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Larry King Live

Violence in the Middle East: Palestinian Mob Kills Israeli Soldiers; Suspected Terrorists Attack USS Cole

Aired October 12, 2000 - 9:00 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LARRY KING, HOST: Tonight on LARRY KING LIVE: an angry Palestinian mob kills three Israeli soldiers. And in a separate attack, a suicide mission leaves six American sailors dead. Could the escalating violence in the Middle East lead to United States involvement?

We will ask former National Security Adviser Brent Scowcroft, and then the chairman of Senate Armed Services Committee, Senator John Warner, along with Senator Joe Biden of Delaware, Senator John Kerry, and Senator Richard Lugar of Indiana. We will hear from New York City Mayor Rudy Giuliani on the massive demonstrations today outside the U.N. And financial expert, Suze Orman explains how this latest round of violence has affected the stock market -- all just ahead on LARRY KING LIVE.

Good evening from New York. We begin with two people directly involved in these events of this ever-changing day. They are, in Washington, Hasan Abdel Rahman. He is the chief Palestinian representative to the United States. And near here in New York is Ehud Olmert. Ehud is the mayor of Jerusalem.

Two late notes: The Security Council of the U.N. adjourned Thursday night -- did not hold an emergency session as the Palestinians requested. And President Clinton has canceled his trip to the Midwest for tomorrow.

We will start with Mr. Rahman.

Mr. Rahman, the Palestinian negotiators have said this is an all- out war against the Palestinians. You have lost 100 people to death. Arafat says he will continue this until an independence day takes place. Are you be -- going to stay this harsh?

HASAN ABDEL RAHMAN, CHIEF PALESTINIAN REP. TO U.S.: Well, I think it is going to depend on the behavior of Mr. Barak in the coming days. If Mr. Barak pursues his policy of diplomacy by tanks and by helicopters, and negotiations by bullets, rather than true negotiations, then I believe that the peace process is over.

But if Mr. Barak tomorrow removes the tanks that he deployed, stops shooting at innocent civilians, open Gaza airport, accept the international commission of inquiry to investigate the causes and who is responsible for what happened, I believe -- and return to the peace negotiations -- I don't believe that the peace process is over.

KING: Mr. Mayor, Mr. Barak announced his plans to form a national emergency government and include the right wing Likud Party, which has opposed the peace talks. He reports that three Israeli soldiers were killed today. He retaliates by bombing. What do you make of what Mr. Rahman has just said?

EHUD OLMERT, MAYOR OF JERUSALEM: First of all, Likud is not against the peace process. We are very much in favor of the peace process. We may have different opinions about some of the proposals that were negotiated and discussed. But the Likud was part of the peace process when we were in government -- and when we will back in government at some point. I don't know if it will be tomorrow or after elections.

We will continue the peace process, but, of course, not on the same basis it was conducted...

KING: Opposed the Barak plan.

OLMERT: That's right.

KING: Now...

OLMERT: But I'll tell you something. You know, I was looking at the PLO representative. And I thought: When will the PLO representative say: I am sorry for the lynching of three innocent Israelis in the most brutal way in the streets of Ramallah today by Palestinians?

I couldn't believe my ears looking at him talking about the Israelis, without any reference to the fact that his people, as you can see now, were lynching, in the most brutal way -- tie them up to the cars, drive them through the streets of Ramallah -- in a most terrible way, drop them from the building of three fours or four floors, and then torture them, and then distorted the bodies.

And there's not one word of apology, not one word of regret.

(CROSSTALK)

OLMERT: And then they are talking about peace negotiations, as if nothing happened, and as if we have to just ignore it, remove it from the agenda, and continue as if nothing happen.

KING: But the Security Council, with the U.N. abstaining, said that Israel was the cause of -- the start of this, did they not?

OLMERT: You know, we know of this resolution.

KING: And?

OLMERT: I think this is a very unfortunate resolution. The fact remains that, from the very beginning, even before the visit of General Sharon on the Temple Mount, it started with the killing of two Israelis. KING: All right, let Mr. Rahman respond. Why not apologize for that act today?

RAHMAN: First of all -- first of all, I am willing to express my regret for the death of the Israeli soldiers. I want Mr. Olmert to express also his apology and his regret for the death of 100 Palestinians and the wounding of 3,000 others. If Mr. Olmert is going to match me, I am waiting for his apology and for his regrets, also.

OLMERT: First of all...

KING: Why don't we both apologize and get on...

OLMERT: I am sorry. I am sorry for the killing of any persons. They...

(CROSSTALK)

RAHMAN: No, I'm talking about Palestinians.

OLMERT: Excuse me.

KING: He's responding.

OLMERT: Listen, I'm responding. I mean, don't attack me here. We are on American ground.

RAHMAN: Because you attacked me first.

OLMERT: No, I didn't attack you. I just said...

RAHMAN: Yes, of course, you did.

(CROSSTALK)

OLMERT: ... in surprise that you didn't -- that you didn't apologize.

RAHMAN: I was not asked if...

(CROSSTALK)

RAHMAN: I am sorry for the killing of any Palestinian, as I am sorry for the killing of all those Israelis that were killed in the last few weeks by Palestinians. The difference between us and them is that, with us, it's not a policy. With them, it's a policy.

KING: All right, who stops first? What's going to happen tomorrow?

OLMERT: I think that very little, because I think that, to this minute, we didn't hear one word by Arafat, who is the inspirator, who is the guy in control of the Palestinians, saying publicly to the Palestinians: Stop shooting, stop shooting.

KING: Will somebody stop this? Mr. Rahman, do you think the Palestinians will stop any violent activity tomorrow?

RAHMAN: You know, I think I made the Palestinian position clear. This whole thing was initiated by the visit of Mr. Sharon.

KING: All right, but that was a while ago. What about now?

RAHMAN: No, two weeks ago. And the killing of six Palestinians on al-Haram as-Sharif by the Israeli security forces, which it triggered all of this. Now, after that, Mr. Barak moved his troops, his tanks and bombed Palestinians and killed so many and wounded others. Now, we are not in Israel. We don't have any tanks on Israeli territory. We do not have Palestinian soldiers on Israeli land.

We are not shooting and bombarding Palestinian -- Israeli positions. Our people are unarmed. Any of them who is armed is armed with stones.

KING: So, all right, I...

RAHMAN: They are not as lethal as...

KING: I have...

RAHMAN: So if Mr. Barak wants to end this, he can withdraw his troops tomorrow. And I assure you that the violence will stop.

KING: OK. All right. Now, he assures that. Do you think, Mayor Olmert, that Mr. Barak may remove the troops tomorrow in view of this promise that violence stops if they leave?

OLMERT: Troops are not the problem.

KING: Are they going to be removed?

OLMERT: I don't know. It depends on the behavior of the Palestinians.

KING: Well, but if one says you go first, and one says you go first, and neither goes first, you are going to keep killing.

OLMERT: We are not initiating any attacks. We -- we are not initiating the attacks today that brought the deaths -- the terrible deaths of three Israeli soldiers.

KING: So you have done nothing wrong?

OLMERT: I -- I -- I just want to say, we probably made many mistakes, because in this turmoil, all sides are making mistakes. I'm talking about policy. And I just want to summarize it in one sentence. Let's assume, Larry, that Ariel Sharon, a political leader of Israel, made a terrible mistake when he thought that he can go and visit the Temple Mount, which happens to be the most sacred place for Jewish people in the last 3,000 years. OK? Let's assume that he made a mistake, and that he shouldn't have gone there, because the Palestinians don't like it. You want to tell me, and the gentleman from the Palestinian Authority wants to say to us that whenever we will have a dispute, and an Israeli will do something that they don't like -- even though he didn't touch the stones of the mosque, he didn't do anything to the mosque, he didn't destroy the mosque, as they destroyed Joseph's Tomb at the weekend -- then just because he did something that they don't like, they can shoot, they can kill, they can fight, they can put all the Middle East into such terrible turmoil.

KING: All right.

OLMERT: I mean, where do we leave?

KING: All right, we have many guests tonight. You have seen the dilemma of the problem. We expect to have both these guests return for lengthier discussions, as this problem hopefully ends, and we can discuss a more peaceful nature. But I thank them both for coming.

Thank you, Mr. Mayor, and thank you, Mr. Rahman.

Brent Scowcroft, former national security adviser, is next.

Don't go away.

(BEGIN VIDEO CLIP)

EHUD BARAK, ISRAELI PRIME MINISTER: We will never lose hope, as I have said, to make peace with the Palestinian people. They're our neighbors forever. But if this leadership is unright, we cannot impose it upon them. It takes two to make peace. It takes only one to lead to a confrontation. And if Arafat wants confrontation, we cannot avoid it.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: Before we here from Brent Scowcroft, let's check in with our CNN military affairs correspondent Jamie McIntyre at the Pentagon for the latest on the Cole attack -- Jamie.

JAMIE MCINTYRE, CNN CORRESPONDENT: Well, the Pentagon is not saying this officially yet, but privately they are saying that this was a suicide sneak attack on the U.S. destroyer Cole, which was stopped in the port of Aden in Greece (sic) on a refueling stop on the way to the Persian Gulf.

While the ship was in port, this hole was blown in the side of the hull -- it's 40 feet across, 20 feet high -- by a boat that was supposed to be helping it with its mooring lines. And when the boat pulled up next to this destroyer, at one point after it looked like it was doing its routine business, two of the men who were on the boat stood -- stood up straight, described as at attention by one eyewitness, and the boat exploded, blasting this hole in the hull. At this point, it looks like we have six people confirmed dead, six sailors, 11 more missing. They're presumed dead. So probably the death toll will go higher. And three dozen were injured in this attack, which the U.S. says was -- has you all the earmarks of a terrorist attack.

The U.S. has said that if it can figure out who's responsible for this, it will take decisive action, hinting of a possible military strike.

KING: Jamie will be back with us later when our panel of reporters gathers.

Now, we'll go to Brent Scowcroft in Washington, the former national security adviser in the Bush administration. What do you make of this, Brent?

BRENT SCOWCROFT, FORMER NATIONAL SECURITY ADVISER: The Cole attack?

KING: Yes. Well, I think it is related in some way to the peace process and what happened: maybe not to the events of the last few days. It seems that this attack must have been fairly carefully prepared for them to be able to do it the way they did.

The Cole, as I understand it, was asked to refuel at Aden because we're sort of trying to improve our relationships with Yemen, which is fine.

Aden is a very tough place, always has been. It's a haven for terrorists and thugs and so on. But to have masqueraded as a tug -- and I understand they even took one of the lines and secured it to a mooring buoy -- they had to have planned this very, very carefully.

I don't know -- I don't know how they found out that the Cole was coming in, but there must have been some accomplices in the port authority somehow for them to do it.

KING: And in your opinion, has our reaction or the reaction of Clinton and George Bush and Al Gore and everybody of a major stripe today been correct?

SCOWCROFT: Oh, I think absolutely. This was totally unprovoked, totally unwarranted. It's not the first, and unfortunately, it probably won't be the last. If we can find the perpetrators, we certainly ought to take action.

But we ought to make sure we find the perpetrators first. We have hit before when we really didn't.

KING: Were wrong. Would you advise people not to go to the area as tourists?

SCOWCROFT: No, I don't -- I don't think I would go that far. They ought to know that there are risks and that there are some people out there who wish them ill. But I think the vast majority of the people in the region are friendly to the United States, friendly to American tourists. And I just think they need to be very, very cautious where the they go and how they comport themselves.

KING: Thank you, Brent -- Brent Scowcroft, former general, former national security adviser in the Bush administration. An old friend and it's always good to see him and always good to see him looking so well. And let's hope things ease off.

As we go to break, we're going to show you an 800 number. If you want information, if you have relatives on the USS Cole, there is an 800 number you can call. It's 800-368-3202. Please, families only. 800-368-3202.

Four United States senators will join us right after these words.

(COMMERCIAL BREAK)

KING: To round out this half hour, four key members of the United States Senate. They are Senator John Kerry, Democratic of Massachusetts, a member of the Senate Foreign Relations Committee; Senator John Warner, Republican of Virginia -- he is chairman of Senate Armed Services -- Senator Joe Biden, Democrat of Delaware, ranking Democrat on Senate Foreign Relations; and Senator Richard Lugar of Indiana, a member of the Senate Foreign Relations Committee as well. These are heavyweights, all veterans of the Senate.

We'll start with Senator Warner as chairman of Senate Armed Services. What's your overview of the events of the day?

SEN. JOHN WARNER (R-VA), CHAIRMAN, ARMED SERVICES COMMITTEE: Very tragic: not only in the Middle East, but all of us who had the privilege of wearing a uniform in this country, and most particularly those on active duty today, you hit one of them, you hit us all. And our hearts go out to the families of those who have suffered the casualties thus far.

And I must tell you, I just was briefed by the Navy Department moments ago. We've still not been able to reach some of the families of those who are known to have been killed, those that are missing, and some 36 that are wounded.

But Larry...

KING: And Senator Biden -- I'm sorry.

WARNER: If I can follow up one thing. We've had briefings in the Senate today, and I think most of us have talked to the secretary of defense and the chief of naval operations. Many questions remain, but let's give our great military the benefit of the doubt.

I think Secretary Cohen and the chiefs, particularly the naval chief, have handled this situation well. France has come to our help with aid. Other nations that have assets in the vicinity, ships and aircraft, have come in to help these wounded and otherwise disabled people.

KING: Senator Biden, do you agree with what Senator Warner said?

SEN. JOSEPH BIDEN (D), DELAWARE: Well, obviously, I do. But I think, Larry, in addition to that, you know, when peace got close -- and it got very close about 10 days ago -- there are so many elements within the Middle East who find it against their interests for there to be peace. And so it's always in almost all circumstances something terrible happens just at the end when the process looks like it's about to come together.

And I think that now the question is what do we do from here? And it seems to me that the request of the president of the United States to Mr. Mubarak to convene a meeting in Egypt with the principal, including Barak and Arafat and the Jordanians as well as us, would be the most positive thing that could be done, along with a cease-fire right away, to try to get this back in the box, because it's an incredibly dangerous situation.

KING: Senator Lugar, tonight on ABC radio, former Secretary Alexander Haig said that we should go out and come right out on Israel's side, stop being in the middle on this, take sides, we should -- we've always been for Israel, let's take sides and make our position clear, and we should not have voted to abstain in the U.N.

SEN. RICHARD LUGAR (R), INDIANA: Well, I'll not second-guess that vote, but I think we have to be clear we're on ally of Israel and that we want to make certain they know it and the world knows it. Beyond that, we have our own interests. It came home to us today that the world is a dangerous place not just for the Israelis but for America. It was our sailors that lost their lives there. And the fact is that we lost a lot of ground in the oil market today. The price of oil went up over $36, the stock market went way, way down.

All of these things are related in terms of our strength in the world, and we're going to have to assess where we stand in the Middle East. Leaving aside the peacemaking, which is very, very important, what our stature is in a very volatile area of the world on which we are still very dependent.

KING: Senator Kerry, who started this or is that now moot?

SEN. JOHN KERRY (D), MASSACHUSETTS: Oh, I mean, that goes back so far that it's moot in the context of tonight.

KING: I mean, the last two weeks?

KERRY: Well, again, even that is moot in the context of tonight. What we need to do is not be casting fingers of blame ourselves. The whole world knows our relationship with Israel, but at the same time, we have been a remarkably responsible broker. And I think we need to understand, what you saw at the beginning of your show between the mayor and the ambassador, just underscores the passions at stake on both sides.

Indeed, Mr. Sharon's visit was volatile. It did incite. But at the same time, of course, he has rights to travel. I mean, there are rights and legitimacies on both sides here. Almost a hundred Palestinians have died.

We have to understand that that's a funeral in so many communities, in so many families, and that those passions have also unlighted tonight.

So I think what we need to do is do exactly what others have proposed, which is get this back on track. Look to Chairman Arafat to exert much greater leadership than he has. He must be able to assert that over the police. The police must begin to act like police.

And at the same time, I don't think it would be a bad idea for the ambassador's suggestions with respect to some of the deployments to perhaps be spontaneously offered by Israel at this moment so that you can have a meeting in Egypt, which President Mubarak is calling for, that really tries to bring the parties together.

This is a very, very dangerous situation, and it's partly spinning out of control now. And it's imperative that we all work to bring it back together.

KING: Some more moments with or distinguished senators, and then the mayor of New York will be with us, then a panel of journalists will discuss it: Christiane Amanpour as well, who's on the scene. We'll be right back.

(COMMERCIAL BREAK)

KING: Senator Richard Lugar of Indiana, who do you think caused this?

LUGAR: Well, the obvious perpetrators of the deed against our ship were terrorists...

KING: Is Yemen connected definitely with this, connected with the events? We don't know?

LUGAR: Not necessarily. The Yemenis, I believe, were fully aware, or at least the group out of Aden, that the Cole had transited the Suez Canal. It's not difficult to observe that, and it was going to be two or three days before it got Aden. They may not have known precisely that this ship was going to come into Aden. But as has been pointed out earlier tonight on CNN, about a dozen such ships had come in at various times. I think they were ready for the target of opportunity when it arrived and seized upon it.

KING: Senator Warner, could we -- could have war here?

WARNER: Oh, Larry, I don't want to bring that word up, because right now the whole international community is trying to do what they can to stabilize it.

But let me point out this ship -- and the Arab world should understand this -- this ship was on a mission to go in and enforce the United Nations and Security Council sanctions against Saddam Hussein, Saddam Hussein who laid ravage to the peninsula. So we were there as the United States. You talk about the balance of our relationship with Israel and the Arabs. We were there to enforce sanctions again Saddam Hussein.

Now to pick up on a point that Dick Lugar made, there is a troubling aspect here. We had to give Aden notice of our ship coming in to refuel.. That notice could easily have been picked up by a terrorist organization, because this accident -- or this tragic attack, not an accident -- this had to be planned.

You could not put that much explosive in that small a boat, and skillfully they did it, work in with the handlers, which are normal in any port landing of a ship, and cause this tragic damage and loss of life without some careful planning and some logistics chain that went back several days to get those explosives, get that ship, figure out how they were going to do it.

So we've got questions to answer.

BIDEN: Larry...

KING: Who was going to speak? I'm sorry. Yes.

BIDEN: Larry, I want to make another point. You ask, who's responsible for this? There's a lot of provocation, and you can assume or suggest that one side provoked the other. But there was an agreement that the Palestinians made to maintain security. They made that agreement in Paris. They put it down in writing.

Arafat made a very risky gamble here. When things spontaneously started the day after Sharon's visit, he let them get out of control. I believe he did it in order to be able to curry public opinion worldwide, assuming the Israelis would overreact.

Now it's gotten so far out of control, and he has not said a word yet. He has not said a word. And he's responsible to say a word. He's responsible to say, stop. He has been unwilling to do that. Barak has been willing to do it.

I'm not defending every action the Israelis took, but there's no question, there's no daylight between us and the Israelis. The world should know that. Even when they make mistakes, there is no daylight between us and them. And we can still be an honest broker.

KING: I've got a time problem.

Senator Kerry, do you think it will get worse before it gets better?

KERRY: Well, obviously, I pray not and I think everybody does. I think tomorrow is critical. I understand that the Palestinians have called for another day of rage. Clearly, whatever steps Israel takes in response to that will be key.

I think now, as a result of what happened today -- and no one, I mean, we were all shocked and stunned, and I can imagine the deep anger in Israel as a consequence of what happened. I mean, there isn't a person there who isn't outraged to the point of wanting revenge, and Barak has said today that the revenge they sought on the police stations is the end of the revenge they intend to seek.

So conceivably tomorrow, cooler heads may conceivably prevail, but Chairman Arafat must stand up publicly. He must call on his police to provide order. And what you've seen is anarchy within the entire Palestinian population, and that does not auger well.

KING: Thank you all: Senators Kerry, Warren, Biden, and Lugar.

Mayor Rudy Giuliani, who spoke today at a major rally here in New York for Israel in this current fracas, if I can use so trite a word -- we'll be right back with the mayor after this.

(BEGIN VIDEO CLIP)

WILLIAM J. CLINTON, PRESIDENT OF THE UNITED STATES: If, as it now appears, this was an act of terrorism, it was a despicable and cowardly act. We will find out who was responsible and hold them accountable.

If their intention was to deter us from our mission of promoting peace and security in the Middle East, they will fail utterly.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: We're back. We want to give you the complete scope of the events of the day. And in New York City, a major rally today, and attending it was the mayor of New York, Rudy Giuliani.

What was this all about today?

MAYOR RUDY GIULIANI (R), NEW YORK: Well, it was a rally to try to show support for Israel during a very difficult and terrible time. And, obviously, people have different viewpoints and different political viewpoints as to what should be done. And I went because I wanted to express the viewpoint that I've held for quite some time. I'm not surprised that Arafat is not living up to his agreements, not doing what is responsible. This is all predictable.

And part of it is a flaw that we have in the way in which we approach this that we should expose, talk about and change.

KING: Which is?

GIULIANI: We have created a moral equivalent between the state of Israel and the Palestinian Authority. And they are not moral equivalents. One is a nation of laws. The other isn't.

KING: You had 15,000 there today.

GIULIANI: Fifteen-thousand.

KING: Are you planning another one?

GIULIANI: Tomorrow, I think there's going to be a Palestinian demonstration.

KING: Will you attend that?

GIULIANI: No, because I don't think there is...

KING: The Palestinians who died didn't want to die either.

GIULIANI: And I...

KING: And they're the victims of their state, if the state is cruel.

GIULIANI: They are. But the reason they are going to protest is to continue the fiction that this is primarily the responsibility of the state of Israel. And it's primarily the responsibility of Yasser Arafat.

KING: Are we...

GIULIANI: And our having romanticized him into something that he isn't, which is a responsible leader of a country.

KING: Now, you never accepted that.

GIULIANI: I never did. I -- and maybe it comes from my own personal experience. When I was a United Stats attorney, I investigated him and the PLO for the murder of Leon Klinghoffer.

KING: On that ship.

GIULIANI: And -- the Achille Lauro. And during the course of that found evidence of maybe 30 or 40 people that he had murdered -- and always felt the United States -- United States foreign policy was romanticizing him. It may be necessary to deal with him. But when you deal with him, you have to require more of him than you do of Israel.

KING: Do you understand the difficulty we are in, though, the United States?

(CROSSTALK)

GIULIANI: The difficulty right now is horrendous. And it's been, you know, created, to some extent, by allowing Arafat to make agreements, break them, and not be held accountable for it.

KING: Do you agree with the statements today by Gore, Bush, Clinton, et al., that we have to a step back, we shouldn't react quickly until we know who did this?

GIULIANI: Yes.

KING: And we -- and Bush said if Arafat thinks if he's elected president, things are going to be different, he has got another think coming.

GIULIANI: No, I think -- I think what he will see in George Bush is somebody that holds him more accountable than the Clinton...

KING: More accountable than Clinton has?

GIULIANI: Than Clinton has. I think Clinton has helped to create the sense that Arafat is a responsible world leader.

KING: But he's sincerely trying for peace.

GIULIANI: Absolutely. But you can have different viewpoints of how to get there. And I think that it's a flawed viewpoint to try to create a moral equivalent between the state of Israel and the Palestinian Authority.

KING: What do you think is going to happen?

GIULIANI: I hope that Arafat will understand that whatever he's gained in terms of world opinion -- which I believe is flawed, but he believe he's gained -- is going to all be lost if he doesn't try to do everything that he can to stop the violence that's going on and make certain that tomorrow turns out to be peaceful.

(CROSSTALK)

GIULIANI: So I hope and I pray that that's the case.

KING: Always good seeing you.

GIULIANI: Thank you. Good to see you.

KING: Subway series.

GIULIANI: Yes. Come with me, all right, to a game?

KING: I will go with you. Mayor Rudy Giuliani, the mayor of New York.

When we come back: Christiane Amanpour on the scene in Jerusalem, John King, our CNN senior White House correspondent. And Jamie McIntyre returns at the Pentagon.

Don't go away.

(COMMERCIAL BREAK)

KING: We're back on LARRY KING LIVE.

Joining us now from Jerusalem is Christiane Amanpour. She is CNN's chief international correspondent -- had an interview with Barak. At the White House is John King, CNN senior White House correspondent. And at the Pentagon, back with us -- he was with us earlier -- is Jamie McIntyre, CNN military affairs correspondent.

Christiane, we are told that the Palestinians may react tomorrow to the Israeli actions of today. Do you expect that?

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Well, given the way that it has been going for the last several days, it's possible. Tomorrow is Friday. There will be Friday prayers in the holy Muslim places. And they've also called yet another day of rage.

And, you know, this dynamic has been going on over the last couple of weeks, where there have been killings, many killings of Palestinians, where there have been funerals, where then all the people gather at the funerals. The emotions are made all raw. People get very angry. The stone-throwing starts -- some people with guns.

The militias starts firing guns. And then the Israelis respond. It's been going on like this for a long, long time. What we've seen in the last 24 hours is an unprecedented escalation of this confrontation. Israel has never reacted in this way against the Palestinians. And what we saw was them taking revenge for a truly horrible lynching of Israeli soldiers this morning. So it's entered a very, very dangerous phase.

KING: And, John King, the president, we understand, has canceled a trip for tomorrow, right?

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Canceled fund raisers tonight, canceled the first leg of a political trip tomorrow. They say they will take this on a day-by-day basis. It is supposed to go through the weekend. But they do not expect him to travel in the middle of this crisis.

An interesting point to follow up on Christiane, Larry: They view tomorrow as a key test here -- the White House saying there was one hopeful development today. They have been openly frustrated with Mr. Arafat. We've seen that from the president on down through senior administration officials, privately frustrated with President Mubarak of Egypt, King Abdullah of Jordan.

The president has appealed to them privately to do more, to pressure Mr. Arafat, to publicly condemn the violence, to do all he can to keep the Palestinians away from anything that could be potentially provocative -- White House officials saying that King Abdullah and President Mubarak tonight gave the president assurances they would now engage and try to do that -- so, obviously, everyone watching tomorrow. The White House hoping that diplomacy here, the president's telephone diplomacy will finally take hold and bring some results.

KING: In as emotionally clouded a situation as this, John, what clout does Clinton have?

J. KING: Well, that is the question. He has built up goodwill among all the parties here in the last 7 1/2 years. One reason the United States abstained and did not veto that resolution at the United Nations last week, that resolution condemning excessive force by the Israelis, the White House knew if it vetoed it, it would have further strained the relations with the Arab world.

Behind the scenes, everyone here acknowledges there is quite a strain right now. Again, they're very upset at Mr. Arafat, and they thought even back at Camp David, when the president thought he was close to an agreement, he very much wanted Mubarak and Abdullah to sell this to Arafat as the best deal he could get. They would not do that, and the White House has been frustrated since then.

And in the last three or four days, the relationships have become quite sense.

KING: Vice President Gore came -- left Wisconsin, came to the White House for a meeting. Have they kept Governor Bush posted as well?

J. KING: They have as well. Since the conventions, it is tradition in this country -- not just in this campaign -- that the challenger, that the in-house president briefs the challenging party. It's mostly done through Condi Rice, who worked here, of course, in President Bush's administration. She is the governor's top national security adviser. They get daily briefings if necessary, and certainly in times of crisis, she keeps in direct contact with Sandy Berger here at the White House.

KING: Jamie McIntyre, would you say the Pentagon is extremely upset?

JAMIE MCINTYRE, CNN CORRESPONDENT: Well, certainly, you could see the reaction here. Secretary Cohen, for instance, was supposed to be tonight in California addressing a group of business executives. He's not doing that.

The joint chiefs chairman, General Hugh Shelton, was supposed to be on leave tomorrow. That's been canceled. The Navy secretary, John Danzig, on a historic trip to China, he is coming back early. He'll be back tomorrow.

This kind of a terrorist attack, while unexpected today, has not been unexpected in the grand scheme of things. For more than a year now, the Pentagon and senior intelligence people have been saying it's not a question of whether there will be a terrorist attack against U.S. interests but when it will happen. And it appears that the when is today, because all of the evidence so far points to this attack on the USS Cole in Yemen as being a preplanned, premeditated terrorist attack that was aimed to take as many American lives as possible.

KING: Christiane, Barak's announced his plans for a national emergency government that includes the right-wing Likud Party. Has this satisfied generally the people of Israel?

AMANPOUR: Well, he's just asked them to join. Apparently, the news tonight was that he had talked to Ariel Sharon, the leader of the Likud Party, and had asked them to join an emergency government or unity government. We don't know the results of that.

But clearly, what the Israelis are saying now is that we need to be together to engage on this crisis and to stand together on this crisis.

However, basically, the analysts think that if they do bring Likud into a national unity government, they strongly oppose Barak's concessions, what Barak is doing toward pursuing his peace process and his part toward peace. And they think that this is going to put a full stop on these efforts.

And by the same token, so do the Palestinians. We spoke earlier this evening to the Palestinian negotiator, chief negotiator, Saeb Erakat, who said, if Sharon is in the government, that is the "death kiss" for the peace process. Those were his words.

KING: You...

AMANPOUR: So, that is very, very...

KING: You know Arafat very well. Why has he not spoken out do you think?

AMANPOUR: Well, I don't actually know him very well. I spoke to him in New York. We had an interview about a month ago, and I think revealing by the tenseness and the testiness of the exchange. He was clearly feeling under great pressure at that time. He was being publicly blamed, particularly by the United States, for the failure of Camp David. And he was under -- feeling under great pressure it seemed by the way he reacted in the interview.

And right now, according to the people around him, he's caught between a rock and a hard place, if you like. On the one hand, he has, according even to Israeli sources, in the last couple of days been trying to get a handle and trying to stop the shooting amongst the police and the militias who are armed here, the Palestinian police. On the other hand, he's reluctant to stop the people, because the people who are demonstrating, not with guns, but demonstrating and occasionally throwing, you know, ending their demonstration with stone throwing, he feels that he cannot stop that emotion, and that should be allowed to go on. But he was trying to stop the guns, which were causing the most trouble and causing the most reaction from the Israelis.

So it's a very, very difficult position, according to the people around him. And one can't underestimate the level of frustration, the level of anger amongst the Palestinian people. And the very fact that most of these people who are out on the streets are young people, they come from poor families, they don't see a great deal of future for themselves, and they're out there doing the only thing they know how to do.

KING: We'll be right back with our outstanding panel of three terrific journalists on the scene for us tonight here on CNN, and then in the final moments of the show, Suze Orman, a financial analyst, will tell us why what happened on Wall Street today happened.

Here's some moments of Christiane Amanpour with Mr. Barak today.

(BEGIN VIDEO CLIP) EHUD BARAK, PRIME MINISTER OF ISRAEL: I expect them to put an end to violence that they have initiated and are responsible for. We have this morning -- we had a lynch of three Israeli reservist soldiers who -- people came from their home -- and were lynched and mutilated and burned. It's something that no government on Earth could accept, and Israel is ready to look open-eyed at the situation.

Understand that we are living in the Middle East, not in North America and not the Midwest, and this is a place where you cannot expect anyone to respect you, you cannot expect your own people to trust you, if you cannot respond to such an event. And we responded in a very focused manner, very clear signal that we will not have this kind of violence continue forever.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: John King, it's been reported that Bill Clinton has told friends and associates that of all the dilemmas he's faced, nothing compares to this one. Is that what you've heard?

J. KING: It certainly is, and we've heard just in the past few days he's been quite despondent and angry from moment to moment.

How intractable is the Middle East? Look at what's happened here, Larry, just in the last few days. The president meets with the No. 2 official from North Korea, communist North Korea, is planning a trip to that country before he leaves office. The communist regime in Yugoslavia falls, a fledgling democracy, another hangover of the Cold War. And he signs legislation, permanent trade relations with China. All seemingly obstacles they could never overcome in U.S. policy fading away. The president, who has spent so much time, so many hours on the Middle East, back to square one in the view of many people here.

KING: Jamie McIntyre, do you know what we when we find, if we find out who did the action on the ship?

MCINTYRE: Well, the Pentagon's being a little cagey about that, but they clearly hinted that military action is a possibility. But the real problem is they have to be pretty certain that they know who's responsible for this.

You may recall, of course, after the U.S. struck that pharmaceutical plant in Sudan, there were many questions asked about whether the level of evidence linking that plant to Osama bin Laden was really very convincing. A lot of people still believe that that was weak evidence.

So if the United States is going to take military action, it's got to make sure that it can make a pretty clear case in the court of public opinion that it knows who's responsible for this attack.

KING: Christiane, would you recommend anything to tourists planning a trip to Jerusalem? Should they not go? AMANPOUR: Well, you know, the United States itself has put out a travel advisory, so that's the position of the United States. But I think the most dramatic and the most worrying thing that we've seen in the last 24 hours is this public vitriol that is now being hurled across the airwaves between the Israeli prime minister and the Palestinian chief negotiator at the Palestinian Authority president, each one saying that they don't consider the other anymore a partner for the peace.

And this is very dramatic rhetoric that is being...

KING: Boy.

AMANPOUR: ... hurled, as I say, across the airwaves. Who knows whether it's just for public consumption right now, or just in the heat of the moment of these aroused and inflamed passions, but it's a different tone.

KING: Thank you all very much. Christiane Amanpour, on the scene in Jerusalem, John King -- who went back to the White House tonight to report for us -- we thank him very much -- and Jamie McIntyre, who appears to live at the Pentagon. We thank you all very much for being with us.

When we come back, we will talk with Suze Orman, financial analyst. She wrote the book: "The Courage to be Rich." And she is going to try to tell us why this -- the Dow went down 379 points today, and global markets rocked by what the news is out of the Middle East.

Don't go away.

(COMMERCIAL BREAK)

KING: Now some remaining moments with Suze Orman in San Francisco, a financial analyst, author of "The Courage to be Rich."

Why did what happened today happen?

SUZE ORMAN, FINANCIAL ANALYST: Well, many reasons. A lot of people, I'm sure, are rushing in to say: Oh looked what happened there in the Middle East, and therefore the markets went down. And it's true, Larry, when news hit the floor today that the ship was bombed, Asia, Europe started to rush into the United States markets and go into bonds. People started to get very afraid, because they thought oil prices were going to continue to skyrocket. It's true we hit 30...

KING: And they did, didn't they?

ORMAN: And they did. But think about it. And they didn't go up that much. We were already pretty close to $35 a barrel.

KING: So why were people panicking?

ORMAN: So people panic because they're afraid. They're already panicking. If you think about it -- and I just want you to think about this -- six months ago, I was on this show with you. We weren't a whole lot different than we are right now. Right now, we are at 10000 on the Dow. Then, we were at 10300.

You know, now, we are down in the Nasdaq. But what you have to understand here is that percentage-wise, what happened today was not as bad as what happened six months ago when I was with you. That day, the market went down 600 points. We were down 5.6 percent. Today, we were only down 3.6 percent. So percentage-wise, it's not as big of a deal as everybody is trying to make it, if you really think about it.

KING: But what is its carryover tomorrow?

ORMAN: Now, I personally think it's going to continue to carry on. And I think, even if it goes back up -- after the last time I was on with you and the markets were down, they rallied. Just one month ago, the Dow was at 11300. It is down now 1000 points, or 1300 points. from there. We are going to see the markets rally.

When the markets do rally, people start to get optimistic. But that's the time, in my opinion, we should be selling. I don't think these markets are over, by any means. I think what's really driving these markets down is the fact that Alan Greenspan, a-year-and-a-half ago, came out and said: I'm going to start raising interest rates. He started to do so with the Fed fund rates.

We are now starting to see earnings decrease, the economy slow down. The labor market is tight. People are afraid of recession. They are afraid of recession because of oil prices. What happened in the Middle East today did scare people when it came to oil prices. All of this is going to continue on. And I don't think this market, as I said, a while ago...

KING: Right.

ORMAN: It's a place to be with a lot of money. No more than 40 percent of your assets should be in the stock market, in my opinion.

KING: A lot of emotion is dealt here. Could this sweep worldwide? Are we going to see it in London and Japan tomorrow? Is it going to get worse?

ORMAN: I think -- as I said, I think it is going to get worse. I don't think we're anywhere...

KING: Everywhere.

ORMAN: Everywhere. We are now a global economy. We are a global stock market. Just like I said a few seconds ago, when this happened, we saw money from Europe and Asia rush into the United States bond market. We all start using each other's economies. And what happens with oil does affect everything all over. What happens here with interest rates affects everything all over.

So, yes, I think the stock market is not the place to be with a considerable sum of your money all the way through this year, into 2001, and possibly even 2002.

KING: So the financial panic all deals around one word: oil?

ORMAN: Well, we would like to think it deals around oil. I think the one word it deals around is interest rates. We are now seeing the effects that the interest rates, that Alan Greenspan did -- the rise of those interest rates a year-and-a-half ago -- we are starting to feel the effects now.

KING: So you think that...

ORMAN: And that is more of a thing than...

KING: So you're saying today is kind of a blip?

ORMAN: I think today is a blip. It is. Think about it. We went down 379 points and you're going: Why, why, why? Again, that's only a 3.6 percent drop versus six months ago, when we didn't have this happen in the Middle East, we were not having the oil crisis like we're having today, we dropped 5.6 percent. Why? Earnings, interest rate, the markets aren't the greatest place to be overall for -- in my opinion, for now.

KING: A warning from Suze. Thank you, Suze -- Suze Orman, financial analyst, author of "The Courage to be Rich" -- on the fluctuations today.

CNN "NEWSSTAND" is next -- continuous 24-hour coverage of the crisis in the Middle East.

Thanks for joining us. I'm Larry King.

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