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The Situation Room

Gorbachev's Warning: Bend or Be Banned; Anti-Palin Tell-All Leaked To Media; "People Have Fallen In The Street"; Moammar Gadhafi Accused of Genocide; Libya in Turmoil, Gas Prices Climb; American Jailed in Pakistan; Governor to Speak Soon in Budget Standoff

Aired February 21, 2011 - 17:00   ET

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

WOLF BLITZER, HOST: Brooke, thanks very much.

Happening now, breaking news out of Libya. After days of unrest, alarming reports of a deadly new crackdown. Moammar Gadhafi's regime fighting back at protesters, warning of civil war. Some Libyan officials now are turning against the strongman and even accusing him of genocide.

Plus, the budget war in Wisconsin -- the governor taking a new swipe at public workers protesting a bill they call anti-union.

Is there any hope for a breakthrough?

We're expecting to hear from the governor in about an hour. Stand by for that.

And sex, lies and chemical weapons -- a scorned wife tries to poison her husband's lover and faces the kind of charges you might see leveled against a terrorist. Now the U.S. Supreme Court is stepping in.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

The unrest sweeping the Middle East and Northern Africa appears to be exploding right now in Libya. We just received word from a top U.S. official that Libya has used some kind of aircraft to attack protesters on the outskirts of Tripoli. Also, in new video -- some of which is so hard to watch that we've had to blur some of the images -- you will see burned bodies on the streets of Tripoli. Opposition sources say they're the bodies of Libyan soldiers who refused to shoot at anti-government demonstrators.

CNN has also learned that members of the Libyan Air Force flew to Malta in the Mediterranean so they can defect, sources telling CNN that the strongman, Moammar Gadhafi, is still in Libya. Britain's foreign secretary had earlier said Gadhafi might be heading toward Venezuela.

Also earlier, one of Gadhafi's sons went on state TV to warn, in his words, of a fierce civil war unless the demonstrations stop.

All of this is dramatically unfolding right now.

But I want to check in with CNN's Ivan Watson, who is on the scene for us in Cairo, neighboring Libya right now -- the Libyan government, as you know, Ivan, has put severe restrictions on communications, has not allowed officials -- allowed reporters into the country, by and large.

But what can you tell from what's going on?

IVAN WATSON, CNN CORRESPONDENT: Well, Wolf, the Libyan government seems to be fighting for its life right now and using, from the reports we're getting -- the scanty reports we're getting -- brutal and bloody tactics to try to preserve itself right now. We've gotten reports from opposition activists saying that they had eyewitness accounts of some kind of a helicopter gunships being used against demonstrators in the capital of Tripoli. We got a report from a newspaper -- a Libyan newspaper that used to be very close to the government line, saying that an eyewitness had -- had seen what appeared to be African mercenaries opening fire on civilian demonstrators and snipers opening fire, as well, prompting people to then call out from the mosques calling for jihad.

Now where can some of this be coming from?

Before dawn this morning, one of the sons of Moammar Gadhafi, who has traditionally been a -- a -- friendly to the West, a friendly face to Western countries, an English speaking, European educated man, Said el-Islam Gadhafi, gave a chilling, at times, speech on Libyan state TV, during which he warned that rivers of blood would run through Libya if the opposition did not stand down.

Take a listen to what he said.

(BEGIN VIDEO CLIP, COURTESY LIBYA STATE TV)

SAIF EL-ISLAM GADHAFI, SON OF LIBYAN LEADER: Everyone has access to weapons. Instead of crying over 84 killed people, we'll be crying over thousands. Blood will flow -- rivers of blood -- in all the cities of Libya. We will never give up Libya. We will fight for the last inch, to the last shot. We will never leave our country so that Al Jazeera or Al Arabiya or the BBC could be laughing at us or all these treason -- traitors living abroad. We will not leave our country.

(END VIDEO CLIP)

WATSON: Now, Wolf, we cannot get direct information from the capital, Tripoli, right now. There is a virtual telecommunications blockade. We cannot reach any phone numbers on the ground in there.

However, CNN is gathering information from Eastern Libya, near the border with Egypt and getting reports that there are no uniformed bothered guards at that border, on the Libyan side, that there are volunteers wearing white vests. And they are armed. And they have taken control of that strategic border area of Eastern Libya -- Wolf.

BLITZER: Libya clearly on the edge right now, Ivan. We're also getting word that some members of the Libyan military are actually defecting.

What else do we know about that?

WATSON: This lends more credence to the U.S. government official who has said that -- that -- who has told CNN that Libya has used quote, unquote, "aviation assets" against demonstrators. Two Libyan Air Force fighter jets landed this afternoon in the nearby island nation of Malta. And the pilots, they said that they were defecting, according to a Maltese government source, they said that they had been ordered to open fire with their fighter planes on demonstrators and had refused. The government source telling CNN, Wolf, that the planes were armed with bombs. Their machine guns were loaded and prepared to fire, as well -- Wolf.

BLITZER: Dramatic developments.

All right, stand by, Ivan because I want to continue on Libya right now.

Over at the United Nations, a powerful accusation that Moammar Gadhafi is committing genocide -- genocide against his own people. And it comes from one of Libya's top diplomats.

Let's go to CNN's Richard Roth.

He's over at United Nations for us.

So what happened on that front -- Richard?

RICHARD ROTH, CNN SENIOR UNITED NATIONS CORRESPONDENT: Wolf, an incredible scene. Early this morning, waiting for any Libyan diplomat, the deputy Libyan ambassador, Ibrahim Dabbashi, promised me there would be some news. And I was somewhat skeptical. But not -- soon after that, he delivered.

(BEGIN VIDEOTAPE)

ROTH (voice-over): It was an extraordinarily undiplomatic moment -- the deputy U.N. ambassador from Libya denouncing the leader of his own country, Moammar Gadhafi.

IBRAHIM DABBASHI, LIBYAN DEPUTY AMBASSADOR TO UN: We come to the conclusion that it is, in fact, a declaration of war against the Libyan people. The regime of Gadhafi has already started the genocide against the Libyan people for quite some time, from the 15th of January.

ROTH: The envoy was backed up in the lobby of the Libyan mission by a dozen other Libyan staff members. The deputy ambassador says he isn't worried about his own fate, his team is more concerned about the Libyan people under attack inside Libya.

DABBASHI: We are expecting genocide in Tripoli. So we are calling on the United Nations to impose a -- a non-flight zone in all the cities so to cut of all supplies of arms and materials to the regime.

ROTH: An extremely surreal site in the shadow of one of the many portraits of Moammar Gadhafi on a horse, his deputy in New York demanding the International Criminal Court investigate Gadhafi for crimes against humanity.

DABBASHI: I call on all countries of the world, also, to not permit Gadhafi to -- to escape inside their territories. And I call on all of them to watch carefully any -- any amount of money which may be flew outside of Libya.

ROTH: The deputy said he didn't know where his boss, the ambassador, was. Unless they are in agreement on what he said, it should be an interesting day at the office on Tuesday.

(END VIDEO TAPE)

ROTH: Now there's no word of any Security Council meeting at the request of this deputy Libyan ambassador. It doesn't mean it can't happen, but the council has been very silent on this turmoil and revolutionary cycle spinning through the Middle East.

Secretary General Bond, Wolf, did speak with Colonel Gadhafi, urging him to use restraint on the civilians -- back to you.

BLITZER: Did you -- did he get Ban Ki-moon, the U.N. secretary general?

Did he get any commitments from Gadhafi in that -- that lengthy phone conversation he had?

ROTH: Not that the U.N. is saying. We also have not been able to see or find out the whereabouts of the current Libyan ambassador here at the United Nations. The Libyan deputy says under the Responsibility to Protect clause that the U.N. all agreed to years ago, there should be U.N. involvement. So far, no word -- no -- no movement on that front from the U.N. Security Council.

BLITZER: Tunisia, Egypt, now Libya. We'll see what else is happening.

We're staying on top of this story.

Thanks, Richard.

Yemen's embattled president is comparing anti-government protests in his country to a virus, like the flu that's sweeping across the region. Ali Abdullah Saleh today rejecting demands that he step down after three decades in power. Rebels, who have been battling his government for years, are now joining demonstrations in the streets.

Britain's prime minister today became the first world leader to visit Egypt since President Hosni Mubarak's ouster. State-run media reporting today that Egypt's caretaker regime now has frozen the assets of Mubarak and his family. So we're staying on top of Egypt, as well. The unrest in Libya could have a direct effect on all of us. The country produces massive -- repeat massive -- amounts of oil. And that means gas prices could go up dramatically.

And will the protests in Wisconsin's capital end any time soon?

The governor of that state due to speak out shortly in that showdown over the budget and union clout.

(COMMERCIAL BREAK)

BLITZER: We're getting a statement just into THE SITUATION ROOM from the secretary of State, Hillary Clinton, blasting the Libyan regime of Moammar Gadhafi.

Let me read the statement in full to you: "The world is watching the situation in Libya with alarm. We join the international community in strongly condemning the violence in Libya.

Our thoughts and prayers are with those whose lives have been lost and with their loved ones. The government of Libya," she says, "has a responsibility to respect the universal rights of the people, including the right to free expression and assembly. Now is the time to stop this unacceptable bloodshed. We are working urgently with friends and partners around the world to convey this message to the Libyan government."

That strongly worded statement coming in from the secretary of State, Hillary Clinton, just moments ago, arriving here in THE SITUATION ROOM.

We're going back to this story in Libya in a few moments.

Much more information coming in not only there, but elsewhere in North Africa and throughout the Middle East.

We'll check in with Fouad Ajami, the Middle East scholar, as well.

But let's get to some other important news here at home.

More protest and paralysis right now in Wisconsin. The state now being called ground zero in the battle over budget cuts. Republican Governor Scott Walker is expected to hold a news conference less than an hour from now. He's been standing firm against opponents of a bill that would limit the unit bargaining rights of teachers and other public workers.

CNN's Casey Wian is covering the standoff for us in Madison, Wisconsin the state capital.

What's the latest -- Casey?

CASEY WIAN, CNN CORRESPONDENT: Well, Wolf, not only is this ground zero for the battle other budget cuts, it's also ground zero over the rights of unions in that battle. The protesters that have been here for seven days now and continue to flood the halls inside the state capital building behind me. They're very upset about this proposed legislation which would strip them of many of their collective bargaining rights.

As you mentioned, we are anticipating a news conference from governor Scott Walker a little bit later this evening, but all indications we are getting from both sides of this debate, lawmakers on both sides of this debate, that neither side is willing to compromise at this hour. Democratic lawmakers remain across state lines, and that has allowed them to, basically, block this legislation from moving forward. In the words of some of those Democratic lawmakers, it's allowed these protesters who've been here throughout the weekend in big numbers, by the tens of thousands, to have their voices heard.

They are saying that they hope that this moves the governor off his position, that he's not going to negotiate with these public sector unions, and so far, the governor and other Republicans say he's not budging either. So, right now, we've got a political impasse. The good news for Wisconsin families, especially parents, is that teachers are expected to go back to work tomorrow. They were off the job last week for three days, Wolf.

WOLF BLITZER, CNN ANCHOR: All right. We'll see what the governor has to say at the top of the hour. All right, Casey. Thanks very much.

In the nation's capital, the clock is ticking toward a possible repeat, possible government shutdown 11 days from now, unless, a dispute over budget cuts is resolved. Lawmakers aren't even working this week. Let's bring in our senior political analyst, Gloria Borger. She's been doing some reporting on what's going on.

Gloria, the conventional wisdom has it that the government shutdown would help President Obama politically, like the one back in 1995 helped Bill Clinton politically. Does that conventional wisdom hold in this case given the mood of the country?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, you know, at this point, I think what voters voted for is for the Congress and the president to work together and get something done, Wolf. And if you go to the brink on this and you have a government shutdown, sure, perhaps President Obama and Democrats could benefit a bit from it, but overall, independent voters do not like this brinksmanship. They want it to end. That's what they voted for. You know, when they voted Democrats out of office, it wasn't a mandate for the Republicans per se.

It was a mandate to get something done. So, I actually think it's in neither side's interest right now to shut this government down, and it sounds like, if you listen, the leaders of both parties and the president don't want to do it. I think the wild card here, Wolf, are the 87 new Republican house freshman who may say -- who may have not been through this before and may not understand how it played out in 1995 when it really hurt the Republican Party.

BLITZER: You know, with the Republicans having a significant majority in the House, the Democrats having a much smaller majority in the Senate, who has the upper hand?

BORGER: Nobody.

BLITZER: Right now in this fight. Would it be the Obama administration or the Republicans?

BORGER: It's -- it's kind of a standoff right now, Wolf. I mean, you know, obviously, you don't have one party controlling both Houses of Congress, and you've got the president, and I think it's sort of a -- sort of a standoff, but, again, I have to say that there is this question, Wolf, of what constitutes overreach here? Will the Republicans be seen as over interpreting their mandate when they won control of the House?

I mean, you could -- I talked to some Democrats today who said to me, look, where's all the talk about jobs? We, say the Democrats, made the mistake about not talking about jobs enough. Why aren't the Republicans talking about jobs instead of some of the freshmen saying they want to shut the government down? That's what the public wants. They want jobs -- Wolf.

BLITZER: Of course, they do. All right. Gloria, thanks very much.

World leaders, new and old, keeping a very, very important eye on Libya right now, including the for former soviet leader Mikhail Gorbachev. His advice to Muammar al-Gaddafi, stand by.

And invitations are now out for Britain's royal wedding. You might be surprised who made the list.

(COMMERCIAL BREAK)

BLITZER: A cold war icon is now weighing in on the situation in Libya as well. Lisa Sylvester is here. She's monitoring that and some of the other top stories in the SITUATION ROOM. Lisa, what's the latest?

LISA SYLVESTER, CNN CORRESPONDENT: Hi, Wolf. Well, start bending to the will of the people or they might run you out of the country. That is the message today from former soviet leader, Mikhail Gorbachev to Libya's Muammar Gaddafi. In Moscow, the Nobel Piece Prize winner called Gaddafi's violent reaction to the Libyan uprising ruthless. Gorbachev warned that people are trying to get -- people who are trying to get out of poverty have nothing to lose.

An upcoming and unflattering tell-all book leaked over the weekend described Sarah Palin as the governor who hated her job and allegedly broke campaign election laws. "The Anchorage Daily News" says the manuscript was written by former Palin aide, Frank Bailey. The book alleges Palin violated campaign law by collaborating with the Republican Governor's Association on a political ad back in 2006. The former Alaskan governor isn't expected to respond.

And it will be an intimate little gathering of more or less 1,000 family members and friends. Invitations are in the mail for the wedding of Britain's Prince William and Kate Middleton. Reportedly on the guest list, we have it here, soccer star, David Beckham and his wife, ex-Spice Girl, Victoria, the king of Bahrain, singer Elton John, and rapper, Kanye West. Reportedly not invited, President Obama and Aunt Sarah Ferguson who says that she has not received an invitation.

The royal wedding will be held at Westminster Abbey, April 29th, and I haven't gotten that invitation. I'm guessing, Wolf, you haven't gotten the invitation, but you did get an invitation to the all-star game.

BLITZER: I was at the NBA All-Star Game. I was happy about that. I'm wondering if our own Piers Morgan has an -- I'm sure he's going to be invited to the wedding. I have no doubt about that. Let's see if he gets -- if he shares the actual invitation with all of our viewers. I'm looking forward to seeing the actual copy of the invi -- you have no doubt that Piers is going to be invited to the wedding, right?

SYLVESTER: You know, they have something like more than 1,000 people. I think I saw the number 1,800 people invited to this wedding. So, it's possible that he, you know, we'll have to watch and see if he tweets about it, Wolf.

BLITZER: You can follow him at @PiersMorgan, all one word or you can follow me @WolfBlitzerCNN, all one word as well. We'll see who gets that invitation. I'm not going -- I'm sure I'm not going to get one. I suspect he will. He probably has it already. Well, watch his show tonight to see if he shows the invitation to all of our viewers here on CNN. All right. Thanks very much, Lisa, for that.

We're following on a very, very serious note the breaking news out of Libya right now and the unrest across the region. Muammar Gaddafi, will he fall? Is he on the brink right now? And will Iran be next? What could it all mean for the United States? Fouad Ajami, the Middle East scholar standing by.

And four Americans seized by pirates. The U.S. navy is now on the trail.

(COMMERCIAL BREAK)

BLITZER: Confirmation of what's happening right now in Libya is very hard to come by, but here's where things stand as we understand all those things right now. The Libyan leader, Muammar Gaddafi's government has launched a new effort to crackdown on pro-Democracy demonstrations in Tripoli. One witness tells CNN people are shooting randomly into the crowds. It's unclear where Gaddafi is. He was rumored to be on route to Venezuela, but a Libyan diplomatic source tells CNN he's still in Libya right now.

Let's bring in a well-known expert on the region, the Middle East scholar, Fouad Ajami. He's director of the Middle East Studies Program at the Johns Hopkins University School of Advanced International Studies in Washington, D.C. Fouad, it looks like some elements of the Libyan air force are actually firing into crowds of people, underscoring, I guess, the panic that's going on in Tripoli and Benghazi, elsewhere in Libya right now. The bottom line question, is it over for Gaddafi sooner or later? PROF. FOUAD AJAMI, MIDDLE EAST EXPERT: Well, here's the interesting question. In fact, with this great upheaval in the Arab world stands. In Egypt and Tunisia, we have seen, if you will, a velvet revolution. We've seen for the most part peaceful revolutions. Now, when the revolution goes into Libya, it meets a very different challenge and meets a very different man at the head of that state because when you look at Egypt and Tunisia, Zine El Abidine Ben Ali and Hosni Mubarak were dictators, but they were not psychopath.

This man is a psychopath and a killer. When you begin to talk about the use of air power and helicopter gunships against civilian population, you're talking Saddam Hussein. That's exactly from the book of Saddam Hussein. The man is doomed, but it's going to be a very bloody encounter, and it will not be shades of Tunisia and Egypt. This is very different country, and essentially, a very different man.

BLITZER: It's one thing for Gaddafi to order his military to fire on these unarmed demonstrators, but it's another thing for elements of the Libyan police or military to actually start killing fellow Libyans. In Egypt, they wouldn't do it. In Tunisia, they didn't do it, but you're saying that these elements in the Libyan military have no problem killing fellow Libyans?

AJAMI: Well, we really don't know yet. As you rightly led, the information from Libya is very sparse because the man has turned off the lights. This is not Egypt. This is not done at Tahrir Liberation Square. This is not an open country. This is not Tunisia. So, we don't have that kind of information, and we can't pronounce on the outcome with any confidence.

But this is it. This is a fight for the regime. This is a fight for the country that Moammar Gadhafi has brutalized for nearly four decades.

And when he finally was up against it, guess what he did? He sent his deranged son to talk to the Libyans. So he showed them the future. In fact, what he said to them is, I've ruled you for 40 years and here's the future.

Saif Islam, as I always say, remember, his name means "the sword of Islam." So this was the message sent to the Libyan people, that there is more terror to come.

BLITZER: He warned of a civil war and he said maybe 150 or 200 people have died so far, but thousands and thousands could die.

AJAMI: Yes.

BLITZER: Will die, in fact, he suggested. And I guess the question that I'm asking myself, can the outside world, others in the Arab world, anyone do anything if the Libyan government, the regime there, is going to start killing thousands of fellow Libyans? Can anyone stop that?

AJAMI: Well, you have asked a very fundamental question, Wolf, because Saif Islam is a spokesman for his father. He warned the Libyan people. He warned them in a very interesting way. He said the West will not accept an Islamic emirate in Libya because we are an oil producer.

This is the time for President Obama to step forth and speak to the Libyan people and unequivocally call for the dispatch of the dictator, because it's very important to underline to the Libyan people that we favor a change at the helm in Libya. It's all over for Moammar Gadhafi morally and strategically, and I think we should make it unequivocally clear that we don't want this regime, that we don't believe the regime's lies of Saif Gadhafi or the Islamists, and that is where soft power, if you will, moral power, makes a great difference.

BLITZER: What about the rest of the region right now? What's next? Bahrain, obviously going through enormous turmoil, but what about Iran and Syria, for example? What's happening there?

AJAMI: Well, that's very interesting, because the Syrian dictator has made a very interesting remark. He said only pro-Western regimes fall. That means Tunisia and Egypt. So Libya is the test case of whether ant anti-Western regime will fall.

And, of course, Syria and Iran, these are much more difficult nuts to crack. I think maybe the Syrian regime may be in the balance, if you will.

Iran is further away, and this Arab revolution in Yemen and Morocco, and in a light way in Libya and so on, this Arab revolution really isn't about Iran. And Iran is a very different player. And I have the feeling, unfortunately, sadly, that the Iranian theocrats have taken Iran out of the contest, that the brutality in 2009 was so decisive, that I think maybe for now they are safe.

But the question has been raised, do anti-Western regimes collapse? Are they subject to the moral judgment and the pressure of outsiders?

BLITZER: That's a good question, and we'll soon find out. I think this situation is moving very, very rapidly throughout North Africa, throughout all of the Middle East, Fouad. It's a situation you and I will watch closely together, together with all of our viewers.

Thanks very much.

AJAMI: Thank you.

BLITZER: Libya sits on the largest oil reserve in Africa. How is the country's crisis going to impact you at the gas pumps? Stand by.

And a love triangle, a plot for revenge and chemical weapons. The bizarre case now headed to the U.S. Supreme Court.

(COMMERCIAL BREAK)

BLITZER: As Libya goes through its wave of unrest right now, the X factor in all of this equation is oil. Libya is sitting on one of the largest oil reserves in the world. CNN's Lisa Sylvester is joining us once again.

The fuel prices are already going up, Lisa. Could the Libyan situation make matters so much worse?

SYLVESTER: It absolutely could. You know, consider this, Wolf -- crude oil futures are up more than $5 a barrel today, and this is the largest one-day rise in two years.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Talk about feeling the pinch at the pump, gas prices have jumped a whopping 49 cents a gallon since September. That's tough for those logging time on the road.

UNIDENTIFIED MALE: It's a 30-gallon tank, so at $3 a gallon, that's $90.

UNIDENTIFIED MALE: I'm worried about it because the economy is not doing too good. A lot of people are struggling

SYLVESTER: The average price for a gallon of gasoline in the United States is $3.18, according to the Lundberg Survey. In San Francisco, gas is $3.54 a gallon. St. Louis, $2.99 a gallon. Atlanta, $3.11. And Boston, $3.21.

The price is on the upswing as violence is spreading in Libya, ,a member of OPEC. Oil speculation is rampant with new threats of supply disruptions there. Libya produces nearly 1.7 million barrels of crude oil a day. Take that much oil of the global market, and analysts say pump prices could skyrocket.

PROF. ADEL ISKANDAR, GEORGETOWN UNIVERSITY: You're looking at a government who -- or a country that has the largest oil reserves in the continent of Africa, a major exporter to sub-Saharan Africa, as well as major European countries, France, Italy and others.

SYLVESTER: BP and Shell Gas companies have pulled their employees' families out of Libya. BP has also stopped its onshore drilling operations.

BOB DUDLEY, CEO, BP: We are monitoring the situation in Libya very carefully about where our employees are, to make sure that they are safe. We've certainly passed that information on, and right now, I think for the whole world, we're just trying to get information about what is happening inside Libya.

(END VIDEOTAPE)

SYLVESTER: And while many middle class families are feeling the squeeze, wealthy hedge fund managers and investors, well, they are benefiting, speculating that gas and oil prices are going to go up even higher -- Wolf.

BLITZER: They always speculate and they do well very often. All right. Thanks very much for that. In our next hour, by the way, meeting with Moammar Gadhafi. Our own Fran Townsend sat down with the Libyan leader. We're getting her impressions on how that went.

Plus, a CIA spy or not? New details emerging about an American sitting in a Pakistani prison.

(COMMERCIAL BREAK)

BLITZER: We're continuing to watch the situation in Libya unfold. Dramatic developments.

With a look at world's response to the Libyan uprising, let's take a look at some of these photos.

In Malta, demonstrators stomp on a photo of the Libyan leader, Moammar Gadhafi.

In Finland -- look at this -- supporters of Libyan protesters stand in the cold holding signs.

In Cairo, protesters chant slogans against Gadhafi outside the Libyan Embassy.

And in London, a girl gives the peace sign.

Growing concerns right now about an American jailed in Pakistan as well, and the problems he's causing for both countries. U.S. sources now acknowledging that the man in custody was a contractor for the CIA.

Let's bring in our foreign affairs correspondent, Jill Dougherty. She's working the story -- Jill.

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Yes, Wolf. U.S. officials tell CNN even the Pakistanis themselves are concerned that this American that they are holding could be in danger. Pakistani officials claim he's in the safest facility available, but the U.S. says this has dragged on long enough and that the Pakistani government must, by law, free him and let him safely leave the country.

Today they were lobbying the media to make that point.

(BEGIN VIDEOTAPE)

DOUGHERTY (voice-over): Anxious U.S. officials say Raymond Davis now sits in a prison in Lahore, Pakistan, along with 4,000 inmates, many of them militants. He's been moved to a separate part of the jail, they say. Guards have had their guns taken away out of fear they might try to kill him. Worried he might be poisoned, prison officials are using dogs to taste his food.

There's little question Davis shot and killed two Pakistani men, but he says they were trying to rob him. Many Pakistanis are outraged over the shootings. American officials are concerned that his connection to a U.S. intelligence agency complicates his case more. Senior U.S. officials now say that Davis, a former ZSecurity (ph) agent and former member of U.S. Special Forces, was working for the CIA. Not a spy, they insist, but an independent contractor providing security and surveillance for CIA officers.

The Lahore police chief calls the shootings cold-blooded murder, but the police report obtained by CNN says two other Pakistanis were robbed by the same assailants who were carrying pistols, ammunition and stolen cell phones. But the real diplomatic fight between the U.S. and Pakistan is over whether Davis had diplomatic immunity, protecting him against criminal prosecution in Pakistan.

U.S. officials insist it's crystal clear he has the papers and does have immunity. The Pakistani government says his papers were for him to work at the embassy in Islamabad. Davis was working at the consulate in Lahore.

But a former State Department legal adviser says that makes no difference.

JOHN BELLINGER, FMR. STATE DEPT. LEGAL ADVISER: It really doesn't matter if he was working at the consulate in Lahore. If the State Department notified him as a member of the administrative and technical staff of the embassy in Pakistan, then he has diplomatic immunity.

DOUGHERTY (on camera): Full?

BELLINGER: Full stop diplomatic immunity from arrest, detention or, most importantly, the criminal jurisdiction of Pakistan.

(END VIDEOTAPE)

DOUGHERTY: Bellinger and other observers believe at heart this is a standoff between a weak Pakistani central government and a regional government in Lahore that wants to hang on to Davis in order to exploit the situation. And it's a real dilemma. If they let Davis go, the center government risks the fury of Pakistanis, and if they don't, they could face a cutoff of billions of dollars in U.S. aid -- Wolf.

BLITZER: When the State Department is asked, Jill, what would happen if let's stay a Pakistani diplomat in New York or Washington shot two Americans under questionable circumstances, shall we say, would that individual have diplomatic immunity and be allowed to go back to Pakistan without facing any charges in the United States?

DOUGHERTY: Well, you know, that actually happened when -- remember the diplomat -- I think it was from Georgia -- ran over and killed a woman here in Washington, D.C.? But Georgia gave up his diplomatic immunity, but unfortunately that usually is the case.

BLITZER: So, in other words, if you have diplomatic immunity, and even if you're charged with murder, you go back to the country of origin as is. All right.

Thanks very much.

Jill Dougherty is over at the State Department.

Pakistan is one of the countries looking to sell very high-powered weaponry, but who is buying right now? We're taking you to the world's premiere arms dealing show. It's under way right now.

Plus, a surprising confession from a possible presidential contender, Mike Huckabee.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session." Joining us, the Democratic strategist, Steve McMahon, and the Republican strategist and CNN political contributor, Ed Rollins.

Guys, thanks very much for coming in.

This Wisconsin standoff that's going on, Ed -- first to you -- we're standing by at the top of the hour to hear from the Wisconsin governor on what's going on, the latest developments -- he's basically doing -- well, let me throw the question to Steve.

Steve, he's basically doing right now, the governor, what he said he would do during the campaign, and he's living up to his campaign commitments. Is that fair?

STEVE MCMAHON, DEMOCRATIC STRATEGIST: Well, I mean, it's certainly fair to try. And he's going to try. But the Democrats in the legislature were also elected, and they were elected on a different platform, and they're doing what they said they would do.

I mean, this is a governor who doesn't just want to balance the budget, he wants to break the union. And when the union agreed to his financial demands, he is now insisting and continuing to insist that they give up their collective bargaining rights and that they have to basically vote every year to reform their union.

So I think that any Democrat would say no to that, and the 14 Democrats in the legislature are going to say no. And I think there might be, before it's over, some Republicans who say no too.

BLITZER: Ed, is that what the governor is trying to do, to end collective bargaining for these public employees?

ED ROLLINS, CNN POLITICAL CONTRIBUTOR: Certainly not on the payroll side. The side that's never discussed is, over the last 10 years, taxpayers in Wisconsin have put over $20 billion -- $20 billion -- into the pensions and into the health care. Employees themselves have paid less than $500 million. So it's a gigantic gap between what they pay in and what they get out.

And obviously, over the last decades, Wisconsin has been a heavily Democrat state, and they were very generous to the unions. It's a union state. So I think what the governor is attempting to do -- and it wasn't till last Friday that the unions even agreed to make any kind of bargains -- I think he's trying to get control of this. And I think other governors across the country are going to do the same thing.

BLITZER: Will this spread, Steve, across the country to other states?

MCMAHON: Well, I think it's already -- there are a lot of governors, newly elected governors, John Kasich, the governor in Ohio, and the governor newly elected in Florida, are watching this very closely, because obviously these pensions and benefits are a concern to taxpayers. But the union has conceded that there's a financial burden that they need to share, and that they've agreed now to make contributions to their pension and their health care.

The governor, on the other hand, has not agreed to make any concessions. And he wants them to be prohibited from using their union dues, even if they agree to it, for political activity. He wants them to not be able to make automatic deductions for union dues.

So he's doing all kinds of things that go beyond the financial crisis and the budget crisis, which the unions have agreed is a crisis. And he clearly wants to break the unions. And it is going to spread if he's allowed to succeed.

BLITZER: Ed, let's switch to presidential politics a little bit.

ROLLINS: Sure.

BLITZER: The guy you worked for in the last campaign, Mike Huckabee, he's now telling ABC that Obama's going to be very tough to beat, the incumbency is not easy to defeat. Despite the mood of the country, Obama could get re-elected. Pretty blunt talk from Huckabee.

ROLLINS: Any president can get re-elected. You know, you go back through history, and recent history, his facts are a little bit long in the sense that Carter got defeated and George Bush got defeated and Gerald Ford got defeated. So it's not that you can't get defeated.

I think at the end of the day, this president is more vulnerable than he's ever been. But when you look at electoral strategies, he can't put 270 electoral votes today together. Either can a Republican. But I think the bottom line is no Republican today is conceding this election to Obama, and I think we have many issues to go out and fight hard.

I think Mike basically has got another life now. I love him dearly. I would love to have him run again. I can't make him run and no one else can either. He's got to make that decision himself, and I think he's struggling with the decision.

BLITZER: He's saying a lot of conservatives and other Republicans, Steve, should stop talking about the whole birther issue as far as President Obama is concerned.

Listen to this little clip. (BEGIN VIDEO CLIP)

MIKE HUCKABEE (R), FMR. ARKANSAS GOVERNOR: For Republicans to even be bringing it up, I think it's a waste of energy and time. Let's focus on the issues with which we have disagreement, not on really the extraneous personal things that are immaterial.

(END VIDEO CLIP)

BLITZER: That's a little straight talk from Mike Huckabee. What do you think?

MCMAHON: Well, I think it is straight talk. I don't agree with him on much. I think he's absolutely right.

You know, politics really is about who is more reasonable and who appears more reasonable. And I think the Republicans are going to succeed or fail in 2012 based on whether or not they appear reasonable to voters. And right now the Republicans in Congress, the Tea Partiers who want to shut down the Congress, don't appear very reasonable. And the birthers who are out there questioning President Obama's birth certificate and whether or not he was born in this country, when it's posted online and the state of Hawaii has confirmed it repeatedly, don't look very reasonable to most Independent voters. And those are the people ultimately who decide elections.

BLITZER: Steve McMahon and Ed Rollins.

Guys, thanks very much.

ROLLINS: Thanks. Thank you.

BLITZER: We're watching important developments unfold right now in Libya, including why some analysts are comparing the Libyan government to "The Sopranos."

But first, the nation's highest court about to hear from a scorned wife treated like a supposed terrorist.

(COMMERCIAL BREAK)

BLITZER: A scorned wife prosecuted for violating a chemical weapons treaty, the kind of charge you might see leveled against a terrorist. Now the U.S. Supreme Court is being asked if the federal government went too far.

Mary Snow is following all of this for us.

What's going on here, Mary?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, the justices are scheduled to hear arguments in this case tomorrow. It sounds more like a soap opera, but at the heart of the case is a contentious fight over states' rights.

(BEGIN VIDEOTAPE) SNOW (voice-over): Carol Anne Bond thought she was on her way to living the American dream when she moved from Barbados to Pennsylvania, got married, and earned a Masters degree in microbiology. Now, at 40 years old, she's serving six years in federal prison after her lawyer says she went into a psychological tailspin when learning her husband got her best friend pregnant. Bond's attorney, Robert Goldman, says his client admits trying to poison the other woman to scare her, but the fight came over who would prosecute her.

ROBERT GOLDMAN, ATTORNEY FOR CAROL ANNE BOND: From the very start, when I took this case, I had the impression this was a case of the federal government overcharging, misapplying a federal statute against a woman who should have been prosecuted locally.

SNOW: Bond admitted to postal inspectors stealing an arsenic-based chemical from the company where she worked. Her lawyer says she mixed it with potassium dichromate that she bought on the Internet. Then she admits she repeatedly went to the woman's home, putting chemicals that turned into an orange powder on her doorknob, a car door handle, and a mailbox. In large doses, they can be toxic, even lethal, but the victim knew something was wrong and escaped serious harm.

(on camera): It's here in Norristown, Pennsylvania, where the federal government got involved. The victim in this case called postal inspectors because letters had been taken out of her mailbox. And that's when things shifted.

(voice-over): The postal service set up a surveillance camera and caught Bond taking mail and spreading the chemicals. Instead of simple assault, Bond then faced federal charges of violating a chemical weapons treaty passed by Congress.

At issue in this case that's reached the Supreme Court, does Bond have the right to challenge her federal prosecution and argue it should have been handled in state courts where the penalties would have been much less? And that tests the 10th Amendment, which preserves states' rights from federal encroachment.

CNN's legal analyst, Jeffrey Toobin, says only states, not individuals, have been able to assert rights under the 10th Amendment.

JEFFREY TOOBIN, CNN SR. LEGAL ANALYST: So far, the Supreme Court has never said an individual has a right to say, "You violated my 10th Amendment rights." But a lot of conservatives, especially people in the Tea Party, have said that should change. And this case is an opportunity for conservatives on the Supreme Court to say just that, that individuals have 10th Amendment rights.

(END VIDEOTAPE)