Friday, May 13, 2011

Israel Turns 63 - Congratulations!

This from a memo reader and friend: "As far as I am concerned Bernard-Henri Levy makes Tom Friedman look like an idiot. Friedman recently said in a NY Times article, that he is still uncertain whether Israel has a real partner in peace. Give me a break. How can you have a legitimate partner in peace that wants to destroy you? (See 1 and 1a below.)
An astute investment adviser wrote the following recently: "The Bureau of Labor Statistics announced the latest Producer Price Index numbers this week. They showed prices have risen 6.8% over the last year. Savings accounts are paying less than 1%. So if you had $1 million in the bank, you lost roughly $50,000 in value last year. You'll go broke fast if you can't earn at least as much as inflation on your savings."

Obama says tax the rich as if they are not already being taxed and paying more than their fair share. Meanwhile, Bernanke is taxing everyone else by wrecking the dollar and keeping interest rates around the ankles of savers.

This is the kind of economic policy that is eroding everyone's buying power and to top it off Obama would rather assist Brazil in drilling for oil and have us ship our money to the Middle East than drill on our own soil, tapping reserves which, when developed, could actually make us energy independent.

By playing on economic ignorance, Obama appeals to passion not American common sense. Obama would rather lie than have America drill out of our energy conundrum. This is not leadership this is wanton recklessness.

If you believe there is an economic crisis brewing you might find these articles of interest.

I remain in the camp of those who believe Congress will end by kicking the ball down the field because Obama is not serious about anything except campaigning and he will do everything he can to shift blame.

The economy is improving enough to where Obama can probably finesse the problem for the time being and the Republican Party seems to have developed a deep philosophical schism within its ranks. (See 2 and 2a below.)
Kissinger comments on China - excerpt from his new book. (See 3 below.)
N Korea and Iran trade missile technology according to a U.N. Report. (See 4 below.)
Israel is now 63 - Congratulations! I am older than the country by 15 years.
1)French philosopher and writer
ByBernard-Henri Lévy

"Oh ! The Fools!"* (On a Palestinian Munich)

How can anyone be so stupid?

And how can so many commentators, how can this or that eminence of whatever parliamentary commission, this or that minister or former minister, how can the French Socialist party--in short, how can so many reasonable minds welcome the reconciliation between Fatah and Hamas as good news, a good sign, like the far too long delayed reunion of a too long divided people, when it is, in reality, a catastrophe?

It is a catastrophe for Israel, aware that an organisation whose favoured mode of diplomatic expression has consisted, since the 2007 putsch, of firing missiles at the civilians of Sderot, is back in the saddle. Barely a month ago, on Hamas's initiative, a schoolbus came under fire from a Kornet anti-tank weapon.

It is a catastrophe for Mahmud Abbas, President of the Palestinian Authority, who, in a few short moments, the time it took to sign at the bottom of the page of an accord he himself may not believe in, has ruined all the hard-won political and moral credit gained in the course of the years when, confronted by a Hamas dubbed a "terrorist organisation" by all whose voices are considered authoritative, beginning with the European Union and the United States, he hung on. Mahmud Abbas has returned to the bygone days of doublespeak, when Yasser Arafat declared the PLO charter "null and void", all the while underhandedly encouraging various and diverse terrorist attacks.

It is a catastrophe for the Palestinian people themselves (but perhaps the great conciliators, these friends of the Palestinian people who know better than they themselves what is good for them, are not worried about that?) It is a catastrophe, yes, for the million and a half citizens of Gaza who live under the law of a party that is not only terrorist, but totalitarian, an enemy of Palestinian women (these "man factories ", to quote Article 17 of a charter that people really should get round to reading), assassin of the rights and liberties of Palestinians (Articles 24 and 27, among others), and which has chosen to fight to the very last drop of blood of the last living Palestinian rather than to attend "international conferences"--"futile activities" they consider a "waste of time" (Article 13 of the same charter).

It is a catastrophe for a peace of which it is false to say that it was at a standstill. All the polls attest to the fact that a majority of Israelis were and are ready for it. An increasing number of Palestinians were and are fed up with fueling the ages-old hate machine and are inclined to counter the hardline attitude of their leaders in exchange for a viable State. And now, all that has gone by the wayside with the rehabilitation of the only party concerned that is still proclaiming (Article 7, again, of its charter) that "the fulfilment of the promise" shall not come until "the Muslims" have not only "combated" but "killed" all "the Jews".

And, finally, it is a catastrophe for an Arab spring that, as no one can ignore, is also an ideological battlefield where two kinds of power are at loggerheads: on the one side, the democratic and liberal movement that enthusiastically supports human rights, tenant of moderate Islam; and on the other, the old crabs of radical Islam, the tyrannies of yesterday and the day before, the indestructible Muslim Brotherhood, created in Egypt in 1928, close on the heels of burgeoning Hitlerism, and of which Hamas is, today, the Palestinian branch. How, in these conditions, can one fail to see that this "historic" accord signals a prehistoric regression? How can one fail to understand that this fraternisation, with all its razzle-dazzle, is an insult to everything new the recent insurrections have been able to bring to an Arab world crushed under the yoke--an insult to the youth of Tahrir Square in Cairo, who demonstrated for weeks on end without uttering the shadow of an anti-western, anti-American, or anti-Israeli slogan? It is an insult to the insurgents of Benghazi who are fighting for a Libya that will cease to be the second homeland for the negationists, killers of Jews, and terrorists of this world, as it was under Qadhafi; it amounts to spitting in the faces of the hundreds of Syrians who, since March, have been massacred by the best friend of Hamas; it is an offense to Mohammed Buazizi, the young Tunisian who set everything off and who, to my knowledge, did not immolate himself "in solidarity with the jihadis of 1936" (again, the same Article 7 of the Hamas charter. 1936, the high point of the 'Hitlerian' era of the young Hamas).

And so, I know that people are saying, "Wait, you'll see, give it some time, it's by letting the fascists back into the game, by flattering them, showing them consideration, that we'll succeed in toning them down, in improving them."

Well, we'll see. Except that the only thing we've seen so far, the first strong gesture the candidates for improvement made, the day after this shameful accord, was to condemn the elimination of Bin Laden--this "crime" (as Hamas's leader, Ismaël Haniyeh put it) which is right in line with the "policy of oppression" founded upon the "bloodbaths" of formerly colonized peoples. That says it all. And there is, not only in his words, but in the deafening silence that echoes them here, something devastatingly distressing.

*As France's Prime Minister, Edouard Daladier accompanied Neville Chamberlain to Munich and acquiesced to the agreement with Hitler, though, personally, he had no illusions as to Hitler's ultimate intentions. Returning to Paris, he glanced out the plane window at the cheering crowds and reportedly exclaimed, "Ah! Les cons!" [Oh! The fools!]

1a)Abbas vs. Obama
By Steven J. Rosen
Middle East Quarterly

Having sidelined Barack Obama's peace initiative by refusing to return to the negotiations table without apriori Israeli concessions, the Palestinian leadership seeks to secure an international declaration of statehood at the next U.N. General Assembly session in September 2011. This "date certain" strategy, whereby its entitlement to a state will be fulfilled by the world powers, has long been preferred by the Palestinian leadership to any arduous, bilateral negotiation with Israel, which would require painful concessions. The Palestinians enjoy wide support in many European capitals, and they know that the Obama administration is close to their positions on many of the core issues. So forcing the statehood demand into a multilateral forum can entice governments into satisfying the Palestinian aspirations by a fixed date.

European Support

Since the start of the Obama administration, PA president Mahmoud Abbas has refused to engage in direct talks before the stoppage of all Jewish construction activities in eastern Jerusalem and the West Bank, despite having negotiated with seven previous Israeli prime ministers without such preconditions.

Some key European leaders have shown growing receptivity to setting a date for the creation of a Palestinian state. Their frustration has mounted since the breakdown of the Oslo negotiations when Yasser Arafat launched his war of terror in September 2000, then rejected Bill Clinton's final proposal in January 2001. In 2002, the Europeans hatched the idea of a "road map" for Arab-Israeli resolution as a way to create deadlines for the establishment of a Palestinian state,[1] and European Union pressure led to the creation of the Quartet (the United States, U.N., European Union, and Russia), and to the Quartet's first statement on September 17, 2002, announcing "a concrete, three-phase implementation road map that could achieve a final settlement within three years."[2]

But the Bush administration was unwilling to go all the way with fixed deadlines and a date certain because it recognized that this would free the Palestinians from the responsibility to compromise with Israel. Bush insisted that the road map deadlines be conditional: Transition from one phase to the next would be "performance based"—i.e., based on the responsibilities of the parties themselves. The road map announced "clear phases, timelines, target dates, and benchmarks." [3] But the Quartet partners were forced to agree that "progress between the three phases would be strictly based on the parties' compliance with specific performance benchmarks to be monitored ... based upon the consensus judgment of the Quartet of whether conditions are appropriate to proceed." [4]

For these reasons, the road map did not achieve its stated goal of "a final settlement within three years," and European frustration continued to mount. In July 2009, Europe's then-foreign policy chief Javier Solana called for the U.N. Security Council to recognize a Palestinian state by a certain deadline even if Israelis and Palestinians had failed to agree among themselves: "After a fixed deadline, a U.N. Security Council resolution should proclaim the adoption of the two-state solution ... set a calendar for implementation ... [and] accept the Palestinian state as a full member of the UN. … If the parties are not able to stick to [the timetable], then a solution backed by the international community should be put on the table." [5]

French foreign minister Bernard Kouchner moved in the same direction in February 2010: "One can imagine a Palestinian state being ... recognized by the international community, even before negotiating its borders. I would be tempted by that."[6] Kouchner and his Spanish counterpart Miguel Angel Moratinos wrote on February 23, 2010, that the European Union "must not confine itself to the … outlines of the final settlement" but "should collectively recognize the Palestinian State ... There is no more time to lose. Europe must pave the way." [7] Then in July 2010, Kouchner said, "France supports the creation of a viable, independent, democratic Palestinian state ... by the first quarter of 2012." [8]

But none of this happened. Solana, Moratinos, and Kouchner are no longer in their positions, and Europe has not delivered what the Palestinians sought.

Palestinian Gains
The Palestinian leadership has taken its own initiative to force a deadline for statehood without negotiations. In a major address at al-Quds University on June 22, 2009, Salam Fayyad of the Palestinian Authority announced a 24-month program to build the institutions of statehood, so that "the Palestinian State [will] become—by the end of next year or within two years at most—a firm reality." He predicted that the "building of institutions ... within two years will enable us to swing back the position of the international community in support of our right to an independent, fully sovereign State on the 1967 border and with East Jerusalem as its capital." [9] On August 26, 2009, Fayyad issued the details of his program for building statehood institutions within two years.[10]

His initiative was quickly adopted by the Middle East Quartet, which declared on March 19, 2010, that "negotiations should lead to a settlement negotiated between the parties within 24 months."[11]

"It's not a coincidence that the Europeans came out with a landmark statement," Fayyad boasted. "All of a sudden everyone is talking about a two-year timeline. The Quartet on March 19 of this year said two years. Well, their two years is longer than ours—we started a bit earlier."[12] On August 20, 2010, the Quartet made another statement shortening its timeline to match that of Fayyad, declaring that "a settlement ... can be completed within one year" instead of the two years it had announced just five months earlier.[13]

Secretary of State Hillary Clinton announced the same timeline, saying, "Direct negotiations to resolve all final status issues ... can be completed within one year."[14] Special Envoy George Mitchell gave Clinton's reasons:

Prime Minister Netanyahu said ... that he believed it could be done within a year. President Abbas has expressed similar sentiments to me. So we believe it can be done within a year ... Both the United States and the Quartet have said that we believe there should be direct talks without preconditions ... If those negotiations are conducted seriously ... they can produce such an agreement within 12 months.[15]

Indeed, Netanyahu did give a nod to the 2011 target date, perhaps as an indication of his own sincerity about peace talks. In his September 8, 2010 Rosh Hoshana greeting, the prime minister said, "I believe that we should make every effort to reach a historic compromise for peace over the coming year."[16] Then during a press conference in Sderot on September 21, 2010, Netanyahu added, "My goal is not to conduct a process but to complete it ... to reach a historic peace. ... [through] accelerated negotiations within one year in order to achieve a framework agreement."[17]

But the most important victory for the Palestinian date-certain campaign was the dramatic pronouncement by Obama in his remarks to the opening session of the United Nations General Assembly on September 22, 2010. Obama said, "When we come back here next year, we can have an agreement that will lead to a new member of the United Nations—an independent state of Palestine."[18] This was the only line in Obama's 2010 speech that received an enthusiastic ovation.

The Palestinians remained unimpressed. Palestinian Authority chairman Mahmoud Abbas responded, "I hope this is not just a slogan, and when the time comes, he says, 'We are sorry we could not [do it]. Leave it for next year.'" He continued, it "is a promise and a debt around your neck, and it must be realized so that Palestine becomes a full member state of the United Nations."[19]

The Final Push
The Palestinians now have a plan to receive payment for all these promises and collect on this "debt." In January 2011, the Palestinian Authority (PA) announced that it had prepared a draft resolution to be introduced in the U.N. Security Council in September 2011 when Obama's one-year promise falls due.[20] This includes formal recognition of a Palestinian state by the most authoritative organ of the world body and admission of Palestine as a member state of the United Nations. And it enshrines two additional key principles: (1) that the pre-1967 armistice line should be the basis for future negotiations over borders, and (2) that eastern Jerusalem be the capital of this Palestinian state.

In his announcement of the draft resolution, Riad Malki of the PA said, "Such recognition would create political and legal pressure on Israel to withdraw its forces from the land of another state that is recognized within the '67 borders by the international organization."[21] It would also have the effect of making eastern Jerusalem, where more than half the Jews in Israel's capital live, occupied territory, invalidating the titles to their homes. It would give a new state of Palestine legal standing to seek indictment of Israel's leaders before the International Criminal Court and to litigate a great variety of claims before the International Court of Justice.

When Obama, Hillary Clinton, and Mitchell made their several statements approving target dates, they framed the goal in every case as dates by which bilateral direct negotiations between Tel Aviv and the PA should be completed. It was not the administration's intent to incur an obligation to support statehood by those dates if the negotiations did not occur, certainly not if the Palestinians themselves refused to negotiate. But since the onset of this administration, the Palestinians have in fact refused to engage in direct talks unless the Israeli government yielded to a precondition: that there be no construction of any homes for Jews in eastern Jerusalem nor anywhere on the West Bank. This is, as Clinton acknowledged, an unprecedented precondition. Israeli building on the West Bank, she said on October 31, 2009, has "always been an issue within the negotiations. … There's never been a precondition." [22]

In fact, Abbas himself negotiated with seven previous Israeli prime ministers without such preconditions. For seventeen years—from the Madrid conference of October 1991 through Abbas's discussions with Israeli prime minister Ehud Olmert, which ended in 2008—a subject of recent disclosures by Al-Jazeera television—negotiations moved forward while construction of homes for Jews in eastern Jerusalem and the West Bank continued. Madrid, Oslo I, Oslo II, the Hebron protocol, the Wye River memorandum, Camp David, Taba, the disengagement from Gaza, and Olmert's offer to Abbas—all these events over the course of two decades were made possible by a continuing agreement to disagree about Israeli construction of Jewish homes in Jewish neighborhoods outside the pre-1967 line in East Jerusalem.

But now, on Obama's watch, the PA is refusing to negotiate. This is a direct violation of the commitment the Palestinians made at the start of the Oslo process, which included Arafat's pledge to Prime Minister Yitzhak Rabin on September 9, 1993, that the "PLO commits itself to the Middle East peace process, and to a peaceful resolution of the conflict between the two sides, and declares that all outstanding issues relating to permanent status will be resolved through negotiations."[23] It is also a direct violation of the pledge that Abbas himself made barely three years ago at the Annapolis conference, witnessed by the foreign ministers of fifty-seven countries: "We agree to immediately launch good-faith bilateral negotiations ... vigorous, ongoing, and continuous negotiations."[24] Yet the Obama administration has been utterly silent about the Palestinian refusal to negotiate, issuing not a single audible word of criticism.[25]

Obama has certainly not been reticent to criticize what he sees as the failures on the Israeli side. On at least thirteen separate occasions, starting just weeks after Netanyahu took office, he and his top officials have issued sharply expressed objections to the building policies of the Israeli government, often doing so in the presence of the Israeli prime minister himself. For example, on March 9, 2010, Vice President Biden condemned "the decision by the government of Israel to advance planning for new housing units in East Jerusalem." [26] Secretary Clinton said, "The president was very clear when Prime Minister Netanyahu was here. He wants to see a stop to settlements ... That is what we have communicated very clearly ... And we intend to press that point."[27]

Mahmoud Abbas has attributed the hardening of his own stand toward Israeli settlements to the example set by Obama. "President Obama stated in Cairo that Israel must stop all construction activities in the settlements. Could we demand less than that?"[28]

The administration did not mean to produce this result. Obama's envoy, George Mitchell, argued, "We do not believe in preconditions. And we urge others not to impose preconditions." Despite this, to repeat, neither Mitchell nor any other member of the Obama team has said anything pointed about Abbas's refusal to negotiate unless his preconditions are met.

In February 2011, Abbas succeeded in putting Obama on the defensive at the U.N. Security Council by rejecting the administration's compromise formula and forcing it to veto a Palestinian resolution condemning Israeli settlements as an obstacle to peace.[29] In September 2011, he will be going to the Security Council, daring the president to veto, and putting him in the hot seat. A veto would not be received well in the Muslim world, a key target of Obama's outreach, which is why he is looking for avenues for multilateral cooperation that would preempt the need for unilateral measures like the veto..[30] And if Obama does nonetheless veto a statehood resolution that has wide international support, he will be under pressure to offset this with fresh gestures toward the Palestinians. Obama's dilemma is that, either way, the refusal to negotiate will be rewarded. And negotiation of the issues between the Palestinians and the Israelis will still be nowhere in sight.

Steven J. Rosen served for twenty-three years as a senior official of the American Israel Public Affairs Committee. He is now director of the Washington Project of the Middle East Forum.

[1] "Chronological Review of Events Relating to the Question of Palestine," Monthly Media Monitoring Review, U.N. Information System on the Question of Palestine, Nov. 2002.
[2] "Communiqué Issued by the Quartet," United Nations, New York, Sept. 17, 2002.
[3] "A Performance-Based Roadmap to a Permanent Two-State Solution to the Israeli-Palestinian Conflict," United Nations, New York, Apr. 30, 2003.
[4] "Quartet Statement on the Middle East," European Union @ the United Nations, New York, Sept. 17, 2002.
[5] Reuters, July 12, 2009.
[6] France 24 TV, Feb. 22, 2010.
[7] Bernard Kouchner and Miguel Angel Moratinos, "A Palestinian State: When?" Le Monde (Paris), Feb. 23, 2010.
[8] Bernard Kouchner, "Viable Palestinian State by 2012," Ma'an News Agency (Bethlehem), July 27, 2010.
[9] Salam Fayyad, address at al-Quds University, Abu Dis, Prime Minister's Office, Palestinian National Authority, June 22, 2009.
[10] "Ending the Occupation, Establishing the State: Program of the Thirteenth Government," Palestinian National Authority, U.N. Information System on the Question of Palestine, Aug. 2009.
[11] "Statement by Middle East Quartet," Moscow, Mar. 19, 2010.
[12] "Fayyad: 'Build, build despite the occupation,'" Palestine Note website, Washington, D.C., July 30, 2010.
[13] Quartet statement, United Nations, New York, Aug. 20, 2010.
[14] Political Transcript Wire, Aug. 20, 2010.
[15] Ibid.
[16] "Rosh Hashanah Greeting from PM Netanyahu," Israel Ministry of Foreign Affairs, Jerusalem, Sept. 8, 2010.
[17] Benjamin Netanyahu, press conference in Sderot, Israel Ministry of Foreign Affairs, Jerusalem, Sept. 21, 2010.
[18] Barack Obama, remarks to the United Nations General Assembly, New York, White House Press Office, Sept. 22, 2010.
[19] World Bulletin (Istanbul), Nov. 11, 2010.
[20] Ha'aretz (Tel Aviv), Jan. 10, 2011.
[21] Ibid.
[22] Benjamin Netanyahu and Hillary Clinton, remarks in Jerusalem, U.S. State Department, Oct. 31, 2009.
[23] Exchange of letters between Yitzhak Rabin and Yasser Arafat, Sept. 9, 1993, MidEast Web archive.
[24] Annapolis agreement, The Guardian (London), Nov. 27, 2007.
[25] Steven J. Rosen, "Why Isn't Obama Pressuring the Palestinians?" Foreign Policy, Jan. 4, 2011.
[26] Joseph R. Biden, Jr., statement in Jerusalem, White House Press Office, Mar. 9, 2010.
[27] Ahmed Ali Aboul Gheit, Egyptian foreign minister, and Hillary Clinton, remarks in Washington, D.C., U.S. Department of State, May 27, 2009.
[28] "Mahmoud Abbas: I Reached Understandings with Olmert on Borders," Middle East Media Research Institute, Washington, D.C., Nov. 16, 2010; The Jerusalem Post, Jan. 22, 2011.
[29] BBC News, Feb. 18, 2011.
[30] Steven J. Rosen, "Will Obama Use His U.N. Veto?" Commentary, Sept. 2010.
2)Dealing with Our Coming Economic Disaster
By Frank Ryan

The situation in the United States has deteriorated and will continue to do so unless drastic action on our federal, state and local government deficits is taken. We need to trace what happens during an economic collapse. In preparation for a collapse here is what you can do personally to avoid being swept away by the tidal wave of fear, anxiety and trepidation.

During the early stages of a nation collapsing economically, the debt of the nation swells almost uncontrollably. We, in the United States are already there.

From the burgeoning debt loads come the setting for collapse.

While the disaster can unfold in many ways, the course for the United States is already set in motion.

Inflation will increase. When inflation hits, citizens with limited financial resources become economic casualties first. These citizens are part of the beginnings of the downward spiral which ultimately leads to a depression.

In a misguided attempt to kick start the economy, our government will attempt another stimulus program which will fail. The parameters under which Fiscal Policy might work if you are so inclined to believe that it does have long been broken. Consequences of government actions are becoming unpredictable and are having unintended consequences.

The United States began the first phase of the stimulus program with the American Recovery and Reinvestment Act as well as the significant expansion of the unemployment compensation to pull us out of the recession. Both actions were the wrong actions at the wrong time.

When stimulus programs fail, our government will try to increase taxes or fees, often in deceptive ways such as fuel taxes, oil drilling taxes, user fees or increased regulatory burdens. This demand to increase taxes is to help support the citizens who were the first economic casualties of the recession as well as to pay for the deficit.

Next the bond rating agencies will downgrade our debt. At that point, our interest rates will increase and further prolong the recession. It is this downgrading of the debt and potential inability to sell our debt on the open markets that will be our undoing.

Our deficits will skyrocket because of the increased interest costs and creditor-forced reductions in spending will be enforced against us. The U. S. Congress will no longer establish our budget priorities. Our creditors will, as is done is Greece today.

The depression follows.

What then should the individual do?

Personally we have many options and they are extremely straightforward. The actions to be taken are exactly the same action that government needs to take but will not.

First, know where you are financially. Know your income and expenses and balance your own budget.

Second, you must start to build your funds if you are able. By establishing some cash reserves, you are reducing the risk of you becoming one of the first casualties of the collapse.

Third, you should consider paying off all short term credit card debt and minimize the use of credit cards unless you have the financial resources to pay for your spending.

Fourth, I would recommend refinancing your home with a 30 year long term mortgage considering how low rates look now. If your home is "underwater" with debt already that may not be possible.

Fifth, build up credit availability if you have the discipline not to use it. If you do not have that discipline, adding credit availability is one of the worst things you can do.

Sixth, make certain you valuable to your employer. Stay current and productive. Many countries in Europe have 15% unemployment or more. Try not to become part of the "expendable" because you have let yourself stagnate.

Finally, help your family.

Surviving an economic collapse is possible. It will take 2 or more years for the U. S. to be in a full collapse. In interim get active politically, vote, and make government accountable, responsible and efficient to help prevent the disaster. I doubt Washington has gotten the message though! I hope you do. Your family is depending on it.

Frank Ryan, CPA specializes in corporate restructuring and lectures on ethics for the state CPA societies. Frank is a retired Colonel in the Marine Corps Reserve and served in Iraq and briefly in Afghanistan. He is on numerous boards of publicly traded and non-profit organizations.

2a)What If the U.S. Treasury Defaults? 'People aren't going to wonder whether 20 years ago we delayed an interest payment for six days. They're going to wonder whether we got our house in order.'

'A financial crisis is surely going to happen as big or bigger than the one we had in 2008 if we continue to behave the way we're behaving," says Stanley Druckenmiller, the legendary investor and onetime fund manager for George Soros. Is this another warning from Wall Street that Congress must immediately raise the federal debt limit to prevent the end of civilization?

No—Mr. Druckenmiller has heard enough of such "clamor and hyperbole." The grave danger he sees is that politicians might give the government authority to borrow beyond the current limit of $14.3 trillion without any conditions to control spending.

One of the world's most successful money managers, the lanky, sandy-haired Mr. Druckenmiller is so concerned about the government's ability to pay for its future obligations that he's willing to accept a temporary delay in the interest payments he's owed on his U.S. Treasury bonds—if the result is a Washington deal to restrain runaway entitlement costs.

"I think technical default would be horrible," he says from the 24th floor of his midtown Manhattan office, "but I don't think it's going to be the end of the world. It's not going to be catastrophic. What's going to be catastrophic is if we don't solve the real problem," meaning Washington's spending addiction.

Widely credited with orchestrating Mr. Soros's successful shorting of the British pound in 1992, Mr. Druckenmiller also built his own fund, Duquesne Capital, into a $12 billion titan. He announced plans last year to close the fund and now reports, "I have no clients." He is still managing his own money, which Forbes magazine recently estimated at $2.5 billion.

Whatever the correct figure is, it would be significantly larger if Mr. Druckenmiller hadn't given away so much of his wealth. The online magazine Slate reported last year that Mr. Druckenmiller and his wife gave away more money in 2009—over $700 million—than anyone else in the country. Over the last two decades, he has been the largest benefactor of the Harlem Children's Zone, a community service organization featured in the movie, "Waiting for 'Superman.'"

Mary Kissel of the editorial board previews congressional action on the debt limit.
.It's hard to think of someone with more expertise in the currency and government-debt markets, but Mr. Druckenmiller's view on the debt limit bumps up against virtually the entire Wall Street-Washington financial establishment. A recent note on behalf of giant banks on the Treasury Borrowing Advisory Committee warned of a "severe and long-lasting impact" if the debt limit is not raised immediately. The letter compared the resulting chaos to the failure of Fannie Mae and Freddie Mac and warned of a run on money-market funds. This week more than 60 trade associations, representing virtually all of American big business, forecast "a massive spike in borrowing costs."

On Thursday Federal Reserve Chairman Ben Bernanke raised the specter of a market crisis similar to the one that followed the 2008 bankruptcy of Lehman Brothers. As usual, the most aggressive predictor of doom in the absence of increased government spending has been Treasury Secretary Timothy Geithner. In a May 2 letter to House Speaker John Boehner, Mr. Geithner warned of "a catastrophic economic impact" and said, "Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover."

In a Monday speech at the New York Economic Club, Mr. Boehner fired back, saying that "It's true that allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process."

So the moment couldn't be better to consult Mr. Druckenmiller, who almost never gives interviews but is willing to speak up now because he thinks that fears about using the debt-limit as a bargaining chip for spending cuts are overblown—and misunderstand the bond market. "The Treasury borrowing committee letter speaks about catastrophic financial crises, comparing it to Fannie and Freddie. That's not what we're talking about here," he says.

He contemplates the possibilities for bond investors if a drawn-out negotiation in Washington creates a short-term problem in servicing the debt but ultimately reduces spending:

"Here are your two options: piece of paper number one—let's just call it a 10-year Treasury. So I own this piece of paper. I get an income stream obviously over 10 years . . . and one of my interest payments is going to be delayed, I don't know, six days, eight days, 15 days, but I know I'm going to get it. There's not a doubt in my mind that it's not going to pay, but it's going to be delayed. But in exchange for that, let's suppose I know I'm going to get massive cuts in entitlements and the government is going to get their house in order so my payments seven, eight, nine, 10 years out are much more assured," he says.

Then there's "piece of paper number two," he says, under a scenario in which the debt limit is quickly raised to avoid any possible disruption in payments. "I don't have to wait six, eight, or 10 days for one of my many payments over 10 years. I get it on time. But we're going to continue to pile up trillions of dollars of debt and I may have a Greek situation on my hands in six or seven years. Now as an owner, which piece of paper do I want to own? To me it's a no-brainer. It's piece of paper number one."

Mr. Druckenmiller says that markets know the difference between a default in which a country will not repay its debts and a technical default, in which investors may have to wait a short period for a particular interest payment. Under the second scenario, he doubts that investors such as the Chinese government would sell their Treasury debt and take losses on the way out—"because I'll guarantee you people like me will buy it immediately."

Now suppose, Mr. Druckenmiller adds, that he's wrong. If the market implodes on day two of the technical default, Mr. Obama and Congress would be motivated to finally come to agreement. But he doesn't expect such market chaos. "My guess is that the bond market would rally as long as it believed the ultimate outcome was going to be genuine entitlement reform—that we wouldn't even have to find out about a meltdown because it wouldn't happen. And I have some history on my side here."

And the scars to prove it. In 1995, Bill Clinton was threatening to veto budget cuts advanced by the Republican House. In return, congressional leaders threatened not to increase the federal debt ceiling. Back then, before Americans knew what a real government spending crisis was, the debt stood at less than $5 trillion. (It has nearly tripled since then and is poised to race some $10 trillion higher in the next decade.)

Mr. Druckenmiller had already recognized that the government had embarked on a long-term march to financial ruin. So he publicly opposed the hysterical warnings from financial eminences, similar to those we hear today. He recalls that then-Secretary of the Treasury Robert Rubin warned that if the political stand-off forced the government to delay a debt payment, the Treasury bond market would be impaired for 20 years.

"Excuse me? Russia had a real default and two or three years later they had all-time low interest rates," says Mr. Druckenmiller. In the future, he says, "People aren't going to wonder whether 20 years ago we delayed an interest payment for six days. They're going to wonder whether we got our house in order."

Mr. Druckenmiller notes that from the time he started saying that markets would welcome a technical default in exchange for fundamental reform, in September 1995, "the bond market rallied throughout the period of the so-called train wreck . . . and, by the way, continued to rally. Interest rates went down the whole time, past the government-shutdown deadline, and really interest rates never went back up again until the Republicans caved and . . . supposedly the catastrophic problem was solved."

He adds, "I owned [Treasury] bonds and Rubin accused me and Soros of being short them, and that this was some sort of conspiracy. We made a fortune being long bonds during the whole fight. We were advocating a default and we were long bonds. That's kind of putting your money where your mouth is. By the way, I'm long them today."

Mr. Druckenmiller is puzzled that so many financial commentators see the possible failure to raise the debt ceiling as more serious than the possibility that the government will accumulate too much debt. "I'm just flabbergasted that we're getting all this commentary about catastrophic consequences, including from the chairman of the Federal Reserve, about this situation but none of these guys bothered to write letters or whatever about the real situation which is we're piling up trillions of dollars of debt."

He's particularly puzzled that Mr. Geithner and others keep arguing that spending shouldn't be cut, and yet the White House has ruled out reform of future entitlement liabilities—the one spending category Mr. Druckenmiller says you can cut without any near-term impact on the economy.

One reason Mr. Druckenmiller says he spoke up in 1995 was his recognition that the first baby boomers would turn 65 in 2010, so taxpayers would soon have to start supporting a much larger population of retirees. "Well," he says today, "the last time I checked, it's 2011. We don't have another 16 years this time. We're there. I don't know whether the markets give us three years or four years or five years, but we're there. We're not going to be having this conversation in 16 years. We're either going to solve it or we're going to find ourselves being Greece somewhere down the road."

Some have argued that since investors are still willing to lend to the Treasury at very low rates, the government's financial future can't really be that bad. "Complete nonsense," Mr. Druckenmiller responds. "It's not a free market. It's not a clean market." The Federal Reserve is doing much of the buying of Treasury bonds lately through its "quantitative easing" (QE) program, he points out. "The market isn't saying anything about the future. It's saying there's a phony buyer of $19 billion of Treasurys a week."

Warming to the topic, he asks, "When do you generally get action from governments? When their bond market blows up." But that isn't happening now, he says, because the Fed is "aiding and abetting" the politicians' "reckless behavior."

And they could get even more reckless. Mr. Druckenmiller acknowledged by 1996 that the Republican budget shutdown strategy had failed, and he agrees today that the worst outcome would be a technical default that still doesn't muster enough pressure to force the Beltway to change its spending habits. This possibility "scares the hell out of me because I don't know whether Obama would cave. I tell you one thing, if [Obama officials] believe what they're saying, they'll cave. If they believe this is Armageddon and this is worse than Lehman and this is the greatest catastrophe ever, they'll cave."

But what if Mr. Obama hangs tough, Republicans cave, and there is no spending reform between now and the 2012 elections? Would Mr. Druckenmiller sell his Treasurys? "Everything else being equal, that would be a big sell factor, not a buy factor. One of the reasons I bought the Treasurys a ways back was I thought [House Budget Chairman Paul] Ryan was serious. I mean I heard some serious things that I hadn't heard in a long time." When President Obama responded to Mr. Ryan with a harsh partisan attack instead of a serious policy proposal, "that made me feel not as good about my Treasurys as the day before. But I'm still long them," he says.

Mr. Druckenmiller says he's "a registered independent" but says he admires New Jersey Gov. Chris Christie for the way he has explained that the state has to reform its benefit plans if it is going to be able to take care of retired government workers. He argues that the same case needs to be made nationally. "We don't have a choice between Paul Ryan's plan and the current plan, because the current plan is a mirage. . . . That money is not going to be there."

Given Mr. Druckenmiller's track record, officials at the Fed and Treasury may not have a choice, either. They may finally have to try to explain why technical default is a crisis, but runaway spending is not.

Mr. Freeman is assistant editor of The Journal's editorial page.
3)The China Challenge

Societies and nations tend to think of themselves as eternal. They also cherish a tale of their origin. A special feature of Chinese civilization is that it seems to have no beginning. It appears in history less as a conventional nation-state than as a permanent natural phenomenon. In the tale of the Yellow Emperor, revered by many Chinese as the legendary founding ruler, China seems already to exist.

The Yellow Emperor has gone down in history as a founding hero; yet in the founding myth, he is re-establishing, not creating, an empire. China predated him; it strides into the historical consciousness as an established state requiring only restoration, not creation.

In general, Chinese statesmanship exhibits a tendency to view the entire strategic landscape as part of a single whole: good and evil, near and far, strength and weakness, past and future all interrelated. In contrast to the Western approach of treating history as a process of modernity achieving a series of absolute victories over evil and backwardness, the traditional Chinese view of history emphasized a cyclical process of decay and rectification, in which nature and the world could be understood but not completely mastered.

For China's classical sages, the world could never be conquered; wise rulers could hope only to harmonize with its trends. There was no New World to populate, no redemption awaiting mankind on distant shores. The promised land was China, and the Chinese were already there. The blessings of the Middle Kingdom's culture might theoretically be extended, by China's superior example, to the foreigners on the empire's periphery. But there was no glory to be found in venturing across the seas to convert "heathens" to Chinese ways; the customs of the Celestial Dynasty were plainly beyond the attainment of the far barbarians.

* * *

The most dramatic event of the Nixon presidency occurred in near obscurity. Nixon had decided that for a diplomatic mission to Beijing to succeed, it would have to take place in secrecy. A public mission would have set off a complicated internal clearance project within the U.S. government and insistent demands for consultations from around the world, including Taiwan (still recognized as the government of China). This would have mortgaged our prospects with Beijing, whose attitudes we were being sent to discover. Transparency is an essential objective, but historic opportunities for building a more peaceful international order have imperatives as well.

So my team set off to Beijing via Saigon, Bangkok, New Delhi and Rawalpindi on an announced fact-finding journey on behalf of the president. My party included a broader set of American officials, as well as a core group destined for Beijing—myself, as national security adviser, three aides and two Secret Service agents. The dramatic denouement required us to go through tiring stops at each city designed to be so boringly matter-of-fact that the media would stop tracking our movements. In Rawalpindi, we disappeared for 48 hours for an ostensible rest (I had feigned illness) in a Pakistani hill station in the foothills of the Himalayas—but our real destination was Beijing. In Washington, only the president and Col. (later Gen.) Alexander Haig, my top aide, knew our actual mission.

When the American delegation arrived in Beijing on July 9, 1971, we had experienced the subtlety of Chinese communication but not the way Beijing conducted actual negotiations, still less the Chinese style of receiving visitors. American experience with Communist diplomacy was based on contacts with Soviet leaders, principally Andrei Gromyko, who had a tendency to turn diplomacy into a test of bureaucratic will; he was impeccably correct in negotiation but implacable on substance—sometimes, one sensed, straining his self-discipline.

Strain was nowhere apparent in the Chinese reception of the secret visit or during the dialogue that followed. In all the preliminary maneuvers, we had been sometimes puzzled by the erratic pauses between their messages, which we assumed had something to do with the Cultural Revolution. Nothing now seemed to disturb the serene aplomb of our hosts, who acted as if welcoming the special emissary of the American president for the first time in the history of the People's Republic of China was the most natural occurrence.

In a preview of Friday's "Big Interview," Dr. Henry Kissinger discusses China's emergence as a world power and what it implies for the U.S. economy, while stating that much of the U.S. economy's problems are homegrown.
.After being welcomed by the vice chairman of the military commission in Beijing, we soon discovered that our Chinese hosts had designed an almost improbably leisurely schedule—as if to signal that after surviving more than two decades of isolation, they were in no particular hurry to conclude a substantive agreement now. If one allowed for 16 hours for two nights' rest, there would be less than 24 hours left for the first dialogue between countries that had been at war, near war, and without significant diplomatic contact for 20 years. In fact only two formal negotiating sessions were available: seven hours on the day of my arrival, from 4:30 p.m. to 11:20 p.m.; and six hours on the next, from noon until about 6:30 p.m.

It could be argued that the apparent Chinese nonchalance was a form of psychological pressure. To be sure, had we left without progress, it would have been a major embarrassment to Nixon. But if the calculations of two years of China diplomacy were correct, the exigencies that had induced Mao Zedong to extend the invitation might turn unmanageable by a rebuff of an American mission to Beijing.

Confrontation made no sense for either side; that is why we were in Beijing. Nixon was eager to raise American sights beyond Vietnam. Mao's decision had been for a move that might force the Soviets to hesitate before taking on China militarily. Neither side could afford failure. Each side knew the stakes.

In a rare symbiosis of analyses, both sides decided to spend most of the time on trying to explore each other's perception of the international order. Since the ultimate purpose of the visit was to start the process of determining whether the previously antagonistic foreign policies of the two countries could be aligned, a conceptual discussion—at some points sounding more like a conversation between two professors of international relations than a working diplomatic dialogue—was, in fact, the ultimate form of practical diplomacy.

The full Big Interview with Dr. Henry Kissinger focuses on China as an economic powerhouse, its "assertive behavior" in Southeast Asia, and the concessions China and the U.S. must make in order to work together.
.When Premier Zhou Enlai arrived later that day, our handshake was a symbolic gesture—at least until Nixon could arrive in China for a public repetition—since Secretary of State John Foster Dulles had refused to shake hands with Zhou at the Geneva Conference in 1954, a slight that rankled, despite the frequent Chinese protestations that it made no difference. We then repaired to a conference room in the guesthouse and faced each other across a green baize table. Here the American delegation had its first personal experience with the singular figure who had worked by Mao's side through nearly a half-century of revolution, war, upheaval and diplomatic maneuver.

* * *

Seven months later, on Feb. 21, 1972, President Nixon arrived in Beijing on a raw winter day. It was a triumphant moment for the president, the inveterate anti-Communist who had seen a geopolitical opportunity and seized it boldly.

As a symbol of the fortitude with which he had navigated to this day and of the new era he was inaugurating, he wanted to descend alone from Air Force One to meet Zhou, who was standing on the windy tarmac in his immaculate Mao jacket as a Chinese military band played "The Star-Spangled Banner." The symbolic handshake that erased Dulles's snub duly took place. But for a historic occasion, it was strangely muted. When Nixon's motorcade drove into Beijing, the streets had been cleared of onlookers. And his arrival was played as the last item on the evening news.

As revolutionary as the opening itself had been, the final communiqué had not yet been fully agreed upon—especially in the key paragraph on Taiwan. A public celebration would have been premature and perhaps weakened the Chinese negotiating position of studied equanimity.

Our hosts made up for the missing demonstrations by inviting Nixon to a meeting with Mao within hours of our arrival. "Inviting" is not the precise word for how meetings with Mao occurred. Appointments were never scheduled; they came about as if events of nature. They were echoes of emperors granting audiences.

The first indication of Mao's invitation to Nixon occurred when, shortly after our arrival, I received word that Zhou needed to see me in a reception room. He informed me that "Chairman Mao would like to see the President." To avoid the impression that Nixon was being summoned, I raised some technical issues about the order of events at the evening banquet. Uncharacteristically impatient, Zhou responded: "Since the Chairman is inviting him, he wants to see him fairly soon." In welcoming Nixon at the very outset of his visit, Mao was signaling his authoritative endorsement to domestic and international audiences before talks had even begun. Accompanied by Zhou, we set off for Mao's residence in Chinese cars.

Mao's residence was approached through a wide gate on the east–west axis carved from where the ancient city walls stood before the Communist revolution. Inside the Imperial City, the road hugged a lake, on the other side of which stood a series of residences for high officials. All had been built in the days of Sino-Soviet friendship and reflected the heavy Stalinist style of the period. Mao's residence appeared no different, though it stood slightly apart from the others. There were no visible guards or other appurtenances of power. A small anteroom was almost completely dominated by a Ping-Pong table.

It did not matter because we were taken directly to Mao's study, a room of modest size with bookshelves lining three walls filled with manuscripts in a state of considerable disarray. Books covered the tables and were piled up on the floor. A simple wooden bed stood in a corner. The all-powerful ruler of the world's most populous nation wished to be perceived as a philosopher-king who had no need to buttress his authority with traditional symbols of majesty.

Mao rose from an armchair in the middle of a semicircle of armchairs with an attendant close by to steady him if necessary. We learned later that he had suffered a debilitating series of heart and lung ailments in the weeks before and that he had difficulty moving. Overcoming his handicaps, Mao exuded an extraordinary willpower and determination. He took Nixon's hands in both of his and showered his most benevolent smile on him. The picture appeared in all the Chinese newspapers.

Nixon's visit to China is one of the few occasions where a state visit brought about a seminal change in international affairs. The re-entry of China into the global diplomatic game, and the increased strategic options for the U.S., gave a new vitality and flexibility to the international system. Nixon's visit was followed by comparable visits by the leaders of other Western democracies and Japan. Consultation between China and the United States reached a level of intensity rare even among formal allies.

Would the interests of the two sides ever be truly congruent? Could they ever separate them from prevalent ideologies sufficiently to avoid tumults of conflicting emotions? Nixon's visit to China had opened the door to dealing with these challenges; they are with us still.

* * *

In recent years, China's encounter with the modern, Western-designed international system has evoked in the Chinese elites a special tendency in which they debate—with exceptional thoroughness and analytical ability—their national destiny and overarching strategy for achieving it.

The world is witnessing, in effect, a new stage in a national dialogue about the nature of Chinese power, influence and aspirations that has gone on fitfully since the West first pried open China's doors.

The previous stages of the national-destiny debate asked whether China should reach outward for knowledge to rectify its weakness or turn inward, away from an impure if technologically stronger world. The current stage of the debate is based on the recognition that the great project of self-strengthening has succeeded and China is catching up with the West. It seeks to define the terms on which China should interact with a world that—in the view of even many of China's contemporary liberal internationalists—gravely wronged China and from whose depredations China is now recovering.

An example of the "triumphalist" line of thinking is in Col. Liu Mingfu's 2010 book "China Dream." In Liu's view, no matter how much China commits itself to a "peaceful rise," conflict is inherent in U.S.-China relations. The relationship between China and the U.S. will be a "marathon contest" and the "duel of the century." Moreover, the competition is essentially zero-sum; the only alternative to total success is humiliating failure.

Neither the more triumphalist Chinese analyses nor the American version—that a successful Chinese "rise" is incompatible with America's position in the Pacific, and the world—have been endorsed by either government, but they provide a subtext of much current thought. If the assumptions of these views were applied by either side—and it would take only one side to make it unavoidable—China and the U.S. could easily fall into an escalating tension.

China would try to push American power as far away from its borders as it could, circumscribe the scope of American naval power, and reduce America's weight in international diplomacy. The U.S. would try to organize China's many neighbors into a counterweight to Chinese dominance. Both sides would emphasize their ideological differences. The interaction would be even more complicated because the notions of deterrence and preemption are not symmetrical between these two sides. The U.S. is more focused on overwhelming military power, China on decisive psychological impact. Sooner or later, one side or the other would miscalculate.

The question ultimately comes down to what the U.S. and China can realistically ask of each other. An explicit American project to organize Asia on the basis of containing China or creating a bloc of democratic states for an ideological crusade is unlikely to succeed—in part because China is an indispensable trading partner for most of its neighbors. By the same token, a Chinese attempt to exclude America from Asian economic and security affairs will similarly meet serious resistance from almost all other Asian states, which fear the consequences of a region dominated by a single power.

The appropriate label for the Sino-American relationship is less partnership than "co-evolution." It means that both countries pursue their domestic imperatives, cooperating where possible, and adjust their relations to minimize conflict. Neither side endorses all the aims of the other or presumes a total identity of interests, but both sides seek to identify and develop complementary interests.

The issue of human rights will find its place in the total range of interaction. The U.S. cannot be true to itself without affirming its commitment to basic principles of human dignity and popular participation in government. Given the nature of modern technology, these principles will not be confined by national borders. But experience has shown that to seek to impose them by confrontation is likely to be self-defeating—especially in a country with such a historical vision of itself as China. A succession of American administrations, including the first two years of President Barack Obama's, has substantially balanced long-term moral convictions with case-to-case adaptations to requirements of national security. The basic approach remains valid; how to achieve the necessary balance is the challenge for each new generation of leaders on both sides.

When China and the U.S. first restored relations 40 years ago, the most significant contribution of the leaders of the time was their willingness to raise their sights beyond the immediate issues of the day. In a way, they were fortunate in that their long isolation from each other meant that there were no short-term day-to-day issues between them. This enabled the leaders of a generation ago to deal with their future, not their immediate pressures, and to lay the basis for a world unimaginable then but unachievable without Sino-American cooperation.

In pursuit of understanding the nature of peace, I have studied the construction and operation of international orders ever since I was a graduate student well over half a century ago. I am aware that the cultural, historic and strategic gaps in perception will pose formidable challenges for even the best-intentioned and most far-sighted leadership on both sides. On the other hand, were history confined to the mechanical repetition of the past, no transformation would ever have occurred. Every great achievement was a vision before it became a reality.

In his essay "Perpetual Peace," the philosopher Immanuel Kant argued that perpetual peace would eventually come to the world in one of two ways: by human insight or by conflicts and catastrophes of a magnitude that left humanity no other choice. We are at such a juncture.

When Premier Zhou Enlai and I agreed on the communiqué that announced the secret visit, he said: "This will shake the world." What a culmination if, 40 years later, the U.S. and China could merge their efforts not to shake the world, but to build it.

—Adapted from "On China" by Henry Kissinger, to be published Tuesday by the Penguin Press, a member of Penguin Group (USA) Inc. Copyright © 2011 by Henry A. Kissinger.
4)Korea, Iran trade missile technology: U.N
By Louis Charbonneau

NEW YORK (Reuters) - North Korea and Iran appear to have been regularly exchanging ballistic missile technology in violation of U.N. sanctions, according to a confidential United Nations report obtained by Reuters on Saturday.

The report said that the illicit technology transfers had "trans-shipment through a neighboring third country." That country was China, several diplomats told Reuters on condition of anonymity.

The report was submitted to the U.N. Security Council by a U.N. Panel of Experts, a group that monitors compliance with U.N. sanctions imposed on Pyongyang after it conducted two nuclear tests in 2006 and 2009.

The U.N. sanctions included a ban on trade in nuclear and missile technology with North Korea, as well as an arms embargo. They also banned trade with a number of North Korean firms and called for asset freezes and travel bans on some North Korean individuals.

"Prohibited ballistic missile-related items are suspected to have been transferred between the Democratic People's Republic of Korea (North Korea) and the Islamic Republic of Iran on regular scheduled flights of Air Koryo and Iran Air," the report said.

"For the shipment of cargo, like arms and related materiel, whose illicit nature would become apparent on any cursory physical inspection, (North) Korea seems to prefer chartered cargo flights," it said.

It added that the aircraft tended to fly "from or to air cargo hubs which lack the kind of monitoring and security to which passenger terminals and flights are now subject."

Several Security Council diplomats said that China was unhappy about the report.

Beijing has prevented the publication of expert panel reports on North Korea and Sudan in the past. Earlier this week, Russia took similar steps to suppress an equally damning expert panel report on Iran.

The report said the possibility of exports of weapons-grade nuclear material from North Korea or nuclear technology to other countries remains a concern and presents "new challenges to international non-proliferation efforts."

U.S., Israeli and European governments have said that North Korea was helping Syria build a nuclear reactor that Israel destroyed in 2007.

In its report, the panel said that North Korea's uranium enrichment problem, which Pyongyang says is for civilian purposes, is "primarily for military purposes."

It added that North Korea "should be compelled to abandon its uranium enrichment programme and that all aspects of the programme should be placed under international monitoring."

The report also said there were concerns about safety at North Korea's Yongbyon nuclear complex. It said "safety issues should be discussed an integral part of the denuclearization of (North Korea)."

It added that "reckless decommissioning or dismantlement at Yongbyon could cause an environmental disaster."

(Reporting by Louis Charbonneau; Editing by Laura MacInnis and Paul Simao)

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