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THE SITUATION ROOM

Unyielding Violence in Iraq; DP World Agrees to Delay in Taking Over Six U.S. Ports; Thwarted Attack On Saudi Oil

Aired February 24, 2006 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: It's 5:00 p.m. here in Washington, and you're in THE SITUATION ROOM, where news and information from around the world arrive at one place at the same time.
Happening now, it's 1:00 a.m. south of Baghdad, where a sacred Shiite tomb is targeted. After days of rage following the bombing of another shrine, President Bush says he expects the next few days to be intense.

It's 1:00 a.m. in Saudi Arabia, where there are deadly explosions, but the government says it stopped a bold suicide attack on an oil facility. Oil markets, though, feel the impact.

And it's 4:00 p.m. in New Orleans. Mardi Gras revelers are covering themselves in beads and bright colors. Yet, Katrina is casting a wide shadow.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

President Bush calls it a "moment of choosing for the Iraqi people." Attack and counterattack amid seemingly unyielding violence in Iraq after the bombing of a sacred Shiite shrine.

Let's get more from CNN's Aneesh Raman. He's in Baghdad -- Aneesh.

ANEESH RAMAN, CNN CORRESPONDENT: Wolf, Mortars fired late Friday, the Muslim shrine sacred to both Sunnis and Shia. It happened in the town of Salman Pak, southeast of the capital. That town is a majority Sunni population that tonight is in a tense standoff with the Shia militia, a militia that the government must now contend with.

(BEGIN VIDEOTAPE)

RAMAN (voice over): Living in a land unto themselves, clad in black, guns raised, they are an army of followers of radical Shia cleric Muqtada al-Sadr, a key figure with enough power to influence whether Iraq descends into civil war. The Mehdi militia is one of two main Shia militias here. The other, the Iran-linked Badr Brigade. Restraint from both has been a big part at keeping civil war at bay.

But events over the past few days have changed everything. In the aftermath of Wednesday's attack on the sacred Shia mosque, sectarian violence has torn through the country. Shia militias exacting revenge against Sunnis. Over 130 people killed in the past two days alone. And what's been key is that Shia religious leaders who hold enormous influence over the actions of the Shia militias who have long called for complete restraint are now, according to analysts, moving the line.

UNIDENTIFIED MALE: Although they are -- the Shiite leaders are calling for calm, they are calling for no reprisals against the Sunni Arabs in general, they are also now talking about deploying Shiite militias. They are calling for demonstrations at a time when the country is very tense.

(END VIDEOTAPE)

RAMAN: And also in the capital today, two Sunni mosques coming under attack. That despite the fact that Baghdad was under curfew for all but four hours today -- Wolf.

BLITZER: Aneesh Raman in Baghdad.

Thanks.

Iraq's raging insurgency is stirring fears the country could face an all-out civil war. The Pentagon is nervously watching what happens next.

Let's bring in our Pentagon correspondent, Barbara Starr. She has more -- Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Wolf, that curfew helped keep at least parts of Iraq calm today, but the question now, of course, is what will happen when the curfew is finally lifted?

(BEGIN VIDEOTAPE)

STARR (voice over): In Baghdad's Sadr City, many took to the streets, defying the government-imposed curfew. In cities across the country, in Basra and in Najaf, more demonstrations amid continuing reports of attacks against Sunni mosques in retaliation for the Wednesday attack on the Golden Dome Mosque in Samarra.

General George Casey, who commands 136,000 U.S. troops in Iraq, will watch carefully through the weekend to see how Iraqi security forces meet their most crucial challenge yet.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: General Casey reports that they are doing a fine job of enforcing curfew and working to restore order and calm. We can expect the days -- the coming days will be intense. Iraq remains a serious situation.

STARR: The Pentagon has worried for months that the questionable loyalty of Iraq's police forces could make this very type of sectarian violence difficult to control. In a report Friday to Congress, the Pentagon noted, "... many serving police officers, particularly in the south, have ties to Shia militias." U.S. troops are increasing joint patrols with Iraqi units, especially in Baghdad, but are trying to ensure Iraqi forces continue to take the lead.

UNIDENTIFIED MALE: We have postured our forces throughout our responsibilities to respond in need that -- in the event they need assistance.

(END VIDEOTAPE)

STARR: And Wolf, military commanders say the next step that is essential is to see if both Sunni and Shia politicians return to the political process of trying to select a new national unity government and move past this crisis -- Wolf.

BLITZER: I've been talking to some U.S. military planners, Barbara, who say to me that they are really concerned that the Shiites in this particular case are going to walk away and say, you can't really trust the police, you can't trust the national army, you really can only trust your own militia. And, in effect, this is going to strengthen those various Shiite and Sunni militias, if you will.

How concerned are officials there at the Pentagon where you are?

STARR: You know, Wolf, it is the militias that are a critical concern right now, especially those Shia militias in the south.

The question on the table is this: how to get them under control. There have been reports of abuses of death squads, of them moving to incite much of this sectarian violence.

The police forces have been a concern here at the Pentagon for months. They are not trained to the standard that the U.S. wants to see them trained. They are very different than the Iraqi army, which does have, apparently, a sense of national loyalty, if you will, to a new Iraqi government.

The concern now, how to get those militias under control. If they are going to be part of the fabric of Iraqi life, how to have them loyal to a national government and not an entity that sparks this type of violence -- Wolf.

BLITZER: Barbara Starr at the Pentagon.

Thanks very much.

President Bush is also discussing the situation elsewhere in the Middle East. The president previously called Iran part of an axis of evil. Today he said his administration is asking for $75 million in emergency funds to support democracy in Iran. Mr. Bush says the money would be used to free the Iranian people.

(BEGIN VIDEO CLIP)

BUSH: Iran is a nation held hostage by a small clerical elite that is isolating and repressing its people and denying them basic liberties and human rights. The Iranian regime sponsors terrorists and is actively working to expand its influence in the region. The Iranian regime has advocated the destruction of our ally, Israel, and the Iranian regime is defying the world with its ambitions for nuclear weapons.

(END VIDEO CLIP)

BLITZER: The president says Iran is isolating itself from the rest of the world.

Let's move on now to our CNN "Security Watch" and continuing unease over the deal to hand control of six U.S. ports to a Middle Eastern company. On those fears from Americans, the company now says, essentially, we hear your concern. Dubai Ports World says it will delay the deal. Will that make Congress feel any better?

Joining once again, our senior national correspondent, John Roberts.

What are you hearing, John?

JOHN ROBERTS, CNN SR. NATIONAL CORRESPONDENT: Well, good afternoon, Wolf.

Regardless of the delay that the White House orchestrated, members of Congress are moving ahead with their threat, vowing to introduce legislation on Tuesday to halt this deal dead in its tracks.

(BEGIN VIDEOTAPE)

ROBERTS (voice over): The White House had hoped a slowdown of the ports deal would be just the political relief it needed. Not a chance.

SEN. CHARLES SCHUMER (D), NEW YORK: Well, a cooling off period simply doesn't do the job.

ROBERTS: In fact, rather than calming the waters, the delay only stirred even members of the president's own party to make sure that during this pause, the White House undertakes a thorough security review of Dubai Ports World.

REP. PETE KING (R), NEW YORK: If there's nothing to hide, why not investigate. Again if you were applying for a job at the federal government, you'd get a full investigation and a full vetting. To me, the same principle should apply to a company coming out of a country which has had very strong al Qaeda connections in the past.

ROBERTS: The White House is having none of it. The deal is done, say officials, and will not be reopened. The most they'll do during the delay is attempt to convince members of Congress that national security concerns have been addressed.

JOHN SNOW, TREASURY SECRETARY: It will give -- give the administration and give DP World an opportunity to better inform the Congress and the public about this -- about this -- this transaction. ROBERTS: And if the White House holds to that position, says Congressman Peter King, there's going to be a problem.

KING: I've lost too many constituents on September 11 to ever make the mistake again of trusting without verifying.

(END VIDEOTAPE)

ROBERTSON: Congressman King and Senator Schumer aren't the only ones who continue to have problems with this deal. Senator Susan Collins of Maine told me just a few minutes ago that she wants an investigation as well and is signing on to this legislation, insisting that while she trusts the White House on many national security issues, Wolf, it just plain got this one dead wrong.

BLITZER: Is there any sense how long this delay is going to be? Is it going to be a matter of weeks, months, maybe a permanent delay?

ROBERTS: The company hasn't said. It's going ahead with the rest of its acquisition. It's just putting its acquisition of U.S. ports on hold. But I would think this delay is going to last as long as the Congress wants it to last.

BLITZER: As long as it's not going to pass, there's going to be a delay.

ROBERTS: I would think so.

BLITZER: John, thanks very much.

The Bush administration confirms the United Arab Emirates donated $100 million for victims of Hurricane Katrina. The gift came just weeks before Dubai Ports World sought approval for the deal that would put it in charge of six U.S. ports.

Administration officials say there is no connection. The State Department says that the nation was four times that of all other international gifts combined.

The Homeland Security secretary, Michael Chertoff, is talking about that hurricane donation from the United Arab Emirates. He's also offering his opinion on the Dubai port deal.

Let's bring in our Jeanne Meserve. She spoke with the secretary earlier today -- Jeanne.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Wolf, Secretary Chertoff says he only found out about the DPW decision in the last few weeks, after it was made. But he is, he says, completely on board.

(BEGIN VIDEOTAPE)

MESERVE (voice over): Secretary Chertoff says there is absolutely no connection between the ports deal and a $100 million UAE contribution to Katrina relief. "It's not even the tail wagging the dog," he says. "It is the tail of a cat and a dog, no connection."

The secretary says the U.S. has received unprecedented security assurances that would give the U.S. complete visibility into the firm's operations here, which would be closely monitored. He says if the U.S. Coast Guard or Customs and Border Protection became unhappy or uncomfortable with the security of port operations, "forget the agreement. What they are going to say is time out, stop. And Since Coast Guard and Customs have guns and boats and stuff, they are going to prevail. I mean, let's get real here."

(END VIDEOTAPE)

MESERVE: Chertoff added that Customs and Border Protection has a track record with Dubai Ports World and has always found the firm forthcoming and helpful -- Wolf.

BLITZER: Jeanne Meserve reporting.

Thanks, Jeanne, very much.

Stay tuned to CNN day and night for the most reliable news about your security.

Time now for what we call "The Cafferty File." That means Jack Cafferty comes back to THE SITUATION ROOM.

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: Hi.

Did Jeanne just say that the secretary of Homeland Security didn't know we were negotiating to give control of six of our ports to a company owned by an Arab country that harbored terrorists?

BLITZER: Well, let's bring back Jeanne and ask her -- Jeanne.

MESERVE: We're told that this process which has undergone about 65 times a year is handled at the assistant secretary level. And that's what happened this time around. Only in cases when concerns are raised is it elevated and brought to the attention of higher-ups in the department.

This one, no concerns voiced. It didn't go up to Chertoff. He says he only found out about it in the last few weeks.

BLITZER: He's not the only one, by the way, Jack. The secretary of Defense, the secretary of the Treasury, all the secretaries, all the big -- certainly the president, none of them knew about this until it became really a story in the press.

CAFFERTY: It's like we're living in the twilight zone here.

Anyway, thanks, Jeanne.

Moving on here, if you are supposed to keep your friends close and your enemies closer, then you might be interested in this new poll.

Thirty-one percent of Americans say that Iran is this country's worst enemy, not Iraq. Iran. That's up from 14 percent last year. Twenty-two percent say Iraq is our worst enemy, 15 percent say North Korea is.

What about our best friends? Eighty-nine percent of Americans give Canada a favorable rating. Great Britain got about the same response. Seventy-nine percent feel that Germany is our best friend, and 54 percent say France is.

Hey, nothing is perfect.

The Gallup Poll says the percentage of Americans who viewed France and Germany favorable jumped up sharply since 2003 when they challenged President Bush on the war in Iraq.

So here's the question: Which country is America's biggest friend or enemy?

E-mail your thoughts to caffertyfile@cnn.com or go to cnn.com/caffertyfile.

BLITZER: Good question. Thanks, Jack, very much.

CAFFERTY: Sure.

BLITZER: See you soon.

Up ahead, Scooter Libby and his lawyers have just come out of court regarding the CIA leak case. We're going to go there live. Our Brian Todd was inside the courtroom. He'll have the latest.

And a bold suicide attack on a key oil facility. We're going to show you how it was stopped and why it may represent yet a new terror tactic.

And Mardi Gras celebrations rolling on despite the controversy over partying in the wake of Katrina. We're going to take you live to New Orleans.

And BlackBerry in court. We'll have the latest developments in the lawsuit that some fear could lead to a total service shutdown.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: In news around the world, Saudi Arabia says its security forces stopped an attempted suicide attack on a key oil facility.

Zain Verjee joining us once again from the CNN Center with details -- Zain.

ZAIN VERJEE, CNN ANCHOR: Wolf, this was a really bold attempt to cripple Saudi Arabia's Abqaiq oil installation, which by some estimates processes as much as two-thirds of all the oil the country produces.

(BEGIN VIDEOTAPE)

VERJEE (voice over): The Saudi government says two cars carrying would-be bombers were intercepted as they tried to break into the facility and the two vehicles exploded when guards fired on them. A Saudi security consultant says the attackers breached the facility's outer perimeter before being stopped at a second security cordon. All of the attackers are said to have been killed.

NAWAF OBAID, SAUDI SECURITY CONSULTANT: This is a complete vindication of what the Saudi security forces and authorities have been saying over the last three years, that if you are going to attack the Saudi oil industry, their main facility, they're so well protected that the would-be attackers would not come close to the main facility.

VERJEE: This was the first direct attack on an oil facility in Saudi Arabia.

In May of 2003, al Qaeda launched a series of attacks in Saudi Arabia, targeting oil company offices and housing compounds. Both Osama bin Laden and his deputy, Ayman al-Zawahiri, have called for attacks on oil targets in the Gulf.

(END VIDEOTAPE)

VERJEE: Word of the attack, Wolf, caused the price of crude oil to spike, but only temporarily. And it settled down again as we learned that oil production itself wasn't impacted -- Wolf.

BLITZER: Zain, thanks very much.

Ali Velshi has more now on the oil prices and, in fact, all the day's business news. He's here with "The Bottom Line" -- Ali.

ALI VELSHI, CNN CORRESPONDENT: Hey, Wolf.

Oil traders, as Zain said, were nervous about supply disruptions out of Saudi Arabia and they ended up pushing the price of crude oil even after it settled back down a little bit, $2.36 higher. It ended up at almost $63 a barrel in New York.

Now, that news from Saudi Arabia barely came in after Nigerian militants released photographs of hostages that they are holding. Nigerian militants have been targeting Western oil interests in that country.

Now, Saudi Arabia is the third largest source of crude oil imports to the United States. Its facilities are heavily guarded. Nigeria is the fifth largest source of oil to the U.S. Some oil analysts have speculated that if this sort of what they call petrol terrorism becomes common, oil could hit $100 a barrel.

Now, a more likely scenario we spoke to some analysts about is that further attacks on oil facilities would probably push oil back up into the mid $60s.

Now the bump in oil prices did hurt the Dow a little bit today. It ended up about seven points lower, despite some gains in ExxonMobil because of the increase in oil prices.

The Nasdaq, as you can see, was seven points higher, thanks in part to a strong gain in the shares of Canada's Research in Motion. It's the maker of the ubiquitous BlackBerry handheld device.

Now, the gain at Research in Motion comes on the heels or on the thumbs of news that its golden goose, the BlackBerry, lives to fight another day. A judge here in Virginia, or just south of us in Virginia, postponed a possible decision to shut down the BlackBerry service in the United States.

This, as you know, Wolf, is just one more chapter in the epic patent infringement battle that started back in 2002. The judge today supported a previous verdict that found that Research in Motion had violated a patent. But it said that the matter should have been settled out of court.

A settlement in the case is more likely than a shutdown. But whatever the outcome, millions of Americans are addicted to these things.

Now, here's my prediction. The human thumb will evolve over time from this chubby unattractive digit that you see into a sleek, conical input device like that with a tiny flat tip which is ideal for tapping the little keyboard on the mobile keyboards.

Keep this tape, because I'm making a prediction.

And Wolf, what's the absolute last thing you want to hear from the company preparing your tax return? That it goofed on its own taxes.

Right in the middle of tax preparation season, H&R Block admitted that it had underestimated its own state-effective income tax rate, as it calls it. As a result, H&R Block owes $32 million in back taxes -- Wolf.

BLITZER: What a story that is. Ali, thank you very much.

Ali Velshi has got "The Bottom Line."

And this important note to our viewers. Ali also works on the weekends. He's got a show called "ON THE STORY." It airs this weekend.

He goes over -- does it at George Washington University before a studio audience of students, among others. They take a look at all the big stories of the week.

Those students at GW are going to be very excited this weekend. The Colonials of GW ranked number six in the nation right now. "ON THE STORY" airs Saturday nights, 7:00 p.m. Eastern, replays Sunday afternoons, 1:00 p.m. Eastern. Ali Velshi, "ON THE STORY." Don't miss it this weekend.

Also, Jack, "IN THE MONEY" this weekend as well.

Coming up, brand new developments in the CIA leak case. Scooter Libby left court just minutes ago. A live report from the courthouse here in Washington only moments away.

Plus, grave developments in the case of an American musician infected with anthrax. We're going to have late details on his condition. It's taking a turn, unfortunately, for the worst.

And is Hurricane Katrina casting a shadow over Mardi Gras celebrations? We'll take you live to New Orleans.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Lawyers for Lewis "Scooter" Libby are asking for classified CIA documents they say they need to defend Vice President Cheney's former chief of staff. Libby was in court for a hearing today. It's the latest chapter in the CIA leak case.

Our Brian Todd is outside the courthouse here in Washington. He has the latest details -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, there some very impassioned arguments going on in the courtroom. Just moments ago, Scooter Libby left with his attorneys. Ted Wells is his lead attorney. He was walking right behind Scooter Libby as they came out of the courtroom.

We were all trailing behind them firing questions at them. They would not answer those questions. They just took a long, brisk walk to their car and then left.

Essentially, what we heard in the courtroom today were impassioned arguments on both sides regarding presidential daily briefings, those classified documents that you were just discussing. The defense -- Scooter Libby's defense wants about almost a year's worth of presidential daily briefings turned over to them.

The defense wants the judge to order the prosecutor, Peter Fitzgerald (sic), to have those documents turned over to the defense. The defense wants to review those documents in secret, not in open court. They don't want to use them in open court, but they want to review them in secret.

The reason? They want to establish their argument that Scooter Libby was distracted by matters of weighty national security and, therefore, did not have the proper context of what he was supposed to or not supposed to, or what he was saying to reporters. That he was distracted by matters of national security. The prosecution says -- Fitzgerald, the prosecutor, said it would "derail the case" if they were to hand over those briefing documents to the -- to the defense. And we also asked a former special prosecutor why the defense would want these -- these types of presidential daily briefings, these highly classified documents, and what it would mean for the defense case versus the prosecution's case.

Here's former prosecutor Michael Zeldin.

(BEGIN VIDEO CLIP)

MICHAEL ZELDIN, FMR. INDEPENDENT COUNSEL: This sort of gray mail, as they call it, classification documents is an effort oftentimes to force the government to choose what's more important, the protection of the secrets within the classified documents or this prosecution. Prosecutors are put in a difficult position of having that choice, and the hope of defense counsel is that they'll resolve it in favor of keeping a secret and not furthering the prosecution. That's what Libby's gambit is here.

(END VIDEO CLIP)

TODD: Now, essentially what that means is the defense, if they review these classified documents and make the argument in court that they should use some of that information to make their case, it could be hopeful that the judge says, or the White House, or whoever handles that classified information, denies that request, saying it's executive privilege or that it's highly classified and you can't use it in court.

If that happens, then that would essentially make the defense's argument, well, then we can't use this in court. The case -- we can't make our case. There should be no case here. The charges should be dismissed.

That's essentially what Mr. Zeldin was saying that all of this means. The judge says he -- this is all a very weighty matter to him. He will take a couple of weeks to decide whether these presidential daily briefing documents should be turned over to the defense or not -- Wolf.

BLITZER: I take it, Brian, there is some discussion in the courtroom as well about other reporters being brought in as potential witnesses. What are you hearing on that?

TODD: Well, there was. And the defense is indicating now that they want to subpoena some other reporters and some news organizations in the effort to find out exactly which reporters knew about Valerie Plame's identity, what they told about it, and who they told it to.

Now, these reporters in these news organizations can be subpoenaed. They can also take some time to fight those subpoenas, to quash those subpoenas in court.

The defense just making the argument today that they want to subpoena some of these other reporters. So if they get their wish, somewhere down the line we may find out exactly which reporters knew about Valerie Plame's identity.

BLITZER: But no names, I take it, were mentioned?

TODD: No, no names mentioned today. We probably wouldn't hear about any names for some time because the judge is going to make a ruling as to whether they can subpoena these -- these reporters and then, of course, the news organizations will be able to fight those subpoenas.

BLITZER: Brian Todd at the courthouse for us.

Thanks very much.

And there are also some new details right now developing in that mysterious case of anthrax in New York City.

Let's bring in our Mary Snow. She's watching this story for us.

What your getting, Mary?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, officials in New York City insist that a case of inhalation anthrax reported this week is rare and isolated. But they say they are broadening precautions and are now giving antibiotics to seven people.

Officials are stressing, none of the seven is showing any symptoms of anthrax, but they say the city wants to be cautious -- now, all this after the seven individuals came in contact with the workplace of a drum-maker in New York, who was hospitalized, and he is now in serious condition.

Officials believed, he developed inhalation anthrax after importing untreated animal hides from Africa to the U.S., and using them to make drumheads. Now, tests for anthrax were positive at the man's apartment, and looks likely in two other locations.

(BEGIN VIDEO CLIP)

MICHAEL BLOOMBERG (R), MAYOR OF NEW YORK: The first confirmed results were received earlier today, and, not unexpectedly, indicated low levels of anthrax bacteria -- bacteria at the patient's apartment.

There have also been preliminary positive results, indicating the possibility of probable -- probable presence of anthrax in samples taken at the workplace and the van. This is not a surprise and should not cause alarm.

(END VIDEO CLIP)

SNOW: And Mayor Mike Bloomberg also said, while inhalation anthrax can often be lethal, he emphasized, it is not spread from human to human. The city is working alongside the Centers for Disease Control to clean the areas where the anthrax was found, as well as neighbors' apartments -- Wolf.

BLITZER: All right, Mary, I know you are going to stay on top of this story for us -- Mary Snow reporting.

Coming up here in THE SITUATION ROOM -- trying to have fun, amid obvious signs that all is not necessarily well. It's Mardi Gras in New Orleans. How will the festivities go on this year?

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Good times are rolling, along with the traditional Carnival parades in New Orleans. But there's no escaping the shadow Hurricane Katrina is casting on this year's celebration.

CNN's Chris Lawrence is in New Orleans. He's joining us now live -- Chris.

CHRIS LAWRENCE, CNN CORRESPONDENT: Well, Wolf, there was a pretty steady rain falling for the past couple of hours.

That kept some of the folks indoors. But, right now, there's a -- somewhat of a fairly sizable crowd here on Bourbon Street. You can take a look. This is one part of the New Orleans Mardi Gras experience -- a lot of tourists out on the street, a pretty raucous crowd, when the sun sets, in a little while.

Now, the other half is the parades. That's more for the local families who live here, really appreciate the tradition, bringing out their families to participate in some of those parades.

It has been six months now since floods literally lifted some of the homes off their foundations. Some of those homes are still in the piles, in the middle of the street.

Over the past week, I have had a chance to speak with some people, who have told me that the city should have skipped Mardi Gras this year. They feel that that $2.7 million could have been better spent on getting some of the recovery pushed along. They say, you have got fewer doctors, fewer police officers than normal, and only about two emergency rooms operating in the city.

On the other hand, I talked to an official at the Convention Bureau. And he told me, New Orleans doesn't just want tourists to come back; it needs them. He says, the tourism industry is the city's number-one employer, and that the city's operating budget takes one- third of its revenue from tourism.

He said, it's a desperate need for the city to get tourists to come back. He has been telling me that, right now, Mardi Gras hotels are almost sold out, that 1,000 restaurants are open. And looking at the scene here on Bourbon Street, you wouldn't know anything had ever happened.

But we have spent the last week going around to some of these other blocks, and, while things are definitely doing well here, you go a block or two over, the art galleries, the antique stores, a lot of these store owners are really, hurting and on the verge of going out of business -- Wolf.

BLITZER: We will be watching all weekend and throughout next week, Chris. Thanks very much.

Even if you can't make it to New Orleans, it isn't too late to partake in this year's Mardi Gras celebrations.

Our Internet reporter, Jacki Schechner, has a solution. And it doesn't necessarily mean waiting for Fat Tuesday -- Jacki.

JACKI SCHECHNER, CNN INTERNET REPORTER: Mardi Gras is only as far away as your computer screen.

You can find Webcams. This is a good network, courtesy of NOLA.com, the online component of the "Times-Picayune," the local newspaper in New Orleans, Louisiana.

Let's take a look at some of the cameras they have got set up. This here is Bourbon-cam. We anticipate, this will pick up as we get closer to the evening.

Another one you want to start taking a look at their parade- route-cam. Now, this one, they say, will be hopping with action come 6:00 Eastern Standard Time, up close and personal. You don't have to fight the crowds.

The other thing they do have online is a parade-cam. But I have to tell you -- or not a parade-cam -- I'm sorry -- a bead-cam. But I have you, it is the Web. It is uncensored. You never know what you're going to see there.

And we wanted to tell you that CNN also has our Pipeline broadband service. They are going to have cameras, Wolf, along the parade route, along with correspondents giving you reports.

BLITZER: Let the celebrations begin.

(CROSSTALK)

BLITZER: Jacki, thanks very much.

Like many Gulf Coast residents, Americans are divided over this year's Mardi Gras festivities. In a CNN/"USA Today"/Gallup poll, 33 percent of those asked said the celebration should be just like the past. Thirty-nine percent, it should be on a smaller scale. Twenty- two percent, there shouldn't -- said, there shouldn't be any celebration at all this year.

Still to come, which country is America's biggest friend? Which country is America's biggest enemy? Jack Cafferty looking through your e-mail on this question of the hour.

And death and destruction -- with all the violence in Iraq, many are worried about civil war. But how bad is the situation? We will hear from an expert on Iraq.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: We are just learning of a developing story out of the Pentagon. Let's head over there.

Our correspondent, Barbara Starr, is working it.

What are you picking up, Barbara?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, this word now just being released by the U.S. Army -- seven members of the Army's elite 82nd Airborne Division now charged with violating the Uniform Code of Military Justice for -- quote -- "knowingly engaging in sex for money on a public Web site."

This is an investigation that had been going on for some weeks -- and now the word coming that seven members of the 82nd Airborne Division have been charged. Three of them are charged with criminal charges and are facing court-martial. They are charged with pandering and basically wrongly engaging in sex acts with another person while being filmed, and that, then, being broadcast over a public Web site -- four additional members facing what is called nonjudicial punishment.

Basically, they are going to be restricted to their barracks. They will be reduced in rank. They will be fined. But now all seven members of the 82nd Airborne Division certainly can expect to be removed from military service -- Wolf.

BLITZER: All right. You will be watching this story for us. Barbara Starr, at the Pentagon, thanks very much.

Lou Dobbs getting ready for his program that begins right at the top of the hour -- Lou, what are you working on?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Wolf, thank you.

Coming up at 6:00 here on CNN: Was the decision to delay the Dubai ports deal a calculated political move by the Bush administration? Is Congress about to roll over for the White House? We will be live at the White House with that story.

I will be joined by Congressman Pete King, who is the chairman of the House Committee on Homeland Security. We will be talking about what national security means in an international trade era. Is this administration putting far more emphasis on -- emphasis on commerce, rather than national security? We will have that.

I will be joined by Joe Klein, David Gergen, Ed Rollins to assess the importance of national security, and whether this country has moved too far, and its government, toward commercial interests.

We will have all of that and a great deal more coming up for you at the top of the hour. Please join us -- back to you, Wolf. BLITZER: And Lou himself is going to be in THE SITUATION ROOM during our 7:00 p.m. Eastern hour. He is going to be debating Darrell Issa, the congressman from California, on this deal. We look forward to that.

Lou, thanks very much.

DOBBS: You bet. Thank you, Wolf.

BLITZER: And we're following a development in Iraq today on the ground. Gun -- gunmen have fired two rockets near a tomb sacred to Shiites, just south of Baghdad.

While there are no reported casualties or damage to the shrine, it comes after a string of attacks targeting holy mosques.

For more on this latest attack, though, let's go to our Internet reporter, Jacki Schechner -- Jacki.

SCHECHNER: Wolf, we found some photographs of the shrine online.

It called the Shrine of Salman Pak. And he was a 7th century Persian convert to Islam. This is the mausoleum, you see here, inside of that shrine. He was the barber to the Prophet Mohammed. This is located in the village of Salman Pak. That is 20 miles southeast of Baghdad. It is also known as Salman al-Farisi, or "Salman the Pure" -- again, 20 miles southeast of Baghdad -- Wolf.

BLITZER: Thanks very much, Jacki, for that.

A surge of deadly sectarian violence in Iraq, with many saying the country is on the verge of civil war right now.

For some insight, we're joined by Michael Rubin, an Iraq expert with the American Enterprise Institute, himself, a former adviser to the Coalition Provisional Authority in Baghdad.

Michael, thanks for coming in.

MICHAEL RUBIN, RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE: Thanks for having me.

BLITZER: This latest attack at this other Shiite shrine, south of Baghdad right now -- the -- the Golden Dome was attacked and destroyed, basically, the other day -- how worried are you that the country is now on the verge of civil war?

RUBIN: I'm very worried.

And, in many ways, the attack in Samarra was Iraq's 9/11. It really caught -- it shocked Iraqis, Sunnis and Shia alike, and gave them pause for reflection. The big question is, what's going to happen now?

I would argue that we're not at civil war yet. The way I would define civil war is when the Iraqi army starts to peel apart and turn on itself.

BLITZER: Here's what the president of the United States said this morning in a very carefully crafted speech. Listen to this.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We can expect the days -- the coming days will be intense. Iraq remains a serious situation. But I'm optimistic.

(END VIDEO CLIP)

BLITZER: Is he just native -- you know, inherently optimistic, or is there room -- room for optimism right now? Because a lot of people are looking at the situation on the ground and say, it looks gloomy, and they are very pessimistic.

RUBIN: Well, it's kind of ironic, because we're looking at the situation on the ground in Iraq and becoming more pessimistic.

The Iraqis are looking at the situation in Washington and becoming more pessimistic.

BLITZER: Because they're afraid the U.S. is going to pull out?

RUBIN: Exactly.

BLITZER: And what -- what we're at now is a real situation, where we're going to see whether Rumsfeld has really believed his own rhetoric a little bit too much about how good this Iraqi army is. And we're also going to -- the Iraqi government is going to be challenged, whether they can go in and fill the vacuum.

You know, something like this happened back in August 2003 with the bombing at the tomb of Imam Ali in Najaf. And the big danger there, and one of the dangers we face, is, for the cause of short-term tranquility, we empowered the militias; we allowed them to really fill the vacuum.

And, in the short term, that may have made sense, but it really hurt us in the long term. And that's going to be one of our challenges now, to make sure the central government triumphs and not the militias.

BLITZER: This latest attack -- Zalmay Khalilzad, the U.S. ambassador in Baghdad, said, "I think attack has had a major impact here, getting everyone's attention that Iraq is in danger."

When you were in Iraq, and how many -- how long did you spend there?

RUBIN: I spent a total of 20 months there. I was just there last month.

BLITZER: All right.

Well, when you were there for an extended period of time at the beginning, when the...

RUBIN: Right.

BLITZER: ... CPA was just getting going, did you ever think it was going to deteriorate like this?

RUBIN: People were worried, but I don't think anyone thought that it would deteriorate the way it is.

But it's important to realize that people aren't blaming the usual Washington blame-game, and they aren't blaming the United States only. But, ultimately, what this comes down to is the audacity of the terrorists and the necessity to stop terrorists.

Anyone that detonates a bomb at a mosque, at a school, has planned this in advance, and that's what shocks Iraqis and Americans alike.

BLITZER: The best-case scenario is that this sparks the Iraqis, the Shias, the Sunnis, the Kurds, to recognize that there are these terrorist threats out there to rip this country apart, basically; they unite; they crush the insurgency; the democracy goes forward, with a national unity government encompassing all the ethnic sects -- all the ethnic groups of Iraq.

What's the worst-case scenario?

RUBIN: The worst-case scenario is that we simply pull out, because that would create a vacuum.

And that -- that's what Iraqis will actually define as the worst- case scenario. Right now, it's kind of ironic, because I -- I would actually argue that some of the violence, some of the terrorism has increased in relation to the talk in Washington of scaling back troops, of withdrawing troops.

Perhaps, what we need to do is sit back and ask ourselves -- on one hand, of course, politicians will look at the 2006 congressional elections, but, on the other hand, is it responsible to pull back troops? Are we emboldening the insurgents?

In November, I actually went to Jordan to interview some Iraqi insurgents. They were convinced that they had won, that they had reached the turning point. We need to convince them that, no, they have not won; we're there to stay, and we are there to complete the mission.

BLITZER: Michael Rubin is with the American Enterprise Institute.

Thanks for coming into THE SITUATION ROOM.

RUBIN: Thanks for having me.

BLITZER: Up ahead, a new clue in what's believed to be Britain's largest cash robbery ever. We are going to show you what police found.

And this note -- coming up in our 7:00 p.m. Eastern hour, a giant donation and a done deal -- we are going to take a look at the timeline of Dubai's gift for hurricane victims and the controversial port deal. Was there any connection?

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Ali is joining us once again with a closer look at other stories making news -- Ali.

ALI VELSHI, CNN CORRESPONDENT: Hey, Wolf.

South Dakota's legislature today approved a measure banning all abortions, except when the woman's life is at stake. The state's governor says, he will likely sign the bill into law. Now, it appears to be a direct legal assault on Roe vs. Wade, and will likely end up before the Supreme Court.

But, under the measure, doctors could get up to five years in prison for performing illegal abortions. Planned Parenthood is planning to sue over the measure.

Well, British police have recovered at least some of the cash from what is being called the largest currency heist in the country's history. Police are combing through a white van where the cash was discovered for forensic evidence.

Three people have been detained for questioning. The thieves made off with up to $88 million in British currency from a cash depot on Wednesday -- no word yet on how much money was found in the van today.

And what is under your bed? A Louisiana man decided to do a little house cleaning after he heard that an unclaimed Powerball ticket was worth $853,000. And along with some dust bunnies and some dirty socks, he swept out that winning ticket from under his bed. After taxes, he walked away with nearly $600,000.

And I am cleaning my apartment this weekend -- Wolf.

(LAUGHTER)

BLITZER: Thanks, Ali. What a story. Thanks very much for that.

How vulnerable is your computer to attacks? P.C. users are accustomed to viruses and worms. But now there are growing concerns Apple Mac users may also be at risk.

Our Internet reporter, Jacki Schechner, is here to put it all in perspective -- Jacki.

SCHECHNER: A lot of people have Macs or think any buying Macs because they are, conventionally, thought to be more secure than P.C.s.

And it's never known whether that's because the operating system is actually more secure or if it's because they only have 5 percent of the market, and people really haven't really tried to hack into them yet.

Well, this week, we saw a series of news of viruses that were swirling around that had to do with Mac. The good news is, the news seems to be a little overblown. There was one virus that seemed to penetrate iChat, which is a communication Apple program.

But what happened was, the date expired. This was supposed to hit big. And there's no real reports of widespread damage -- a couple of other flaws, one of them seeming to affect Safari, which is the browser that comes with Mac. But, again, there's really no widespread damage that is reported.

What can you do if you have got a Mac? Well, Apple says go to the Web site and download the patch, update your Mac software. And, in general, Wolf, I like to tell people, just practice safe computing, whether you have got a Mac or a P.C.

BLITZER: Good advice. Thanks, Jacki, very much.

Up next, which country is America's biggest friend and enemy? It's our question of the hour. Jack Cafferty is standing by with your e-mail.

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty is back in New York with "The Cafferty File" -- Jack.

CAFFERTY: Thirty-one percent of Americans, Wolf, say Iran is this country's worst enemy. Eighty-nine percent think Canada and Great Britain are our best friends.

We wanted to know what you thought.

Marcel in New York: "China, China and China -- while we are stuck in Iraq, they get a wide-open playing field. The world is theirs, while we're busy in a mess."

Ed in Seattle: "Our biggest friend, that's easy -- the United Arab Emirates, of course. Just ask the Bush administration."

Eric in New Jersey: "Nations don't have friends or enemies. They only have geopolitical interests."

Pete in Germantown, Maryland: "Israel is our best friend. Any country that doesn't recognize them is our worst enemy."

Ron in Canton, Georgia: "Right now, America's worst enemy is America. We're on the verge of a national nervous breakdown."

John in Lockport, Illinois: "Without any doubt, the District of Columbia is a growing danger. They possess weapons of mass deception. We need to start planning for a preemptive strike for this November."

Dan in Hanover, Ontario: "America's biggest enemy?"

(COUGHING)

CAFFERTY: Pardon me.

"The red states."

Greg in Westville, Nova Scotia: "You shouldn't even have to ask, Jack. Canada is your best friend, and vice versa. But you could blow it, Cafferty, so, be careful. It's not like you have a long list to choose from."

A quick clarification -- in the last hour of THE SITUATION ROOM, Wolf asked me about an interview I did with a "New York Times" op-ed columnist, Tom Friedman, today, and what he thought if we asked him about this ports deal.

And what Tom said to me in the interview and in his column in "The Times" today was that, while he thinks the politics of the port deal was a big mistake, he thinks the president is right, and the deal ought to go through. And I didn't want to risk mischaracterizing Mr. Friedman's thoughts on the port deal.

So, what he thinks was -- is, the politics was a mistake, but he thinks the deal is a good idea. The rest of the interview is coming up on "IN THE MONEY," Saturday at 1:00, Sunday and 3:00 -- at 3:00. And -- and we invite you to watch that.

BLITZER: Saturday at...

CAFFERTY: Wolf.

BLITZER: You got to say this, Jack -- Saturday at 1:00 p.m. Eastern...

CAFFERTY: I'm sorry. You're absolutely right.

BLITZER: ... 10:00 a.m. Pacific.

(LAUGHTER)

BLITZER: Sunday at...

CAFFERTY: I'm used to working local news.

BLITZER: Sunday at 3:00 p.m. Eastern.

(LAUGHTER)

BLITZER: That would be...

CAFFERTY: OK.

BLITZER: ... noon Pacific, "IN THE MONEY." Jack Cafferty...

CAFFERTY: Thank you.

BLITZER: ... good show...

CAFFERTY: I...

BLITZER: ... on the weekend.

CAFFERTY: I appreciate it.

BLITZER: See you in an hour.

We are here in THE SITUATION ROOM weekdays, 4:00 to 6:00 p.m. Eastern. We are back, 7:00 p.m. Eastern, just an hour from now -- coming up, a special debate in THE SITUATION ROOM, Lou Dobbs, Congressman Darrell Issa, on port security. Lou feels very strongly about this.

I'm Wolf Blitzer in THE SITUATION ROOM.

"LOU DOBBS TONIGHT" starts right now.

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