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The Situation Room

Earlier Report From U.S. Coast Guard Shows Reservations Over Dubai Ports Deal

Aired February 27, 2006 - 16:00   ET

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

WOLF BLITZER, CNN ANCHOR: To our viewers you are now in THE SITUATION ROOM, where new pictures and information from around the world are arriving all the time.
Happening now. A calming storm, or still unsettled? Congress weighing a new plan to review the controversial Dubai Ports deal. It's 4:00 p.m. here in Washington where top Democrats keep voicing their security fears.

Also this hour. A political obsession. Does Karl Rove spend too much time thinking about Hillary Clinton? The senator is firing back at the strategist and she isn't mincing any words.

And Arnold Schwarzenegger, the sequel. The California governor is trying to remake his image and his agenda again. It's 1:00 p.m. in Los Angeles and we are getting a new read on Schwarzenegger's campaign script.

I'm Wolf Blitzer, you're in THE SITUATION ROOM.

There are new and potentially significant developments this hour on the controversy over port security right here in the United States.

Just a few moments ago, we've learned that the Coast Guard may have raised serious questions about the United Arab Emirates taking over operations at six major U.S. ports.

Our White House correspondent Dana Bash is standing by.

Let's go to Ed Henry on Capitol Hill first. He's got some of these developments. Ed?

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: That's right, Wolf. A surprising development, indeed, at a special Senate briefing on this port deal. Senator Susan Collins released part of that CFIUS report we've been hearing so much about. The report that the Bush administration used to support and approve this deal the first time around.

In this unclassified version of the report, it shows that the intelligence branch of the Coast Guard basically raised concerns about intelligence gaps dealing with this whole agreement. And as a result, the Coast Guard said it was precluded from actually completing, quote, an overall threat assessment of this port deal.

Senator Collins called this development troubling. She said it shows the Bush administration the first time around should have in fact triggered a full 45 day investigation. This coming as the Democrats say the latest development over the weekend, which the Bush administration finally said it would in fact conduct a 45 day investigation. Democrats saying that is a positive development, but still not enough.

(BEGIN VIDEOTAPE)

SEN CHARLES SCHUMER, (D) NEW YORK: You can't do the report in secret. You can't just give this to the president who has already said he supported this deal. You have to show the congress the full report. And you have to make public every part of that report that is not classified.

HENRY (voice-over): Rallying with Teamsters workers at the port of Newark, Democrat Chuck Schumer formally introduced legislation mandating Congress, not just the president, get final approval over the port deal.

But Senate Republican Leader Bill Frist says he does not want the Schumer bill or any port legislation to move forward until the 45 day investigation is completed. Frist, who stunned the White House last week calling for a temporary halt to the port deal, told reporters over the weekend that intelligence briefings have significantly alleviated his concerns.

SEN. BILL FRIST, (R-TN) MAJORITY LEADER: We all trust the president. We are behind the president 100 percent and believe his decision is in all likelihood absolutely the right one. But until we have the opportunity to ask the same question so that we can go back to our constituents, and have that same comfort level, we are just asking for a pause.

HENRY: Frist aides insist the Senate is pushing ahead with aggressive oversight of the deal with Bush officials briefing members of the Homeland Security Committee on Monday. Which will be followed by two hearings later in the week.

(END VIDEOTAPE)

HENRY: Now the Democratic Senatorial Campaign Committee, which is chaired by Senator Schumer today charged that in fact Senator Frist is flip-flopping after being, quote, "taken to the White House wood shed last week." Frist aides denying that. They say they are not back pedaling. They say they are still going to hold the Bush administration's feet to the fire.

In fact one senior Republican told CNN, in reference to legislation that they could still unveil, quote, the gun is locked and loaded and it could be used at any time if the administration starts pushing back at all and doesn't conduct a full and fair 45 day investigation. Wolf?

BLITZER: Ed Henry on Capitol Hill. Thanks very much.

Let's go right over to the White House. Our correspondent Dana Bash standing by.

The Republican Chairwoman of this committee, The Homeland Security Committee, Susan Collins, now raising these concerns suggesting that there's a document that the U.S. Coast Guard, Dana, released saying that there are, in the words of this document, intelligence gaps. Many intelligence gaps.

The Coast Guard now part of the Department of Homeland Security, which presumably signed off on this. Are you getting any immediate reaction from the White House?

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Not yet, Wolf. But it was interesting and perhaps important to note is in talking to White House officials over the past week about this issue, they say that they are not saying that there weren't objections or concerns, I should say, raised within the process.

They have actually admitted that there were, specifically from The Department of Homeland Security. They raised their hand at one point and said we do have some concerns. But in the end, what they say here at the White House, is that those concerns, for whatever reason were allayed.

That in the end, they went to the company, they raised those concerns. And in the end, it was unanimous that they agree that this deal should go forward. So we are just getting details about this new document. It's going to be interesting to see whether or not this was one of the concerns The Department of Homeland Security had.

Interestingly, that is something that Fran Townsend, the president's Homeland Security adviser, actually brought up, even volunteered in a briefing here last week in talking about this. She actually, before she came here, worked for The Coast Guard. Was head of the intelligence for the Coast Guard. But again, she didn't know about any details of this deal until it was done.

It will be interesting to see how this unfolds. But when you talk about the overall compromise that was reached over the weekend, people here at the White House have sort of a matter of fact reaction to it, almost nonchalant.

But I can tell you that that is not the way it happened behind the scenes.

(BEGIN VIDEOTAPE)

BASH (voice-over): Fine by us is the White House response to a Dubai Ports World request for another security review.

SCOTT MCCLELLAN, WHITE HOUSE SPOKESPERSON: We think that a reasonable middle ground has been reached.

BASH: But that carefully calibrated statement belies what one source involved calls a desperate behind the scenes White House effort to engineer this new review. A face-saving way to try to salvage the controversial deal and avert a damaging showdown with GOP leaders. On Friday, the president's National Security Adviser echoed other Bush officials insisting the approval process thoroughly dealt with security questions opposing a new review.

But even as he spoke, efforts were underway to do just that. Bush economic adviser Al Hubbard works with Bush ally and UAE lobbyist Vin Weber and Senate Majority Leader Bill Frist. GOP Senator's John McCain and John Warner were key middlemen in talks that finally produced agreement over the weekend.

The unspoken reality, Senator Frist was too quick to challenge the president with legislation blocking the deal and Mr. Bush had gone too far in defiantly promising to veto any such effort.

A second Republican source involved in the talks put it this way. They were all playing chicken in public. But being chickens behind the scenes. An open question is still how did senior White House aides let it come to this? Allowing a major internal Republican feud and Democrats to score points against Mr. Bush and top political adviser Karl Rove on their signature issue. Security.

JOHN PODESTA, FORMER WHITE HOUSE CHIEF OF STAFF: I think they should have seen this coming. They should have known this was controversial.

BASH: Top Bush aides say they were not informed by assistant secretaries on the panel until it was too late. But media accounts of the deals started as far back as the end of November.

Bush allies say it's another glaring symptom of mounting second- term fatigue. A White House seemingly flat-footed, whether by Katrina, handling the vice president's hunting accident or realizing early on the political power the ports deal could carry.

(END VIDEOTAPE)

BASH: And this time the president will be directly involved in whether or not this deal goes through when the 45 day review is complete. The law says it must go to his desk and he must give final approval and tell Congress why he has made his decision. But as Stephen Hadley, the president's national security adviser, told you yesterday, he does still believe that this is a deal that should go through.

BLITZER: Dana Bash at the White House. Thanks very much.

Just to recap these new developments that are unfolding only within the past few minutes. A committee report up on the Hill suggesting that the Coast Guard, which is part of the Department of Homeland Security, raising some concerns whether Dubai Ports World could be involved in some sort of terrorist operation.

There are many intelligence gaps concerning the potential for DPW or P&O assets to support terrorist operations that precludes an overall threat assessment of the potential merger. This undated Coast Guard report released by Susan Collins, the chairwoman of this committee, says, "The breadth of the intelligence gaps also infer potential unknown threats against a large number of potential vulnerabilities."

This the document from the U.S. Coast Guard. Susan Collins saying this report suggest there were significant and troubling intelligence gaps. That language is very troubling to me. We are going to be watching these new developments. Getting more reaction, updating you as we get more information.

Meanwhile, the Committee on Foreign Investment in the United States, or CFIUS as it's known, must now conduct a more comprehensive review of the ports deal over 45 days. But this committee is no stranger to criticism. Let's go to our Internet reporter Jacki Schechner for a closer look.

JACKI SCHECHNER, CNN INTERNET REPORTER: Wolf, within just days of Dubai Ports World approaching Treasury officials over the purchase of P&O ports, the Senate Committee on Banking, Housing and Urban Affairs, held a second of two hearings on CFIUS and weather or not it was as effective as it could possibly be.

This was on the heels of government accountability report looking into CFIUS specifically. They had some recommendations. One of those was the fact that after 9/11, the definition of national security had changed and that all of the departments composed CFIUS didn't agree on that definition of national security.

Another thing is that the review process that was in place wasn't sufficient. They needed more time. Now, of course, you want to keep in mind that of the 15,000 of these cases that have gone before CFIUS, only a handful of those have gone to investigation, and only one has ever been refused -- Wolf.

BLITZER: Thanks very much, Jacki, for that.

The White House today is rejecting a new call for a special counsel probe into the domestic spying program. Eighteen House Democrats are urging the appointment of a special counsel to determine that wiretaps without warrants violate federal law. They say their efforts to get answers about the program have been stymied by the Bush administration.

The White House Press Secretary Scott McClellan contends a special counsel is not needed. He says Democrats should investigate who leaked information about the secret eavesdropping program in the first place.

Senators today are also revisiting a contentious question. Should the Patriot Act be renewed? A long-term extension of the anti- terror law was delayed twice while lawmakers worked on ways to ease concerns about civil liberties. But now senators appear on track to approve an amended version of the Patriot Act this week. The final vote expected Wednesday.

Remember, stay tuned to CNN day and night for the most reliable news about your security. Zain Verjee is joining us now from the CNN global headquarters in Atlanta with a closer look at other stories making news. Hi, Zain.

ZAIN VERJEE, CNN ANCHOR: Hi, Wolf.

Iran's resumed enriching uranium, but on a limited scale. That's according to a confidential International Atomic Agency report. It's due to be submitted to the U.N. Security Council next week. The IAEA report says basically that Iran's enrichment activities are currently less than 1 percent of what's need to produce nuclear weapons. Iran says that it has arrived under the Nuclear Non-Proliferation Treaty to pursue a nuclear program. It insists that it's for peaceful purposes only, to generate electricity.

Mortars landed on a girl's school and gas station in northwest Baghdad today, killing four people. Later,four more people were killed by a bomb outside a Sunni mosque. About three dozen people were wounded in those attacks. And north of the capital in Baquba, gunmen killed six and wounded five people in a pair of attacks. More than 200 people have died in a wave of sectarian violence since a bomb destroyed a Shia shrine last week, Officials say though the violence is now sporadic, there is still high tension between Shias and Sunnis.

The violence, though, has some U.S. commanders uncertain about the timetable for troop reductions in Iraq. Secretary of Defense Donald Rumsfeld is expected to meet this week with top generals to discuss troop withdrawals, but CNN has learned that some senior commanders believe that the U.S. should not reduce the levels until there's a substantial period of calm.

And Iraqi authorities reportedly are optimistic about the fate of kidnapped American reporter Jill Carroll. The latest in a series of apparent deadlines set by Carroll's captors passed last night with no word. But in an interview with Wolf today, U.S. ambassador to Iraq Zalmay Khalilzad says that he's been told by Baghdad's interior minister that Jill Carroll is alive and could be released soon. You can listen to Wolf's interview with the ambassador a little bit later this hour.

And Saudi security officials reportedly killed five suspected militants in a two-hour gun battle outside of Riyadh. The interior ministry says that the suspects are believed to have been linked to Friday's car bombing just outside a major oil facility. The sixth suspect was reportedly arrested -- Wolf.

BLITZER: Zain, thank you very much. Let's go up to New York right now. Jack Cafferty, standing by for another week of "The Cafferty File." Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, when the news first broke over the Dubai port deal a week ago, the outrage in Washington was palpable. Members of President Bush's party in open revolt, congress going to stop the deal from happening, the president going to beat over legislation if they did. Fast forward a week and the same bunch of clowns that short-circuited the review process the first time -- that's the Committee on Foreign Investment in the United States, or CFIUS -- is going to get a do over.

This time they're going to do the whole 45-day review like they were supposed to do the first time, but didn't bother. When the review's complete, it will land on the president's desk for his approval. From the sounds of some in Congress over the weekend now, they're all busy backing down.

(BEGIN VIDEO CLIP)

FRIST: We all trust the president. We are behind the president 100 percent and believe his decision is, in all likelihood, absolutely the right one. But until we have the opportunity to ask the same questions so that we can go back to our constituents and have that same comfort level, we are just asking for a pause.

(END VIDEO CLIP)

CAFFERTY: What a joke. Apparently selling control of six American ports to a country with ties to terrorism is OK, we just have to wait a while. Right, Senator Frist?

Here's the question. Is it a mistake if members of Congress back down over the port deal? E-mail us at caffertyfile@CNN.com or go to cnn.com/caffertyfile.

BLITZER: Thanks, Jack, very much.

Coming up here in THE SITUATION ROOM, Hillary Clinton versus Karl Rove. The senator takes a new shot in the war of words. We'll tell you what's going on in this battle.

Plus, as a movie star, Arnold Schwarzenegger knew a thing or two about sequels. But can he pull off now one that -- while he's running for reelection in California? We're going to you what the latest is on that front.

And America's governors here in the nation' capital. And on the run, many of them at least. Who's got the most to lose this November and the most to gain in 2008? You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Few would argue that the Deputy White House Chief of Staff Karl Rove is obsessed with politics, but today Senator Hillary Clinton is charging that Rove is obsessed with her. In a radio interview, Senator Clinton responds to a new book in which Rove contends she'll be the 2008 presidential nominee, but won't be able to win the general election.

Here are some excerpts.

(BEGIN AUDIO CLIP)

SEN. HILLARY CLINTON (D), NEW YORK: Well, you know, he doesn't talk to me. So I don't know where he gets his information. But I'm, you know, very happily -- I'm happily and enthusiastically running for re-election. I know that the Republicans are out there trying to get yet another candidate in against me. I think Karl Rove spends -- well, he spends -- Karl Rove spends a lot of time obsessing about me. He has people to the White House. He sends out e-mails. He spends more time thinking about my political future than I do.

Karl Rove is a brilliant strategist. So if I were thinking about this, Fred, I'd say why are they spending so much time talking about me? Is it to divert attention from their own problems and from their continuing plans to implement this really ill-thought out, ill-advised agenda?

What they're hoping is that all of their missteps, which are now, you know, numbering in the hundreds, are going to somehow be overlooked. Because people, instead of focusing on the '06 elections, will jump ahead and think about the next one.

(END AUDIO CLIP)

BLITZER: We've been trying to get some reaction from Karl Rove. No luck yet. But we are still working on that front.

President Bush is getting an earful today from the nation's governors. At the White House, they vented on a variety of issues including port security, immigration, Medicare, and funding for National Guard troops. The governors are here in Washington for their winter meeting. It's a showcase for those in tough re-election battles and for governors with their eyes on the White House in 2008.

(BEGIN VIDEOTAPE)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: So now I'd like to offer a toast to the governors of the United States.

BLITZER (voice-over): The president may be toasting the governors now. But will his party feel like celebrating after the 2006 elections? Republicans hold 28 out of 50 governors' offices. But this year, Democrats could gain a majority of seats for the first time since 1990.

Republicans have a tougher row to hoe. Of the 36 seats up for grabs, Republicans are defending 22 of them. And they are losing more incumbents. Of the nine governors who are retiring or are term limited, eight are Republicans, including one of the president's staunchest allies -- his brother.

BUSH: All of you who won't be back here, thank you for serving your states and our country.

BLITZER: Several who aren't running for reelection are running for president, or at least are thinking about it, along with a now ex- governor of Virginia. One other, maybe more, are testing the presidential waters while keeping their day jobs. Four of the last five presidents served as governors.

With a wide-open presidential race in 2008, top state house jobs may be more coveted than ever. And the battles to win them, more contentious.

(END VIDEOTAPE)

BLITZER (on camera): One of the governors who came here to Washington doesn't need anymore publicity. But Arnold Schwarzenegger does need to improve his standing back home in California before he faces reelection in November.

Our senior political analyst, Bill Schneider, is watching all of this unfold in L.A. Bill?

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST (on camera): Wolf, you know how movies have sequels? Well, so do governors. You might call this one Schwarzenegger III.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Governor Schwarzenegger take one, 2004 -- Arnold the Conciliator. Worked with Democrats to reform state finances -- a hit! Take two, 2005 -- Arnold the Fighter. Picked fights with unions and Democrats over ballot measures and lost. Flop- a-roo! Take three, 2006 -- Arnold the Builder.

GOV. ARNOLD SCHWARZENEGGER (R) CALIFORNIA: We cannot just fight. We must build.

SCHNEIDER: A huge new public works program. $222 billion for highways, schools, bridges -- it's big, it's bold. But will it be a blockbuster? California has learned small is not beautiful.

SCHWARZENEGGER: We can not be infrastructure isolationists and say that if we don't build it, they won't come.

SCHNEIDER: Rebuilding California should appeal to a bi-partisan audience.

SAL RUSSO, REPUBLICAN POLITICAL CONSULTANT: I think he's trying to get both parties on the same page, to say California infrastructure needs bi-partisan help.

SCHNEIDER: Governing California requires coalition building, because it's really two states.

(on camera): In dreams begin responsibilities, the poet Delmore Schwartz once wrote. Coastal California is the land of dreams, where Arnold Schwarzenegger realized his dream of fame and fortune. It's a blue state -- liberal and Democratic. And it turned against the governor last year.

Inland California is the state of responsibilities. It puts food on the table. It's a red state -- hard working and conservative. And it worries whether the Governor Schwarzenegger will turn away from them.

(voice-over): But a conservative revolt that was supposed to take place at the California Republican Convention last weekend fizzled. Since the governor fought for them last year and lost, conservatives decided to keep their differences all in the family.

TOM MCCLINTOCK (R) CALIF. LT. GOV. CANDIDATE: There are always political differences within a family. I don't agree with my wife on absolutely everything, but I still love her. And I don't agree with the governor on absolutely everything, but I still support him.

SCHNEIDER: Maybe President Bush has written California out of his screen play, but this is my picture, the governor said on "Meet the Press."

SCHWARZENEGGER: I will run as an Arnold Republican.

(END VIDEOTAPE)

SCHNEIDER (on camera): What's an Arnold Republican? A bold problem solver. That's a story line that could win Governor Schwarzenegger the only Oscar that counts: Best Chance to Get Re- Elected. Wolf?

BLITZER: Bill Schneider in L.A. for us. Bill, good piece. Thanks very much.

Up next, the storm over ports. Is it calming, or will the controversy continue to make waves? I'll ask two political experts. They're standing by -- Donna Brazile and Bill Bennett.

Plus, what should the Bush administration do about the sectarian violence in Iraq? Find out more in today's "Strategy Session."

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

(COMMERCIAL BREAK)

BLITZER: Welcome back. Today in our "Strategy Session" -- the deal to allow a Dubai-based company to manage six major U.S. ports going back for yet more review. There are new developments unfolding this hour and the story we've just learned that the U.S. Coast Guard warned of what it called "intelligence gaps" before the deal was ultimately approved. Could this new information provide additional ammunition to the president's critics?

Joining us now, CNN analysts: Democratic strategist Donna Brazile and Bill Bennett, the host of the radio show "Morning in America."

Here's what the Coast Guard intelligence assessment said. It was just released by Susan Collins, the chairwoman of the Senate Homeland Security Committee. The Coast Guard said this, referring to Dubai Ports World and P&O, which was the British-owned company it's buying. "There are many intelligence gaps concerning the potential for DPW or P&O assets to support terrorist operations, that precludes an overall threat assessment of the potential merger. The breadth of the intelligence gaps also infer potential unknown threats against a large number of potential vulnerabilities."

Yet at the same time, despite that internal Coast Guard document, they concluded -- this committee that reviewed it -- there were no national security concerns that justified a 45-day review, which is the law. What do you make of this, Bill?

BILL BENNETT, HOST, "MORNING IN AMERICA": It's not good, as I said before. The party is riven over this, the Republican Party, and things I think will get worse before they get better. The only good thing is they are now giving this the 45 day review. But they should have given this the 45 day review earlier, as this Coast Guard point makes clear.

We've now got another situation where you've got some of the conservative pundits talking down to the base, saying this is nativism. You know, we've got this kind of reaction that's xenophobic. Not true -- people are genuinely concerned. They don't understand why a country or a set of Emirates that was heavily involved on the wrong side in the war on terror -- now has flipped -- should be given control of these ports. Or at least the contract for these ports.

For the president to have come out so quickly and said, well if you resist, I'm going to veto any congressional attempt sends the wrong signal. It's not sympathetic. It doesn't understand what people are talking about. And I fear there could be a crack-up on this issue.

BLITZER: Donna, listen to what the president's national security adviser, Stephen Hadley, told me yesterday on "LATE EDITION." Listen to this.

(BEGIN VIDEO CLIP)

STEPHEN HADLEY, NATIONAL SECURITY ADVISER: We are confident. The president is confident when Congress really understands the transaction, they will conclude, as he did, that it's the right thing to do.

(END VIDEO CLIP)

BLITZER: It seems like a lot of Republicans, especially now are turning around. Originally a week ago, very concerned. Bill Frist, the Senate majority leader, among others now suggesting, well, it looks like it's going to be OK.

Do the Democrats have the votes, when all is said and done, to block this deal after 45 days of review? Assuming the administration comes up with the same bottom line conclusion that it represents no risk?

BRAZILE: Well, first of all, Senator Schumer today introduced this bill. This bill will provide Congress with more oversight of these deals in the future including this bill. Senator Schumer has now only good Democratic support for the bill. But he picked up the support today of Senator Santorum and Senator Corzine.

So I believe that this deal at some point will be reviewed by Congress. Whether or not this legislation moves in the next 10 days we don't know. But there's legislation now that Congress intends to provide its own oversight of these types of deals.

BLITZER: It's clear, Bill, that Democrats would like to be critical of the administration from the hard line national security perspective, because this was an issue that the Republicans were very strong on. Listen to Senator Hillary Clinton.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D), NEW YORK: It raises serious concerns about who's minding the store in Washington and what kind of leadership we need and deserve when it comes to homeland security.

(END VIDEO CLIP)

BLITZER: Can they get away with that? Can they criticize the president from the security perspective? That he's being weak-kneed on national security?

BENNETT: If they're strong and if they're careful. It's a tricky place to be. I heard governor -- Governor Corzine talking this morning. He's very careful to say, you know, "I'm not being xenophobic. It's not that I suspect, you know, because it's an Arab country. We've got to be very careful of this."

But the short term politics, I think, are not the same as the long term politics of this. And I think what most legitimate concerns, whether they're Democrat or Republican, are about national security. There may be some short-term political gain here for the Democrats.

The long term question is, is somebody messing around with our security? Playing games with our security? And that's where I think at least the Republican base, a large part of the American people need reassurance.

The polls that I have seen. It's out. There haven't been that many yet. I guess they'll be coming out. Suggests there are very strong majorities that are quite suspicious of this.

BLITZER: The Republican Congressman Mark Foley of Florida, normally a strong supporter of the president, said this. He said, "We've defended them on wiretaps. We've defended them on Iraq. We've defended them on so many things he's tried to accomplish. That to be left out here supporting this thing," referring to the ports, "in a vacuum is kind of offensive."

There's anger among Republicans.

BRAZILE: There's anger on both sides of the aisle. And clearly Senator Clinton also introduced legislation with Senator Menendez that would prohibit any foreign ownership of our port security.

So there is clearly support in Congress to not only have a stronger port security. But to also point at look, remember, it was the Democrats who came out in support of the Department of Homeland Security before the president came along. So I don't think Democrats should be criticized for being weak or late on national security. Instead, Democrats are trying to offer leadership.

BLITZER: Hear what Jim Zogby of the Arab American Institute here told me yesterday when it comes to the opposition that has developed. Listen to this.

(BEGIN VIDEO CLIP)

JAMES ZOGBY, PRESIDENT ARAB AMERICAN INSTITUTE: The reason why people are afraid is because leadership led them down this path. It exploited the fear, the concern, and it used an Arab boogeyman to do it. I think it was a shameful and irresponsible display that came from members of Congress.

(END VIDEO CLIP)

BLITZER: Does he have a point?

BENNETT: No, I don't think so. I mean we are supposed to be embarrassed that we ask questions of the United Arab Emirates? To this day they do not recognize Israel. They recognize the Taliban. It was a transshipment point for money to al Qaeda. It was the favorite shipment point for M.Q. Khan and his nuclear weapons program. So we're not allowed to ask questions?

Tom Kean, the co-chairman of the 9/11 Commission, is opposed to this deal. Is Tom Kean some sort of reactionary xenophobe? I don't think so.

BLITZER: He's a former Republican of New Jersey. We've got to leave it there, guys. Thanks very much, Donna and Bill. We'll see you back here in THE SITUATION ROOM.

Up next, what can the U.S. do to try to avert a possible civil war in Iraq? The U.S. ambassador to Iraq, Ambassador Zalmay Khalilzad, he'll be here in THE SITUATION ROOM.

And later, much more on the storm over port security. Is it a mistake if members of Congress back down over the port deal? Jack Cafferty's been going through your e-mail. He's standing by. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Some new violence today in Iraq. It underscores the still potentially explosive situation on the ground.

A daylight curfew has been lifted, and the threat of all-out civil war has eased somewhat. But U.S. and Iraqi officials know that danger to citizens and troop at holy shrines still is very real.

(BEGIN VIDEOTAPE)

And joining us now is the U.S. point man, the man in charge of the U.S. mission in Baghdad, the United States ambassador Zalmay Khalilzad. Mr. Ambassador, with some 2,300 American troops now dead, 15,000 or so injured, many of them very seriously, the price tag to American taxpayers over these past few years nearly a half a trillion dollars, $500 billion. It looked in recent days, in the aftermath of the bombing of that Shiite shrine, that the whole thing was about to fall apart. How close to the abyss were you?

ZALMAY KHALILZAD, U.S. AMBASSADOR TO IRAQ: Well, I think the country came to the brink of a civil war. But the Iraqis decided that they didn't want to go down that path and came together.

Clearly, the terrorists who plotted that attack wanted to provoke a civil war. It looked quite dangerous in dangerous in the initial 48 hours. But I believe that the Iraqis decided to come together, and now the risk of civil war from this attack on the Golden Mosque is over.

Certainly, there are pockets of problems. There are issues with regard to implementations of the agreements made. But we are -- we are back on track, I believe.

BLITZER: Well what -- what would happen if there were another attack on a major religious shrine, whether Sunni or Shiite, within the next few days? Would it go back to that brink of civil war situation?

KHALILZAD: Of course there is a risk of that. And there is, of course, the desire to provoke a civil war. And I'm sure those who want to provoke it will look at other opportunities for doing that same (ph) thing. But I believe that, as far as the current crisis is concerned, that one with regard to the current incident, that crisis is over.

BLITZER: The Shiite -- radical Shiite leader, Muqtada al-Sadr, is quoted as saying, "Cut the snake's head, and all evil will be removed. We got rid of Saddam Hussein, and now we have another dictatorship of Britain, America and Israel."

His militia, Muqtada al-Sadr's militia, is very powerful right now in Iraq. How concerned are you about these independent militias that seem to be the source of so much fear and so much power in this new Iraq?

KHALILZAD: One of the things that this crisis indicated is the role of militias. And the government has decided to ban people who are not authorized from carrying weapons on the streets. And is moving towards implementing that decision. We think that's a good thing.

Also the new government, the government of national unity, will have to deal with the issue of militias. They pose a huge challenge who -- in the future of Iraq,. For Iraq to be a successful country, a democratic country, it needs to overcome the militia problem. And other unauthorized military formations.

(END VIDEOTAPE) BLITZER: And much more of my interview with Ambassador Khalilzad in our 7 p.m. Eastern hour right here in THE SITUATION ROOM. We'll also let you know what he has to say about Jill Carroll, a reporter from the "Christian Science Monitor" who's being held hostage in Iraq.

Coming up, much more on our top story. There are new developments in the storm over port security here in the United States. We've just learned that the U.S. Coast Guard, which is part of the Department of Homeland Security, may have raised some serious questions about the United Arab Emirates taking over operations at U.S. ports before the Bush administration approved the deal.

Is there going to be any political fall-out? What's going on? We're going to go live to the White House, Capitol Hill at the top of the hour for all these late breaking developments.

But up next, there's a new plot twist for a best-selling conspiracy thriller. Find out why this one took even the author by surprise.

And Mardi Gras celebrations are nearing their finale in New Orleans. So how much of a damper did Hurricane Katrina put on the festivities? We're going to take a closer look.

(COMMERCIAL BREAK)

BLITZER: Let's check back with Zain for a closer look at some other stories making news now -- Zain.

VERJEE: Wolf, the European Union is granting some $143 million in emergency aid for the Palestinian government. The funds are earmarked for things like energy and utility payments, health and education. But the money is not going to go directly to the Palestinian Authority to handle.

Israel and the U.S. halted funding for the Palestinian Authority after the militant group Hamas won Palestinian elections last month.

Now the E.U., Wolf, hasn't decided how they're going to disperse aid to the Palestinians once Hamas has formed a government.

Authorities in the Republic of Georgia have ordered the culling of domestic fowl after a suspected outbreak of bird flu. Initial testing indicates that the virus has shown up in swans in the western part of the country. Samples have been sent to Britain for more testing.

And the European Union lab has confirmed an outbreak of the virus in Bosnia. Authorities there have ordered all poultry to be moved indoors.

And there's a new plot twist in the odyssey of the best-selling novel "The Da Vinci Code." Dan Brown, the book's author, was in a London court today to face allegations that he basically lifted the idea of his conspiracy thriller from a 1982 non-fiction novel. The authors of that book, "The Holy Blood and the Holy Grail," have filed suit to bar the use of their material. The case could hold up the scheduled May release of the film version "The Da Vinci Code."

And Mardi Gras celebrations in New Orleans are nearing their finale. These are live pictures that you are looking at from Bourbon Street. Looks like a number of people there have gathered and are just having a good time.

The annual pre-Lenten festival ends tomorrow. It's known as Fat Tuesday. Local merchants say that they're enjoying an upsurge in business and that they need that. But the crowds are significantly thinner than in years past.

We're going to bring you a live report, amid all the shouts and cheers there on Bourbon Street, in THE SITUATION ROOM in the next hour -- Wolf.

BLITZER: Thanks very much, Zain. We're going to go to New Orleans shortly.

Coming up, a new battle over abortion. South Dakota passes a bill that would ban nearly all abortions in the state. But will the state's governor sign the bill into law? And if he does, what happens next?

Plus, new developments this hour in the storm over ports. Did the U.S. Coast Guard have serious misgivings about the deal? We're going to go live to the White House, go live to Capitol Hill right at the top of the hour. Important developments, the storm over ports.

(COMMERCIAL BREAK)

BLITZER: We're getting some pictures now. New details of that prison escape in Yemen a few weeks ago. Let's go to the Pentagon. Our Barbara Starr recently spent some time in Yemen, is joining us now with the latest -- Barbara.

BARBARA STARR, CNN CORRESPONDENT: Wolf, this is an extraordinary story. You will recall earlier this month, 23 al Qaeda prisoners broke out of a high security prison in Yemen, and the worldwide hunt was on.

Well, now the government of Yemen just a few minutes ago has released some photographs of the escape tunnel that these men dug. Let's go to some of these initial pictures we are now just getting.

This is extraordinary information that we see. Let's stop on this picture for one minute. You see a soccer ball there in the lower right corner. There is a tube attached to that soccer ball. Tough to see. But they believe this was the breathing apparatus that the escapees used as they made their way through this 140-foot tunnel out of a secure prison in Yemen.

The other pictures show us just how -- how rough and primitive the tunnel was, how small it was, 23 men squeezing their way through this, climbing out, escaping.

The estimate is it took two months to dig this tunnel. A number of very primitive tools were found, essentially bits of a broken electric fan, bits of plastic utensils.

We also are now finally being shown pictures of all of the escapees, the Yemeni government saying three of the men have now surrendered themselves to government authorities and are saying that the other 20 are still inside Yemen and that the government will be taking them into custody.

But really, Wolf, an extraordinary look inside an al Qaeda escape from a prison -- Wolf.

BLITZER: Barbara, thanks very much. Barbara Starr at the Pentagon.

On our political radar this Monday, the South Dakota governor, Mike Rounds, says he's getting support from his colleagues as he weighs final approval of a sweeping state abortion ban. Rounds is here in Washington for the National Governor's Conference.

He says he's inclined to sign a bill passed by the state legislature last week banning nearly all abortions in the state. If it becomes the law, the bill may set the stage for a direct legal challenge to Roe vs. Wade in the U.S. Supreme Court. We are going to have a live report from South Dakota tomorrow here in THE SITUATION ROOM on this story.

The Japanese surrender in World War II, the inauguration of FDR. Access to any of this rare footage would take a visit to the National Archives here in Washington, D.C., at least until now.

Our Internet reporter, Jacki Schechner, is here to explain what has changed -- Jacki.

SCHECHNER: This is unprecedented and astounding. Take a look at this historic film video. This is President Truman being sworn in after the death of FDR. I can show you the raising of the flag at Iwo Jima. You can also see the surrender of the Japanese after World War II.

All of this video is available on your computer. You don't need any special, access thanks to Google Video and the National Archives. They now have a partnership. They digitalized 103 historical films and made them available free to the public on the computer.

There are tens of thousands of videos in this archive, Wolf. This is a pilot project, and they hope it's a sign of more to come.

BLITZER: Jacki, thanks very much.

Still to come here in THE SITUATION ROOM, we're now learning that the United States Coast Guard raised some serious red flags about the Dubai port deal. Will it be a mistake if congress backs down from this controversy?

Jack Cafferty has been going through your e-mail, standing by to join us next. And Iraq on the brink. After a deadly week of sectarian violence, I'll speak with the United States Congressman who's been pushing for a quick U.S. troop withdrawal. Democrat John Murtha, he'll be my guest here in THE SITUATION ROOM. That's coming up in the next hour.

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

CAFFERTY: When the news of the port deal broke a week or so ago, the outrage was palpable. Members of President Bush's own party were in open revolt.

But now the United Arab Emirates company will get a 45-day review, which they should have gotten in the first place, by the Committee on Foreign Investment in the United States. And from the sounds of some in Congress, they're already positioning themselves to back down.

The question is this: is it a mistake the members of Congress back down over the port deal?

Kevin in Sandy Hook, Virginia, writes, "If you're a Republican looking to keep control in November, it'll be disastrous if Congress is unable to stop the deal, regardless of its real merits or shortcomings. It is political suicide for anyone running in 2006 to support it."

Karla in Birmingham, Alabama: "Members of Congress who back down and knuckle under the Bush administration's demands that Arabs be allowed to guard our ports are traitors, plain and simple."

Bill in Madison Heights, Michigan: "They've already backed down. They're just taking up time to smooth it over and cool it down. Some are already talking money instead of America. Benedict Arnold is smiling in his grave."

Perry in Council Bluffs, Iowa: "This is the first sign of any backbone in Congress in over six years. Seeing them on the job makes some of us feel good."

Franc in New York writes, "Of course, it's a mistake to back down. This is the single most important issue facing us today, and President Bush simply cannot be allowed to unilaterally decide this one with the threat of a veto. Congress should muster up the courage and the votes to challenge King George."

And Patricia in Atlanta: "Is it a mistake? Nope, just politics as usual, like my favorite shoes, flip-flops! I fully expect that this deal will close and all the concerns we have will be swept away under the rug" -- Wolf.

BLITZER: Jack, thanks very much.

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