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Paula Zahn Now

Government Issues Terrorism Warning; Was United States Duped Into War?

Aired May 26, 2004 - 20:00   ET

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

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


(BEGIN VIDEOTAPE)
PAULA ZAHN, CNN ANCHOR (voice-over): Tonight, the government wants you to be on the lookout for these people and warns that a major terror attack could happen on U.S. soil as early as this summer.

JOHN ASHCROFT, ATTORNEY GENERAL: This disturbing intelligence indicates al Qaeda's specific intention to hit the United States hard.

ZAHN: So why isn't the terror alert level going up?

ROBERT MUELLER, FBI DIRECTOR: Unfortunately, we currently do not know what form the threat may take.

ZAHN: And disturbing questions about a former friend, Ahmad Chalabi, and his Iranian connections. Was the U.S. duped into going to war? And was "The New York Times" duped as well?

(END VIDEOTAPE)

ZAHN: Good evening. Welcome. Glad to have you with us tonight.

All that ahead, plus our continuing look at soaring gas prices, "Crude Awakening." Tonight, should the U.S. dip into its strategic oil reserves to reduce costs?

But we begin with terrorism and confusion.

The chief of homeland security today said the nation's terror threat level would stay where it is. Yet we also heard the attorney general warn about an al Qaeda plan to attack the U.S. sometime this summer. And we heard the FBI director ask Americans to watch out for seven people he says have ties to al Qaeda, warnings that emphasize just how vulnerable the nation may be over the next few months.

(BEGIN VIDEOTAPE)

MUELLER: This summer and fall, our nation will celebrate a number of events that serve as powerful symbols of our free and democratic society.

ZAHN (voice-over): The unofficial start of the summer season is almost upon us, Memorial Day just five days away. But the nation was put on notice today by Attorney General Ashcroft and FBI Director Mueller that this might not be business as usual. ASHCROFT: Credible intelligence from multiple sources indicates that al Qaeda plans to attempt an attack on the United States in the next few months. Now, this disturbing intelligence indicates al Qaeda's specific intention to hit the United States hard.

ZAHN: Missing from today's announcement, however, was what might be expected to go hand in hand with such events, the raising of the threat level.

TOM RIDGE, HOMELAND SECURITY SECRETARY: There is absolutely nothing specific enough or that rises to the level where we would presently today as we speak make a recommendation to the president to raise the threat level.

ZAHN: In fact, specifics had been scarce in the hours since the warning first emerged last night.

ASHCROFT: It is fair to say that we do not have intelligence that leads us to specific location in regard to this threat which we see this summer and fall.

ZAHN: After the Madrid bombing which helped change the outcome of the Spanish election, two locations that have gotten the most public attention are the hosts of this summer's political conventions, New York and Boston.

LT. KEVIN FOLEY, BOSTON POLICE DEPARTMENT: We have no credible information that there will be a terrorist attack here in Boston.

RAYMOND KELLY, NYPD COMMISSIONER: We have no specific information as to a threat against New York City.

ZAHN: So with no specific immediate threat and no raise in the threat level, then why raise the fear factor and why today? There were some specifics. The nation was told to be on the lookout for these seven people all presumed armed and dangerous.

ASHCROFT: They all are sought in connection with the possible terrorist threats in the United States. They all pose a clear and present danger to America.

(END VIDEOTAPE)

ZAHN: Well, two of the seven stand out. One is an American who officials say attended terror training camps in Afghanistan. Another is a woman.

So with so few specifics and the terror threat level unchanged, how should you deal with this news?

Well, let's ask that of Miami Police Chief John Timoney.

Always good to see you, sir. Welcome.

JOHN TIMONEY, MIAMI POLICE CHIEF: Good to see you, Paula.

ZAHN: So, Chief, do you understand why a lot of Americans might either be ticked off or confused by this latest warning?

TIMONEY: Maybe, but I'm certainly not.

We had received a detailed briefing a week ago from the FBI outlining some of the things you -- that the attorney general and Bob Mueller outlined today. And so law enforcement, at least the chiefs in the major cities, had a week's advance notice. And my sense is there may have been some leakage over the weekend with regard to those briefings and both Mr. Ashcroft and Mr. Mueller came out today to let the public know.

ZAHN: Are you telling us tonight you don't think that they had the intention of ever making this public at this stage?

TIMONEY: Oh, no, I'm sure they did. But, you know, sometimes you don't get to determine when. You all in the press determine when, when the leaks start to drift out. That's just my speculation, by the way.

What I can tell you is, this is two and a half years post-9/11. I've received lots of briefings. This by far is the most serious. It is most credible in that it is coming from a variety of sources. And so I think Attorney General Ashcroft and Bob Mueller were perfectly -- I think they were right in what they did today coming out and alerting the nation.

ZAHN: All right, but if you believe this is the most serious briefing you've had in your time in law enforcement, why not raise the terror alert level? Are you surprised by that?

TIMONEY: Not really, because, you know, early on, the terror alert level was raised and then put down again and received a certain amount of ridicule, unfairly, I think, because the DHS, the new department, is just -- it is in the developmental stage if you will. And I think they're coming up with much more stringent or strict protocols.

There's a recognition on the part of Tom Ridge that, when you do that, there is certain things that kick in, including astronomical costs to cities. And so my sense is the color-coding system is not out. However, there is probably something in between before you go to the next level and that would be some of the things -- some of the briefings we have received in person over the last week.

And I think they're getting better at this. And so while it is easy to subject them to ridicule or second-guess them, I'm not saying you're doing that, some people are, I think it is kind of unfair. And what I can tell you is that the relationships between the locals, us on the ground level and the feds, the FBI, the CIA, and the folks in Homeland Security, couldn't be better. It is way better than it was prior to 9/11.

ZAHN: All right, but here is what I don't get. Your community and the public is being asked to be extremely vigilant now.

TIMONEY: Yes. ZAHN: But we have also been told there is no specific targets, that there's no specific date. So what the heck are we supposed to do? What concrete steps can we take?

TIMONEY: Well, there is some specificity in that we're talking about the summer leading up to the election. We know for a fact that al Qaeda has gotten some enjoyment and empowerment as a result of the Madrid bombing.

We know for a fact that they're on the run. Some of their top leadership has been taken out. Whether this is their last hurrah, at least from a unified perspective, that doesn't account for the cells that are all over the country, all over the world, rather, who knows. The bottom line is, there's enough things going on in this country. It is an election year. There are a variety of big events, starting with the G8 Summit, all the way up to the presidential conventions, all the way up to the first presidential debate, which is right here in Miami, and a whole host of other things and celebrations in between that are inviting targets for somebody trying to make a statement or trying to impact as they did on the Madrid elections, on the American elections.

ZAHN: Maybe you can help us better understand this then tonight, now that you have brought up the issue of the conventions.

(CROSSTALK)

ZAHN: Director Mueller saying that both Boston and New York have taken extraordinary precautions to guard those sites. What does that mean exactly?

TIMONEY: Well, I think it means a variety of things, one, additional police officers.

For example, I ran the 1998 convention in New York City. And underneath Madison Square Garden, there are a whole variety of subway lines, about six or seven, and then Amtrak, Long Island Railroad, that come in underneath the convention hall itself. I guarantee you there will be more inspections of those rail tracks. There will be police officers on the trains coming in from Long Island into the train station itself.

And while the authorities, both Mayor Bloomberg and Commissioner Kelly, have indicated no intention of closing down the system, my sense is that could change as you move closer and maybe just close it down for the final night of the convention, that Thursday night, while President Bush is speaking from 8:00 to 10:00.

So I think that while there was a high sense of security back in 1992, in no way would it compare to what goes on today.

ZAHN: Well, we appreciate your putting this all in perspective for us. Miami Police Chief John Timoney, again, thanks for dropping by.

(CROSSTALK) TIMONEY: Thank you.

ZAHN: When we come back, a closer look at the terror suspects the government is looking for. Who are these people? What have they done? And are they already here in this country? I'll ask two experts on terrorism.

And a startling admission in the prestigious "New York Times" about its coverage of the crisis in Iraq and the administration's case for war.

And part two of our series "Crude Awakening." Would tapping into the nation's oil reserves keep gas prices from rising even higher? We are going to debate that later on in this hour.

(COMMERCIAL BREAK)

ZAHN: A clear and present danger to America and armed and dangerous. Attorney General John Ashcroft used those phrases today to describe the six men and one woman wanted in connection with possible terrorist threats here in the United States. But what do we know about them? And are they now in the U.S.?

Joining us from Boston is former National Security Council staffer Jessica Stern, now with Harvard University. She is the author of "Terror in the Name of God: Why Religious Militants Kill." And from Washington, Ben Venzke, founder and CEO of IntelCenter, which provides intelligence support to police and the military.

Good to have both of you with us this evening.

Ben, I'm going to start with you.

Let's talk a little bit about the FBI releasing the pictures of those seven people believed to be connected to an al Qaeda plot. What do you make of today's warning?

BEN VENZKE, FOUNDER & CEO, INTELCENTER: Well, one of the tools that you have available to you in law enforcement intelligence is when you hit a certain point, there is a point where it is advantageous to try and turn up new leads, turn up and develop new information, the chance that somebody might recognize someone, might have seen them in the past or might currently know where they're at.

And when you have exhausted a lot of other avenues, this can sometimes turn up a new stone, open up a new path that might lead you down to where they're located or turn in the direction of new information.

ZAHN: Jessica, when John Ashcroft was asked specifically by a reporter, do you believe any of these people that we're looking at pictures of tonight are in this country, he did not answer the question. What is your belief? Are they here?

JESSICA STERN, HARVARD UNIVERSITY: Well, I'm really not in a position to know if John Ashcroft isn't sure or isn't pretend to tell us. If I saw them, believe me, I would do something about it.

(CROSSTALK)

ZAHN: No, but there have been a number of, as you know, counterintelligence officials who are anonymously quoted tonight saying that in fact there is a belief there that some of these folks are already here. It wasn't clear whether he didn't want to answer the question or whether he couldn't.

STERN: I think there is something that is really alarming the government. And so I would guess that some of them are here. But it is not really something I know about.

ZAHN: What conclusions can we draw from the fact that one of the people that we see in these pictures is an American citizen?

STERN: Well, this is something that I've been quite concerned about for a long time, that the fact that al Qaeda is deliberately recruiting in unusual communities, deliberately recruiting among converts, deliberately recruiting, using other organizations in fact to recruit within American prisons and in European prisons, inner cities, recruiting within migrant communities.

Al Qaeda is very good at recruiting people with the right passports and increasingly with the right looks that would allow them to escape the kind of inquiry, the kind of -- make them suspects automatically. And this is something -- a development that has been going on for some time and I believe increasing.

ZAHN: Ben, let's talk a little bit about what else Mr. Ashcroft had to say today. He alluded to the terror bombings in Spain and talked about how that was effectively done basically to change the outcome of the election. Do you agree that perhaps the timing of this obviously has something to do with this upcoming election here?

VENZKE: Well, there is no doubt that that was an extremely significant event for al Qaeda in the ability that they were able to prove that they could impact the outcome of an election. And I think as we go through the election period, there is great concern.

We have sort of the underlying base level of threat. Al Qaeda is clearly going to try and attack us. They have been for some time. They are going to continue to do that. But during this period that leads up to the election, there is much greater concern that they might go after one of the conventions or one of these targets or they might choose to go after -- for instance, in Madrid they went after trains to impact the election, that they might choose something that would have a great significant impact in order to steer the direction.

So I think it is a very clear threat and something to be concerned about.

ZAHN: And, Jessica, in conclusion tonight, on one hand, the government is telling us that the intelligence is highly credible, yet not very specific and the threat level, at least for the time being, is not going to be raised. What should that tell all of us? STERN: Well, I think the government has decided that it may actually get information coming in from the public. And it may also feel that it makes people feel better to imagine that they're able to contribute to their own security. Psychologists would certainly tell us that that is a good thing in terms of making people feel a little bit less panicky.

It may be, it is an experiment. I think it might work better than raising the alert levels. And we'll have to see.

ZAHN: Jessica Stern and Ben Venzke, thank you for both of your perspectives tonight.

And coming up next, we will focus on some agonizing questions about the war in Iraq. Did Ahmad Chalabi manipulate the U.S. into launching the war? We are going to look at allegations that Iraq's neighbor Iran used him to dupe the United States.

And when Iraqis take control of their country in just over a month, how soon will a U.S.-trained military force be ready to maintain security and stability? We are going to look that the part of the handover plan later on.

(COMMERCIAL BREAK)

ZAHN: Not long ago, the U.S. considered Ahmad Chalabi a candidate to run the new Iraq. Chalabi, the man in the light gray suit, is a onetime Iraqi exile who returned to Baghdad after the ouster of Saddam Hussein.

Well, at this State of the Union address, Chalabi sat just behind first lady Laura Bush. Well, since last week's raid on his home in Baghdad, questions have risen about his honesty, his loyalty and his connection with Iran. Even more disturbing, articles this week in "The Guardian" newspaper raise the possibility that Iran, by using Chalabi to pass on false intelligence, may have manipulated the U.S. into invading Iraq.

In Washington to discuss this is someone who knows Chalabi well, Robert Baer, the senior CIA officer in Northern Iraq during the mid- '90s. He actually worked with Chalabi then. He is the author of a book now in paperback called "Sleeping With the Devil: How Washington Sold Our Soul for Saudi Crude."

Always good to see you, Bob. Welcome.

ROBERT BAER, FORMER CIA OFFICER: Paula, good evening.

ZAHN: Good evening.

First of all, do you think it is true, what is written in "The Guardian" newspaper, that Iran somehow used Chalabi and even misled him about some of the intelligence they gave him to lead the U.S. into war?

BAER: I think it is a good possibility. Chalabi has always had better relations with Tehran than he has with Washington in terms of following a certain agenda. He always knew that Iran would play a key role in Iraq even after the U.S. leaves. He ingratiated himself at any turn he could. When we were in northern Iraq, he was giving them free facilities. He was giving them free cars, helping them out in operations.

We knew it at the time and the CIA knew it at the time. So it doesn't surprise me at all that he finally went too far in terms of giving information to Iran.

ZAHN: But go back to the period of time you were just talking about. What was in it for him at that time? Was it money? Was it prestige? What was it?

BAER: In order to get into northern Iraq, he had to go through Tehran. A lot of his equipment came through Tehran. He's a Shia, as are the Iranians. He needed the support of the Shia in the south. And all the main groups, the Shia groups were located in Tehran. He was encouraging them to back him up.

ZAHN: So it would be your belief first that he was working in Iran first or is it possible that he was working for both the U.S. and Iran simultaneously?

BAER: I think -- he was fairly frank with me. He said Iran is key to Iraq's future and key to my future.

And I'm going to use anybody to get to Baghdad, including Washington. What surprises me is that people in Washington weren't aware of this background. The CIA certainly was, but the larger political sphere in Washington wasn't.

ZAHN: Why do you think they ignored the CIA's protests?

BAER: It turned into a political fight. That was the problem. It was the conservatives, the neocons, as they're called, accused the CIA of being soft on Saddam Hussein. And therefore, whatever the CIA produced was discounted by this political class.

ZAHN: The most confusing part of the story is the fact that Chalabi was never supposed to have access to critical U.S. security information. He didn't have the security clearances. How was it that -- one of the allegations is, in addition to the Iranian intelligence being passed on to him, somehow, there was also intelligence information about the U.S. and troop movement that was shared with him? How would that have happened?

BAER: It was worse than that.

As I understand it, it was specially compartmented information which a lot of U.S. government employees don't have access to. Even within the CIA, it is highly compartmented. We can't even describe what that information is. And somehow it ended up with Chalabi. And Chalabi apparently or one of the surrogates passed it to Iran. The question is who gave it to him. And that's what the FBI is looking into.

And this is the reason that the White House finally had to cut Chalabi loose. It was very reluctantly.

ZAHN: I guess that's the question I have for you then. What is your understanding of how many people in the United States government or in the CIA would have had access to that information? It's just a handful of people?

BAER: It is a very small circle. It is closely protected. It's top-secret. We have all sorts of code words for this stuff.

I certainly, being outside of the CIA, can't even get near it. And people in the CIA would never talk to me about it. Somebody made an enormous mistake passing this on. Remember, it is not illegal for him to pass the information to Iran, but whoever gave it to Chalabi, if he's caught, will do jail time.

ZAHN: So why do you suspect it was passed along to him?

BAER: Somebody made an error. Someone doesn't take this seriously, national security. It is a crime.

ZAHN: And what are the consequence for U.S. troops?

BAER: Well, the U.S. troops depend upon this information to stay alive in Iraq, because there's a lot of groups that are targeting them. And this sort of information is passed on to the troops to protect and even move positions or arrest people. But once these sources and methods are compromised, we lose this shield. I think it is a catastrophe.

ZAHN: I need a yes-or-no answer to this one. In the end, does Chalabi get arrested?

BAER: No, because he didn't break the law. I think Chalabi is becoming a political figure in his own right. And I would never count him out. He's a survivor.

ZAHN: Bob Baer, you got that one right, as you have watched his career, if you can call it that, over the last 20 years or so. Thanks for your time tonight. Appreciate it.

BAER: Thanks. Thank you, Paula.

ZAHN: It turns out there are also some questions about information Chalabi funneled to the news media. When we come back, "The New York Times" blame itself for not being skeptical enough about the case for war in Iraq.

Plus, our series on skyrocketing gas prices looks at the wisdom of tapping into the oil stored in the nation's strategic reserve.

Then tomorrow, we'll look at pump prices and politics, an explosive mixture. How will it play out in this November's election? That's tomorrow. (COMMERCIAL BREAK)

ZAHN: Before the war in Iraq, they were all over the newspapers and magazines and on TV, reports about Saddam Hussein's alleged weapons of mass destruction. Some even cited sources who claimed to have seen these weapons or the storage facilities for them.

But now many of those sources have turned out to be unreliable. And today, "The New York Times" examined problems in its own reporting.

(BEGIN VIDEOTAPE)

ZAHN (voice-over): Page A-10, below the fold, titled "The Times and Iraq," a surprising statement of contrition regarding its coverage of Iraq's alleged weapons of mass destruction program.

"The Times"' editors say some of their correspondents relied too heavily on Iraqi defectors, like Ahmad Chalabi, intent on overthrowing Saddam Hussein. And "The Times" says its reporters often went to hawkish U.S. officials who also wanted Saddam out to confirm their stories. Some examples, November 8, 2001, a front-page article which reported that Iraqi defectors said they knew of a highly guarded compound where Iraqi scientists led by a German produced biological agents. "New York Times" editors now say the story was not independently verified.

example, September 8, 2002, the lead story reported that Iraq was trying to get aluminum tubes to make an atomic bomb. The article cited American intelligence sources. Now the editors say they should have been more cautious because intelligence agencies were debating whether Iraq really wanted the tubes for a nuclear bomb or for something else. Of the six flawed articles highlighted by the editors, Judith Miller's byline appeared on four of them. Today the paper says individual reporters are not to blame. The problem, it says, is more complicated than that.

(END VIDEOTAPE)

ZAHN: We asked the "New York Times" to comment on the story but the paper declined saying today's editor's note speaks for itself. Earlier I discussed the paper's reporting on Iraq with Greg Mitchell the editor-in-chief of "Editor & Publisher." His magazine has criticized some of the "New York Times" articles. We were also joined by Karen Brown Dunlap, president of the Poynter Institute, a school for professional journalists.

(BEGIN VIDEOTAPE)

ZAHN: Welcome. Greg Mitchell and Karen Brown Dunlap, glad to have both of you with us. Greg, we're going to start with you this evening. You say today's mea culpa in the "New York Times" in many ways is even more damaging than the Jason Blair controversy. How so?

GREG MITCHELL, EDITOR-IN-CHIEF, "EDITOR & PUBLISHER": Well, it is because of what is at stake. The Jason Blair controversy obviously was serious because of lying in the newsroom. But of course this involves a war, a very costly war as we're finding out now. And so obviously the stakes were much higher. Whether the transgressions were as bad as with Jason Blair, people could argue about this. Certainly the end result that we ended up in a very, very costly war cannot be denied and makes this thing incredibly serious question.

ZAHN: What does this tell us about the consumer news today, Karen? We know that a number of news organizations used many of the same sources of the "New York Times," particularly in the Bush administration.

KAREN BROWN DUNLAP, PRESIDENT, THE POYNTER INSTITUTE: I think it says news reporting is very difficult and we sometimes get it wrong. When we get it wrong, we need to be open about it, we need to be quick about it. We need to explain what happened, try to make sure we get it right. There has been a lot of skepticism about the press, didn't just start last year. The public knows that we make mistakes. I think we are doing a little better job of discussing those mistakes and trying to correct things.

ZAHN: Greg, we're supposed to have a healthy sense of skepticism going. In any story, you have to assume whatever your guest is going to tell you is lying except for the two of you here this evening. I'm not making that assumption. How do you think the rest of the press did during this period?

MITCHELL: I thought it was fairly abysmal in terms of the run-up to the war and the justifications for it as we're seeing now, going back to Colin Powell's speech before the U.N. which virtually everyone in the media felt he had made the case for the war, since then our magazine and others have shown that 70, 80, 90 percent of the information he was putting out turned out to be wrong.

ZAHN: But, Karen, to be perfectly fair here, wasn't it just last weekend for the first time that Colin Powell stated publicly not only was some of that intelligence flawed but deliberately misleading?

DUNLAP: I think this speaks to the complexity of the situation. The journalists had to gain intelligence reports to try to test the intelligence reports. In other words, it is difficult to access truth in a situation like this. But let me add, on the other hand this goes to the basics of reporting. It speaks of the importance of having a range of sources with varying opinions. It is important to understand their interests. It is important to be skeptical.

ZAHN: And you to think the media was in general as bad as Greg suggested during this run-up to war?

DUNLAP: I think the media has been timid. They've been courageous in covering the war in the war. But they have been timid overall in the discussion of Iraq.

ZAHN: And we have to leave it there this evening. Karen Brown Dunlap, Greg Mitchell, thanks.

(END VIDEOTAPE) ZAHN: And the handover of power in Iraq is 35 days away. What will it mean for the safety of America's men and women in uniform and how soon will an Iraqi force be able to take over? We will ask two career generals what they think.

Then what would drivers save if the government opened up the Strategic Oil Reserve? We will debate that when we come back.

(COMMERCIAL BREAK)

ZAHN: When President Bush, this week, named his five steps for bringing democracy to Iraq, making it stable and secure was job No. 2. That job now belongs to 138,000 American troops. But the president's goal is to train a force of some 260,000 Iraqis to take over once American troops go home. Senior Pentagon correspondent Jamie McIntyre reports on that challenge as we continue our week-long look at the president's five-step plan.

(BEGIN VIDEOTAPE)

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT (voice-over): When U.S. marines had to call off their offensive in Fallujah last month because of the objections of Iraq's governing council, to many it seemed like a defeat. But now the Pentagon says allowing former members of Saddam's army to patrol the town is a model for the flexibility that will be required after the transfer of sovereignty. Marine corps commandant General Michael Haguey (ph).

UNIDENTIFIED MALE: If that's a defeat, we need more defeats like that.

MCINTYRE: In his Monday speech, President Bush said the U.S. would accelerate the training of 260,000 Iraqis to form the lynch-pin of a homegrown security force. But critics in Congress such as Democratic Senator Joseph Biden charged the number and effectiveness of those U.S. trained forces is consistently overstated.

SEN. JOSEPH BIDEN (D), DELAWARE: This malarkey you guys came up with, you've got 200,000 trained Iraqis, every single solitary expert including your guys that we met with in Iraq said it will take three years to train 40,000 Iraqi military.

MCINTYRE: Not to mention that when U.S. commanders ordered some of those Iraqis into battle many refused to fight. The administration hopes that after June 30, with Iraqis in charge, their resolve will stiffen.

RICHARD ARMITAGE, DEPUTY SECRETARY OF STATE: These Iraqi forces who have fought, in many cases, valiantly will no longer be fighting for the occupiers. They will be fighting for Iraq.

MCINTYRE: Army Colonel Paul Hughes, a professor at the National Defense University believes imposing order is job one. Especially with Iraq's elections coming up.

COL. PAUL HUGHES, NATIONAL DEFENSE UNIVERSITY: If we fail in providing security at those particular junctures, I think that we're going to have a significant setback in seeing a viable Iraqi government established.

MCINTYRE: Hughes and many others in the military believe ultimately that will require significantly more U.S. troops than the 138,000 currently in Iraq.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: If they need more troops, I will send them.

MCINTYRE: And those troops, the U.S. insists, will not be subject to a veto from the Iraqi government if the U.S. believes it needs to take action say for instance to capture Abu Musab al-Zarqawi, currently the most wanted man in Iraq.

UNIDENTIFIED MALE: In the short term there will not be sufficient forces of Iraqis to maintain security and stability. That is a reason why the United States is going to remain there for some time to come.

(END VIDEOTAPE)

ZAHN: That report from senior Pentagon correspondent Jamie McIntyre. We will look at that more closely now, at some of these challenges and dangers facing the U.S. as the June 30 handover approaches. Joining us are two CNN military analysts. From Tucson, Arizona, Retired Major General Don Shepperd and in Illinois, Retired Brigadier General Daniel Grange. Always good to see the two of you. Welcome. General Shepperd, what do you think happens between now and June 30? Do you expect the death toll of American soldiers to continue to climb?

MAJ. GEN. DON SHEPPERD, U.S. AIR FORCE (RET.): I do, Paula. You will see deaths of Americans every day and deaths of Iraqis every day as these insurgent attacks continue. The Iraqis are not going to be ready in the way we want and ready to take over on the 30th of June. But we'll do the best we can. The militias will remain. We're going to continue accelerating the training of policemen and militia, civil defense force, border guard, et cetera, but it's going be a rough and rocky road. After we hand it over, it will be rough after that.

ZAHN: Thank you, General Shepperd.

General Grange, do you agree with that assessment, and if you do how do you reduce the cycle of death?

GRANGE: There will be -- reduce the cycle of death, you're going to have to have sufficient forces for the task given. If the tasks are to patrol cities you have to have enough troops to do that effectively. I think you're going to see where the strategy changes, though, where U.S. and other coalition troops may hand over some of those tasks that eat up numbers of troops to Iraqis. The question then goes to do you have enough Iraqis trained to do the task?

I would say you have some now that are quite good. But then you have -- you will not have the numbers -- hundreds of thousands for years to come.

ZAHN: That's the kind of gap you are talking about here?

GRANGE: I think so. If you just look back Vietnam. I worked first -- for part of my tours. And you were an adviser to some Vietnamese that were so so. Than the Vietnamese paratroopers were excellent, brave, great fighters, a lot of experience. So they have pockets of very well trained Iraqis like their special forces that are being used right now against al Sadr as an example. They're ready to go now. They just need a few more numbers. But you don't need mass numbers of those types of people. Patrolling streets than you need a lot more numbers. And there are not quite there yet.

ZAHN: General Grange just mentioned, General Shepperd, radical cleric Muqtada al-Sadr. And there was just a story that broke within the last hour suggesting a proposal of a partial withdrawal of fighters from Najaf and the turnover of government buildings there to Iraqi police.

What does that mean to you?

SHEPPERD: What you're seeing is the weakening of al-Sadr. He tried to make an alliance with the Sunnis in Fallujah, that didn't work. He tried to incite the Shia majority across the nation, also in Baghdad. That didn't work. He tried to take over facilities and all of the facilities, some of that worked, some of it didn't. But you're seeing him being marginalized and I think this is a good sign. He's becoming weaker, but still going to be a factor and have to be dealt with. I doubt very seriously he's going surrender to (UNINTELLIGIBLE) on charges, Paula.

ZAHN: And General Grange, coming back to the point you where making about the large gaps between the training of Iraqi security forces those that are ready now and what will be needed down the road, do you think there will be additional U.S. forces needed in that transition period to fill the gap?

GRANGE: Could very well be. If you want to seal the entire border to keep infiltrators out, mercenaries. If you want to ensure that you have rule of law as was stated earlier on the program, in order to transition a market economy and the other things required in this new Democratic governance, then you may need to surge and put more in there. The key is you're training a military that totally lacks sergeants, junior officers, everything was senior officers. There was no lower ranking expertise or authority. It just like the old Russian army, in the old Ukrainian Army. These armies don't have what we have or the British have. And it takes a while to establish that base. It is going take a lot of good trainers from our country to bring them up to standard to take care of themselves.

ZAHN: And General Shepperd, it's going to take a lot of time to build trust there.

What is your greatest fear about turning over some of this power to these local militias? SHEPPERD: Rather than the fear about turning over to the militias, which I think is part of the solution there, while we're training them. My fear is that the American public will become list illusions and abandon this. I think that is also the fear of the Iraqis, and it is hindering our ability it train and turn over and maintain security across the nation there.

ZAHN: General Grange, when are U.S. troops out of Iraq once and for all?

GRANGE: Down the road, Paula, and that's the commitment. When you go to war, quite often we fail to look and talk about -- at least talk about what is behind the second and third hill. And behind the second and third hill it's going to take several years. I think we will always have an advisory status there. I think we will always have a presence for maybe even training in the desert. And we'll always be the backdrop to support the new elected government if they are threatened either by neighbors or internally.

ZAHN: General Shepperd, just a final thought. You said down the road, several years, you agree that?

We need a brief answer.

SHEPPERD: Yes, I absolutely agree with it. It's going to be a long rocky road and our patients is going to be tested as well as our treasure and the courage of our kids.

ZAHN: General Grange, General Shepperd, thank you, both. Appreciate it.

Next from the war in Iraq to the economic battle over a barrel of oil.

Would releasing some of the nation's emergency oil supply lower gas prices?

We'll debate that in our crude awakens segment, next.

(COMMERCIAL BREAK)

ZAHN: In our series crude awakening, we're looking at what can be done about the high price of gasoline. Florida's attorney general is trying some legal pressure. He has just subpoenaed eight oil companies seeking documents about the cost, production, inventory and pricing of gasoline. Another tactic would be tapping the nation's strategic oil petroleum reserve.

Chris Huntington, looks at how that would work.

(BEGIN VIDEOTAPE)

CHRIS HUNTINGTON, CNN CORRESPONDENT (voice-over): Deep beneath the Gulf Coast of Texas and Louisiana, buried in dozens of hollowed out salt caverns lies the biggest oil storage facility on the planet. The strategic petroleum reserve currently holds a record 660 million barrels of crude with plans to top off at 700 million barrels sometime next year. President Bush has made it clear the SPR is for emergency use only.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: That petroleum reserve is in place in case of major disruptions of energy.

HUNTINGTON: Oil traders are betting the administration sticks to that policy.

UNIDENTIFIED MALE: I just don't see a high price as a reason to release SPR. That would be the Department of Energy speculating on price direction and I know for a fact they don't want to do that.

HUNTINGTON: Think of the reserve as a national gas can with a small spout. Even topped off at 700 million barrels, the SPR would run dry in less than 6 months if oil were drawn down at the maximum rate of about 4 million barrels a day. But that flow would cover less than half of U.S. daily crude imports and only about one-fifth of total U.S. daily oil consumption. It would still need to be converted into fuel.

DAVID KNAPP, OIL INTELLIGENCE GROUP: It is crude oil, not product. It is crude oil. It has to be refined in a refining system that is stretched.

HUNTINGTON: The idea of a stockpile date backs to the Truman administration, but it took the Arab oil embargo of 1973 to make it a priority. Two years later, Gerald Ford signed the SPR into law, granting presidential authority over when and how to use the oil. So far the reserve has only been tapped for emergencies on two occasions. In 1991 at the start of the Gulf War, the first President Bush ordered 17 million barrels released to help stabilize global oil supplies. And in late 2000, President Clinton loaned out 30 million barrels to ease a shortage of home heating oil in the northeast.

(on camera): Oil from the SPR has occasionally been loaned out to help these commercial bottlenecks and sold and it's even been sold off to trim the federal budget deficit. But the Strategic Petroleum Reserve has never been tapped to make it cheaper to fill the family minivan.

(END VIDEOTAPE)

ZAHN: That was Chris Huntington reporting for us tonight. Despite the resistance from President Bush tapping into the Strategic Petroleum Reserve, continues to be a hot topic on Capitol Hill.

(BEGIN VIDEO CLIP)

SEN. CHARLES SCHUMER, (D) NEW YORK: It is high time for the administration to use the tools at their disposal to drive prices down and send a signal to OPEC. The bottom line is we have to release oil from the strategic petroleum reserve.

(END VIDEO CLIP) ZAHN: We're going discuss this now with two members of the House Energy and Commerce Committee. Texas Republican Joe Barton is in Dallas tonight. New Jersey Democrat Frank Pallone Jr. is with me here in New York. Also here with us in the studio tonight, oil and gas analyst Fadel Ghett. Good to see all of you gentlemen.

Congressman Barton, you just heard your colleague, Senator Schumer, say it is time to tap the reserves. Do you support that idea?

REP. JOE BARTON, (R) TEXAS: Well, it would be breaking the law. The law says you're supposed to use it in a severe supply interruption, or disruption. We don't have that. We have plenty of oil. It is just very expensive. About 40 to $41 a barrel. So the president is absolutely right to not use the SPR to manipulate prices. That's not what it was intended for.

ZAHN: There are consumer groups out there Congressman Pallone that say $41 a gallon -- excuse me, $41 a barrel of gasoline does constitute a crisis.

REP. FRANK PALLONE, JR. (D) NEW JERSEY: Not only that, I think it is not true to say you're breaking the law. The law says that economic hardship is a reason to use this (UNINTELLIGIBLE). And the bottom line is that the high gas prices are a threat to the American economy. So, I think it makes sense to do that.

And all we're saying is that we should do basically what President Clinton did, which is 1 million barrels per day over 30 days, which is essentially what Clinton did. And it drove down prices about 14 cents a gallon at the time in 2000.

ZAHN: And Congressman Barton, you don't deny that work do you?

BARTON: I oppose what President Clinton did. I did a little investigation of what President Clinton did. So it would be hypocritical of me to now tell President Bush that he ought to do what I opposed President Clinton to do.

ZAHN: But it did bring gas prices down at the pump, didn't it?

BARTON: When all the dust had settled I think it made a difference of about one cent a gallon in the fuel oil prices. Which is what President Clinton was trying to accomplish.

PALLONE: Gas prices went down about 14 cents. And the bottom line is, this is causing harm to the American economy. We estimate that when gas prices go up one cent it means about a billion dollars less in consumer spending. If this continues, it is not only going to hurt the person who can't afford to buy the gas at the pump, it is going to hurt the economy overall. I think that's the problem.

ZAHN: what do you think is the answer here?

FADEL GHETT, OIL AND GAS ANALYST: This is a knee jerk reaction. This country has no energy policy or energy plan. Unfortunately, we always find a solution after the damage is already done. I mean, preventive measures should have avoided $40 oil to start with. Oil prices are at the current level, not because of lack of supply, it is because of fear of potential supply disruption.

ZAHN: Well, you have that supply disruption when you had Venezuela on strike. Congressman Barton, would that have been a time you would have supported tapping into the reserves? A lot of people think we should have done it then.

BARTON: We don't have the Arab oil embargo like we had in the mid '70s with when the OPEC cartel refused to ship to the United States. That's when we created the strategic petroleum reserve. I agree that energy prices are very high.

I would point out we passed an energy bill in the house. It is waiting in the Senate since around Thanksgiving of last year. I would also point out that if we would allow drilling up in Alaska, most experts think that there are a million to -- a million and a half barrels a day that would come out of that one field which would lower pump prices significantly.

ZAHN: But people are look for relief this summer. Are they going to get it?

PALLONE: I don't see how they're going to get it unless the Bush administration does something immediately. You know, the president said when he was running four years ago he would force and pressure OPEC to lower prices. He hasn't done anything as far as OPEC is concerned from what I can see.

ZAHN: What do you think could be done, do you think Fadel, to bring down the price of gas?

GHETT: One side is saying we should drill in Alaska. That's not going to change oil prices today or tomorrow or next year. On the other hand, we should have a balanced approach. It goes on the supply and the demand side.

What happened to conservation. What happened to energy credit, what happened to infrastructure in this country. There are no refineries built in 30 years. But people want to drive SUVs and complain about higher oil prices.

So we all are part of the problem. It is the president and the Congress and the consumers. So let's accept higher oil prices and let's live with it if we don't have better solution. Let's just accept it.

ZAHN: Congressman Pallone do you have a final thought.

PALLONE: He's right about the refineries. President Bush under his watch, basically the number of refineries has been reduced. There has been basically mergers, which he's approved. And now market concentration, which I think makes it easier for the oil companies to manipulate prices. And I would like to see an actual investigation of what is happening with the prices, because we know that back in 2000 there was a lot manipulation of the market. I think that's happening now. It should be investigated. It's not happening

ZAHN: You've got a bunch of attorney generals around the country looking into that. Congressman Barton, you get last word. Will we see the prices go down between now and the election?

BARTON: Let me point out the problem is that there is not enough supply in the world. We have -- we're using about 80 million barrels of oil a day worldwide. And we're consuming about 80 million barrels of oil worldwide. I would also point out, that in spite of these high gas prices, demand for gas in the United States is up 5 percent, up 5 percent. And when the automobile manufacturers do consumer surveys to see what one of 20 things people want in the new automobile, fuel efficiency lasts -- ranks dead last.

ZAHN: I guess...

BARTON: The problem is us. We're using more gasoline and we're complaining about the price. The price is too high. But what we need is a balanced energy policy that lets the market operate.

ZAHN: So, I guess we're all in agreement that we are energy pigs. Not a nice way of saying, but that's what we are.

GHETT: And pigs get slaughtered at the end of the day.

ZAHN: I guess that's what is happening at the pump. Fadel Ghett, Congerssman Joe Barton and Congressman Frank Pallone. Thank you very much. We'll be right back.

(COMMERCIAL BREAK)

ZAHN: And that wraps it up for all of us here this evening. Thanks so much for being with us tonight. "LARRY KING LIVE" is next. Have a great night. We'll be back same time, same place tomorrow.

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


Aired May 26, 2004 - 20:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
PAULA ZAHN, CNN ANCHOR (voice-over): Tonight, the government wants you to be on the lookout for these people and warns that a major terror attack could happen on U.S. soil as early as this summer.

JOHN ASHCROFT, ATTORNEY GENERAL: This disturbing intelligence indicates al Qaeda's specific intention to hit the United States hard.

ZAHN: So why isn't the terror alert level going up?

ROBERT MUELLER, FBI DIRECTOR: Unfortunately, we currently do not know what form the threat may take.

ZAHN: And disturbing questions about a former friend, Ahmad Chalabi, and his Iranian connections. Was the U.S. duped into going to war? And was "The New York Times" duped as well?

(END VIDEOTAPE)

ZAHN: Good evening. Welcome. Glad to have you with us tonight.

All that ahead, plus our continuing look at soaring gas prices, "Crude Awakening." Tonight, should the U.S. dip into its strategic oil reserves to reduce costs?

But we begin with terrorism and confusion.

The chief of homeland security today said the nation's terror threat level would stay where it is. Yet we also heard the attorney general warn about an al Qaeda plan to attack the U.S. sometime this summer. And we heard the FBI director ask Americans to watch out for seven people he says have ties to al Qaeda, warnings that emphasize just how vulnerable the nation may be over the next few months.

(BEGIN VIDEOTAPE)

MUELLER: This summer and fall, our nation will celebrate a number of events that serve as powerful symbols of our free and democratic society.

ZAHN (voice-over): The unofficial start of the summer season is almost upon us, Memorial Day just five days away. But the nation was put on notice today by Attorney General Ashcroft and FBI Director Mueller that this might not be business as usual. ASHCROFT: Credible intelligence from multiple sources indicates that al Qaeda plans to attempt an attack on the United States in the next few months. Now, this disturbing intelligence indicates al Qaeda's specific intention to hit the United States hard.

ZAHN: Missing from today's announcement, however, was what might be expected to go hand in hand with such events, the raising of the threat level.

TOM RIDGE, HOMELAND SECURITY SECRETARY: There is absolutely nothing specific enough or that rises to the level where we would presently today as we speak make a recommendation to the president to raise the threat level.

ZAHN: In fact, specifics had been scarce in the hours since the warning first emerged last night.

ASHCROFT: It is fair to say that we do not have intelligence that leads us to specific location in regard to this threat which we see this summer and fall.

ZAHN: After the Madrid bombing which helped change the outcome of the Spanish election, two locations that have gotten the most public attention are the hosts of this summer's political conventions, New York and Boston.

LT. KEVIN FOLEY, BOSTON POLICE DEPARTMENT: We have no credible information that there will be a terrorist attack here in Boston.

RAYMOND KELLY, NYPD COMMISSIONER: We have no specific information as to a threat against New York City.

ZAHN: So with no specific immediate threat and no raise in the threat level, then why raise the fear factor and why today? There were some specifics. The nation was told to be on the lookout for these seven people all presumed armed and dangerous.

ASHCROFT: They all are sought in connection with the possible terrorist threats in the United States. They all pose a clear and present danger to America.

(END VIDEOTAPE)

ZAHN: Well, two of the seven stand out. One is an American who officials say attended terror training camps in Afghanistan. Another is a woman.

So with so few specifics and the terror threat level unchanged, how should you deal with this news?

Well, let's ask that of Miami Police Chief John Timoney.

Always good to see you, sir. Welcome.

JOHN TIMONEY, MIAMI POLICE CHIEF: Good to see you, Paula.

ZAHN: So, Chief, do you understand why a lot of Americans might either be ticked off or confused by this latest warning?

TIMONEY: Maybe, but I'm certainly not.

We had received a detailed briefing a week ago from the FBI outlining some of the things you -- that the attorney general and Bob Mueller outlined today. And so law enforcement, at least the chiefs in the major cities, had a week's advance notice. And my sense is there may have been some leakage over the weekend with regard to those briefings and both Mr. Ashcroft and Mr. Mueller came out today to let the public know.

ZAHN: Are you telling us tonight you don't think that they had the intention of ever making this public at this stage?

TIMONEY: Oh, no, I'm sure they did. But, you know, sometimes you don't get to determine when. You all in the press determine when, when the leaks start to drift out. That's just my speculation, by the way.

What I can tell you is, this is two and a half years post-9/11. I've received lots of briefings. This by far is the most serious. It is most credible in that it is coming from a variety of sources. And so I think Attorney General Ashcroft and Bob Mueller were perfectly -- I think they were right in what they did today coming out and alerting the nation.

ZAHN: All right, but if you believe this is the most serious briefing you've had in your time in law enforcement, why not raise the terror alert level? Are you surprised by that?

TIMONEY: Not really, because, you know, early on, the terror alert level was raised and then put down again and received a certain amount of ridicule, unfairly, I think, because the DHS, the new department, is just -- it is in the developmental stage if you will. And I think they're coming up with much more stringent or strict protocols.

There's a recognition on the part of Tom Ridge that, when you do that, there is certain things that kick in, including astronomical costs to cities. And so my sense is the color-coding system is not out. However, there is probably something in between before you go to the next level and that would be some of the things -- some of the briefings we have received in person over the last week.

And I think they're getting better at this. And so while it is easy to subject them to ridicule or second-guess them, I'm not saying you're doing that, some people are, I think it is kind of unfair. And what I can tell you is that the relationships between the locals, us on the ground level and the feds, the FBI, the CIA, and the folks in Homeland Security, couldn't be better. It is way better than it was prior to 9/11.

ZAHN: All right, but here is what I don't get. Your community and the public is being asked to be extremely vigilant now.

TIMONEY: Yes. ZAHN: But we have also been told there is no specific targets, that there's no specific date. So what the heck are we supposed to do? What concrete steps can we take?

TIMONEY: Well, there is some specificity in that we're talking about the summer leading up to the election. We know for a fact that al Qaeda has gotten some enjoyment and empowerment as a result of the Madrid bombing.

We know for a fact that they're on the run. Some of their top leadership has been taken out. Whether this is their last hurrah, at least from a unified perspective, that doesn't account for the cells that are all over the country, all over the world, rather, who knows. The bottom line is, there's enough things going on in this country. It is an election year. There are a variety of big events, starting with the G8 Summit, all the way up to the presidential conventions, all the way up to the first presidential debate, which is right here in Miami, and a whole host of other things and celebrations in between that are inviting targets for somebody trying to make a statement or trying to impact as they did on the Madrid elections, on the American elections.

ZAHN: Maybe you can help us better understand this then tonight, now that you have brought up the issue of the conventions.

(CROSSTALK)

ZAHN: Director Mueller saying that both Boston and New York have taken extraordinary precautions to guard those sites. What does that mean exactly?

TIMONEY: Well, I think it means a variety of things, one, additional police officers.

For example, I ran the 1998 convention in New York City. And underneath Madison Square Garden, there are a whole variety of subway lines, about six or seven, and then Amtrak, Long Island Railroad, that come in underneath the convention hall itself. I guarantee you there will be more inspections of those rail tracks. There will be police officers on the trains coming in from Long Island into the train station itself.

And while the authorities, both Mayor Bloomberg and Commissioner Kelly, have indicated no intention of closing down the system, my sense is that could change as you move closer and maybe just close it down for the final night of the convention, that Thursday night, while President Bush is speaking from 8:00 to 10:00.

So I think that while there was a high sense of security back in 1992, in no way would it compare to what goes on today.

ZAHN: Well, we appreciate your putting this all in perspective for us. Miami Police Chief John Timoney, again, thanks for dropping by.

(CROSSTALK) TIMONEY: Thank you.

ZAHN: When we come back, a closer look at the terror suspects the government is looking for. Who are these people? What have they done? And are they already here in this country? I'll ask two experts on terrorism.

And a startling admission in the prestigious "New York Times" about its coverage of the crisis in Iraq and the administration's case for war.

And part two of our series "Crude Awakening." Would tapping into the nation's oil reserves keep gas prices from rising even higher? We are going to debate that later on in this hour.

(COMMERCIAL BREAK)

ZAHN: A clear and present danger to America and armed and dangerous. Attorney General John Ashcroft used those phrases today to describe the six men and one woman wanted in connection with possible terrorist threats here in the United States. But what do we know about them? And are they now in the U.S.?

Joining us from Boston is former National Security Council staffer Jessica Stern, now with Harvard University. She is the author of "Terror in the Name of God: Why Religious Militants Kill." And from Washington, Ben Venzke, founder and CEO of IntelCenter, which provides intelligence support to police and the military.

Good to have both of you with us this evening.

Ben, I'm going to start with you.

Let's talk a little bit about the FBI releasing the pictures of those seven people believed to be connected to an al Qaeda plot. What do you make of today's warning?

BEN VENZKE, FOUNDER & CEO, INTELCENTER: Well, one of the tools that you have available to you in law enforcement intelligence is when you hit a certain point, there is a point where it is advantageous to try and turn up new leads, turn up and develop new information, the chance that somebody might recognize someone, might have seen them in the past or might currently know where they're at.

And when you have exhausted a lot of other avenues, this can sometimes turn up a new stone, open up a new path that might lead you down to where they're located or turn in the direction of new information.

ZAHN: Jessica, when John Ashcroft was asked specifically by a reporter, do you believe any of these people that we're looking at pictures of tonight are in this country, he did not answer the question. What is your belief? Are they here?

JESSICA STERN, HARVARD UNIVERSITY: Well, I'm really not in a position to know if John Ashcroft isn't sure or isn't pretend to tell us. If I saw them, believe me, I would do something about it.

(CROSSTALK)

ZAHN: No, but there have been a number of, as you know, counterintelligence officials who are anonymously quoted tonight saying that in fact there is a belief there that some of these folks are already here. It wasn't clear whether he didn't want to answer the question or whether he couldn't.

STERN: I think there is something that is really alarming the government. And so I would guess that some of them are here. But it is not really something I know about.

ZAHN: What conclusions can we draw from the fact that one of the people that we see in these pictures is an American citizen?

STERN: Well, this is something that I've been quite concerned about for a long time, that the fact that al Qaeda is deliberately recruiting in unusual communities, deliberately recruiting among converts, deliberately recruiting, using other organizations in fact to recruit within American prisons and in European prisons, inner cities, recruiting within migrant communities.

Al Qaeda is very good at recruiting people with the right passports and increasingly with the right looks that would allow them to escape the kind of inquiry, the kind of -- make them suspects automatically. And this is something -- a development that has been going on for some time and I believe increasing.

ZAHN: Ben, let's talk a little bit about what else Mr. Ashcroft had to say today. He alluded to the terror bombings in Spain and talked about how that was effectively done basically to change the outcome of the election. Do you agree that perhaps the timing of this obviously has something to do with this upcoming election here?

VENZKE: Well, there is no doubt that that was an extremely significant event for al Qaeda in the ability that they were able to prove that they could impact the outcome of an election. And I think as we go through the election period, there is great concern.

We have sort of the underlying base level of threat. Al Qaeda is clearly going to try and attack us. They have been for some time. They are going to continue to do that. But during this period that leads up to the election, there is much greater concern that they might go after one of the conventions or one of these targets or they might choose to go after -- for instance, in Madrid they went after trains to impact the election, that they might choose something that would have a great significant impact in order to steer the direction.

So I think it is a very clear threat and something to be concerned about.

ZAHN: And, Jessica, in conclusion tonight, on one hand, the government is telling us that the intelligence is highly credible, yet not very specific and the threat level, at least for the time being, is not going to be raised. What should that tell all of us? STERN: Well, I think the government has decided that it may actually get information coming in from the public. And it may also feel that it makes people feel better to imagine that they're able to contribute to their own security. Psychologists would certainly tell us that that is a good thing in terms of making people feel a little bit less panicky.

It may be, it is an experiment. I think it might work better than raising the alert levels. And we'll have to see.

ZAHN: Jessica Stern and Ben Venzke, thank you for both of your perspectives tonight.

And coming up next, we will focus on some agonizing questions about the war in Iraq. Did Ahmad Chalabi manipulate the U.S. into launching the war? We are going to look at allegations that Iraq's neighbor Iran used him to dupe the United States.

And when Iraqis take control of their country in just over a month, how soon will a U.S.-trained military force be ready to maintain security and stability? We are going to look that the part of the handover plan later on.

(COMMERCIAL BREAK)

ZAHN: Not long ago, the U.S. considered Ahmad Chalabi a candidate to run the new Iraq. Chalabi, the man in the light gray suit, is a onetime Iraqi exile who returned to Baghdad after the ouster of Saddam Hussein.

Well, at this State of the Union address, Chalabi sat just behind first lady Laura Bush. Well, since last week's raid on his home in Baghdad, questions have risen about his honesty, his loyalty and his connection with Iran. Even more disturbing, articles this week in "The Guardian" newspaper raise the possibility that Iran, by using Chalabi to pass on false intelligence, may have manipulated the U.S. into invading Iraq.

In Washington to discuss this is someone who knows Chalabi well, Robert Baer, the senior CIA officer in Northern Iraq during the mid- '90s. He actually worked with Chalabi then. He is the author of a book now in paperback called "Sleeping With the Devil: How Washington Sold Our Soul for Saudi Crude."

Always good to see you, Bob. Welcome.

ROBERT BAER, FORMER CIA OFFICER: Paula, good evening.

ZAHN: Good evening.

First of all, do you think it is true, what is written in "The Guardian" newspaper, that Iran somehow used Chalabi and even misled him about some of the intelligence they gave him to lead the U.S. into war?

BAER: I think it is a good possibility. Chalabi has always had better relations with Tehran than he has with Washington in terms of following a certain agenda. He always knew that Iran would play a key role in Iraq even after the U.S. leaves. He ingratiated himself at any turn he could. When we were in northern Iraq, he was giving them free facilities. He was giving them free cars, helping them out in operations.

We knew it at the time and the CIA knew it at the time. So it doesn't surprise me at all that he finally went too far in terms of giving information to Iran.

ZAHN: But go back to the period of time you were just talking about. What was in it for him at that time? Was it money? Was it prestige? What was it?

BAER: In order to get into northern Iraq, he had to go through Tehran. A lot of his equipment came through Tehran. He's a Shia, as are the Iranians. He needed the support of the Shia in the south. And all the main groups, the Shia groups were located in Tehran. He was encouraging them to back him up.

ZAHN: So it would be your belief first that he was working in Iran first or is it possible that he was working for both the U.S. and Iran simultaneously?

BAER: I think -- he was fairly frank with me. He said Iran is key to Iraq's future and key to my future.

And I'm going to use anybody to get to Baghdad, including Washington. What surprises me is that people in Washington weren't aware of this background. The CIA certainly was, but the larger political sphere in Washington wasn't.

ZAHN: Why do you think they ignored the CIA's protests?

BAER: It turned into a political fight. That was the problem. It was the conservatives, the neocons, as they're called, accused the CIA of being soft on Saddam Hussein. And therefore, whatever the CIA produced was discounted by this political class.

ZAHN: The most confusing part of the story is the fact that Chalabi was never supposed to have access to critical U.S. security information. He didn't have the security clearances. How was it that -- one of the allegations is, in addition to the Iranian intelligence being passed on to him, somehow, there was also intelligence information about the U.S. and troop movement that was shared with him? How would that have happened?

BAER: It was worse than that.

As I understand it, it was specially compartmented information which a lot of U.S. government employees don't have access to. Even within the CIA, it is highly compartmented. We can't even describe what that information is. And somehow it ended up with Chalabi. And Chalabi apparently or one of the surrogates passed it to Iran. The question is who gave it to him. And that's what the FBI is looking into.

And this is the reason that the White House finally had to cut Chalabi loose. It was very reluctantly.

ZAHN: I guess that's the question I have for you then. What is your understanding of how many people in the United States government or in the CIA would have had access to that information? It's just a handful of people?

BAER: It is a very small circle. It is closely protected. It's top-secret. We have all sorts of code words for this stuff.

I certainly, being outside of the CIA, can't even get near it. And people in the CIA would never talk to me about it. Somebody made an enormous mistake passing this on. Remember, it is not illegal for him to pass the information to Iran, but whoever gave it to Chalabi, if he's caught, will do jail time.

ZAHN: So why do you suspect it was passed along to him?

BAER: Somebody made an error. Someone doesn't take this seriously, national security. It is a crime.

ZAHN: And what are the consequence for U.S. troops?

BAER: Well, the U.S. troops depend upon this information to stay alive in Iraq, because there's a lot of groups that are targeting them. And this sort of information is passed on to the troops to protect and even move positions or arrest people. But once these sources and methods are compromised, we lose this shield. I think it is a catastrophe.

ZAHN: I need a yes-or-no answer to this one. In the end, does Chalabi get arrested?

BAER: No, because he didn't break the law. I think Chalabi is becoming a political figure in his own right. And I would never count him out. He's a survivor.

ZAHN: Bob Baer, you got that one right, as you have watched his career, if you can call it that, over the last 20 years or so. Thanks for your time tonight. Appreciate it.

BAER: Thanks. Thank you, Paula.

ZAHN: It turns out there are also some questions about information Chalabi funneled to the news media. When we come back, "The New York Times" blame itself for not being skeptical enough about the case for war in Iraq.

Plus, our series on skyrocketing gas prices looks at the wisdom of tapping into the oil stored in the nation's strategic reserve.

Then tomorrow, we'll look at pump prices and politics, an explosive mixture. How will it play out in this November's election? That's tomorrow. (COMMERCIAL BREAK)

ZAHN: Before the war in Iraq, they were all over the newspapers and magazines and on TV, reports about Saddam Hussein's alleged weapons of mass destruction. Some even cited sources who claimed to have seen these weapons or the storage facilities for them.

But now many of those sources have turned out to be unreliable. And today, "The New York Times" examined problems in its own reporting.

(BEGIN VIDEOTAPE)

ZAHN (voice-over): Page A-10, below the fold, titled "The Times and Iraq," a surprising statement of contrition regarding its coverage of Iraq's alleged weapons of mass destruction program.

"The Times"' editors say some of their correspondents relied too heavily on Iraqi defectors, like Ahmad Chalabi, intent on overthrowing Saddam Hussein. And "The Times" says its reporters often went to hawkish U.S. officials who also wanted Saddam out to confirm their stories. Some examples, November 8, 2001, a front-page article which reported that Iraqi defectors said they knew of a highly guarded compound where Iraqi scientists led by a German produced biological agents. "New York Times" editors now say the story was not independently verified.

example, September 8, 2002, the lead story reported that Iraq was trying to get aluminum tubes to make an atomic bomb. The article cited American intelligence sources. Now the editors say they should have been more cautious because intelligence agencies were debating whether Iraq really wanted the tubes for a nuclear bomb or for something else. Of the six flawed articles highlighted by the editors, Judith Miller's byline appeared on four of them. Today the paper says individual reporters are not to blame. The problem, it says, is more complicated than that.

(END VIDEOTAPE)

ZAHN: We asked the "New York Times" to comment on the story but the paper declined saying today's editor's note speaks for itself. Earlier I discussed the paper's reporting on Iraq with Greg Mitchell the editor-in-chief of "Editor & Publisher." His magazine has criticized some of the "New York Times" articles. We were also joined by Karen Brown Dunlap, president of the Poynter Institute, a school for professional journalists.

(BEGIN VIDEOTAPE)

ZAHN: Welcome. Greg Mitchell and Karen Brown Dunlap, glad to have both of you with us. Greg, we're going to start with you this evening. You say today's mea culpa in the "New York Times" in many ways is even more damaging than the Jason Blair controversy. How so?

GREG MITCHELL, EDITOR-IN-CHIEF, "EDITOR & PUBLISHER": Well, it is because of what is at stake. The Jason Blair controversy obviously was serious because of lying in the newsroom. But of course this involves a war, a very costly war as we're finding out now. And so obviously the stakes were much higher. Whether the transgressions were as bad as with Jason Blair, people could argue about this. Certainly the end result that we ended up in a very, very costly war cannot be denied and makes this thing incredibly serious question.

ZAHN: What does this tell us about the consumer news today, Karen? We know that a number of news organizations used many of the same sources of the "New York Times," particularly in the Bush administration.

KAREN BROWN DUNLAP, PRESIDENT, THE POYNTER INSTITUTE: I think it says news reporting is very difficult and we sometimes get it wrong. When we get it wrong, we need to be open about it, we need to be quick about it. We need to explain what happened, try to make sure we get it right. There has been a lot of skepticism about the press, didn't just start last year. The public knows that we make mistakes. I think we are doing a little better job of discussing those mistakes and trying to correct things.

ZAHN: Greg, we're supposed to have a healthy sense of skepticism going. In any story, you have to assume whatever your guest is going to tell you is lying except for the two of you here this evening. I'm not making that assumption. How do you think the rest of the press did during this period?

MITCHELL: I thought it was fairly abysmal in terms of the run-up to the war and the justifications for it as we're seeing now, going back to Colin Powell's speech before the U.N. which virtually everyone in the media felt he had made the case for the war, since then our magazine and others have shown that 70, 80, 90 percent of the information he was putting out turned out to be wrong.

ZAHN: But, Karen, to be perfectly fair here, wasn't it just last weekend for the first time that Colin Powell stated publicly not only was some of that intelligence flawed but deliberately misleading?

DUNLAP: I think this speaks to the complexity of the situation. The journalists had to gain intelligence reports to try to test the intelligence reports. In other words, it is difficult to access truth in a situation like this. But let me add, on the other hand this goes to the basics of reporting. It speaks of the importance of having a range of sources with varying opinions. It is important to understand their interests. It is important to be skeptical.

ZAHN: And you to think the media was in general as bad as Greg suggested during this run-up to war?

DUNLAP: I think the media has been timid. They've been courageous in covering the war in the war. But they have been timid overall in the discussion of Iraq.

ZAHN: And we have to leave it there this evening. Karen Brown Dunlap, Greg Mitchell, thanks.

(END VIDEOTAPE) ZAHN: And the handover of power in Iraq is 35 days away. What will it mean for the safety of America's men and women in uniform and how soon will an Iraqi force be able to take over? We will ask two career generals what they think.

Then what would drivers save if the government opened up the Strategic Oil Reserve? We will debate that when we come back.

(COMMERCIAL BREAK)

ZAHN: When President Bush, this week, named his five steps for bringing democracy to Iraq, making it stable and secure was job No. 2. That job now belongs to 138,000 American troops. But the president's goal is to train a force of some 260,000 Iraqis to take over once American troops go home. Senior Pentagon correspondent Jamie McIntyre reports on that challenge as we continue our week-long look at the president's five-step plan.

(BEGIN VIDEOTAPE)

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT (voice-over): When U.S. marines had to call off their offensive in Fallujah last month because of the objections of Iraq's governing council, to many it seemed like a defeat. But now the Pentagon says allowing former members of Saddam's army to patrol the town is a model for the flexibility that will be required after the transfer of sovereignty. Marine corps commandant General Michael Haguey (ph).

UNIDENTIFIED MALE: If that's a defeat, we need more defeats like that.

MCINTYRE: In his Monday speech, President Bush said the U.S. would accelerate the training of 260,000 Iraqis to form the lynch-pin of a homegrown security force. But critics in Congress such as Democratic Senator Joseph Biden charged the number and effectiveness of those U.S. trained forces is consistently overstated.

SEN. JOSEPH BIDEN (D), DELAWARE: This malarkey you guys came up with, you've got 200,000 trained Iraqis, every single solitary expert including your guys that we met with in Iraq said it will take three years to train 40,000 Iraqi military.

MCINTYRE: Not to mention that when U.S. commanders ordered some of those Iraqis into battle many refused to fight. The administration hopes that after June 30, with Iraqis in charge, their resolve will stiffen.

RICHARD ARMITAGE, DEPUTY SECRETARY OF STATE: These Iraqi forces who have fought, in many cases, valiantly will no longer be fighting for the occupiers. They will be fighting for Iraq.

MCINTYRE: Army Colonel Paul Hughes, a professor at the National Defense University believes imposing order is job one. Especially with Iraq's elections coming up.

COL. PAUL HUGHES, NATIONAL DEFENSE UNIVERSITY: If we fail in providing security at those particular junctures, I think that we're going to have a significant setback in seeing a viable Iraqi government established.

MCINTYRE: Hughes and many others in the military believe ultimately that will require significantly more U.S. troops than the 138,000 currently in Iraq.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: If they need more troops, I will send them.

MCINTYRE: And those troops, the U.S. insists, will not be subject to a veto from the Iraqi government if the U.S. believes it needs to take action say for instance to capture Abu Musab al-Zarqawi, currently the most wanted man in Iraq.

UNIDENTIFIED MALE: In the short term there will not be sufficient forces of Iraqis to maintain security and stability. That is a reason why the United States is going to remain there for some time to come.

(END VIDEOTAPE)

ZAHN: That report from senior Pentagon correspondent Jamie McIntyre. We will look at that more closely now, at some of these challenges and dangers facing the U.S. as the June 30 handover approaches. Joining us are two CNN military analysts. From Tucson, Arizona, Retired Major General Don Shepperd and in Illinois, Retired Brigadier General Daniel Grange. Always good to see the two of you. Welcome. General Shepperd, what do you think happens between now and June 30? Do you expect the death toll of American soldiers to continue to climb?

MAJ. GEN. DON SHEPPERD, U.S. AIR FORCE (RET.): I do, Paula. You will see deaths of Americans every day and deaths of Iraqis every day as these insurgent attacks continue. The Iraqis are not going to be ready in the way we want and ready to take over on the 30th of June. But we'll do the best we can. The militias will remain. We're going to continue accelerating the training of policemen and militia, civil defense force, border guard, et cetera, but it's going be a rough and rocky road. After we hand it over, it will be rough after that.

ZAHN: Thank you, General Shepperd.

General Grange, do you agree with that assessment, and if you do how do you reduce the cycle of death?

GRANGE: There will be -- reduce the cycle of death, you're going to have to have sufficient forces for the task given. If the tasks are to patrol cities you have to have enough troops to do that effectively. I think you're going to see where the strategy changes, though, where U.S. and other coalition troops may hand over some of those tasks that eat up numbers of troops to Iraqis. The question then goes to do you have enough Iraqis trained to do the task?

I would say you have some now that are quite good. But then you have -- you will not have the numbers -- hundreds of thousands for years to come.

ZAHN: That's the kind of gap you are talking about here?

GRANGE: I think so. If you just look back Vietnam. I worked first -- for part of my tours. And you were an adviser to some Vietnamese that were so so. Than the Vietnamese paratroopers were excellent, brave, great fighters, a lot of experience. So they have pockets of very well trained Iraqis like their special forces that are being used right now against al Sadr as an example. They're ready to go now. They just need a few more numbers. But you don't need mass numbers of those types of people. Patrolling streets than you need a lot more numbers. And there are not quite there yet.

ZAHN: General Grange just mentioned, General Shepperd, radical cleric Muqtada al-Sadr. And there was just a story that broke within the last hour suggesting a proposal of a partial withdrawal of fighters from Najaf and the turnover of government buildings there to Iraqi police.

What does that mean to you?

SHEPPERD: What you're seeing is the weakening of al-Sadr. He tried to make an alliance with the Sunnis in Fallujah, that didn't work. He tried to incite the Shia majority across the nation, also in Baghdad. That didn't work. He tried to take over facilities and all of the facilities, some of that worked, some of it didn't. But you're seeing him being marginalized and I think this is a good sign. He's becoming weaker, but still going to be a factor and have to be dealt with. I doubt very seriously he's going surrender to (UNINTELLIGIBLE) on charges, Paula.

ZAHN: And General Grange, coming back to the point you where making about the large gaps between the training of Iraqi security forces those that are ready now and what will be needed down the road, do you think there will be additional U.S. forces needed in that transition period to fill the gap?

GRANGE: Could very well be. If you want to seal the entire border to keep infiltrators out, mercenaries. If you want to ensure that you have rule of law as was stated earlier on the program, in order to transition a market economy and the other things required in this new Democratic governance, then you may need to surge and put more in there. The key is you're training a military that totally lacks sergeants, junior officers, everything was senior officers. There was no lower ranking expertise or authority. It just like the old Russian army, in the old Ukrainian Army. These armies don't have what we have or the British have. And it takes a while to establish that base. It is going take a lot of good trainers from our country to bring them up to standard to take care of themselves.

ZAHN: And General Shepperd, it's going to take a lot of time to build trust there.

What is your greatest fear about turning over some of this power to these local militias? SHEPPERD: Rather than the fear about turning over to the militias, which I think is part of the solution there, while we're training them. My fear is that the American public will become list illusions and abandon this. I think that is also the fear of the Iraqis, and it is hindering our ability it train and turn over and maintain security across the nation there.

ZAHN: General Grange, when are U.S. troops out of Iraq once and for all?

GRANGE: Down the road, Paula, and that's the commitment. When you go to war, quite often we fail to look and talk about -- at least talk about what is behind the second and third hill. And behind the second and third hill it's going to take several years. I think we will always have an advisory status there. I think we will always have a presence for maybe even training in the desert. And we'll always be the backdrop to support the new elected government if they are threatened either by neighbors or internally.

ZAHN: General Shepperd, just a final thought. You said down the road, several years, you agree that?

We need a brief answer.

SHEPPERD: Yes, I absolutely agree with it. It's going to be a long rocky road and our patients is going to be tested as well as our treasure and the courage of our kids.

ZAHN: General Grange, General Shepperd, thank you, both. Appreciate it.

Next from the war in Iraq to the economic battle over a barrel of oil.

Would releasing some of the nation's emergency oil supply lower gas prices?

We'll debate that in our crude awakens segment, next.

(COMMERCIAL BREAK)

ZAHN: In our series crude awakening, we're looking at what can be done about the high price of gasoline. Florida's attorney general is trying some legal pressure. He has just subpoenaed eight oil companies seeking documents about the cost, production, inventory and pricing of gasoline. Another tactic would be tapping the nation's strategic oil petroleum reserve.

Chris Huntington, looks at how that would work.

(BEGIN VIDEOTAPE)

CHRIS HUNTINGTON, CNN CORRESPONDENT (voice-over): Deep beneath the Gulf Coast of Texas and Louisiana, buried in dozens of hollowed out salt caverns lies the biggest oil storage facility on the planet. The strategic petroleum reserve currently holds a record 660 million barrels of crude with plans to top off at 700 million barrels sometime next year. President Bush has made it clear the SPR is for emergency use only.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: That petroleum reserve is in place in case of major disruptions of energy.

HUNTINGTON: Oil traders are betting the administration sticks to that policy.

UNIDENTIFIED MALE: I just don't see a high price as a reason to release SPR. That would be the Department of Energy speculating on price direction and I know for a fact they don't want to do that.

HUNTINGTON: Think of the reserve as a national gas can with a small spout. Even topped off at 700 million barrels, the SPR would run dry in less than 6 months if oil were drawn down at the maximum rate of about 4 million barrels a day. But that flow would cover less than half of U.S. daily crude imports and only about one-fifth of total U.S. daily oil consumption. It would still need to be converted into fuel.

DAVID KNAPP, OIL INTELLIGENCE GROUP: It is crude oil, not product. It is crude oil. It has to be refined in a refining system that is stretched.

HUNTINGTON: The idea of a stockpile date backs to the Truman administration, but it took the Arab oil embargo of 1973 to make it a priority. Two years later, Gerald Ford signed the SPR into law, granting presidential authority over when and how to use the oil. So far the reserve has only been tapped for emergencies on two occasions. In 1991 at the start of the Gulf War, the first President Bush ordered 17 million barrels released to help stabilize global oil supplies. And in late 2000, President Clinton loaned out 30 million barrels to ease a shortage of home heating oil in the northeast.

(on camera): Oil from the SPR has occasionally been loaned out to help these commercial bottlenecks and sold and it's even been sold off to trim the federal budget deficit. But the Strategic Petroleum Reserve has never been tapped to make it cheaper to fill the family minivan.

(END VIDEOTAPE)

ZAHN: That was Chris Huntington reporting for us tonight. Despite the resistance from President Bush tapping into the Strategic Petroleum Reserve, continues to be a hot topic on Capitol Hill.

(BEGIN VIDEO CLIP)

SEN. CHARLES SCHUMER, (D) NEW YORK: It is high time for the administration to use the tools at their disposal to drive prices down and send a signal to OPEC. The bottom line is we have to release oil from the strategic petroleum reserve.

(END VIDEO CLIP) ZAHN: We're going discuss this now with two members of the House Energy and Commerce Committee. Texas Republican Joe Barton is in Dallas tonight. New Jersey Democrat Frank Pallone Jr. is with me here in New York. Also here with us in the studio tonight, oil and gas analyst Fadel Ghett. Good to see all of you gentlemen.

Congressman Barton, you just heard your colleague, Senator Schumer, say it is time to tap the reserves. Do you support that idea?

REP. JOE BARTON, (R) TEXAS: Well, it would be breaking the law. The law says you're supposed to use it in a severe supply interruption, or disruption. We don't have that. We have plenty of oil. It is just very expensive. About 40 to $41 a barrel. So the president is absolutely right to not use the SPR to manipulate prices. That's not what it was intended for.

ZAHN: There are consumer groups out there Congressman Pallone that say $41 a gallon -- excuse me, $41 a barrel of gasoline does constitute a crisis.

REP. FRANK PALLONE, JR. (D) NEW JERSEY: Not only that, I think it is not true to say you're breaking the law. The law says that economic hardship is a reason to use this (UNINTELLIGIBLE). And the bottom line is that the high gas prices are a threat to the American economy. So, I think it makes sense to do that.

And all we're saying is that we should do basically what President Clinton did, which is 1 million barrels per day over 30 days, which is essentially what Clinton did. And it drove down prices about 14 cents a gallon at the time in 2000.

ZAHN: And Congressman Barton, you don't deny that work do you?

BARTON: I oppose what President Clinton did. I did a little investigation of what President Clinton did. So it would be hypocritical of me to now tell President Bush that he ought to do what I opposed President Clinton to do.

ZAHN: But it did bring gas prices down at the pump, didn't it?

BARTON: When all the dust had settled I think it made a difference of about one cent a gallon in the fuel oil prices. Which is what President Clinton was trying to accomplish.

PALLONE: Gas prices went down about 14 cents. And the bottom line is, this is causing harm to the American economy. We estimate that when gas prices go up one cent it means about a billion dollars less in consumer spending. If this continues, it is not only going to hurt the person who can't afford to buy the gas at the pump, it is going to hurt the economy overall. I think that's the problem.

ZAHN: what do you think is the answer here?

FADEL GHETT, OIL AND GAS ANALYST: This is a knee jerk reaction. This country has no energy policy or energy plan. Unfortunately, we always find a solution after the damage is already done. I mean, preventive measures should have avoided $40 oil to start with. Oil prices are at the current level, not because of lack of supply, it is because of fear of potential supply disruption.

ZAHN: Well, you have that supply disruption when you had Venezuela on strike. Congressman Barton, would that have been a time you would have supported tapping into the reserves? A lot of people think we should have done it then.

BARTON: We don't have the Arab oil embargo like we had in the mid '70s with when the OPEC cartel refused to ship to the United States. That's when we created the strategic petroleum reserve. I agree that energy prices are very high.

I would point out we passed an energy bill in the house. It is waiting in the Senate since around Thanksgiving of last year. I would also point out that if we would allow drilling up in Alaska, most experts think that there are a million to -- a million and a half barrels a day that would come out of that one field which would lower pump prices significantly.

ZAHN: But people are look for relief this summer. Are they going to get it?

PALLONE: I don't see how they're going to get it unless the Bush administration does something immediately. You know, the president said when he was running four years ago he would force and pressure OPEC to lower prices. He hasn't done anything as far as OPEC is concerned from what I can see.

ZAHN: What do you think could be done, do you think Fadel, to bring down the price of gas?

GHETT: One side is saying we should drill in Alaska. That's not going to change oil prices today or tomorrow or next year. On the other hand, we should have a balanced approach. It goes on the supply and the demand side.

What happened to conservation. What happened to energy credit, what happened to infrastructure in this country. There are no refineries built in 30 years. But people want to drive SUVs and complain about higher oil prices.

So we all are part of the problem. It is the president and the Congress and the consumers. So let's accept higher oil prices and let's live with it if we don't have better solution. Let's just accept it.

ZAHN: Congressman Pallone do you have a final thought.

PALLONE: He's right about the refineries. President Bush under his watch, basically the number of refineries has been reduced. There has been basically mergers, which he's approved. And now market concentration, which I think makes it easier for the oil companies to manipulate prices. And I would like to see an actual investigation of what is happening with the prices, because we know that back in 2000 there was a lot manipulation of the market. I think that's happening now. It should be investigated. It's not happening

ZAHN: You've got a bunch of attorney generals around the country looking into that. Congressman Barton, you get last word. Will we see the prices go down between now and the election?

BARTON: Let me point out the problem is that there is not enough supply in the world. We have -- we're using about 80 million barrels of oil a day worldwide. And we're consuming about 80 million barrels of oil worldwide. I would also point out, that in spite of these high gas prices, demand for gas in the United States is up 5 percent, up 5 percent. And when the automobile manufacturers do consumer surveys to see what one of 20 things people want in the new automobile, fuel efficiency lasts -- ranks dead last.

ZAHN: I guess...

BARTON: The problem is us. We're using more gasoline and we're complaining about the price. The price is too high. But what we need is a balanced energy policy that lets the market operate.

ZAHN: So, I guess we're all in agreement that we are energy pigs. Not a nice way of saying, but that's what we are.

GHETT: And pigs get slaughtered at the end of the day.

ZAHN: I guess that's what is happening at the pump. Fadel Ghett, Congerssman Joe Barton and Congressman Frank Pallone. Thank you very much. We'll be right back.

(COMMERCIAL BREAK)

ZAHN: And that wraps it up for all of us here this evening. Thanks so much for being with us tonight. "LARRY KING LIVE" is next. Have a great night. We'll be back same time, same place tomorrow.

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