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Your World Today

Interview With Iraqi Foreign Minister; Debate Intensifies Over U.S. Military Offensive in Iraq; Eye on Russia

Aired June 28, 2007 - 12:00   ET

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

MICHAEL HOLMES, CNN INTERNATIONAL ANCHOR: A call for help after a hand-over. An airstrike backs up Iraqi security forces trying to hold new positions.
A plea bargain for Israel's president. A deal that keeps Moshe Katsav out of jail also forces him out of office.

And a population shift raises Russia. Life from St. Petersburg, Jim Clancy takes a look at Russia and an influx of Chinese workers across the border.

And the Spice Girls, their breakup is behind them. They reunite to bring girl power back to the stage.

5:00 p.m. in London, 8:00 p.m. in Baghdad, also St. Petersburg.

Welcome to our report broadcast right around the globe.

I'm Michael Holmes.

From Jerusalem to Johannesburg, New Orleans to New Delhi, everywhere you're watching, this is YOUR WORLD TODAY.

Greetings, everyone.

The summer offensive in Iraq that Washington calls the surge could prove critical to the U.S. war effort, and President George W. Bush is trying to convince Americans and the world to keep the faith as support steadily fades. Mr. Bush has just finished a speech at the Naval War College in the state of Rhode Island. He says the intensified military operations in Iraq are making progress in places like Al Anbar Province, and he urged critics to give the strategy more time, saying this one is different from previous efforts.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This new strategy is different from the one we were pursuing before. It's being led by a new commander, General David Petraeus, and a new ambassador, Ryan Crocker. It recognizes that our top priority must be to help the Iraqi government and its security forces protect their population from attack, especially in Baghdad, the capital.

(END VIDEO CLIP)

HOLMES: Mr. Bush lost his biggest ally in the war in Iraq when British prime minister Tony Blair finished his term on Wednesday.

To see whether his replacement, Gordon Brown, intends to stay the course or take a different path, let's bring in Hala Gorani in Baghdad -- Hala.

HALA GORANI, CNN INTERNATIONAL CORRESPONDENT: Well, hello, Michael.

Indeed, that is a question I put to the foreign minister of Iraq, Hoshyar Zebari. We'll get to that in a minute, but first, as always here in Iraq, and almost on a daily basis, a very bloody day. At least 22 people were killed when a car packed with explosives killed that many people at a Baghdad bus station.

Now, later, four more people died in a car bomb explosion at a petrol station in the western part of the capital. To the south, there were military casualties. A roadside bomb killed three British soldiers on a foot patrol in Basra. A fourth soldier was critically wounded. There were also reports that 20 behead bodies were found south of Baghdad.

Well, in the face of all of this violence, and as the country goes through a bloody and divisive sectarian conflict, earlier I spoke with Hoshyar Zebari, the Iraqi foreign minister, who told me he doesn't want the world, and particularly America, to abandon his country now.

(BEGIN VIDEOTAPE)

HOSHYAR ZEBARI, IRAQI FOREIGN MINISTER: This was another message we gave to our audience, both in Washington, in New York, in London. Really, if there would be a premature withdrawal of the multinational forces...

GORANI: That is a concern of yours?

ZEBARI: It's a concern. The consequences -- and I think even General Petraeus and Ambassador Ryan Crocker, when they go to Congress or to the White House in September, will say the same thing.

The consequences of a premature withdrawal would be a disaster. Not only for Iraq, for the region and for the U.S. interests. And the reason I'll summarize for you like this.

Really, this all-out sectarian war will be in full fledge. A civil war is a high possibility. Even a regional war as a result of intervention military by our neighbors, weather from the east, the north, the west, would be another possibility. Plus, al Qaeda will definitely find a safe haven to operate from the heart of the Arab and Islamic world against other people's interests.

GORANI: What is premature? You mean before the spring of 2008?

ZEBARI: No, I think before the Iraqi capabilities and readiness would be in place. Still, we are building. Still, we haven't reached the level that we would desire to reach, to see our forces fill the vacuum, to be...

GORANI: But that's an open-ended horizon.

ZEBARI: It's not.

GORANI: You're telling Americans, well, it could take 10 years.

ZEBARI: No, definitely we are not. I think we are thinking about some long-term arrangements beyond the current arrangements, you see. That will help the Americans, it will help us here, it will help the situation. But it's still early, let's say, to expand all this.

GORANI: Did you get any guarantees from Washington as far as how long troops will stay in Iraq for sure?

ZEBARI: I think everybody realizes and recognizes how serious, and everybody is fully aware of the serious consequences of Iraq to fail as a state.

GORANI: So no guarantees?

ZEBARI: Well, there is a commitment, definitely, you see, that we won't allow that situation to happen, because it's bad for everybody.

GORANI: But I'm just wondering, when you talk to them, do they look at a calendar and say, all right, it's not going to happen for the next 12 months? It won't happen for the next six months?

ZEBARI: No. I think this is, again, a process, really. I mean, I am -- I'm not a fan of setting specific timetables.

This will be conditioned generally on, let's say, a decision to draw down the troops, to pull out, to put the Iraqis in the -- in the -- you know, in the forefront and so on. So, that's why very difficult. I resisted throughout my career, you see, to agree on any timeline of specific date for withdrawal.

(END VIDEOTAPE)

GORANI: So you saw it there, Hoshyar Zebari not being drawn in on a timeline. Of course, this is also something we hear in Washington -- no timeline for troop withdrawal, at least from the White House, even though support in America the war is at record lows.

Let's bring in our senior Baghdad correspondent, Michael Ware, for a reality check on what's happening now in the country.

We have several operations. We have one in Diyala. We have also Sunni sheikhs allying themselves with America to combat al Qaeda. All this going on at the same time.

This is a very crucial period for Iraq and for the Americans, isn't it?

MICHAEL WARE, CNN SR. BAGHDAD CORRESPONDENT: Very much so. And certainly the enemies of America, as Washington identifies and principally al Qaeda and the Iranian-backed Shia militias know, that America's on borrowed time.

They know that the clock is ticking down to when the commander of the war, General David Petraeus, goes before Congress in September. So, as one of the other American generals in this country said, the enemies are surging as much as we are. They're trying to distort Petraeus' casualty figures and figures of violence before he goes to Congress so he has nothing but a gloomy picture to give.

GORANI: So those who oppose America keenly aware of the political agenda inside the United States and playing on it, right?

WARE: Oh, absolutely. Yes.

They track it so minutely. They follow it in crucial detail, both to the east, in Tehran, of course, and al Qaeda. Al Qaeda has displayed over and over and over again its ability to play or factor American domestic politics. And we're seeing it again.

GORANI: Let me ask you something about the Anbar strategy of getting Sunni sheikhs, tribal leaders in on a cooperative sort of team against al Qaeda. We saw so many of them killed in the downtown Baghdad hotel.

What happens when the Americans leave?

WARE: These will essentially become the Sunni militia. In fact, they are America's Sunni militia, or they're America's assassins. These are insurgents. These are the Ba'athists. These are the nationalists, the ex-Iraqi West Pointers, so to speak.

From the very beginning, they've never shared al Qaeda's agenda. From 2003, they were looking to work with America. But the administration back then wouldn't have a part of it. Now America knows that the only way to combat al Qaeda is to unleash the Ba'ath insurgency, and that's what they've done, even giving them ammunition.

GORANI: All right. Michael, stand by.

We're going to Frederik Pleitgen story. He was in Diyala Province for an update on the so-called military surge and how American troops are having a hard time to holding on to territory that they "conquered".

Take a look.

(BEGIN VIDEOTAPE)

FREDERIK PLEITGEN, CNN CORRESPONDENT (voice over): U.S. troops fire mortar rounds at a suspected insurgent position. Their mission: clear and secure this area south of Baghdad so Iraqi forces can take control of a checkpoint.

After almost three days of fighting, they hand over the outpost. Now it's up to the Iraqi national police to hold the position. "This is a big sector, and we need a lot of troops. And coalition forces will hopefully help us stand here," the Iraqi colonel says.

The insurgents came sooner than expected. A mosque right next to the checkpoint. And this is that same mosque only about two hours after U.S. troops left the area.

As this video shot from an aerial drone shows, the insurgents at the mosque launch an attack on the outpost, destroying a guard tower and killing several Iraqi officers. With the Iraqis struggling, a British aircraft is called in to aid them. The fighter drops a massive 2,000-pound bomb on a house used by the attackers, a rare opportunity for coalition forces to effectively use air power against insurgents.

COL. WAYNE GRIGSBY, U.S. ARMY: When the enemy does mass this way, we focus right then on the security line of operation and we take everything that we have to kill or capture the enemy.

PLEITGEN: But while military officials call the airstrike a success, they acknowledge it highlights a major problem for U.S. forces in Iraq. American troops fight and die to win terrain from insurgents, but Iraqi security forces are often unable to hold the ground on their own.

MAJ. GEN. RICK LYNCH, U.S. ARMY: The key is, someone has to stay. There has to be a persistent security presence, and that has to be Iraqi security forces. So we continue to work with the government of Iraq and the leaders of the Iraqi security forces to get that persistent presence.

PLEITGEN: A crucial point, military leaders say. Even with the major increase of U.S. soldiers in Iraq, they will not be able to hold all the ground they are now fighting for. That is something the Iraqis must do on their own.

Frederik Pleitgen, CNN, Salman Pak, Iraq.

(END VIDEOTAPE)

GORANI: All right. One last question to you, Michael. We saw that in Salman Pak, but Diyala Province is going through a very crucial operation as well. And the big question is, will the insurgents move elsewhere? Have they gone already?

WARE: Well, indeed, the second most senior American general in the country, Lieutenant General Ray Odierno, has already said that as far as the U.S. forces are aware, the top al Qaeda leadership left Diyala before the operation. I mean, it was flagged so heavily.

I mean. the insurgents know that the U.S. is coming. They left Falluja. They left Samarra. They left Tal Afar. They've done the exact same thing yet again, and they'll continue to do so.

GORANI: All right. Michael Ware, thanks very much. All right, well, that's it from me and Michael Ware here in Baghdad for now.

Michael in Atlanta, back to you.

HOLMES: We'll check in with you later, Hala. And we will have more from Baghdad.

And she'll have more on Tony Blair's credibility, among other things, in that region as he gets ready to step into his new role as Middle East peace envoy.

Also ahead, we're going to take you to Russia and a world in black and white. A political cartoonist draws Russian life as he sees it, but are the newspapers buying into his vision?

(COMMERCIAL BREAK)

HOLMES: You're looking at live pictures from St. Petersburg, Russia. All this week we have, of course, been focusing on aspects of Russian life in our special coverage, "Eye on Russia".

And welcome back to YOUR WORLD TODAY as we focus on Russia and its people. We also anticipate a visit by Russian president Vladimir Putin to the United States.

The two leaders of those countries had a tense exchange of words over the missile defense system the U.S. wants to build in Europe. A move Russia vehemently opposes. Earlier, we spoke with Russian political science professor Vladimir Gelman about how Russian leaders are viewing the dispute.

(BEGIN VIDEO CLIP)

VLADIMIR GELMAN, EUROPEAN UNIVERSITY AT ST. PETERSBURG: For Russian rulers, it's a very important signal to say, hey, Americans again are cheating. Americans probably will do it against us. So, we should consolidate our nation's -- nation against the foreign enemy as it was during the Cold War.

(END VIDEO CLIP)

HOLMES: For more on our special "Eye on Russia" coverage, Jim Clancy joins us now live from St. Petersburg.

Jim, let me throw this at you. What is the state of Russia versus the U.S. on trust issues at the moment? How's it being seen there?

JIM CLANCY, CNN INTERNATIONAL ANCHOR: Well, Michael, I seem to have lost my communication with you there, but let me just say that when you talk to Professor Gelman and so many others in this country, what they say is really going on between the United States and Russia today is largely based on domestic policy here in Russia. And what is happening is that some of the domestic issues, some of the controversies that play out between the U.S. and Russia, really play in the favor of the Kremlin here -- the image of leaders standing up to the United States, asserting Russia's role in the world.

Remember ever since the collapse of communism there's been a deep suspicion that the West wanted Russia to fail. That may not be the case, but a lot of Russian people believe it.

Now, Professor Gelman and others really believe that at this point there's not much the U.S. can do. The Russians are going to continue to play out that card. We're going to see it this weekend.

Already, we heard from Tony Snow at the White House, telling us, don't expect too much to come out of this Bush-Putin summit. What Russia would like to see is for President Bush to back down somewhat on the missile defense plans that he has and to accept a Russian compromise to use a rented radar station in Azerbaijan.

Will that happen? Well, some people think it might. But at the same time, there's so much more that's at stake here.

This is an issue, of course, that is of interest all across Russia, and the Russians have a lot on their minds right now, Michael. One of the things they have on their minds is the declining population in this country due to deaths that are completely preventable, and also due to a lack of births. There was a lack of confidence in the economy as a result.

Nowhere is this more pronounced than in the Far East, where Russians are looking at their neighbor, China. They're seeing Chinese come across the border, open up shops, seeing them come in and take up jobs. And a lot of Russians are worried that immigration could dilute the Russian nature of its own Far East.

Matthew Chance has a report on that from Vladivostok.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN SR. INTERNATIONAL CORRESPONDENT (voice over): Trained across the sea of Japan, Russian guns from a bygone age. Defenders from Asian attack, reduced to a Vladivostok tourist attraction. But concerns linger of invasion, that an army of Chinese visitors sees this sparsely populated Far East of Russia as a land of opportunity, and historically theirs.

"There's so much more territory here to grow vegetables and fruits than in China," this tour guide tells us. "This land once belonged to China," one of her group says. "We have very mixed feelings when we come here."

And in a region closer to Beijing than to Moscow, there are mixed feelings among Russians, too. For some, the Chinese who come to stay are resented. Across Russia's Far East, Chinese workers provide cheap labor.

"Of course I don't want more Chinese people to work here," says this man. "It will only have a negative effect on us."

"Our president, Putin, is trying to save Russian jobs by imposing quotas on foreign labor," this woman told us. "We hope that will have an effect in the future."

It's having an affect already. On the new laws, the authorities have closed down Chinese-run markets, arresting illegal traders, forcing most to return home. Russia may enjoy friendly relations with its populace neighbor, but it seems there are limits. And there are complaints it's driven up prices.

But behind locked gates, we found a group of Chinese working in a Russian-owned car repair shop. Chen Si Dun (ph) told me Russian businessmen simply prefer to hire workers like him. "There are some good workers in Russia, but they work very slowly," he says. "Sometimes the worker's salary is more expensive than the car he's meant to be fixing."

Like many places in the world, cheap immigrant labor has become a vital, if politically sensitive, fact of life.

(on camera): These are difficult times for immigrant communities across Russia, but especially for Chinese in Vladivostok. But even here, there's a growing sense of unstoppable Asian influence. The future of Russia's Far East could yet be China.

(voice over): These students at Vladivostok University certainly think so. They are majors in Chinese language which they hope will secure them a lucrative, Far Eastern career. Their thoughts not of China's potential threat, but of its potential.

Arina (ph) told me, "It's important for Russia to develop good relations with countries in all parts of the world. We should cooperate with China in industrial development," she says. "At the same time, we should have friendly relations with the U.S. and with Europe. We should work in all directions."

"Of course, Asia will influence Russia's development in the future," she Gulia (ph), "not only here in the Far East, but all over Russia. Europe will influence it, too."

And there is hope that's where Russia's future lies. Not severed from or fearful of its neighbors, but engaged with China and the world beyond.

Matthew Chance, CNN, Vladivostok, in Russia's Far East.

(END VIDEOTAPE)

HOLMES: Fascinating coverage coming out of there, Jim.

What's up for tomorrow?

CLANCY: Well, we're going to be looking at really the culture here. You know, as there's been an economic resurgence in Russia, a lot of money has been poured into Russia's heritage and its culture. And it's benefiting a lot of things.

The opera is completely being refurbished, and we're going to introduce you to one of the real stars on stage here in Russia. We'll have that.

Plus, we're going to take you to a look at city where you have a majority -- it's called a City of a Thousand Mosques -- a majority of Muslims living. How are they co-existing in this new Russia?

So we've got a lot coming up.

And also, if you want to know more about our "Eye on Russia" series, you can log on to our Web site at CNN.com/russia. There you'll find blogs. You'll find photo slide shows, as well as some of our video reports here, that tell a lot about what we've been up to in the last week here in Russia. Talking about its economy, talking about its young people, talking about so much of the things, so much of the change that has taken place here.

"Eye on Russia" will be back again tomorrow, with more of that.

For now, that's our report, live from St. Petersburg. And we'll leave you with a picture here, the Arch of Triumph rising there.

(COMMERCIAL BREAK)

HOLMES: Welcome back to our viewers joining us from more than 200 countries and territories around the globe, including the United States. This is YOUR WORLD TODAY. I'm Michael Holmes.

Let's update you on some of the top stories of the day.

The U.S. president trying to rally support for intensified military operations in Iraq, operations that are part of the so-called surge. George W. Bush says the strategy is working in places like al Anbar province, and he hopes to replicate that success elsewhere. He also said this day (ph) that the stakes are high, as he said before, as Iraq is the central battleground in the war against Islamic extremists.

Britain's new Prime Minister Gordon Brown has appointed former Environment Minister David Miliband as his Foreign Secretary. He replaces Margaret Beckett. At age 41, Miliband is seen as a rising star in the Labor Party.

Former Foreign Secretary Jack Straw was named Justice Secretary in the cabinet. Brown's cabinet reshuffle is considered the biggest shake-up in the government since the Labor Party came to power ten years ago.

Well, one of the most pressing and puzzling questions about Britain's new leader relates to the Iraq war, an issue that proved a political liability for his predecessor.

Now, for more on Mr. Brown's position, we're joined again by Hala Gorani, who is on assignment in Baghdad to talk to us about that, and also Tony Blair -- Hala.

HALA GORANI, CNN CORRESPONDENT: Well, Gordon Brown has pledged to maintain Britain's commitment in southern Iraq, but don't forget troop levels for Britons have gone from 7,000 to 5,500 already. Also, today's death of three British soldiers, is the kind of news that puts pressure on the Gordon Brown government.

Also, you mentioned the appointment of some ministers. It's a brand new cabinet there for Gordon Brown, and some of them have come out publicly against this war. So, it is still an open question as to going forward. There still is all this speculation surrounding what Britain will do with its remaining troops in the southern part of this country.

HOLMES: Hala, tell me about Tony Blair. He's obviously got this new and vital role coming up. But his stock in the Middle East, when it comes to things like Iraq and also Israel's war with Lebanon, not all that high. How is he going to be viewed? You travel around the area all the time.

GORANI: Well, Michael, not all that high is putting it mildly. We've been monitoring, of course, Arab newspaper comments and editorials. And just -- I can read you one from "al Quzo Arabi" (ph), this is just one example. But it does reflect what is being said across the region.

"There is no way that he," Tony Blair that is, "can be the special envoy to peace to the same region that is suffering because of the lies and the destructive results in Iraq."

Others are criticizing Tony Blair for not having called for a cease-fire between Israel and Hezbollah last summer. So, Tony Blair as a special envoy to the Middle East is something that is raising eyebrows across the region.

"Haaretz," though, the Israeli newspaper, welcomed Tony Blair. In fact, calling and titling its editorial, "Welcome Aboard, Tony." So, you're seeing from the Israelis and from the Arab side of the equation different reactions.

Well, it seems that though Tony Blair did receive a vote of confidence of sorts from the new Palestinian prime minister.

Ben Wedeman is live. He sat down for an interview with Mr. Fayyad and has more on what he told him -- Ben?

BEN WEDEMAN, CNN CORRESPONDENT: Yes, Hala, this is the first interview, Salam Fayyad, the new Palestinian prisoner -- prime minister, excuse me, gives to the western media, and certainly he had a lot to say. He's particularly concerned about the situation in the West Bank, following the takeover of Gaza by Hamas.

What he said was that as far as he's concerned, his top priority is to stop the West Bank from sliding into chaos.

(BEGIN VIDEO CLIP)

SALAM FAYYAD, PALESTINIAN AUTHORITY PM: As a matter of highest priority, we should first ensure that what happened in Gaza will not spill over in the West Bank. That's -- that's key amongst our short- term objectives. Beyond that, we should move on fast to ensure the oneness of the Palestinian Authority and the fact that guns and arms are exclusively the property of the official agencies of the government, of the Palestinian National Authority.

My vision is one of trying to get to resolution of this conflict through peaceful means, through negotiations, with the outcome of this process being an independent Palestinian state, living side by side with the state of Israel. A home for the Palestinian people, for our people to enjoy the right which every people all over the world now enjoys, being free in a country of their own.

(END VIDEO CLIP)

WEDEMAN: Now, Hala, what was interesting also is this: Mr. Fayyad didn't really have a solution as to how to bridge the gap between what are effectively two separate Palestinian governments. One in the West Bank, one in Gaza. He said that the Hamas government or entity, as he described it, in Gaza, is simply going to have to accept the fact that there is a government in Ramallah, and it's going to have to bow to its authority. And Hamas, of course, is probably not going to be willing to cooperate in that regard -- Hala?

GORANI: Well, it's a tough job for a man in a very difficult spot. What did Salam Fayyad have to say about Hamas itself?

WEDEMAN: Well, he basically understands that Hamas did, he accepts that Hamas did win fair and square in the January 2006 Palestinian elections, and he doesn't dispute the results. He just feels that they have been unable to work, either as a pure Hamas government and as a National Unity Government, that they failed to really address the fundamental problem facing Palestinians, both in Gaza and the West Bank, and that was security.

They really skirted the problem, never addressed it. And that is what was one of the contributing factors in his belief to the events in Gaza we saw earlier this month -- Hala?

GORANI: All right, Ben Wedeman, reporting to us live with that exclusive interview with Salam Fayyad, the new Palestinian prime minister. He faces many challenges ahead (INAUDIBLE).

HOLMES: All right, Hala, we have to interrupt there.

George W. Bush in Newport, Rhode Island, speaking about a major defeat really, on his plans to overhaul immigration laws. The Senate refusing to advance that legislation. Let's listen in.

(JOINED IN PROGRESS)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ...Congress' failure to act on it is a disappointment. American people understand the status quo is unacceptable when it comes to our immigration laws. A lot of us worked hard to see if we could find common ground, and it didn't work.

Congress really needs to prove the American people that it can come together on hard issues. The Congress needs to work on comprehensive energy policy and good health care, making sure health care is affordable, without inviting the federal government to run the healthcare system. We got to work together to make sure we can balance this federal budget, not overspend nor raise taxes on the American people, and we got a lot of work to do.

When they come back from the summer -- from the July recess, before the summer break begins, we'll be focusing on the appropriations process. And I look forward to working with Congress to balance our budgets and to be wise about how we spend the people's money. Thank you for your time.

UNIDENTIFIED FEMALE: Are you sorry you couldn't do more personally to lobby (INAUDIBLE)?

HOLMES: President Bush -- U.S. President George W. Bush there not taking questions. A very brief statement to the media, saying Congress really needs to prove to the American people it can come together on hard issues, describing this -- this defeat, if you like, or blocking of this immigration legislation as a disappointment.

President Bush has long sought an overhaul of course, of U.S. immigration laws for years, really. This bill may really have been his last chance for a significant legislative victory on this issue. The Senate, however, deciding not to advance that legislation.

Stay with us. We're going to take a short break.

When we come back, inside looks at the access -- axis of oil. Not only do Venezuela and Iraq -- Iran, rather, have an abundance of oil, they also share an antipathy towards the United States. And don't think Washington hasn't noticed.

(COMMERCIAL BREAK)

HOLMES: Welcome back, everyone. You're watching YOUR WORLD TODAY right here on CNN International, live in more than 200 countries and territories across the globe.

Well, protests in Iran, you may have heard of them, over the government's decision to restrict the amount of subsidized gasoline that consumers can buy each month. Police are on hand to prevent any more violent demonstrations like these, which broke out on Wednesday, when a dozen gas stations were torched.

Iranian lawmakers are calling for a review of the system of gas distribution, in a country that is not only OPEC's number two gas exporter, but also the world's number two gas importer. We'll explain that in a minute.

Drivers in Iran have apparently stopped burning gasoline stations for the moment. They're still not happy, though. The government there suddenly imposing fuel rationing, limiting people to about 100 liters a month. That is not very much gasoline. Why would oil-rich Iran be cutting gasoline supplies to its own people?

Jonathan Mann will explain.

JONATHAN MANN, CNN CORRESPONDENT: A hundred liters a month is less than a gallon of gas a day. Iran does have lots of oil, but it can't escape simple math and bad management. So, after a national policy of burning through gasoline like a teenager with a T-bird, Iran is hitting the brakes.

Majid Shirzad is a professional driver whose new monthly ration won't last a week. "I didn't work today," he says. "Nobody can manage this."

Iran's oil is all in the west of the country, right up on the border with Iraq, and so are its major refineries. Abadan is right on the Iraqi border. It can pump out about 400,000 barrels a day. Isfahan, about a quarter of a million barrels. Then, there's Bandar Abbas in the south, right on the Strait of Hormuz, which is going to pump out a little bit less. Tehran, in the north, a little less still.

Add it all up, refine it down, Iran can process about 40 million liters of gasoline a day. Iranian consumers use 70 million liters a day, so do the math. The country has to import the difference. It's a very substantial difference, and last year, it cost more than $5 billion, making, as we've been reporting, Iran the second largest gasoline importer in the world, after the United States.

And Iran also loses money on every liter. Even the gasoline Iran produces itself really costs more than 50 cents a liter. Now, the price is subsidized and Iranians have been paying about 10 cents. That's about 35 cents a gallon.

It's so cheap that millions of liters are, in fact, leaving the country, smuggled out every day in every direction, to Afghanistan, to Pakistan, up north to Turkey, into northern Iraq, and even south into the oil-rich United Arab Emirates. They have lots of oil down there. That's a smuggling operation that informed experts guess is costing $1 billion a year.

Well, Iran has now raised the price and imposed rationing. But it still will need a lot of oil. That's a problem all by itself, because Iran's output pf oil is actually declining. It hasn't invested enough in its oil industry, and outside investors have been skittish about putting their money there.

So, the refineries I mentioned, they're getting old, run down, even decrepit. One analyst believes that without a whole lot of money that Iran doesn't seem to have, Iran may have to stop exporting oil entirely. Remember, one of the world's largest exporters. It may have to stop exporting oil within a decade. That's in the future.

The people there are already feeling the pinch.

(BEGIN VIDEO CLIP)

MAHMOUD, TEHRAN TAXI DRIVER (through translator): Because of the state of petro rationing, there will be no heavy traffic on the streets anymore. But the problem is many people who use their cars to carry passengers in streets, will not be able to work like in the past and a major source of income for many Iranians will be lost.

(END VIDEO CLIP)

MANN: Now, I haven't gotten into the politics, but the politics of it are inflammatory to say the least. One Iranian news agency reported 19 gasoline stations were set on fire. We've been talking about 12. Mahmoud Ahmadinejad, the president, was supposed to be a friend of the working family and cheap gasoline has been an enormous subsidy for the entire economy. As we just heard, unemployed people with cars use them as cabs to make ends meet.

The Iranian government was terrified of taking the subsidy of gasoline away, now it has done it. And it will also be paying a price.

HOLMES: So, what are the chances they'll back away?

MANN: Well, you mentioned before I started that in fact, Iranian parliament members are thinking about adding an additional way to get gasoline. They'll be the subsidized rationing of gasoline and then you can buy it on the free market. The problem there is that it means poor people are going to get a tiny amount of gasoline, and rich people are essentially going to get all the gasoline that they want.

Ahmadinejad is a friend of the poor. He was elected saying, we have oil money, we're going to spend it more equitably. So, even this new system, if they adopt it, is going to have terrible consequences for him politically, the economy is in terrible shape. It's going to be bad no matter what they do.

But here's the thing, the Iranians have no choice, they can't afford to be, to use President Bush's phrase, addicted to oil the way they have in the past.

HOLMES: Yes, what a situation. Who'd have thought?

MANN: Poor Iran, who would have thought?

HOLMES: Who would have thought?

All right, good to see you, Jon. Jon Mann there with some insight.

Well, we are one step closer to the final chapter of a story that has embarrassed Israel and its head of state, to say the least. Israel's president, Moshe Katsav has pleaded guilty to sex crime charges. In fact, the president struck a plea bargain that will keep him out of jail, however, and avoid a rape charge. Israel's attorney general says Katsav pleaded guilty to indecent sexual acts against one woman and sexual harassment against another. Some women's groups are outraged he wasn't more severely prosecuted and that other charges were actually dropped. According to Israeli news reports, Katsav, who's been on leave since January, is also going to Resign. They'll be no surprise about that. He previously, before accepting this deal, had denied any wrongdoing.

Still ahead on YOUR WORLD TODAY, an all-girl band that topped the charts in the '90s -- you might remember those faces, getting back together. Will this be music to your ears?

Stay tuned for the announcement.

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PARIS HILTON, CELEBRITY HEIRESS: I've definitely matured and grown a lot from this experience. So, I just -- I don't know. I just want to be -- I'm 26 years old. I'm an adult. And I'm -- I just have to grow up, and I have to be a more responsible role model.

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HOLMES: Paris Hilton there, right here on CNN, on "LARRY KING LIVE to be precise. The socialite also said going to jail has changed her life forever. She said she spent her time inside the slammer reading the Bible, praying for strength, and that she's learned there are more important things in life than partying.

All right, looking for a way to spice up your life? You might want to check out your local concert venues. That's true, yes, it is, girl power is back. And the '90s girl band Spice Girls are going on the road. There they are behind me. Their 11-city tour, starting in Los Angeles, will begin this December. I bet you can't wait.

Here's Alphonso Van Marsh from London.

ALPHONSO VAN MARSH, CNN CORRESPONDENT: That's right, Michael, to steal a line from one their most popular songs, what the Spice Girls want, what they really, really want, is for you to buy a ticket to their world tour. They got together publicly for the first time in nine years to meet reporters today. We saw Sporty Spice, Ginger Spice, Baby Space, Scary Spice and Posh Spice, otherwise known as Victoria Beckham. We saw them get together to tell reporters that they'll be hitting, as you mentioned, 11 cities over six continents starting in December.

Now, of course, the spice girls in the '90s, they sold some 55 million albums. They had No. 1 singles in some 53 nations. Now, some of the ladies in the group have said that they would never get back together, but Melanie Chisholm, Sporty Spice, told reporters today why she changed her mind.

MELANIE CHISHOLM, SPORTY SPICE: A girl's allowed to change her mind, I'll say first of all. And also, you know, this is something that we've only seriously started discussing this year really.

And, yes, you know, I think a lot of us have had our fears and doubts, but we feel that the time is right.

UNIDENTIFIED FEMALE: It is. CHISHOLM: And yes, and we will have some fun and be together again for a little while.

VAN MARSH: Now, Michael, it's been 10 years since the spice girls were at their peak of popularity, releasing their Spice World album and Spice World film. Now these thirty-something-year-old singers are trying to prove to the world there's more to reunion spice than just being old spice -- Michael.

HOLMES: Tell me you just didn't say old spice. Alphonso, are they Likely to make a lot of money? Is that what this is about, really, money?

VAN MARSH: Reporter: Well, it depends on who you talk to. We had a had a chance to talk to the London bureau chief of "Billboard" magazine, who said, well, yes, if these individual singers, who did try to launch individual solo careers are being so successful, we wouldn't have seen them back together today. So this is all about making money and reuniting with their fans. They'll have a greatest hits album coming out.

And with 11 different shows in six continents, you can bet a lot of people are willing to put down the cash to see their golden oldies -- Michael.

HOLMES: Yes, let's face it, they were enormously popular in their day. Although Posh Spice, Victoria Beckham, probably doesn't need the cash now that her husband is going to make millions playing for the Los Angeles Galaxy soccer team.

Good to see you, Alphonso. Thanks very much. Alphonso Van Marsh there in London.

And that is it for this hour. I'm Michael Holmes. And this is CNN.

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