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THE SITUATION ROOM

Coast Guard Warned of Intel Gaps in Ports Deal; Pockets of Sectarian Violence Persist in Iraq Despite Crackdown; Homecomings on Hold?

Aired February 27, 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 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, new worries and a new deal. There are fresh developments in the deal to give management its six U.S. ports to a Middle Eastern company. Only within the past hour or so a Senate panel here in Washington said the U.S. Coast Guard warned the Bush administration the deal posed some serious risks.

An aggravating development today in the nuclear standoff with Iran. A report now says Iran is enriching small amounts of the materials needed to build a nuclear weapon.

And it's "The Da Vinci Code" with a plot twist. Two men say Dan Brown's blockbuster book is really based on their ideas.

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

In our CNN "Security Watch," new developments this hour on the deal to hand over control of six U.S. ports to a Middle Eastern company. We just learned the U.S. Coast Guard may have raised some alarm bells about the deal.

Standing by, our White House correspondent, Dana Bash, our senior national correspondent, John Roberts. But let's begin with Ed Henry. He's on Capitol Hill -- Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Wolf, this new development came at a briefing that Bush officials were giving to the Senate Homeland Security Committee. The chairwoman, Susan Collins, decided to release part of the so-called CFIUS report we've heard so much about, an unclassified part of that report in which the intelligence branch of the U.S. Coast Guard said there were many "intelligence gaps" concerning this potential merger.

We already knew there were concerns, that they had been raised earlier in this process. But for the first time, we're learning from this document put together in December that, in fact, the Coast Guard's Intelligence Coordination Center said these gaps prevented them from conducting "an overhaul threat assessment of the potential merger." And for the first time, we're also seeing specifically what some of those concerns were. Number one, about operations. The Coast Guard said and asked what is the security environment at all the DPW -- that's the company involved here -- port or terminal operations?

Secondly, personnel. What are the backgrounds of all personnel that would be involved at these ports?

And third, foreign influence beyond the United Arab Emirates. Is there foreign influence that could affect security at any of these ports? If so, what are those other countries that may be involved?

Now, when this report, this part of the report was released, chairwoman Susan Collins said she was very concerned about what it showed. Take a listen.

(BEGIN VIDEO CLIP)

SEN. SUSAN COLLINS (R), MAINE: On the face of it, these unclassified questions and the use of the word "intelligence" gaps that preclude an overhaul threat assessment of the potential merger and that involves potential unknown threats against a large number of potential vulnerabilities, that language is very troubling to me.

(END VIDEO CLIP)

HENRY: Now, Bush officials at this briefing said, in fact, they knew about these concerns, as I mentioned earlier, and that is exactly why they negotiated assurances from the company involved, Dubai Ports World. Bush officials also said, from the Coast Guard, from the Treasury Department and other agencies here in Washington, they basically said they could give senators more information in a classified, not a non-classified setting.

That's where they are right now, in a secure room of the Capitol where senators from the Homeland Security Committee are meeting with Bush officials to get deeper into these questions about what they exactly were and why, in fact, the process was allowed to go forward despite those concerns -- Wolf.

BLITZER: Important new developments, Ed. Thanks very much.

Let's go over to the White House. Dana Bash is standing by there.

What are they saying at the White House, Dana?

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Well, about this, not much yet at all, Wolf. We heard from Ed Henry that there were actually administration officials who were represented and were at this hearing where this information that the chairman, Susan Collins, revealed this information about the Coast Guard.

What we do know is something similar to what Ed said, is that the White House -- actually, the president's homeland security adviser, Fran Townsend, told us last week, last Thursday, that there was actually some concern from the Department of Homeland Security during the review process. But she said that those concerns -- she said to the extent that the had any concerns, they did engage directly with the company, DPW, and they got an additional security agreement in place. And in the words of Fran Townsend, they were satisfied.

So that is at that time, while she was making the case that there was no need for an additional 45 -- 45-day investigation. But as we've been reporting, Wolf, that is sort of moot at this point because the White House has agreed, everybody has agreed, to go on with this 45-day investigation.

Clearly, this White House understood, despite what they were saying, that this was something that they simply could not stop, that there was an outcry from Congress, from Republicans in Congress that they want to have this additional 45 days. Whether they were looking at documents like this and thought this is why we have to go ahead with this, that's unclear at this point. But this 45-day investigation obviously is going to continue, and the president himself is going to have to decide whether he thinks this deal should go ahead.

BLITZER: Dana, thanks very much.

Our senior national correspondent, John Roberts, is also looking at this story.

What are you picking up, John?

JOHN ROBERTS, CNN SR. NATIONAL CORRESPONDENT: Well, Wolf, the disclosure of this Coast Guard document only added to the sense of irony on Capitol Hill today. There were the same political appointees who first avoided what the law states is a mandatory investigation of a deal like this.

They were out there in front of the Senate Homeland Security Committee pledging that this security review, this upcoming 45-day review, will be comprehensive and complete.

(BEGIN VIDEOTAPE)

CLAY LOWERY, ASSISTANT TREASURY SECRETARY: The administration will take this charge very seriously. We have heard very clearly the concerns raised in Congress and in some of the port authorities. We will look at that transaction in that light.

ROBERTS (voice over): The 45-day investigation will begin almost immediately after the Dubai Ports World files a new application. Fourteen government agencies led by Treasury and Homeland Security will oversee the review. The director of National Intelligence, CIA and FBI will be tasked with investigating possible security concerns.

When the investigation is complete, the president will have an additional 15 days to give a thumbs up or down on this the deal. As of now, only the president can make that decision.

Patrick Mulloy helped write the original law and can't believe that a mandatory security review was ignored in the original ports decision. A concern made all the more apparent with the disclosure that the Coast Guard had problems with the deal. He's urging the administration to get a fresh start.

PATRICK MULLOY, INTERNATIONAL TRADE LAW EXPERT: I hope that they feel within themselves the strength to say, we should not be prejudging this, let's do the investigation and see where it leads us.

ROBERTS: But will the administration do that? Listen to the national security adviser.

STEPHEN HADLEY, NATIONAL SECURITY ADVISER: The president is very clear as to where he stands. He thinks there's been a good process. He thinks that the -- there are not outstanding national security concerns that need to be addressed, and that this -- this deal needs to go forward.

(END VIDEOTAPE)

ROBERTS: However this review turns out, it's clear that there's going to be some changes going forward. Congress wants a bigger role in these decisions and may pursue new legislation to increase oversight.

At the very least, during this 45-day review, they want to be kept in the loop. And we've taken a look at the law, and there's every provision for them to be kept in the loop.

Also, the officials in charge of making these decision have been told to get a better political radar so the next time something like this comes over their transom, they will be sure to tell the White House about it -- Wolf.

BLITZER: John, thanks very much.

John Roberts reporting.

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

In Iraq today, pockets of violence pierced the relative calm. Curfews and other proactive measures have not fully resolved the tensions after last week's bombing of a sacred Shiite shrine.

Let's get the latest now from CNN's Aneesh Raman. He's joining us from Baghdad -- Aneesh.

ANEESH RAMAN, CNN CORRESPONDENT: Wolf, Iraq's capital emerging from a an extraordinary 34-hour curfew today. The sectarian violence did return.

A Shia neighborhood coming under attack early Monday. Two mortars landing on a gas station there, another on a girl's high school. At least four killed in that attack.

And later in the day, a Sunni mosque coming under attack. Two explosions rocking the building, leaving at least four people killed there.

Iraq's government continues to try and take hold of the situation to start talks anew on forming a unity government. The largest Sunni political bloc in the country has said they have agreed in principle to rejoin those talks but expect a number of things to happen from Iraq's current government before that can take place.

Meantime, the trial of Saddam Hussein set to resume on Tuesday. He has ended his 11-day hunger strike. That according to his defense team. His defense team, that had been from the proceedings, as well, is expected back in court Tuesday -- Wolf.

BLITZER: Aneesh Raman in Baghdad.

Thank you.

There are also new details on the fate of the abducted American journalist Jill Carroll. Zalmay Khalilzad, the U.S. ambassador to Iraq, says the Iraqi interior minister believes that Jill Carroll is alive and will ultimately be freed. This after yet another apparent deadline came and went yesterday with no word on Carroll's fate.

Upon hearing the news, the "Christian Science Monitor," where Carroll freelanced just before her abduction put out this statement. Let me read it to you.

"The Carroll family and the "Christian Science Monitor" continue to follow developments in Iraq very carefully. We appreciate the wide-ranging efforts being made by Iraqi and U.S. officials to secure Jill's release. We hope that today's encouraging statements about Jill's condition and prospects for safe return are proved correct.

That statement from the "Christian Science Monitor."

Just a little while ago, I spoke with the U.S. ambassador to Iraq, Ambassador Zalmay Khalilzad, and I asked him what he knows about Carroll's whereabouts or condition.

(BEGIN VIDEO CLIP)

ZALMAY KHALILZAD, U.S. AMBASSADOR TO IRAQ: I don't know where she is. If I did, we would be there liberating her.

The minister of interior was reported to have said that he knows where she is and that she's alive. It was also reported that he said that she will be released soon.

We're doing everything we can to find her and to release her to gain her freedom. But she is obviously in a very dangerous situation, and we will persist in doing all that we can to gain her freedom.

BLITZER: Well, what is he referring to, the minister of the interior, when he says he knows where she is and that she's apparently OK? Wouldn't they share that information with you?

KHALILZAD: Well, I talked with him today and he said that he will share what he knows with our people, and our people are in touch with his office.

(END VIDEO CLIP)

BLITZER: And much more of my interview with Ambassador Khalilzad. That's coming up in our 7:00 p.m. Eastern hour here in THE SITUATION ROOM.

The sectarian violence that's being -- that's been raging in Iraq could impact the next round of U.S. troop reductions.

Let's go to the Pentagon. Our Pentagon correspondent, Barbara Starr, standing by with details -- Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, U.S. troops now trying to figure out where they fit in to all of the events that are going on in Iraq.

(BEGIN VIDEOTAPE)

STARR (voice over): A mixed picture on the streets of Iraq. Relative calm. But at least 15 killed in a mortar attack on a Baghdad neighborhood Sunday. U.S. commanders trying to decide what now for the 136,000 U.S. troops still in Iraq.

Defense Secretary Donald Rumsfeld has ordered his top commanders, General John Abizaid and General George Casey, to make recommendations in the next several days on additional troop cuts. But in the wake of the sectarian violence, there are deep divisions even within the U.S. military on how to proceed.

The Iraqi army appears to have held its own.

MAJ. GEN. RICK LYNCH, MULTINATIONAL FORCE IRAQ: We are not seeing members of the Iraqi army, Sunni versus Shia, fighting amongst themselves.

STARR: But some say that's not enough to ensure Iraq is secure enough for another round of U.S. troop withdrawals.

SEN. CARL LEVIN (D), MICHIGAN: You've got to get your political house in order, you've got to get a government of national unity in place, say, within six to eight weeks, which is far longer than constitution contemplated, or else the United States has got to reassess our presence in Iraq.

(END VIDEOTAPE)

STARR: And Wolf, the major problem for the United States now is those Iraqi forces under the ministry of interior, the police forces who are in many cases more loyal to their militia groups than they are to any new government in Iraq. There are continuing reports of death squads, of human rights abuses, of them being very involved in the sectarian violence.

And one U.S. military commander today said the estimate is it could be another year before those police forces are really chained in a fashion more compatible to what the U.S. military has in mind. So still, Wolf, a very long way to go.

BLITZER: Barbara, thanks very much.

And this note to our viewers. Congressman John Murtha, an outspoken critic of the U.S. strategy, the Bush administration's strategy in Iraq, is standing by. He will be my guest in only a few minutes right here in THE SITUATION ROOM.

Let's go back to New York. Jack Cafferty is standing by with "The Cafferty File."

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: Hi, Wolf.

Iran may have found a friend when it comes to its nuclear program. Iran says it's going to stop enriching uranium on its own soil and Russia is going to do it for them instead. This could mark a breakthrough in the showdown with Tehran, but the White House is skeptical, saying they'll have to see the details of any agreement.

Meanwhile, the International Atomic Energy Agency says that the Iran is enriching uranium on a small scale at the present time. Iran contends that its nuclear program is strictly for peaceful purposes. The U.N. Security Council has not decided what, if any, action it will take against Iran.

So the question is this: Should Russia be helping Iran with its nuclear program?

E-mail us at CaffertyFile@CNN.com -- Wolf.

BLITZER: Thanks, Jack, very much.

Up ahead, he's a Vietnam veteran, a staunch military supporter, and an outspoken critic of the war in Iraq. We'll talk live about the latest developments there with Congressman John Murtha of Pennsylvania.

Also, just like the city, the New Orleans Police Department was hit hard by Hurricane Katrina. We're going to show you how it's handling Mardi Gras security.

And a best-selling book at the center of a lawsuit. "The Da Vinci Code" in court. We're going to tell you what all the controversy is about.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: More now on the U.S. mission in Iraq. The Pennsylvania Democratic congressman, John Murtha, is an outspoken critic of the administration's handling of the war, which he has called constantly changing, undefined and open-ended. He's also a decorated Vietnam War veteran. Congressman Murtha is joining us now live from Capitol Hill.

Thanks, Congressman, for joining us.

I want to get to Iraq in a moment. But your quick reaction to these new alarm bells that apparently the U.S. Coast Guard itself raised about possible terror links involving the United Arab Emirates and this port security deal. What's your reaction?

REP. JOHN MURTHA (D), PENNSYLVANIA: Well, they certainly -- they try to scare people, and they've been scaring them with this terrorist tactics, and then all at once they're surprised at the public reaction to something that was secretly handled. I have to take a look at it myself. My initial reaction would be against it since what I heard about the Coast Guard, but, you know, we've got to take a good look at it.

BLITZER: Let's talk about Iraq. Zalmay Khalilzad, the U.S. ambassador, told me, and we heard it here in the past hour, that they were close to looking into the abyss of a civil war a few days ago but now they've come back and things are back moving in the right direction.

You reaction?

MURTHA: Well, Wolf, I think the ambassador is -- he's got a good reputation, everybody thinks highly of him, but he tends to give too much advice to the Iraqis. They have to settle this themselves. They have to settle the underlying problems which have caused the insecurity there.

For instance, water supply, the electricity supply, the oil supply. All those things are prewar level. And there's no way they're going to settle.

Unemployment is 60 percent. There's no way they're going to settle this by talking about it. It's not rhetoric.

And the military has done everything they can do. They have done a marvelous job. Now it's up to the political leaders to take hold of this thing and settle it themselves.

And, you know, I keep getting different reports about the Iraqis being ready to take over, and then the next day they say there's no battalions ready. But the Iraqis themselves have more confidence in their police and in their army than they do in the United States Army.

We have become the enemy, and our troops, unfortunately, have become the targets. So it's time to redeploy our troops.

BLITZER: The argument, though, against that is if the U.S. were to do that, the only thing really standing in the way, they say, of a civil war are those 130,000 U.S. troops. If the U.S. pulled out, redeployed, what would stand in the way of that sectarian violence?

MURTHA: Well, Wolf, in the 1920s, there were 130,000 British troops in Iraq and there were only 2.5 to three million people in Iraq. And we've got 138,000 -- there's 26 million people in Iraq.

I don't know why anybody thinks that we're going to be able to contain this violence. We're caught in between two factions inside the country fighting for supremacy. And there's no way we can take sides, there's no way we can win.

The only answer is, since we've become the targets, and we're uniting them against -- al Qaeda is a very small proportion of what's going on in Iraq. The Iraqis themselves are the ones that are creating the disturbances and have got to settle it themselves.

BLITZER: How long if you had your way would it take to get the U.S. -- 130,000 U.S. troops redeployed outside of Iraq?

MURTHA: Well, I think they have to give them a timeline. I said initially six months. And they could do it in six months.

But the thing that worries me, if they take a plan that takes longer, that means there's less troops there, there's more chance of our troops being vulnerable to attack. And then there's the chance they'd respond to those attacks.

So you'd have to do it -- and to give -- you have to say to the Iraqis, look, you folks, it's your government, you're elected in a free election. Everybody says the election was fine. Now you've got to take over.

You've got more confidence in your police and the Iraqi army than you do in the United States forces, so we're going to get out. Everybody believes this and they keep using the term that the United States is creating stability. Well, when you lose a couple hundred people in the last four days, you don't create stability.

So I'm convinced that we're going in the wrong direction. Incidents are increasing and the domestic situation has gotten no better.

BLITZER: Congressman Murtha, thanks for joining us.

MURTHA: Nice to be here, Wolf.

BLITZER: Congressman John Murtha of Pennsylvania.

Coming up, a best-selling author of "The Da Vinci Code" in court. We'll show you why his book is at the center of a new lawsuit and who's suing.

Plus, he made a career playing lawmen. Details on the death of actor Dennis Weaver.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Let's check back with Zain Verjee at the CNN Center in Atlanta for a closer look at other stories making news. Hi, Zain.

ZAIN VERJEE, CNN ANCHOR: Hi, Wolf.

The Texas woman who has admitted to drowning her children today rejected a plea deal that would have sent her to prison for 35 years. Andrea Yates is pleading innocent by reason of insanity. Her 2002 murder conviction in the deaths of three of her five children was overturned because a witness gave false testimony. A new trial is set to begin in late March.

Actor Dennis Weaver has died. Weaver starred as a maverick lawman in the 1970s TV crime drama "McCloud," but he was probably best known as the loyal limping deputy on the legendary series "Gunsmoke."

Weaver was a big environmentalist and he was once president of the Screen Actors Guild. He died on Friday at his home in Colorado at the age of 81.

And Wolf, here's some rather rare video, a mountain lion you can see there roaming around suburban Los Angeles, and in one particular neighborhood today. And what happened was that animal control tranquilized the animal and said that they're going to release it in the national forest.

There were no reported injuries, but a nearby elementary school was locked down for a brief period of time. Mountain lions are extremely reclusive and rarely spotted near humans -- Wolf.

BLITZER: That's good. They should be rarely spotted. They look sort of worrying.

Thanks, Zain, very much.

Coming up, the good times are rolling in New Orleans, but how is the city's police force keeping it all safe? We're going to take you live to Mardi Gras.

Plus, it's been red hot for years, now signs the U.S. housing market, at least in parts of the country, may be slowing down. Could the bubble burst? Ali Velshi has "The Bottom Line."

(COMMERCIAL BREAK)

BLITZER: Tomorrow is Mardi Gras, and by all accounts, New Orleans' scaled-back celebration in the wake of Hurricane Katrina has been a success. But it's posing a special challenge for the city's police department, which, like the rest of New Orleans, is struggling to make do with less.

CNN's Chris Lawrence is joining us now live. He's got the story -- Chris.

CHRIS LAWRENCE, CNN CORRESPONDENT: Well, Wolf, by far, this is the best day that we have had here in at least a week. You know, it's warm, it's sunny, folks just having a great time down there on Bourbon Street. But even with the crowds much smaller than a normal Mardi Gras, we wanted to know, is the city really equipped to keep these people safe?

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): It doesn't matter if it's the middle of the day or after midnight. The New Orleans Police Department says it's ready for any trouble during this year's Mardi Gras celebrations.

(on camera): How prepared are you right now?

WARREN RILEY, NEW ORLEANS POLICE SUPERINTENDENT: Well, we are prepared?

LAWRENCE: I spoke with Police Superintendent Warren Riley as we walked through the Lower Ninth Ward, an area of the city heavily damaged by Hurricane Katrina and a place where residents still have not been able to return home.

The city of New Orleans recently banned guided tours that had been taking people through neighborhoods like this one. Riley admits, the police department has about 200 fewer officers than it did before the storm, but he's getting help from 200 state troopers and federal agents.

(CHEERING)

LAWRENCE: Riley also says shortening the celebration to eight days has saved the city millions of dollars.

RILEY: We normally run the Mardi Gras for $3.1 million in overtime expenses for -- just for police. This year, we are doing that off $1.2 million.

LAWRENCE: Pre-Katrina, the prison system could house 7,000 inmates. Now it can only hold 1,100. To help, officials built this temporary facility just to process people arrested during Mardi Gras.

UNIDENTIFIED MALE: Processing the inmates may be a little slow at first. But they are going to be revolving straight in, straight out. And the people arrested on serious charges, they're going to -- obviously, they are going to stay.

(END VIDEOTAPE)

LAWRENCE: Yes.

Right now, officials tell us, their major concern right now is the medical situation. Only two hospitals have fully functioning adult care emergency rooms right now.

And they're worried that, if they get a large influx of injuries or accidents from Mardi Gras, it could push the system right over the edge. So, they say, if they can get through the next two -- the rest of today and tomorrow without any major accidents or injuries, they should have a safe end to Mardi Gras. BLITZER: Let's hope...

LAWRENCE: Wolf.

BLITZER: Let's hope they do. The city certainly deserves a safe end to all of this.

Thanks very much, Chris, for the .

Time now for Ali Velshi and what we call the "Bottom Line" -- Ali.

ALI VELSHI, CNN CORRESPONDENT: Hello, Wolf.

Well, the spitting match between Hugo Chavez and his Venezuelan government and the Bush administration continues. Venezuela supplies about 10 percent of America's oil imports. And because America buys more than $1 billion a day worth of oil -- one billion barrels a day from Venezuela, the U.S. is Venezuela's biggest customer.

Well, the latest installment in the battle between the countries, Venezuela says -- or at least's Venezuela's energy minister says he can easily shut off shipments of oil to the United States and find other buyers for it.

Now, much of the oil that Venezuela does send to the U.S. goes to refineries that are owned by Venezuelan company Citgo. It's controlled by the Venezuelan government. So, you know, shipping -- stopping the shipments of oil to the U.S. might be cutting off its nose to spite its face. Oil traders apparently are not all that worried about it, Wolf, because oil closed almost $2 lower today, to $61 a barrel.

In other business news, the man who played a central role in mapping out the human genome is switching gears, literally. Craig Venter is a biologist. He plans to create microbes which could turn crops, like grass and cornstalks, into ethanol.

He also hopes to modify some microorganisms to produce hydrogen. Now, currently, to make ethanol, which as you know, can be used instead of gasoline to power cars., you have got to take the vegetation, turn it into sugar, then turn that sugar into alcohol, and the alcohol is then distilled into ethanol.

And I'm going to talk to you a little later about the housing bubble. Is it bursting? Well, there's a mixed pitch -- picture. Median house prices are up, but home sales are way down. I'm going to have a closer look at the housing market and what you should look out for at 7:00 Eastern.

As for markets, they close higher across the board -- the Dow Jones closing about 35 points higher to 11097 -- Nasdaq 20 points higher to 2307 -- and the S&P nearly made it to about a four-and-a- half-month high. We were off by a little bit on that -- but strong market today -- Wolf.

BLITZER: Good. Thanks very much, Ali. See you at 7:00 p.m. Eastern.

A real-life plot twist for "The Da Vinci Code." It's the subject of a court case that opened in London today, with two authors suing publisher Random House. They claim that the "Da Vinci Code" author, Dan Brown, lifted themes and ideas from their 1982 book entitled "The Holy Blood and the Holy Grail."

Brown and his "Da Vinci Code" are no stranger to controversy, though.

Let's go to our Internet reporter, Abbi Tatton, for more -- Abbi.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, the movie of "The Da Vinci Code" is due to release on May 19.

And, as that date approaches, more and more sites online springing up, critiquing the best-seller. This one has just gone up, "Da Vinci Outreach," by a coalition of Catholic groups. They want, in their words, for Catholics to stand up for the truth, and also download their materials, have discussion groups, and, also, buy their own book, which they say is perfect to be bought in bulk for handing out at movie theaters.

Sites like this countering the book are not new. This site by Opus Dei, he's been -- has been around since 2003. And Sony Pictures is no stranger to this kind of online onslaught. They have launched their own site earlier this month, a forum for people who want to critique the movie to discuss their ideas online -- Wolf.

BLITZER: Abbi, thank you very much.

Still to come, the nuclear standoff with Iran deepens. A report just out from the International Atomic Energy Agency says, the country is now enriching small amounts of the material needed to build a nuclear weapon. The former Defense Secretary William Cohen standing by.

And, in our 7:00 p.m. Eastern hour, my interview with Zalmay Khalilzad. The U.S. ambassador to Iraq talks about the rash of violence in the country and gives his assessment on whether Iraq will spin itself into a civil war.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: There's new concern out today about Iran's nuclear ambitions, with a report from the United Nations watchdog agency that the country has begun enriching uranium.

CNN's Brian Todd is watching the story. He's in the newsroom -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, in today's new report, the International Atomic Energy Agency uses phrases like "regrettable" and "a matter of concern" -- the agency clearly frustrated that a regime antagonistic to the United States and that has called for Israel to be wiped off the map is now found to be more actively pursuing its nuclear program.

(BEGIN VIDEOTAPE)

TODD (voice-over): A confidential report obtained by CNN says that, earlier this month, at a facility in the mountains south of Tehran, the Iranian regime -- quote -- "started enrichment tests of uranium."

Experts say the scope of the testing and enrichment is minuscule, that to produce enough enriched uranium for a nuclear weapon, the regime would need to operate hundreds, maybe thousand more so-called centrifuge machines. But the say the fact that Iran is making progress in enrichment, after suspending that program more two years ago, is ominous.

DAVID ALBRIGHT, INSTITUTE FOR SCIENCE & INTERNATIONAL SECURITY: If they succeed in putting these centrifuges underground, then they could suddenly, one day, throw out the inspectors, and then turn the plan over to producing the material for nuclear weapons.

TODD: Iran has always said, its nuclear program is for peaceful purposes and says it is making progress on a deal with Russia for its uranium to be processed on Russian soil.

But U.S. officials believe Tehran is playing its usual cat-and- mouse game with the West.

ADAM ERELI, STATE DEPARTMENT SPOKESMAN: Ivan is engaged in enrichment activity on its territory, and that that is of -- of serious concern to -- to all of us. And, frankly, that's why Iran finds itself in the -- in the mess that it's in.

TODD: A mess that includes possible U.N. sanctions because of this latest report. Iran's negotiations with top European Union members over its nuclear program have already broken down.

(END VIDEOTAPE)

TODD: Officials at Iran's mission at the United Nations did not return our calls for comment.

As for that often posed bottom line, how close is Tehran to producing a nuclear weapon, the experts we spoke to, a former U.N. inspector and a top former U.S. intelligence official, say, at the earlier, maybe the end of this decade -- Wolf.

BLITZER: Brian, thanks very much.

Let's talk a little bit more about these new developments in the nuclear crisis with Iran.

Here to join us, a key member of our CNN Security Council, CNN world affairs analyst William Cohen. He's a former defense secretary, chairman of The Cohen Group here in Washington. It looks like the Iranians sort of going a dual path, talking to the Russians about letting...

(CROSSTALK)

BLITZER: ... the Russians enrich their uranium, but, at the same time, using some of these centrifuges to do it on their own.

What do you make of this?

WILLIAM COHEN, CNN WORLD AFFAIRS ANALYST: Well, it looks like a push-me, pull-me type of process they're engaged in right now.

As a matter of fact, yesterday, the Russians indicated they had reached an agreement with Iran, and that would mean that the Russians would in fact enrich all the uranium on Russian soil. That apparently has been put on hold, because the Russians have indicated that they would not do that, as long as Iran continues to test these centrifuges, which they are currently doing now. So, that has been put on -- off again. Hopefully, it will be back on again today or tomorrow.

But that's the kind of game, I think, that the Iranians are playing right now. And it's one reason why I think the IAEA is going to go to the U.N. Security Council and make a recommendation, perhaps not sanctions immediately, but that may be inevitable.

BLITZER: He speaks in diplomat -- diplomat -- diplomatic language, Mohamed ElBaradei, the director general of the IAEA.

But he says this: "It is regrettable and a matter of concern that the uncertainties related to the scope of nature of Iran's nuclear program have not been clarified after three years of intensive agency verification."

These experts suggest, it is going to take them until the end of this decade, another six -- you know, four years, let's say, to develop some sort of nuclear bomb. But they could be wrong. They could be a lot closer than a lot of the experts think.

COHEN: Well, there was -- there was expert testimony way back in the first Gulf War with Saddam Hussein. And the experts believed at that time that -- that Saddam might be 10 years away from developing a nuclear weapon. When, in fact, that first Gulf War was completed, we found that he was much closer than anyone had anticipated. So...

BLITZER: Maybe, within a year, he...

COHEN: Exactly. So, it's hard to calculate.

The thing to keep this in mind is, as Iran goes, so goes North Korea. The North Koreans have to looking at what action, if any, the international community is going to take toward Iran, in judging whether or not they're going to start up and accelerate their own production of nuclear weapons.

So, there's a lot at stake here, not only for Iran, but North Korea as well.

BLITZER: Let's talk about port security in the United States.

The Department of the Homeland Security is -- is responsible, through the Coast Guard, Customs. Now it comes out that the Coast Guard had some concerns about the United Arab Emirates and ties to terrorism.

Among other things, a Coast Guard assessment concluded this: "There are many intelligence gaps concerning the potential for Dubai Ports World or P&O assets to support terrorist operations that precludes an overall threat assessment of the potential merger. The breadth of the intelligence gaps also infer potential unknown threats against a large number of potential vulnerabilities."

That, potentially, is a significant development.

COHEN: It is.

And if you read that particular release, it indicates it's an undated Coast Guard memorandum. Now, whether that was a beginning of the process and whether those concerns were addressed remains to be determined.

The Coast Guard commandant, apparently, testified on February 10 of this year, just two weeks ago, roughly two weeks ago, that those concerns have been addressed. Now, whether or not that, nonetheless, should have triggered the 45-day examination remains to be determined.

But what we have now, because of the 45-day delay requested by Dubai and its -- its company is an opportunity to go back and review all of our security measures pertaining to the ports to see what existing gaps there are, then to analyze what Dubai Port would contribute to reducing those gaps, what additional measures might be imposed on Dubai. How do compare Dubai with all of the other either country-owned or foreign company operations that are currently in this country and elsewhere?

So, there's a real opportunity for Congress to make a positive contribution, as they go through and make the determination.

BLITZER: This story is not going away yet, by any means. Thanks very much, William Cohen, for joining us.

Lou Dobbs getting ready for his program that begins right at the top of the hour.

Lou, tell our viewers what you're working on.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Wolf, as you might expect, at 6:00 Eastern here on CNN, we will have all the day's news and the very latest on the Dubai Ports World/U.S. Congress/Bush administration controversy.

Two weeks after we first reported the national security concerns about the Dubai Ports sale, the Bush White House is now trying to save face, and it is really, really twisting arms on Capitol Hill -- a deal to review the deal a second time. But it turns out, despite protestations from the administration and from many on Capitol Hill that there were no objections raised to this deal, it turns out, Homeland Security and the U.S. Coast Guard warned the Bush administration possible links between terrorists and Dubai Ports World.

My guest tonight, one of the Senate's strongest critics of this deal, the ranking member of the Armed Services Committee, Senator Carl Levin.

We will also be talking with two port security analysts who have differing views about the implications of the deal. They will be here to debate that -- all of that and more, a great deal more, coming up at 6:00. Please join us -- now back to you, Wolf.

BLITZER: Lou, before I let you go, what do you make of this new development, this memorandum that the U.S. Coast Guard put forward, saying there were intelligence gaps, as far as the UAE and the connections to terrorist operations? What do you think this is going to mean?

DOBBS: Well, I think it's going to mean -- I would hope it would mean that the United States Congress, with its oversight responsibilities, would find out why people were lying about fact that CFIUS, the Committee on Foreign Investment in the United States, why there were misrepresentations suggesting that there were no -- absolutely no objections or concerns raised at CFIUS, responsible for approving this deal.

This smells to high heaven. And we are going to be examining it carefully, as you might guess -- Wolf.

BLITZER: I bet you will. Thanks very much, Lou -- Lou Dobbs coming up in a few moments, "LOU DOBBS TONIGHT."

Up ahead, it's a crime almost everyone is vulnerable to. Can technology make us safer? We are going to show you the future of identity theft protection.

And this important note -- coming up in our 7:00 p.m. Eastern hour here in THE SITUATION ROOM, my interview with the point man for the United States in Iraq, the ambassador, Zalmay Khalilzad. He will join us in THE SITUATION ROOM to talk about the violence gripping that country.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Let's check back with Zain at the CNN Center for a closer look at other stories making news.

Hi, Zain.

VERJEE: Hi, Wolf. The government of Yemen has released pictures and a lot more detail about the escape of two dozen al Qaeda convicts earlier this month. The pictures show an elaborate tunnel system that led to a women's bathroom in a mosque. One picture shows a soccer ball with a tube that authorities believe was a breathing apparatus. You can see it right there.

Authorities blame lax security for the escape. And they say that they're investigating the prison guards to see if it was an inside job.

Five suspected militants have been killed in a shoot-out with Saudi security forces. Saudi Arabia's Interior Ministry says that the men are linked to Friday's thwarted suicide bombing attack on a major oil facility. A sixth suspect was arrested. The Saudi government says the DNA of two of the suspects does link them to al Qaeda. Authorities say, a surveillance image of a license plate actually helped them track down the suspects.

Britain authorities have arrested five more suspects, in connection with that record-setting heist last week. Investigators now say that the thieves netted some $92 million in cash when they raided a depot near London. A little over $2 million of that has been recovered. Police say that the robbery was the world of organized crime. They have arrested 11 people so far, and they're still searching for a truck that they believe transported much of the cash -- Wolf.

BLITZER: Zain, thanks very much.

And, from Zain, let's head up to New York and Jack.

Jack, what's the latest?

CAFFERTY: Iran, Wolf, may have found a friend in Russia, when it comes to its nuclear program. Iran is going to stop enriching uranium on its own soil. Russia is going to do it for them instead. The White House says it's skeptical, saying they will have to see details of any agreement.

The question is, should Russia be helping Iran with its nuclear program?

Kevin in Minneapolis: "Of course Russia should not be helping Iran with their nuclear program. They're already too busy helping the North Koreans."

Stephen in Northampton, Massachusetts: "Regardless of Russia's intentions, nuclear energy leads to nothing but trouble. I can't imagine an Iranian plant to be as safe as Three Mile Island or Chernobyl. The desert is the perfect place for solar and wind energy. With some help from the West, Iran could set a new standard in safe, renewable energy, and we could avoid a major armed conflict."

Ivan writes: "Russia is flirting with regimes like Iran, North Korea, Syria, God knows who else. Putin's administration is playing a dangerous game -- hungry for cash, it's ready to supply any evil government with technology. Russia should face the objections on this deal, both from the USA and the European Union."

Gary in Dundas, Ontario: "Sure, Russia will refine Iranian uranium, build their bombs, support Hamas, who it says is not a terror organization, and get paid big bucks, while sticking it to the United States and Israel."

Dale writes: "Of course, Russia should be enriching uranium for Iran. It's the guarantee the world has been looking for that the fuel will be used for electrical generation, instead of being atomic weapons. It's what the international community has been asking for. And, if Iran carries through with it, the world could breathe a bit easier."

And Bill in Clayton, North Carolina, writes: "Sure. Why not? It isn't World War III if everybody is not invited" -- Wolf.

BLITZER: Thanks very much, Jack. See you in an hour back here in THE SITUATION ROOM.

Up next, $57 billion lost by U.S. consumers to identity theft last year alone -- we are going to show you how technology may be -- may be able to help all of us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Our series "Welcome to the Future" resumes this week with a focus on security.

CNN's Miles O'Brien shows us the future of fighting identity theft.

(BEGIN VIDEOTAPE)

BARBARA, IDENTITY THEFT VICTIM: It was worse than if somebody had just taken money from my purse, because it made me feel that they were taking me. For me, the cost of being a victim of identity theft was more than monetary.

I had always been pretty trusting and felt that everything was under control. And, suddenly, I started to suspect all the people with whom I normally do business. I mean, those people have all kinds of information about you, you know?

The technological fixes that I have heard of don't completely reassure me that my privacy wouldn't be invaded far more than I would be willing to have it invaded.

MILES O'BRIEN, CNN CORRESPONDENT: Barbara is not alone. In fact, American consumers lost nearly $57 billion last year to identity theft.

When it comes to protecting our personal security, what hope can technology offer?

REID GOUGH, SCHOOL OF TECHNOLOGY DEAN, DAVENPORT UNIVERSITY: This device is a smart card reader.

O'BRIEN (voice-over): Meet Reid Gough, dean of Technology at Davenport University in Michigan.

GOUGH: Biometric security is one way to stop identity theft. Physical characteristics that identity who you are is a lot harder to steal than is a credit card number.

O'BRIEN: Technologies already in place include iris scans, palm geometry readers, facial recognition, and fingerprinting tools.

GOUGH: The next line of defense is trying to identify those unique physical characteristics of an individual that are very hard to replicate, veins in your hands, looking at the inner ear.

O'BRIEN: But are we all ready to divulge that much personal information?

GOUGH: If we think that we live in a -- in a private world, we don't. What we need to do now is just make sure that the information we do have is secure.

(END VIDEOTAPE)

BLITZER: And stay tuned to CNN day and night for the most reliable news about your security.

Turbulent portraits from the civil rights era buried in an equipment closet, at least until now. "The Birmingham News" in Alabama has revealed hundreds of never-before-seen photos, from images of Martin Luther King Jr. to the Ku Klux Klan.

Our Internet reporter, Abbi Tatton, has a first look online -- Abbi.

TATTON: Wolf, it was in a box labeled "Keep; Do Not Sell" that intern Alex Cohn found thousands of negatives.

He researched these photos, and the result is this Web page here, dozens of photos never before seen. It was an editorial decision by the newspaper decades ago that kept these photos from public view, until now, when they have been published. And they document the civil rights struggle in Alabama -- many pictures shown here. There's a link to this site, Wolf, available at CNN.com/situationreport.

BLITZER: Thanks very much for that, Abbi.

And we are back here in THE SITUATION ROOM in one hour, 7:00 p.m. Eastern -- among my guests, the United States ambassador in Iraq, Zalmay Khalilzad.

Until then, thanks very much for joining us.

"LOU DOBBS TONIGHT" starts right now.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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