biggest winners are the countries of the Arabian Peninsula. Although somewhat strained, these countries never really suffered during the period of low oil prices. They have now more than rebalanced their financial system and are making the most of it. This is a time when they absolutely do not want anything disrupting the flow of oil from their region. Closing the Strait of Hormuz, for example, would be disastrous to them. We therefore see the Saudis, in particular, taking steps to stabilize the region. This includes supporting Israeli-Syrian peace talks, using influence with Sunnis in Iraq to confront al Qaeda, making certain that Shiites in Saudi Arabia profit from the boom. (Other Gulf countries are doing the same with their Shiites. This is designed to remove one of Iran’s levers in the region: a rising of Shiites in the Arabian Peninsula.) In addition, the Saudis are using their economic power to re-establish the relationship they ha d with the United States before 9/11. With the financial institutions in the United States in disarray, the Arabian Peninsula can be very helpful.

China is in an increasingly insular and defensive position. The tension is palpable, particularly in Central Asia, which Russia has traditionally dominated and where China is becoming increasingly active in making energy investments. The Russians are becoming more assertive, using their economic position to improve their geopolitical position in the region. The Saudis are using their money to try to stabilize the region. With oil above $120 a barrel, the last thing they need is a war disrupting their ability to sell. They do not want to see the Iranians mining the Strait of Hormuz or the Americans trying to blockade Iran.

The Iranians themselves are facing problems. Despite being the world’s fifth-largest oil exporter, Iran also is the world’s second-largest gasoline importer, taking in roughly 40 percent of its annual demand. Because of the type of oil they have, and because they have neglected their oil industry over the last 30 years, their ability to participate in the bonanza is severely limited. It is obvious that there is now internal political tension between the president and the religious leadership over the status of the economy. Put differently, Iranians are asking how they got into this situation.

Suddenly, the regional dynamics have changed. The Saudi royal family is secure against any threats. They can buy peace on the Peninsula. The high price of oil makes even Iraqis think that it might be time to pump more oil rather than fight. Certainly the Iranians, Saudis and Kuwaitis are thinking of ways of getting into the action, and all have the means and geography to benefit from an Iraqi oil renaissance. The war in Iraq did not begin over oil — a point we have made many times — but it might well be brought under control because of oil.

For the United States, the situation is largely a push. The United States is an oil importer, but its relative vulnerability to high energy prices is nothing like it was in 1973, during the Arab oil embargo. De-industrialization has clearly had its upside. At the same time, the United States is a food exporter, along with Canada, Australia, Argentina and others. Higher grain prices help the United States. The shifts will not change the status of the United States, but they might create a new dynamic in the Gulf region that could change the framework of the Iraqi war.

This is far from an exhaustive examination of the global shifts caused by rising oil and grain prices. Our point is this: High oil prices can increase as well as decrease stability. In Iraq — but not in Afghanistan — the war has already been regionally overshadowed by high oil prices. Oil-exporting countries are in a moneymaking mode, and even the Iranians are trying to figure out how to get into the action; it’s hard to see how they can without the participation of the Western oil majors — and this requires burying the hatchet with the United States. Groups such as al Qaeda and Hezbollah are decidedly secondary to these considerations.

We are very early in this process, and these are just our opening thoughts. But in our view, a wire has been tripped, and the world is refocusing on high commodity prices. As always in geopolitics, issues from the last generation linger, but they are no longer the focus. Last week there was talk of Strategic Arms Reduction Treaty (START) talks between the United States and Russia — a fossil from the Cold War. These things never go away. But history moves on. It seems to us that history is moving.

3) CIA watching for al-Qaida 'succession crisis'
By PAMELA HESS

WASHINGTON - The U.S. is making "a big and continual push" to capture or kill al-Qaida leader Osama bin Laden, but his demise won't end the organization's menace, CIA Director Michael Hayden said Tuesday in an Associated Press interview. The CIA is equally interested in those jockeying to replace bin Laden in what he predicted will be a "succession crisis."


"It will be really interesting to see how that plays out. The organization is a lot more networked than it is ruthlessly hierarchical," Hayden said of the group behind the 9/11 attacks on the U.S. "How do you pick the next overall leader?"

A number of Egyptians are now part of al-Qaida's top echelon and may struggle for power among themselves. Bin Laden's current No. 2, Ayman al-Zawahiri, is an Egyptian.

Despite al-Qaida's resilience, taking out bin Laden would be a psychological blow to the organization, Hayden said.

"If there ever was a sense of invulnerability I think killing or capturing him would shatter it once and for all," he said.

Bin Laden is believed to be hiding in the lawless tribal areas of western Pakistan. The new Pakistani government is negotiating a new peace agreement with the tribes that would have them expel extremists and police the region on their own. Hayden said he believes the result will be similar to the last agreement Pakistan struck with the tribes — nothing is likely to change.

"Any peace agreement that does not move the effective writ of the Pakistani government into the tribal region and push the rule of law there gives these groups the opportunity to continue to train, refit and move across the Afghan border. It's something we certainly could not look kindly on," Hayden said in the telephone interview.

The CIA has been using armed drones to attack alleged terrorists inside the tribal area, as U.S. military forces are barred from pursuing al-Qaida and Taliban fighters across the Afghan border.

Hayden would not say what else the CIA is doing, if anything, to target terrorist enclaves there.

"It's hard for me to get into any details. I understand the situation there and I'm comfortable with the authorities we've been given," he said.

"There's an awful lot of senior leadership killed or captured including even in the last several months," he said.

Although bin Laden remains at large, Hayden said, "On balance I think we are doing pretty well on the war on terror."

"It's not luck," he said. "We've made it more difficult for people who would do us harm. That's not a guarantee. It doesn't mean they won't be back. It doesn't mean we'll always be successful."

One tactic that has caused concern is the CIA's holding of prisoners outside the reach of the International Committee of the Red Cross. The CIA has held fewer than 100 prisoners but kept some of them for years. That program was born of the decision shortly after 9/11 to put the CIA in charge of interrogations of alleged terrorists. The CIA also has come under criticism for harsh interrogation practices, including waterboarding, which makes the victim feel as if he's drowning.

"We were kind of turning into the nation's jailer, a wholly inappropriate role for us," Hayden said.

The CIA is still holding prisoners but for less time. It recently turned over two detainees to the U.S. military at Guantanamo Bay Naval Base after a few months.

"I'm not uncomfortable with the interrogation part or the detention required to conduct the interrogation. But once the intelligence value is bought off to a certain point, we have to move on," he said.

Hayden said he authorizes only intelligence activities that meet several tests, including whether the activity can withstand political shifts.

"We can't stand an American counterterrorism program with an on/off switch every other November," he said, referring to the American election cycle.

On other topics, Hayden said:

_He believes Iran's intention is to produce its own nuclear fuel, using Iranian technology.

"That gives them the potential at any moment to break out and create a weapon and that's what of course is most troubling."

_Even without Israeli intelligence, the CIA would have known by last July that a building in Syria's western desert was meant to be a secret nuclear reactor when a pipe system from the Euphrates River to the building was constructed.

"That was a powerful cooling system going to a building with no visible heat source," Hayden said. Israeli jets destroyed the building in August 2007, although Syria has denied it was a nuclear facility.

_North Korea's arms trade — helping Syria build a nuclear reactor, or selling missile technology to Iran — is motivated by cash. "It's a starved economy, with very, very few sources of foreign exchange," he said. "This is one of the ones where they can actually turn a profit."

4) Jurists: Conviction still a long shot
By Tomer Zarchin


Despite the prosecution's cautious optimism Tuesday, the investigation against Prime Minister Ehud Olmert is far from being a slam dunk case, legal experts warn.

Avi Lavi, a lawyer specializing in white-collar crime, said Tuesday that the state prosecution is rightly being careful in establishing the basis for crimes to be included in an indictment, should one be filed.

"On the face of it, [Morris] Talansky's testimony is problematic for establishing the necessary foundation for a bribery offense, as described by law, since it requires that the money intentionally be given to a public servant in exchange for him doing something for you in his professional capacity," Lavi said. The state has to prove that specific monies and favors were given in order that Olmert would do something in return for Talansky, even if not immediately. But Talansky claims he wanted nothing in return.

Lavi said it is easier to establish charges of fraud and breach of trust in the case of a public servant systematically receiving favors, even without any quid-pro-quo.

Talansky's testimony also indicates alleged tax evasion, since major gifts went unreported.

Prof. Ruth Kannai, a criminal law expert at Bar-Ilan University, says there is not even enough evidence yet to make a charge of breach of trust stick.

"Merely receiving envelopes with money, a vacation loan, funding for hotels or flights are not necessarily a basis for conviction, although you could say that when you receive so much, in such a manner, over time, it constitutes breach of trust. It still looks to me like it's only the beginning."

Kannai concurred with Lavi that it would be easier to establish fraud and breach of trust in view of Talansky's testimony, as opposed to bribery.

4a) Barak mulls ultimatum to PM, may demand resignation or early elections
By Ofra Edelman and Tomer Zarchin

Defense Minister Ehud Barak is contemplating an ultimatum to Prime Minister Ehud Olmert, whereby he will demand the premier either resign or agree on a date for early elections, it was revealed late Tuesday night.

Barak will hold consultations with senior Labor Party officials, after which he is expected to make a statement. As Olmert's senior coalition partner, Labor's departure would leave the premier without a majority with which to rule.

The news came hours after Morris Talansky, the American-Jewish businessman suspected of making illicit cash transfers to Prime Minister Ehud Olmert, said in court testimony in Jerusalem on Tuesday that he had transferred Olmert some $150,000 over 15 years, and that Olmert had tried to aid a Talansky business venture by introducing him to several American billionaires.

Olmert's lawyer Eli Zohar labeled Talansky's testimony "twisted" and said the truth would be revealed in his cross-examination set for July 17. "In general, we're saying that we're not talking about criminal activity whatsoever," Zohar said.

Talansky, 75, said there were no records of how the money he transferred was spent. "I only know that he loved expensive cigars. I know he loved pens, watches. I found it strange," Talansky told the court, then shrugged.

However, Talansky insisted that he never expected anything in exchange.

"I had a very close relationship with him, but I wish to add at this time at the relationship of 15 years was purely of admiration," he added. "I never expected anything personally. I never had any personal benefits from this relationship whatsoever."

But later, he said he had grown disillusioned over the years.

"Olmert had the ability to reach out to the American people, the largest and richest community of Jews in the world," Talansky said. "That's why I supported the man. That's why I overlooked, frankly and honestly, a lot of things. I overlooked them, maybe I shouldn't have."

It remained unclear if Talansky's day-long testimony had significantly helped prosecutors near proof of a "smoking gun" of evidence of bribery against Olmert. Although he admitted to having given Olmert cash-filled envelopes, Talansky maintained that he had asked for nothing in return.

The businessman told the court that Olmert had asked him for donations for his 1993 Jerusalem mayoral campaign and throughout his tenure as industry and trade minister. He said the cash-filled envelopes were transferred through Olmert's former bureau chief, Shula Zaken, each one containing between $3,000 and $8,000, and that the transfers were "legitimate."

Talansky also said that Olmert volunteered to contact three billionaires, including Plaza Hotel owner Yitzhak Tshuva and Las Vegas casino mogul Sheldon Adelson, to try to drum up business for a hotel minibar venture run by Talansky. But Talansky said the offer did not help, and Adelson slammed down the phone on him.

"I said to myself, 'I'm never going to go to a politician for business'," Talansky said with a laugh. "He wanted to do me a favor and it never worked out." Adelson, America's third richest man, was questioned in the case earlier this month during a visit to Jerusalem.

Early deposition

In an unusual move, prosecutors had won permission to depose Talansky in court in a preliminary phase of a criminal investigation into the prime minister, in which no indictments have yet been filed.

The early testimony was requested because Talansky resides in the United States and authorities were concerned that he may not return to Israel to testify in the future. At one point during the hours-long deposition, the possibility of adjourning until Wednesday was raised. This led Talansky to break down in tears, saying he was in a rush to return to the United States due to his wife's ailing health.

Prosecutors are intent on determining whether the money Talansky donated to Olmert - suspected of reaching sums of up to $500,000 - amounted to bribery. Olmert, who stated publicly that he only received funds for campaign purposes, has promised to step down if indicted for bribery.

The unpaid loans, Talansky told Jerusalem District Court, included a $25,000-$30,000 loan used for a 2004 family vacation to Italy. Olmert never paid him back, Talansky said.

The businessman also mentioned a second loan for $15,000, which Olmert asked for during a stay at the Regency hotel in New York. Olmert refused to take a check and asked for cash, Talansky said.

Talansky said he walked to a bank four blocks away and withdrew the money. When he handed over the cash to Olmert, he asked to be repaid as soon as possible. "Famous last words," Talansky said, explaining that he was never paid back.

Cash, no checks

At the start of the deposition, Talansky said that Olmert had specifically requested donations in cash, but later amended the statement to say that Olmert had simply said he preferred not to receive the money in check form.

Talansky alleged that some of the cash he donated was used to upgrade airline tickets from business class to first class, and that he once paid $4,700 for Olmert's three-day stay at the Ritz-Carlton hotel in Washington, D.C.

According to documents revealed during the deposition, that hotel bill included laundry costs, video rentals and international phone calls. This sum, the witness explained, was also a loan that was never repaid.

"Olmert called him to say his own credit card was maxed out," Talansky testified. "He asked if he could borrow my card and he said it was part of a loan."

Talansky said that he later requested the money be paid back, after which Olmert sent him the phone number of his son, who was then working at Nickelodeon Studios in the United States. The two met, and Olmert's son allegedly promised Talansky he would speak with his father. However, he said, he hadn't heard from Olmert or from his son since.

No contact with Olmert as PM

Talansky said the last payment he made to Olmert was for some $72,500 for the latter's Likud primary campaign in 2003. He said there had been no contact since Olmert became prime minister, except for a single meeting at a social function.

Testifying in English, Talansky said he first met then-health minister Olmert in the early 1990s, while the American businessman was working for the U.S. fundraising arm for Shaare Zedek, a Jerusalem hospital.

When Olmert visited New York at one point, Talansky received Olmert's room number from Zaken, and met him there to bring money, he said.

The witness said that he was told the money was needed for expenses, which he thought meant campaign needs such as advertising and posters. He estimated that he tranferred money during roughly half of his visits to the Industry and Trade Ministry.

Olmert had asked him for loans, Talansky said, and he subsequently organized New York fundraisers to help raise cash. He told prosecutors that at such events, envelopes were left on guests' chairs, and then given to Olmert and Zaken.

Talansky also testified that he had asked Olmert, who was a member of Likud at the time, why he didn't raise money through the party's fundraisers in the United States. Olmert told him that should he do so, the money would go straight to the party, Talansky said.

He said that he gave Olmert money because of his great respect for the Israeli politician, who he had believed would represent the future of Israel's leadership.

"He was articulate, he was intelligent. I felt that he would be a leader that I would have hoped to be if I had the talent," Talansky said, adding that Olmert would warmly greet him during their meetings in Jerusalem.

"Whenever Shula told him I was here, no matter what, he would always come out and greet me. A hug, a big hug. He hugged me. I remember for my 70th birthday he sent me a very beautiful card. He invited me to his son's wedding."

Talansky also spoke at length about his close relationship to Israel and to the Jewish organizations with which he has worked.

Ahead of the testimony, State Prosecutor Moshe Lador told reporters not to jump to conclusions and called media reports incorrect and irresponsible.

"There is no decision. We are at the height of the investigation. The case could develop in different directions down the road - there is a possibility that the whole case could be dropped, and there is also a possibility that another decision will be made in the case," Lador said.

Police have said the charges span a 12-year period, when Olmert was mayor of Jerusalem and minister of industry and trade. Detectives have raided Jerusalem city hall and the trade ministry and have grilled Olmert twice.

Defense attorneys representing Olmert and Zaken will be able to cross-examine Talansky on Wednesday. However, the defense lawyers said Friday that they will not cross-examine Talansky at this time, because they claim they have not been given sufficient time to examine the material collected by police investigators in the case.

The defense has said it would like Talansky to return to Israel at a later date, probably in July, for his cross-examination.

The court decided last week that Olmert and Zaken would not have to be present in court during Talansky's deposition, though the State Prosecutor's Office had sought to compel their presence, arguing that their response during the testimony would offer the judges some insight into the case.

In the Tuesday deposition, prosecutors asked Talansky about his relationship with Olmert and their meetings, both in Israel and abroad, as well as his relationship with Zaken and Olmert's former business partner, attorney Uri Messer. He was asked about people who contributed funds to Olmert that Talansky is suspected of having transferred through Zaken. In addition, he was asked about the dates when the alleged transfers were made, as well as the purpose of the funds.

During the High Court of Justice's deliberations last week on a petition by Olmert and Zaken against Talansky's planned deposition, Lador revealed evidence that he said supports the allegations against the prime minister.

Lador said that during Olmert's terms as both Jerusalem mayor and minister of industry and trade, he maintained close ties with American Jewish leaders. Talansky was actively involved in fundraising and organizing meetings with Israeli public figures, and as a result of his close relations with Olmert, he organized events for his friend.

Lador also told the court that according to the testimony Talansky gave to police investigators, he handed Olmert envelopes full of cash during short meetings between the two. According to this testimony, the requests for money came from Olmert, who also dictated the sums.

Lador said that Olmert is suspected of fraud, breach of trust, tax violations and violations of the Gifts Law. He is also suspected of not reporting his receipts of cash while he was minister of industry and trade, as required by law. Lador was careful not to say that Olmert was suspected of receiving bribes, but hinted that "if there is a reason for the money transfers, if something was offered in return, then this may be significant."

5) Bad News for GOP Can Be Good News for McCain
By Froma Harrop

The recent loss of formerly deep-red congressional districts to Democrats is supposed to be awful news for John McCain. Actually, the opposite could be true.

We keep hearing that if Republicans can't hold onto voters in northeastern Mississippi -- or in Baton Rouge, La., or in the Chicago suburbs where former Republican House Speaker Dennis Hastert held sway -- they're done for. The GOP's rocket is hurtling to earth, and not even a special-case Republican like McCain can stop it.

That may be so, but McCain can step aside and let it splat. He can even point to the smoldering ruins as a reason to vote for him, with arguments tailored for different political persuasions.

His most promising audience is Democrats and others itching to slam the door on the Bush era but uneasy about Barack Obama. To them, McCain could say the following:

"See that sprawling wreckage of a once-mighty Republican Congress? Back in the day, it could frustrate your every hope and dream. Since rendered harmless, it can no longer stop your campaigns against global warming or for stem-cell research. (As you may know, I support progress in these areas and will work with Democrats toward that end.)

"I know there are things about me that make you nervous. For example, who would I nominate to the Supreme Court? Do you remember that I was a leader in the Gang of 14? That was the group of Republican and Democratic senators who worked to end partisan warfare over court nominees. The right wing skewered me for consorting with the enemy. By the way, my esteemed Democratic opponent, Sen. Obama -- the self-described 'great conciliator' -- refused to join the bipartisan team.

"You also want to know whether I'll ever end the Iraq war. Well, I recently predicted that most American troops would be out of Iraq by 2013. See, I can talk about timetables, too. And you'll note that former Obama foreign-policy adviser Samantha Power confided to a Scottish newspaper that the Illinois senator's plan to withdraw all troops within 16 months was only a 'best-case scenario.' His decisions would depend on what was happening at the time. In terms of future Iraq policy, we're not totally different.

"You're sensitive to my interest in privatizing things and don't like it. Take comfort that a strong Democratic majority in Congress will sit on such urges. I'm also aware that you're unhappy with my defense of the tax cuts for rich people that I voted against. Sorry about that. But on the subject of welfare for tycoons, let me point out that I've attacked a very popular farm bill that would extend subsidies to agri-couples making close to $2.5 million. Sen. Obama is all for it."

To Republicans who don't particularly like McCain, the Arizona senator can say this:

"Consider the alternatives. See the wreck over there? That's your conservative movement. Poll data on the Rasmussen Reports Website suggest another bloodbath in the offing for House and Senate Republicans. So there may be nothing to stand between a super-empowered Democratic Congress and its wildest schemes -- but me. Obama has a very liberal voting record, you know.

"You really don't want to sit out this election."

Divided government -- that is, the Congress in the hands of one party and the presidency in another -- does have many fans among conservative Democrats, liberal Republicans and, above all, independents. It stops radicals in either party from running government on the fumes of their ideology.

"He'll save you from their excesses" may not make a zippy bumper sticker, but that message could work for a lot of voters, and in McCain's favor.