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On the Story

Scott Peterson Arrested; Bush Spends Weekend at Crawford Ranch; Economic Outlook Remains Mixed

Aired April 19, 2003 - 10:00   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.


RUSTY DORNIN, CNN CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week. I'm Rusty Dornin in Modesto, California, on the story of the murder of Laci Peterson and her unborn son and the arrest of her husband Scott Peterson four months after she disappeared.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: I'm Suzanne Malveaux in windy Crawford, Texas, where President Bush is spending the holiday weekend. I'm on the story, the focus on the economy, not only here but also in Baghdad.

LIZ NEISLOSS, CNN CORRESPONDENT: I'm Liz Neisloss in New York, on the story of the ongoing search for weapons in Iraq and a potential battle over lifting of sanctions.

KATHLEEN HAYS, CNN CORRESPONDENT: I'm Kathleen Hays, also in New York. I'm on the story of a mixed outlook for the U.S. economy, despite a successful end to the war in Iraq.

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: And I'm Andrea Koppel in Washington, on the story of who's next on the United States' suspected military hitlist.

We'll have all these stories and the president's weekly radio address in just a few moments, but first let's go to CNN Headquarters in Atlanta for a check of the news at this hour.

(NEWSBREAK)

MALVEAUX: Well, President Bush only looking forward, not looking back, when it comes to Iraq. But the pictures might paint a different picture. We actually saw just yesterday, from Abu Dhabi Television, they say they received a videotape they claim was of Saddam Hussein on the day that Baghdad fell. U.S. intelligence say that they do not believe that that was actually taped on that day, perhaps even before the war started.

But it brings up a very good point, and this is one of perception here. Was that tape even significant? Did it make a difference? Clearly, Saddam Hussein is one that personifies what one of the major goals of the Bush administration, that is, to get rid of this dictator and this awful regime.

But at the same time, of course, it is a nagging question, where is Saddam Hussein? I spoke with a number of senior administration officials who really said it makes no difference what comes out, what we see of Saddam, whether it's video or audio or otherwise, that he is a man who does not control his country, that his regime has been destroyed.

But clearly, there is a perception problem here. This is something the administration is going to have to be dealing with. It's a nagging issue here.

And the Bush administration really, at the same time, trying to look forward, saying that, yes, we have gotten beyond the significance of Saddam Hussein, we are now looking at questions of reconstruction, we are still look for weapons of mass destruction. But this is something that the American people and the Iraqis should be heartened by.

HAYS: Suzanne, I'm wondering, though, how does it complicate the Bush -- the coalition forces, actually, saying the war has ended, we are now going to go ahead with this interim government, recognize some interim government, if we don't know what has happened to Saddam Hussein?

MALVEAUX: Well, absolutely, I mean, you bring up a very good point. It was just this past week, too, I should mention that Chief of Staff Andy Card and the White House has a website, and they were doing a chitchat site, and that actually he said that he believed that Saddam Hussein was dead. This created quite a bit of stir, but administration officials saying that they do not know whether or not he is dead or alive and that it doesn't really matter.

But you bring up a very good point and that is, is that there are coalition forces, U.S. forces, that are on the ground now, that are simply -- they're looking for weapons of mass destruction. They're also trying to determine just what has happened to Saddam Hussein.

One of the things, when it comes to weapons of mass destruction, is that members of the United Nations, they want to see those weapons inspectors back inside of the country. We heard from U.N. chief weapons inspector Hans Blix this past week, a very familiar face, saying that you should have those inspectors back in, side by side, with U.S. troops, looking for those weapons, just to give it a credibility. It's a credibility issue, just to make it seem like it is legitimate, because there are questions, still, from some European allies, and as well as those from the Middle East, that perhaps the U.S. would plant these weapons.

But, no, the administration says they don't want those inspectors in at this time. It is the job of the coalition forces to go ahead and look for them. But they are going to rely on Iraqis to point them in the right direction, perhaps even those from Saddam's regime to point them in that direction.

NEISLOSS: Suzanne, yes, that will certainly be a big battle at the U.N. There may have to be some diplomatic gymnastics in order to deal with that issue that you mention of weapons inspectors.

But diplomatically, how is the Bush administration trying to move forward? There was a meeting of the European Union in Athens. What sort of reaction does the Bush administration have to what's been happening there and what happened in Athens?

MALVEAUX: You know, it's really a Catch-22 for the Bush administration, because on the one hand they want to move quickly, but on the other hand they really can't.

I mean, what you've seen in Baghdad, thousands of people who have actually taken to the streets, saying that they're frustrated, their futures are uncertain, they want U.S. soldiers out as quickly as possible.

You mentioned, as well, that meeting out of Athens, the European Union, same thing. They released a statement saying, "Yes, we want the United States to restore order and security but, at the same time, to get out as quickly as possible."

At the same time, though, the administration is looking at a process here. And it involves, again, the U.N. Security Council, resolutions that they have to pass, to actually show that that Iraqi government is a legitimate one.

President Bush, his radio address just moments from now.

(BEGIN AUDIOTAPE)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Good morning.

This weekend, families across America will come together to celebrate Easter and continue the observance of Passover. This holy season reminds us of the value of freedom and the power of a love stronger than death.

This year Easter and Passover have special meaning for the families of our men and women in uniform who feel so intensely the absence of their loved ones during these days.

More than 250,000 American troops are serving in Operation Iraqi Freedom to protect our security and to free an oppressed people. Their families await their safe return, and our grateful nation remembers them in prayer.

Our whole nation has also shared in the happiness of learning that seven of Americans prisoners of war were rescued in northern Iraq earlier this week and are now safe. Thanks to the courage of our Marines and the help of Iraqis, their families have even more reason to celebrate this weekend.

After hearing the good news, the parents of rescued helicopter pilot Ronald Young, Jr., of Georgia thanked people from across America and as far away as Australia and Japan for their cards and flowers and prayers. Kaye Young, Ronald's mother said, "You can't believe the blessings that have come out of this. Even as sad as we were, as upset as we were, to think that he was being held, there have been so many blessings."

Mrs. Young continued, "All over this country, people cared so much about us and about our son."

As a nation, we continue to pray for all who serve in our military and those who remain in harm's way. We also pray for those who have lost people they love in this war. I have met with some of these grieving families and I have seen their sorrow and their strength.

Corporal Henry Brown, a 22-year old soldier from Natchez, Mississippi was lost in battle earlier this month. After the news arrived, his best friend, Frank Woods, Jr., said this about Henry. "He believed God was working through him and he was part of the plan. I guess part of the plan now is God calling his soldier home."

America mourns those who have been called home and we pray that their families will find God's comfort in God's grace.

His purposes are not always clear to us, yet this season brings a promise that good can come out of evil, that hope can arise from despair, and that all our grief will someday turn to joy, a joy that can never be taken away.

Laura and I wish you all a Happy Easter and a blessed Passover.

Thank you for listening.

(END AUDIOTAPE)

MALVEAUX: And the president also going to share that message tomorrow. He's actually traveling to Fort Hood, Texas. He's going to attending a church service with soldiers who are there. As you know, very significant, Fort Hood. It's the home to about half of the 42,000 soldiers that are in Iraq at this time.

And clearly that message resonating with many Americans who are still overseas. The president trying to rally the troops, as well, and also comfort the parents and loved ones for those who have not yet made it home -- Andrea.

KOPPEL: Well, Suzanne, we're now going to turn things over to Rusty Dornin in Modesto, California, where she obviously has the latest on the developments in the Laci Peterson case -- Rusty.

DORNIN: Well, Laci Peterson's husband, Scott, was arrested after four months after her disappearance in December. Now, Scott Peterson was arrested in San Diego, sporting a new hair color and a beard. And he was arrested apparently without incident. He's in jail here in Stanislaus County jail.

Now, DNA scientists did determine unquestionably that the bodies found in San Francisco Bay were that of Laci Peterson and her unborn son Conner. Now, it looks like the district attorney here says that the charges will be filed in an arraignment on Monday or Tuesday, and they will involve double homicide with special circumstances. But right now we do not know whether that will involve asking for the death penalty. HAYS: Rusty, what do you know -- do you have any hint about what kind of evidence they finally got to charge Scott Peterson besides the fact that they found Laci's body?

DORNIN: Now, what we do understand, actually from the police chief in Modesto, is that even if they had not discovered Laci's body and her unborn son in the bay, that the police here do believe that they had a strong enough case to arrest Scott Peterson.

Now, they've been very tight-lipped about the details of that case all along. But we do know from a source very close to the investigation that a sonar reading around March 12th or 13th did pick up what they believed was these bodies.

But unfortunately, due to very bad weather and because of turbulence in the shipping lanes in San Francisco Bay, there was so much turbulence that it kicked up all of the mud and apparently pried those bodies away from whatever had weighted them down inside the bay.

Now, they're going to be going back to San Francisco Bay with those sonar devices, looking for perhaps those anchors or whatever weighted the body down and perhaps whatever else is attached to those anchors. They believe that could be part of a smoking gun that could truly be the strength of their case against Scott Peterson.

KOPPEL: Rusty, what I want to know is, why did the police in Modesto wait so long to charge him? They didn't even have him labeled as a suspect. Why did they wait until now?

DORNIN: They wanted to make sure that this case, apparently, was airtight. Often the district attorneys in this cases work very closely with the police department. And from what I understand, the district attorney here is very thorough, wanted to make sure that this case was airtight.

We do understand that Scott Peterson has been under surveillance for the past couple of weeks. They knew he was in San Diego. They were concerned when once they announced that they had identified the bodies that he might flee into Mexico, so they decided to make the arrest now.

KOPPEL: Finally, a bit of closure after four months of not knowing.

Rusty Dornin in Modesto, California, thank you for joining us.

Well, we will have to take a break, but it's going to be a short one. Coming up next on ON THE STORY, CNN's Rula Amin joins us from Baghdad with the latest information about keeping the peace in the Iraqi capital.

(COMMERCIAL BREAK)

RULA AMIN, CNN CORRESPONDENT: Welcome back to CNN's ON THE STORY." I'm Rula Amin. In Baghdad, a fifth Iraqi official has been captured. He's one out of 55 officials on the U.S. most-wanted list. Hikmat al Azzawi was Saddam Hussein's deputy prime minister and finance minister, and he was captured by Iraqi policemen. They got a tape from a local resident who went to them and he said he saw him in one of the neighborhoods, on one of the blocks.

So they just went there, suspected one of the houses, knocked on the door, he opened the door, did not resist his arrest. And then he told his captors that he was considering to surrender but he didn't know how to do it, he didn't have any line of communication with the Americans.

The Iraqi policemen handed him over to the U.S. Marines, who are investigating whatever information he may be able to provide -- Andrea.

KOPPEL: Rula, how long do you think the U.S. has, really, to put its money where its mouth is, in terms of delivering on the humanitarian side and on the reconstruction?

AMIN: Well, on the humanitarian side, I have to tell you, a lot of Iraqis now are very disappointed. They had this illusion, if you want to call it that, the minute Saddam Hussein falls and Americans come in, things will change, and it didn't. So far, still there is no power in most of Baghdad. Only a few hundred houses have power. No running water, no sewage treatment, and very poor medical services.

And people have been coming up to the Palestine Hotel, to journalists and to the U.S. troops, actually demanding that they should do something about it. People saying they feel betrayed, they feel disappointed. And anger and frustration is really growing from this lack of basic services -- Andrea.

MALVEAUX: Rula, is there a sense of fear, and even concern perhaps, that Saddam Hussein is still alive?

We saw these pictures from Abu Dhabi Television. I don't know if the Iraqis got a chance to see it, but they were certainly broadcast throughout the world. And it's almost like there's this ghost of Saddam Hussein.

Does it have kind of a psychological effect on those who are inside of Baghdad, who wonder, is he really gone? Does this mean that they really are free?

AMIN: Well, for those who were happy to see him go and were relieved -- and there are many of them -- they don't have this fear that he will come back. They know that his regime is gone and that's it.

However, the fact that he -- there are pictures of him still around actually satisfies their curiosity more, because many of them are wondering what happened to him. For months and weeks, he had this strong rhetoric that he was going to fight, especially in Baghdad. And then they saw that his troops had orders actually to abandon their weapons and to pull out of the streets. He disappeared, his son disappeared, his aides disappeared.

So they're wondering what happened. Was there a deal made in order for him to save himself and save the Americans a fight in Baghdad, or was he betrayed? Is he alive? Is he dead? So all these questions are on the mind of almost every Iraqi. It's a matter of curiosity, what is he up to.

NEISLOSS: Rula, we're hearing so much about the looting in Iraq and in Baghdad in particular. But for people on the outside, some of the most surprising images are really what happened to Iraq's world- famous museum, all these great antiquities. What are the reactions of the people that you talk to, the Iraqi people, about what has happened?

AMIN: Well, I'll tell you, the looting of the museum has been one of the most devastating scenes for many Iraqis here in the capital. It's not only that valuable items that documented the ancient history of Iraq were stolen, it's also their pride, their prestige.

Many of them are very proud of their potential as a country. They see themselves as an ancient country, a cradle of civilization. So many educated people. They have the wealth, they have oil, they have two rivers. And they always saw themselves as a regional power, or at least with the potential of a regional power.

And to suddenly see that their own people have been looting the museum, taking away all this evidence of their great civilization, was devastating to them and made them even more angry. Many of them are actually blaming the Marines and the U.S. troops, saying, how can they stand by and see the museum being looted?

Even if the Marines were not physically there, they feel that they were the ones who removed Saddam Hussein and they are the ones in charge now and they should have been able to protect the museum.

HAYS: Rula, you know, we here in the States hear so much discussion about what's going to happen among the various Muslim groups within Iraq, say, the Sunnis versus the Shiites. Yet, this week, something we may not have expected, a demonstration where Sunnis and Shiites got together to tell the U.S., "We want you out of here as quickly as possible. We want to run Iraq." What is going on on that front?

AMIN: Well, Iraq is a complex mix of ethnic and religious and even political groups. So it's going to be hard to put all of these groups together and have one consensus on what the future of Iraq should be.

You have those who want an Islamic state. Yesterday, those Sunnis and Shiites who went out of the mosque chanting slogans against the U.S. and demanding the troops should leave were also chanting slogans against a secular state, and they were saying they wanted an Islamic state.

At the same time, seeing people like Chalabi, like other Iraqis, intellectual Iraqis who have been living Iraq for a long time, who desperate for democracy. And they insist they are going to grab to this right. They say they have been promised democracy and they are going to claim it -- Andrea.

KOPPEL: Rula, it was so nice to see you today. We want to thank you for joining us from Baghdad.

With Saddam Hussein's regime now history, the U.S. turns up the heat on Syria. We will have that story and go live to Sheila MacVicar in Damascus when ON THE STORY returns.

(COMMERCIAL BREAK)

KOPPEL: Welcome back to CNN's ON THE STORY. I'm Andrea Koppel in Washington.

Earlier this week, on "The Newshour with Jim Lehrer," Secretary of State Colin Powell discussed future plans to visit Syria.

(BEGIN VIDEO CLIP)

COLIN POWELL, SECRETARY OF STATE: As we get ready to release the road map that will get us jump-started in the Middle East peace process, there will be an opportunity to travel in the region in the not-too-distant future.

(END VIDEO CLIP)

KOPPEL: Now, you couldn't see them in that shot, but there were State Department officials who were sitting off to the side. In fact, there had been an interview on AP television in which Secretary Powell surprised State Department officials, as well as Syrians and many in the region, when he said he will travel again to Syria.

Now, that does not mean that Secretary Powell has a date set, but obviously, in this climate, this very charged climate where people are wondering who is next and there has been a lot of pointed rhetoric aimed at Syria, it certainly had a reassuring effect.

What I want to know, to Sheila actually, in Damascus, is the fact that Abu Abbas, the Palestinian terrorist who was responsible for the Achille Lauro hijacking, the fact he was picked up by special forces because he was turned back at the border twice by Syrians, do you think that message got through loud and clear?

SHEILA MACVICAR, CNN SR. INTERNATIONAL CORRESPONDENT: Well, to quote the Syrian authorities here, they would point out, quite correctly, that he was arrested while he was still in Iraq. And also, he did attempt to enter into Syria. He was picked up by U.S. forces in Iraq.

The Syrians have said that their borders are closed, and there is substantial evidence that, in fact, their land borders are closed. Does that mean the entire border has now become impermeable? Well, given the nature of the border, probably not. MALVEAUX: Sheila, I have a question. Did they actually believe, did the take seriously that the U.S. might actually go in with military force?

Some senior administration officials that I spoke with said that, yes, while certainly they're capitalizing off the moment, their success in Iraq, they thought it was somewhat silly that people thought that U.S. forces were simply going to take a left turn and enter Syria anytime soon. But they clearly wanted to capitalize off of that moment, that they could push the Syrian government as far as possible.

MACVICAR: There's two things. I mean, obviously, there is the very real example of what happened next door.

And it's important to say that the regime here has not been a friend of Iraq, not been a friend of Saddam Hussein for 20 years. In the last two years, there has been a thaw in their relations. And that's come about largely because of economics and, it has to be said, because of smuggled oil.

The question about what happens next in Syria is one that is causing a great deal of uncertainty. But Syrians get it, that the U.S. clearly has ambitions and desires here. They think that a lot of that comes from the south and west of here, that this is, at least in part, an Israeli agenda, and that they think that they will be pushed to do certain things.

What they were puzzled about, over the course of the last 10 days or so, is the volume and the, if you will, the megaphone transatlantic diplomacy. The Syrians couldn't understand why they were being shouted at from Washington by so many different people with so many different messages, when they thought that things could have been dealt with in a different manner.

KOPPEL: Well, Sheila, according to officials that I've spoken to here in Washington, the answer is, in their eyes, a fairly simple one. They just had the victory in Iraq. They really were going for as much bang for the buck as they could get without using military force. And they really wanted to scare not only the Syrians, but the Iranians and any other regime out there that might think that when the U.S. says, "Hey, give up your weapons program, stop supporting terrorists," that the U.S. really means it.

MACVICAR: Well, on the subject of weapons of mass destruction, we can look at what the Syrians did this week at the U.N., where they put forward a proposal to make the Middle East, the entire Middle East, a weapons-of-mass-destruction-free zone.

Now, if you were cynical, you could say that that, you know, is aimed at Israel, because of course when the United States talks about Syria's covert chemical weapons program, what they don't talk about is Israel's covert nuclear weapons program.

And that is one of the irritants in the region. It is one of the things that is seen to be a double standard. And obviously, we can understand that there may be differences in the alliances and differences in the makeup of the government, and that there will be different reasons why the U.S. does that. But from the perspective of the Syrians, from the perspective of Damascus, they see that as a double standard. And they believe that if the U.S. is truly being an honest broker, then they have to address these issues honestly and fairly amongst all parties and not just deal with the Syrian issue as though it is somehow an exception in the region.

NEISLOSS: Andrea, what are you hearing about why Washington is now targeting Syria? What are the reasons you're hearing behind that?

KOPPEL: Well, it has to do with what I was saying to Sheila just a moment ago, about really trying to capitalize on the victory in Iraq. There is still, clearly, a debate within the administration as to just how far to push this.

KOPPEL: We heard some really strong rhetoric from Secretary of Defense Donald Rumsfeld, in which he would not close the door, despite reporters' questions, to the prospect of a future military action against Syria. Whereas Secretary of State Powell, as the week went on, sort of was reigning things in. And it culminated on what you just heard there on the Lehrer Newshour with him saying that he will go to Syria, wanting to kind of pull things back a little and lower the temperature.

MALVEAUX: And interestingly enough, Andrea, there was a middle position that the White House took as well. Ari Fleischer really being intentionally vague when he was asked that question about military action. Interesting how you had the State Department, the Defense and the White House somewhere in the middle.

HAYS: And, but I'm really interested, Andrea, in the reaction overseas. Whatever Rumsfeld and Powell are saying back and forth, whatever the Bush team may think, the rhetoric is getting much more heated overseas, because people are saying this is clear evidence that the United States is becoming a consciously imperial country, it has a motive to dominate the Middle East, dominate the world.

And it just seems that this kind of criticism isn't falling on the ears at the Pentagon. Is it falling on the ears at the State Department?

KOPPEL: Oh, absolutely. They are -- their ears are well tuned to the concerns of the region and, certainly, are watching all of the Arab news networks and are well aware of the criticism that is out there. And the debate within the administration continues.

We want to thank our senior international correspondent, Sheila MacVicar, who is reporting from Damascus. And coming up on ON THE STORY," a suspected terrorist leader captured, but which country will get the case?

Then, as the hunt for weapons of mass destruction in Iraq continues, who should be in charge of the search? We'll get the details from our United Nations producer.

Plus, now that the war in Iraq is winding down, can we expect a bounce on Wall Street? We'll get the economic outlook from New York.

All that, plus a check of the headlines at this hour, right after a short break.

(COMMERCIAL BREAK)

(NEWSBREAK)

KELLY WALLACE, CNN CORRESPONDENT: Welcome back to ON THE STORY. I'm Kelly Wallace on the story in Jerusalem, where there is a renewed focus on that so- called road map for Middle East peace.

But on this day, more violence, during a clash in the West Bank town of Nablus, between Palestinian stone throwers, some armed Palestinian gunmen and Israeli soldiers. A photo-journalist was killed, a man who normally works for Palestinian TV, but on this day was working for Associated Press Television, shot in the head and killed.

He becomes at least the fourth journalist to be killed during this latest Palestinian uprising against Israel, which began in September 2000. And this, a signal of the intense challenges ahead for Israelis and Palestinians if they are going to make their way back to peace negotiations and to the creation of a Palestinian state by 2005.

NEISLOSS: Kelly, tell us a bit about the Palestinians' own efforts at setting up political institutions. They have the newly appointed prime minister, Abu Mazan. How is that progressing?

WALLACE: Well, Abu Mazan is facing a big challenge. He has had a dispute with Palestinian President Yasser Arafat over the make-up of his cabinet. Arafat has made some objections, especially because some people close to Arafat are not being included in Abu Mazan's cabinet.

Sources though are saying that possibly as early as tomorrow, Abu Mazan would have this cabinet together. Then it must be approved by the parliament.

And after than happens, the Israelis say Prime Minister Sharon will invite Abu Mazan to come to Jerusalem for talks. And as we know, President Bush has said he will present that road map for Middle East peace to both sides.

HAYS: Kelly, what is the reaction to the arrest of Abu Abbas, Palestinian terrorist, who masterminded the hijacking of the Achille Lauro back in 1985? Do people put much importance on this, or has this become sort of a footnote in history?

WALLACE: Well, really, it depends on whom you talk to. The Palestinians are angry, at least some are. And they think Abu Abbas should be released. They say his arrest violated an agreement, an interim agreement under the 1993 Oslo peace accords, which said that any member of the Palestinian Liberation Organization could not be arrested for any act committed before 1993. So they want Abu Abbas released. The United States says it is not a party to that agreement, so it's not bound by that.

The Israelis are hailing this arrest. They say Abu Abbas never renounced terrorism, and therefore they believe he should be arrested.

KOPPEL: Kelly, what is the feeling on the streets of both Israel and also in the Palestinian territories? Is there anticipation of this road map? We already know that the Israelis have raised a number of suggestions that they would like made to the road map. Is there any feeling that this could be a turn in the corner?

WALLACE: Well, Andrea, you know, the real mood is pessimism. You talk to Israelis, you talk to Palestinians, both seem somewhat pessimistic. Some Palestinians question how much political capital President Bush is going to invest to try and get the two sides to come to some agreement. Some Israelis are wondering if the U.S. is going to push too hard on the Israelis.

So there is a lot of pessimism, although people do think there is a chance here, and so they're watching very carefully.

I want to bring in now our colleague, producer Maria Fleet, who's joining us from Baghdad, who spent most of the time covering the U.S.- led war in Iraq in northern Iraq. She encountered some very, very difficult situations.

Maria, I first want to ask you, what was the experience like? And how concerned were you for your safety and the safety of your fellow colleagues?

MARIA FLEET, CNN PRODUCER: Well, it was a very different kind of war than what unfolded in the south of Iraq, that's for sure. But we had -- because the battle, the actual war did not come to the north the way we all expected that it would, because the northern front was largely static because of the fact that Turkey would not allow the U.S. to use its bases to base troops there.

However, there were threats, direct threats against Western journalists working in the north of Iraq by the Baghdad regime. And there were -- we were told that there were suicide squads that were out looking to target Western journalists, especially American journalists.

And CNN, in fact, was told by the Kurdish officials that we had a direct -- a plot against the hotel that we were staying at in Irbil, in the capital of northern Iraq. And they uncovered this plot, and actually, it was directed by the baghdad regime, according to those officials, and they thwarted it and managed to stop it before it happened.

NEISLOSS: Maria, there were pictures and very dramatic stories about what you went through with correspondent Brent Sadler. Your car was fired upon as you came into Tikrit. I saw a picture of you with a hole -- I don't know whether it was a bullet or a piece of glass -- in a flack jacket. What are your thoughts after this experience?

And also, there was someone, I guess, traveling along with you for protection, with a weapon, which is considered, I guess, somewhat controversial for journalists. What are your thoughts on all this?

FLEET: Yes, well, that day was the day before the Marines entered Tikrit, actually, and we were driving down to see what the situation was in Tikrit, what the defenses were. And we drove basically freely, all the way, almost right into Tikrit, along the way passing long, giant military compounds that had been abandoned by the Republican Guard and other army units.

And at that point, I mean, we didn't see -- we didn't see any defenses around Tikrit and decided to enter and see, on the basis of some information that we had from people who were driving out, they said it was fine to go inside and they would actually lead us in.

NEISLOSS: Maria, you took quite a chance. We're going to have to leave it there. Our thanks very much to you. Stay safe. Thank you for joining us from Baghdad.

Up next, the continued hunt for weapons in Iraq and a call to lift sanctions. Does the U.S. still need the U.N.? ON THE STORY" returns after this short break.

(BEGIN VIDEO CLIP)

HANS BLIX, CHIEF U.N. WEAPONS INSPECTOR: Well, it is true that the credibility of any finds, I think, would be much better with international inspection.

And I think we have credibility. I know that Washington was disappointed that we did not present evidence that would have suited their argument at a given time. But I think, if anything, that increased our credibility in the world.

(END VIDEO CLIP)

NEISLOSS: Chief U.N. weapons inspector Hans Blix this week, making the case for keeping the weapons hunt an international endeavor. Blix says inspectors are of course ready to go in, as Suzanne said, but Blix says he sees no sign that the U.S. wants his inspectors back.

Welcome to ON THE STORY."

Blix is really becoming a lot more open these days as his term comes to an end. He is now seeing the shoe is on the other foot for the U.S. They have to go in and try to play detective, the way his inspectors were accused by the U.S. of trying to be.

He sees this as still a very difficult task. He says, "Hey, let's see what Washington, let's see what London can find. It is not going to be an easy job."

KOPPEL: Well, Liz, I know that you were shocked, shocked when you heard that there was another impasse at the United Nations over lifting the U.N. sanctions, with France and Russia on one side saying, "You know, you've got to make sure that Iraq is free of weapons of mass destruction. You guys are the ones who said they were there." And the U.S. is saying, "Come on, the regime is gone. Lift the sanctions so that we can sell the oil." Right now they can't sell the oil.

NEISLOSS: Well, this is going to be a very difficult thing with several issues all intertwined. You have sanctions. You have oil for food, the selling of the oil. And there may be some -- may be ugly PR that may come out or may not.

The U.S. is already sort of positioning this as, "Look, you guys didn't want to come along with the war, and now we should be able to say what's happening with the peace."

Diplomats at the U.N. are not necessarily going to go along with this. They see that there will be some leverage that they may have. The U.S. has to come back to the U.N. to get sanctions lifted. According to resolutions that exist, the weapons inspectors have to certify that Iraq is weapons-free before sanctions can be lifted.

But there are ways, and there are hints from Washington that there will be ways found, maybe of going around those resolutions. One suggestion: Hey, these were all entered into when there was a government of Saddam Hussein. That doesn't exist anymore. So perhaps, that's a way of saying, let's write some new resolutions.

But, you know, as one diplomat who did not go along with the war coalition said to me, "Look, there's going to be a lot of horse trading at the table. It's going to come down to money."

WALLACE: Liz, what are diplomats in the hallways telling you? Are they surprised at how quickly this war pretty much wrapped up in Iraq? Are they angry at the U.S.? Are they worried about next steps? What's their main sentiment, as they really were on the sidelines during this entire war?

NEISLOSS: I think there is a bit of sort of amazement at how quickly things went. I don't think that the U.N. diplomats were prepared, the Security Council, were prepared to jump in as quickly as they will need to if they want to get a piece of the action, so to speak.

The U.S. is already steam-rolling ahead, in terms of setting up an interim government. The diplomats at the Security Council are going to have to make a decision.

At the U.N. though, the organization itself, they had been planning for a quite a while for what was going to unfold.

HAYS: Well, Liz, to kind of follow on that question to a certain extent, the reaction now to the U.S. and its fairly aggressive posture in the world, aggressive posture in the region, having won this victory in Iraq so quickly, throwing stones at Syria, if you can put it that way, or at least throwing down a gauntlet, what is the talk about that?

NEISLOSS: Well, regarding Syria, I mean, clearly there's still -- there is still a lot of residual anger and current anger over what happened in Iraq. And Syria being added along with that is not seen as helpful.

Kofi Annan actually took the step, the U.N. secretary general, of coming out and saying, "This is not good for an already unstable region."

So I think a lot of diplomats, and from many parts of the world, are somewhat surprised at what the U.S. is doing.

HAYS: Well, a little bit of surprise on Wall Street this week that some of the earning statements coming out as well as they did. We're going to go from diplomacy to Wall Street. Will victory in Iraq spark a strong U.S. economic recovery? We'll talk about that when ON THE STORY" returns.

(COMMERCIAL BREAK)

HAYS: Welcome back to ON THE STORY."

For me, it's been watching Wall Street these past few weeks, of course, fixated on the war, traders, investor strategists pretty much ignoring news on the economy and watching the dollar. Oil prices gyrate day in and day out. When it looked like we had a harsh battle and things were slowing down, maybe the stocks would fall. As soon as things picked up steam, more of a rally.

But the question really is now the economy. We can make excuses for the economy in February and March. A lot of bad weather across the country in February hurt. Then, of course, war worries. Then the war started.

But now, as the war winds down, there's a real question about, will firms start hiring again? Will businesses go ahead with those big investment decisions? And how much other problems -- think of the ailing airlines. Think of state and local governments that don't have money to spend. Those are problems that go beyond the war. And, again, now people are waiting eagerly to see how these various forces are going to play out.

WALLACE: Well, Kathleen, everyone expected there to be somewhat of a lift in the economy with the war winding down. What are the numbers showing? And do you have any good news for all our viewers today?

HAYS: Well, you know, I think if you look at it as two teams -- you know, recovering the economy versus maybe a move back towards recession -- they're kind of at a standstill right now.

The housing sector is holding up fairly well. We saw a good rebound in housing construction in March. The consumer isn't spending gangbusters, but you know, at least there's modest spending in the economy broadly. That's a good thing. And interest rates remain so low. Low mortgage rates will help keep that housing sector liquefied, will keep us refinancing. That puts money in our pockets.

On the minus side, though, we've seen the new claims for unemployment benefits get back to a high level. It shows that firms are still laying off. The latest manufacturing surveys make it look like in early April there were turndowns in some key regions of the country. And remember, broadly speaking, we carry a lot of debt as consumers, a lot of debt as businesses, and the government's debt is getting bigger in the form of a bigger budget deficit.

KOPPEL: Obviously, Kathleen, so much of the climate for investment is based on, you know, how people feel psychologically. I don't want to put you on the spot, but how would you -- if you could improve the atmosphere, what do you think would need to happen in order to get people investing again and to get those employers to start hiring?

HAYS: I think some people figure that if we saw a sustained move in the stock market, that would help. That would make everybody feel like we're back on track.

And I think some of the things working against that, again, are just some big questions about, for example, how Bush's policies were worked out. Bush, again, calling for very large tax cuts. He's backed away from this $726 billion package. They're talking about $550 billion; the Senate, $350 billion.

But step away from the numbers. I don't think anyone on Wall Street is convinced that tax cuts will do the trick. There's a debate there.

And again, with the state and local governments facing deficits, with communities raising their property taxes, that's a problem.

I think it's a very good question, Andrea, because we don't have any pickup from overseas. Japan weak, European economies are weak. And we know that paying for the reconstruction of Iraq is going to be a big bill as well.

We just have to hope, I guess, that consumers are going to -- you know, people like us are going to say, things are OK, I'll go ahead, I'll refinance, I'll buy a home, I'll get on with my life, and that's the thing that will pull us ahead.

NEISLOSS: On the subject of Iraq, it was described as something that would be potentially just a huge windfall for American businesses. So now we're starting to see the contracts coming out, and Bechtel, I guess, is a big winner. What can you tell us about how that happened?

HAYS: Well, it looks like they had the right bid at the right time, and certainly they have the right connections.

But Bechtel is one of the global construction giants. Remember, they helped build the Hoover Dam; they helped build the Chunnel that links the British Isles to the continent of Europe. So they have the right chops, they have the right experience.

Now, of course, do they have connections? Of course they do. George Schultz, former treasury secretary, sits on their board. Cap Weinberger, former secretary of defense. But this is very common in big businesses like this. I think what's interesting is that the Bush administration has so far allocated about $2 billion for actual rebuilding. We see $680 million going to Bechtel. The good thing is that Bechtel is talking about using a lot of subcontractors, a lot of Iraqi firms even. So that would, you would think, help build good will in the region.

But there's about $1.7 billion that the U.S. Agency for International Development has. I think some people are wondering how much more money is going to be needed, and again, not just for the physical rebuilding, but for paying teachers, civil servants. That's a very important part of rebuilding Iraq. And I think there's some question about how much the Bush administration has budgeted, actually in terms of dollars and in terms of their thinking.

KOPPEL: Just one footnote to all of that, Kathleen. I had a briefing at the USAID, and they did admit that this bidding process was not the way that they usually do it. It was closed. They invited seven companies to bid and -- or it may have even been six -- and it was based -- they all had to be American because of security reasons, and they said that they needed to expedite the reconstruction.

HAYS: I'm so glad you added that, because I think there are many questions about that. Now, we can take that at face value. Did it help the security process? Certainly, the administration is saying that it did, and USAID is backing that up. But we know there are a lot of other big construction companies in the world that would like to get into the action too and so far have not.

But I think it's interesting how this all feeds in, diplomatic questions, economic questions, business questions that still -- and we still end up sort of being pitted against a lot our traditional allies.

KOPPEL: Well, Professor Hays, I want to thank you for those comments...

(LAUGHTER)

... and thanks to all of my colleagues.

That is all the time we have today. And thank you for watching ON THE STORY." We'll be back next week.

Up next, "Inside the Regime," a CNN special on Saddam's palaces. And I'll be back in one hour, at noon Eastern, 9:00 a.m. Pacific, with my colleague Jonathan Karl for "CNN LIVE SATURDAY." And we continue with "CNN LIVE SATURDAY" at 1:00 p.m. Eastern.

A news alert is just after the break. Enjoy your weekend.

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Ranch; Economic Outlook Remains Mixed>


Aired April 19, 2003 - 10:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RUSTY DORNIN, CNN CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week. I'm Rusty Dornin in Modesto, California, on the story of the murder of Laci Peterson and her unborn son and the arrest of her husband Scott Peterson four months after she disappeared.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: I'm Suzanne Malveaux in windy Crawford, Texas, where President Bush is spending the holiday weekend. I'm on the story, the focus on the economy, not only here but also in Baghdad.

LIZ NEISLOSS, CNN CORRESPONDENT: I'm Liz Neisloss in New York, on the story of the ongoing search for weapons in Iraq and a potential battle over lifting of sanctions.

KATHLEEN HAYS, CNN CORRESPONDENT: I'm Kathleen Hays, also in New York. I'm on the story of a mixed outlook for the U.S. economy, despite a successful end to the war in Iraq.

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: And I'm Andrea Koppel in Washington, on the story of who's next on the United States' suspected military hitlist.

We'll have all these stories and the president's weekly radio address in just a few moments, but first let's go to CNN Headquarters in Atlanta for a check of the news at this hour.

(NEWSBREAK)

MALVEAUX: Well, President Bush only looking forward, not looking back, when it comes to Iraq. But the pictures might paint a different picture. We actually saw just yesterday, from Abu Dhabi Television, they say they received a videotape they claim was of Saddam Hussein on the day that Baghdad fell. U.S. intelligence say that they do not believe that that was actually taped on that day, perhaps even before the war started.

But it brings up a very good point, and this is one of perception here. Was that tape even significant? Did it make a difference? Clearly, Saddam Hussein is one that personifies what one of the major goals of the Bush administration, that is, to get rid of this dictator and this awful regime.

But at the same time, of course, it is a nagging question, where is Saddam Hussein? I spoke with a number of senior administration officials who really said it makes no difference what comes out, what we see of Saddam, whether it's video or audio or otherwise, that he is a man who does not control his country, that his regime has been destroyed.

But clearly, there is a perception problem here. This is something the administration is going to have to be dealing with. It's a nagging issue here.

And the Bush administration really, at the same time, trying to look forward, saying that, yes, we have gotten beyond the significance of Saddam Hussein, we are now looking at questions of reconstruction, we are still look for weapons of mass destruction. But this is something that the American people and the Iraqis should be heartened by.

HAYS: Suzanne, I'm wondering, though, how does it complicate the Bush -- the coalition forces, actually, saying the war has ended, we are now going to go ahead with this interim government, recognize some interim government, if we don't know what has happened to Saddam Hussein?

MALVEAUX: Well, absolutely, I mean, you bring up a very good point. It was just this past week, too, I should mention that Chief of Staff Andy Card and the White House has a website, and they were doing a chitchat site, and that actually he said that he believed that Saddam Hussein was dead. This created quite a bit of stir, but administration officials saying that they do not know whether or not he is dead or alive and that it doesn't really matter.

But you bring up a very good point and that is, is that there are coalition forces, U.S. forces, that are on the ground now, that are simply -- they're looking for weapons of mass destruction. They're also trying to determine just what has happened to Saddam Hussein.

One of the things, when it comes to weapons of mass destruction, is that members of the United Nations, they want to see those weapons inspectors back inside of the country. We heard from U.N. chief weapons inspector Hans Blix this past week, a very familiar face, saying that you should have those inspectors back in, side by side, with U.S. troops, looking for those weapons, just to give it a credibility. It's a credibility issue, just to make it seem like it is legitimate, because there are questions, still, from some European allies, and as well as those from the Middle East, that perhaps the U.S. would plant these weapons.

But, no, the administration says they don't want those inspectors in at this time. It is the job of the coalition forces to go ahead and look for them. But they are going to rely on Iraqis to point them in the right direction, perhaps even those from Saddam's regime to point them in that direction.

NEISLOSS: Suzanne, yes, that will certainly be a big battle at the U.N. There may have to be some diplomatic gymnastics in order to deal with that issue that you mention of weapons inspectors.

But diplomatically, how is the Bush administration trying to move forward? There was a meeting of the European Union in Athens. What sort of reaction does the Bush administration have to what's been happening there and what happened in Athens?

MALVEAUX: You know, it's really a Catch-22 for the Bush administration, because on the one hand they want to move quickly, but on the other hand they really can't.

I mean, what you've seen in Baghdad, thousands of people who have actually taken to the streets, saying that they're frustrated, their futures are uncertain, they want U.S. soldiers out as quickly as possible.

You mentioned, as well, that meeting out of Athens, the European Union, same thing. They released a statement saying, "Yes, we want the United States to restore order and security but, at the same time, to get out as quickly as possible."

At the same time, though, the administration is looking at a process here. And it involves, again, the U.N. Security Council, resolutions that they have to pass, to actually show that that Iraqi government is a legitimate one.

President Bush, his radio address just moments from now.

(BEGIN AUDIOTAPE)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Good morning.

This weekend, families across America will come together to celebrate Easter and continue the observance of Passover. This holy season reminds us of the value of freedom and the power of a love stronger than death.

This year Easter and Passover have special meaning for the families of our men and women in uniform who feel so intensely the absence of their loved ones during these days.

More than 250,000 American troops are serving in Operation Iraqi Freedom to protect our security and to free an oppressed people. Their families await their safe return, and our grateful nation remembers them in prayer.

Our whole nation has also shared in the happiness of learning that seven of Americans prisoners of war were rescued in northern Iraq earlier this week and are now safe. Thanks to the courage of our Marines and the help of Iraqis, their families have even more reason to celebrate this weekend.

After hearing the good news, the parents of rescued helicopter pilot Ronald Young, Jr., of Georgia thanked people from across America and as far away as Australia and Japan for their cards and flowers and prayers. Kaye Young, Ronald's mother said, "You can't believe the blessings that have come out of this. Even as sad as we were, as upset as we were, to think that he was being held, there have been so many blessings."

Mrs. Young continued, "All over this country, people cared so much about us and about our son."

As a nation, we continue to pray for all who serve in our military and those who remain in harm's way. We also pray for those who have lost people they love in this war. I have met with some of these grieving families and I have seen their sorrow and their strength.

Corporal Henry Brown, a 22-year old soldier from Natchez, Mississippi was lost in battle earlier this month. After the news arrived, his best friend, Frank Woods, Jr., said this about Henry. "He believed God was working through him and he was part of the plan. I guess part of the plan now is God calling his soldier home."

America mourns those who have been called home and we pray that their families will find God's comfort in God's grace.

His purposes are not always clear to us, yet this season brings a promise that good can come out of evil, that hope can arise from despair, and that all our grief will someday turn to joy, a joy that can never be taken away.

Laura and I wish you all a Happy Easter and a blessed Passover.

Thank you for listening.

(END AUDIOTAPE)

MALVEAUX: And the president also going to share that message tomorrow. He's actually traveling to Fort Hood, Texas. He's going to attending a church service with soldiers who are there. As you know, very significant, Fort Hood. It's the home to about half of the 42,000 soldiers that are in Iraq at this time.

And clearly that message resonating with many Americans who are still overseas. The president trying to rally the troops, as well, and also comfort the parents and loved ones for those who have not yet made it home -- Andrea.

KOPPEL: Well, Suzanne, we're now going to turn things over to Rusty Dornin in Modesto, California, where she obviously has the latest on the developments in the Laci Peterson case -- Rusty.

DORNIN: Well, Laci Peterson's husband, Scott, was arrested after four months after her disappearance in December. Now, Scott Peterson was arrested in San Diego, sporting a new hair color and a beard. And he was arrested apparently without incident. He's in jail here in Stanislaus County jail.

Now, DNA scientists did determine unquestionably that the bodies found in San Francisco Bay were that of Laci Peterson and her unborn son Conner. Now, it looks like the district attorney here says that the charges will be filed in an arraignment on Monday or Tuesday, and they will involve double homicide with special circumstances. But right now we do not know whether that will involve asking for the death penalty. HAYS: Rusty, what do you know -- do you have any hint about what kind of evidence they finally got to charge Scott Peterson besides the fact that they found Laci's body?

DORNIN: Now, what we do understand, actually from the police chief in Modesto, is that even if they had not discovered Laci's body and her unborn son in the bay, that the police here do believe that they had a strong enough case to arrest Scott Peterson.

Now, they've been very tight-lipped about the details of that case all along. But we do know from a source very close to the investigation that a sonar reading around March 12th or 13th did pick up what they believed was these bodies.

But unfortunately, due to very bad weather and because of turbulence in the shipping lanes in San Francisco Bay, there was so much turbulence that it kicked up all of the mud and apparently pried those bodies away from whatever had weighted them down inside the bay.

Now, they're going to be going back to San Francisco Bay with those sonar devices, looking for perhaps those anchors or whatever weighted the body down and perhaps whatever else is attached to those anchors. They believe that could be part of a smoking gun that could truly be the strength of their case against Scott Peterson.

KOPPEL: Rusty, what I want to know is, why did the police in Modesto wait so long to charge him? They didn't even have him labeled as a suspect. Why did they wait until now?

DORNIN: They wanted to make sure that this case, apparently, was airtight. Often the district attorneys in this cases work very closely with the police department. And from what I understand, the district attorney here is very thorough, wanted to make sure that this case was airtight.

We do understand that Scott Peterson has been under surveillance for the past couple of weeks. They knew he was in San Diego. They were concerned when once they announced that they had identified the bodies that he might flee into Mexico, so they decided to make the arrest now.

KOPPEL: Finally, a bit of closure after four months of not knowing.

Rusty Dornin in Modesto, California, thank you for joining us.

Well, we will have to take a break, but it's going to be a short one. Coming up next on ON THE STORY, CNN's Rula Amin joins us from Baghdad with the latest information about keeping the peace in the Iraqi capital.

(COMMERCIAL BREAK)

RULA AMIN, CNN CORRESPONDENT: Welcome back to CNN's ON THE STORY." I'm Rula Amin. In Baghdad, a fifth Iraqi official has been captured. He's one out of 55 officials on the U.S. most-wanted list. Hikmat al Azzawi was Saddam Hussein's deputy prime minister and finance minister, and he was captured by Iraqi policemen. They got a tape from a local resident who went to them and he said he saw him in one of the neighborhoods, on one of the blocks.

So they just went there, suspected one of the houses, knocked on the door, he opened the door, did not resist his arrest. And then he told his captors that he was considering to surrender but he didn't know how to do it, he didn't have any line of communication with the Americans.

The Iraqi policemen handed him over to the U.S. Marines, who are investigating whatever information he may be able to provide -- Andrea.

KOPPEL: Rula, how long do you think the U.S. has, really, to put its money where its mouth is, in terms of delivering on the humanitarian side and on the reconstruction?

AMIN: Well, on the humanitarian side, I have to tell you, a lot of Iraqis now are very disappointed. They had this illusion, if you want to call it that, the minute Saddam Hussein falls and Americans come in, things will change, and it didn't. So far, still there is no power in most of Baghdad. Only a few hundred houses have power. No running water, no sewage treatment, and very poor medical services.

And people have been coming up to the Palestine Hotel, to journalists and to the U.S. troops, actually demanding that they should do something about it. People saying they feel betrayed, they feel disappointed. And anger and frustration is really growing from this lack of basic services -- Andrea.

MALVEAUX: Rula, is there a sense of fear, and even concern perhaps, that Saddam Hussein is still alive?

We saw these pictures from Abu Dhabi Television. I don't know if the Iraqis got a chance to see it, but they were certainly broadcast throughout the world. And it's almost like there's this ghost of Saddam Hussein.

Does it have kind of a psychological effect on those who are inside of Baghdad, who wonder, is he really gone? Does this mean that they really are free?

AMIN: Well, for those who were happy to see him go and were relieved -- and there are many of them -- they don't have this fear that he will come back. They know that his regime is gone and that's it.

However, the fact that he -- there are pictures of him still around actually satisfies their curiosity more, because many of them are wondering what happened to him. For months and weeks, he had this strong rhetoric that he was going to fight, especially in Baghdad. And then they saw that his troops had orders actually to abandon their weapons and to pull out of the streets. He disappeared, his son disappeared, his aides disappeared.

So they're wondering what happened. Was there a deal made in order for him to save himself and save the Americans a fight in Baghdad, or was he betrayed? Is he alive? Is he dead? So all these questions are on the mind of almost every Iraqi. It's a matter of curiosity, what is he up to.

NEISLOSS: Rula, we're hearing so much about the looting in Iraq and in Baghdad in particular. But for people on the outside, some of the most surprising images are really what happened to Iraq's world- famous museum, all these great antiquities. What are the reactions of the people that you talk to, the Iraqi people, about what has happened?

AMIN: Well, I'll tell you, the looting of the museum has been one of the most devastating scenes for many Iraqis here in the capital. It's not only that valuable items that documented the ancient history of Iraq were stolen, it's also their pride, their prestige.

Many of them are very proud of their potential as a country. They see themselves as an ancient country, a cradle of civilization. So many educated people. They have the wealth, they have oil, they have two rivers. And they always saw themselves as a regional power, or at least with the potential of a regional power.

And to suddenly see that their own people have been looting the museum, taking away all this evidence of their great civilization, was devastating to them and made them even more angry. Many of them are actually blaming the Marines and the U.S. troops, saying, how can they stand by and see the museum being looted?

Even if the Marines were not physically there, they feel that they were the ones who removed Saddam Hussein and they are the ones in charge now and they should have been able to protect the museum.

HAYS: Rula, you know, we here in the States hear so much discussion about what's going to happen among the various Muslim groups within Iraq, say, the Sunnis versus the Shiites. Yet, this week, something we may not have expected, a demonstration where Sunnis and Shiites got together to tell the U.S., "We want you out of here as quickly as possible. We want to run Iraq." What is going on on that front?

AMIN: Well, Iraq is a complex mix of ethnic and religious and even political groups. So it's going to be hard to put all of these groups together and have one consensus on what the future of Iraq should be.

You have those who want an Islamic state. Yesterday, those Sunnis and Shiites who went out of the mosque chanting slogans against the U.S. and demanding the troops should leave were also chanting slogans against a secular state, and they were saying they wanted an Islamic state.

At the same time, seeing people like Chalabi, like other Iraqis, intellectual Iraqis who have been living Iraq for a long time, who desperate for democracy. And they insist they are going to grab to this right. They say they have been promised democracy and they are going to claim it -- Andrea.

KOPPEL: Rula, it was so nice to see you today. We want to thank you for joining us from Baghdad.

With Saddam Hussein's regime now history, the U.S. turns up the heat on Syria. We will have that story and go live to Sheila MacVicar in Damascus when ON THE STORY returns.

(COMMERCIAL BREAK)

KOPPEL: Welcome back to CNN's ON THE STORY. I'm Andrea Koppel in Washington.

Earlier this week, on "The Newshour with Jim Lehrer," Secretary of State Colin Powell discussed future plans to visit Syria.

(BEGIN VIDEO CLIP)

COLIN POWELL, SECRETARY OF STATE: As we get ready to release the road map that will get us jump-started in the Middle East peace process, there will be an opportunity to travel in the region in the not-too-distant future.

(END VIDEO CLIP)

KOPPEL: Now, you couldn't see them in that shot, but there were State Department officials who were sitting off to the side. In fact, there had been an interview on AP television in which Secretary Powell surprised State Department officials, as well as Syrians and many in the region, when he said he will travel again to Syria.

Now, that does not mean that Secretary Powell has a date set, but obviously, in this climate, this very charged climate where people are wondering who is next and there has been a lot of pointed rhetoric aimed at Syria, it certainly had a reassuring effect.

What I want to know, to Sheila actually, in Damascus, is the fact that Abu Abbas, the Palestinian terrorist who was responsible for the Achille Lauro hijacking, the fact he was picked up by special forces because he was turned back at the border twice by Syrians, do you think that message got through loud and clear?

SHEILA MACVICAR, CNN SR. INTERNATIONAL CORRESPONDENT: Well, to quote the Syrian authorities here, they would point out, quite correctly, that he was arrested while he was still in Iraq. And also, he did attempt to enter into Syria. He was picked up by U.S. forces in Iraq.

The Syrians have said that their borders are closed, and there is substantial evidence that, in fact, their land borders are closed. Does that mean the entire border has now become impermeable? Well, given the nature of the border, probably not. MALVEAUX: Sheila, I have a question. Did they actually believe, did the take seriously that the U.S. might actually go in with military force?

Some senior administration officials that I spoke with said that, yes, while certainly they're capitalizing off the moment, their success in Iraq, they thought it was somewhat silly that people thought that U.S. forces were simply going to take a left turn and enter Syria anytime soon. But they clearly wanted to capitalize off of that moment, that they could push the Syrian government as far as possible.

MACVICAR: There's two things. I mean, obviously, there is the very real example of what happened next door.

And it's important to say that the regime here has not been a friend of Iraq, not been a friend of Saddam Hussein for 20 years. In the last two years, there has been a thaw in their relations. And that's come about largely because of economics and, it has to be said, because of smuggled oil.

The question about what happens next in Syria is one that is causing a great deal of uncertainty. But Syrians get it, that the U.S. clearly has ambitions and desires here. They think that a lot of that comes from the south and west of here, that this is, at least in part, an Israeli agenda, and that they think that they will be pushed to do certain things.

What they were puzzled about, over the course of the last 10 days or so, is the volume and the, if you will, the megaphone transatlantic diplomacy. The Syrians couldn't understand why they were being shouted at from Washington by so many different people with so many different messages, when they thought that things could have been dealt with in a different manner.

KOPPEL: Well, Sheila, according to officials that I've spoken to here in Washington, the answer is, in their eyes, a fairly simple one. They just had the victory in Iraq. They really were going for as much bang for the buck as they could get without using military force. And they really wanted to scare not only the Syrians, but the Iranians and any other regime out there that might think that when the U.S. says, "Hey, give up your weapons program, stop supporting terrorists," that the U.S. really means it.

MACVICAR: Well, on the subject of weapons of mass destruction, we can look at what the Syrians did this week at the U.N., where they put forward a proposal to make the Middle East, the entire Middle East, a weapons-of-mass-destruction-free zone.

Now, if you were cynical, you could say that that, you know, is aimed at Israel, because of course when the United States talks about Syria's covert chemical weapons program, what they don't talk about is Israel's covert nuclear weapons program.

And that is one of the irritants in the region. It is one of the things that is seen to be a double standard. And obviously, we can understand that there may be differences in the alliances and differences in the makeup of the government, and that there will be different reasons why the U.S. does that. But from the perspective of the Syrians, from the perspective of Damascus, they see that as a double standard. And they believe that if the U.S. is truly being an honest broker, then they have to address these issues honestly and fairly amongst all parties and not just deal with the Syrian issue as though it is somehow an exception in the region.

NEISLOSS: Andrea, what are you hearing about why Washington is now targeting Syria? What are the reasons you're hearing behind that?

KOPPEL: Well, it has to do with what I was saying to Sheila just a moment ago, about really trying to capitalize on the victory in Iraq. There is still, clearly, a debate within the administration as to just how far to push this.

KOPPEL: We heard some really strong rhetoric from Secretary of Defense Donald Rumsfeld, in which he would not close the door, despite reporters' questions, to the prospect of a future military action against Syria. Whereas Secretary of State Powell, as the week went on, sort of was reigning things in. And it culminated on what you just heard there on the Lehrer Newshour with him saying that he will go to Syria, wanting to kind of pull things back a little and lower the temperature.

MALVEAUX: And interestingly enough, Andrea, there was a middle position that the White House took as well. Ari Fleischer really being intentionally vague when he was asked that question about military action. Interesting how you had the State Department, the Defense and the White House somewhere in the middle.

HAYS: And, but I'm really interested, Andrea, in the reaction overseas. Whatever Rumsfeld and Powell are saying back and forth, whatever the Bush team may think, the rhetoric is getting much more heated overseas, because people are saying this is clear evidence that the United States is becoming a consciously imperial country, it has a motive to dominate the Middle East, dominate the world.

And it just seems that this kind of criticism isn't falling on the ears at the Pentagon. Is it falling on the ears at the State Department?

KOPPEL: Oh, absolutely. They are -- their ears are well tuned to the concerns of the region and, certainly, are watching all of the Arab news networks and are well aware of the criticism that is out there. And the debate within the administration continues.

We want to thank our senior international correspondent, Sheila MacVicar, who is reporting from Damascus. And coming up on ON THE STORY," a suspected terrorist leader captured, but which country will get the case?

Then, as the hunt for weapons of mass destruction in Iraq continues, who should be in charge of the search? We'll get the details from our United Nations producer.

Plus, now that the war in Iraq is winding down, can we expect a bounce on Wall Street? We'll get the economic outlook from New York.

All that, plus a check of the headlines at this hour, right after a short break.

(COMMERCIAL BREAK)

(NEWSBREAK)

KELLY WALLACE, CNN CORRESPONDENT: Welcome back to ON THE STORY. I'm Kelly Wallace on the story in Jerusalem, where there is a renewed focus on that so- called road map for Middle East peace.

But on this day, more violence, during a clash in the West Bank town of Nablus, between Palestinian stone throwers, some armed Palestinian gunmen and Israeli soldiers. A photo-journalist was killed, a man who normally works for Palestinian TV, but on this day was working for Associated Press Television, shot in the head and killed.

He becomes at least the fourth journalist to be killed during this latest Palestinian uprising against Israel, which began in September 2000. And this, a signal of the intense challenges ahead for Israelis and Palestinians if they are going to make their way back to peace negotiations and to the creation of a Palestinian state by 2005.

NEISLOSS: Kelly, tell us a bit about the Palestinians' own efforts at setting up political institutions. They have the newly appointed prime minister, Abu Mazan. How is that progressing?

WALLACE: Well, Abu Mazan is facing a big challenge. He has had a dispute with Palestinian President Yasser Arafat over the make-up of his cabinet. Arafat has made some objections, especially because some people close to Arafat are not being included in Abu Mazan's cabinet.

Sources though are saying that possibly as early as tomorrow, Abu Mazan would have this cabinet together. Then it must be approved by the parliament.

And after than happens, the Israelis say Prime Minister Sharon will invite Abu Mazan to come to Jerusalem for talks. And as we know, President Bush has said he will present that road map for Middle East peace to both sides.

HAYS: Kelly, what is the reaction to the arrest of Abu Abbas, Palestinian terrorist, who masterminded the hijacking of the Achille Lauro back in 1985? Do people put much importance on this, or has this become sort of a footnote in history?

WALLACE: Well, really, it depends on whom you talk to. The Palestinians are angry, at least some are. And they think Abu Abbas should be released. They say his arrest violated an agreement, an interim agreement under the 1993 Oslo peace accords, which said that any member of the Palestinian Liberation Organization could not be arrested for any act committed before 1993. So they want Abu Abbas released. The United States says it is not a party to that agreement, so it's not bound by that.

The Israelis are hailing this arrest. They say Abu Abbas never renounced terrorism, and therefore they believe he should be arrested.

KOPPEL: Kelly, what is the feeling on the streets of both Israel and also in the Palestinian territories? Is there anticipation of this road map? We already know that the Israelis have raised a number of suggestions that they would like made to the road map. Is there any feeling that this could be a turn in the corner?

WALLACE: Well, Andrea, you know, the real mood is pessimism. You talk to Israelis, you talk to Palestinians, both seem somewhat pessimistic. Some Palestinians question how much political capital President Bush is going to invest to try and get the two sides to come to some agreement. Some Israelis are wondering if the U.S. is going to push too hard on the Israelis.

So there is a lot of pessimism, although people do think there is a chance here, and so they're watching very carefully.

I want to bring in now our colleague, producer Maria Fleet, who's joining us from Baghdad, who spent most of the time covering the U.S.- led war in Iraq in northern Iraq. She encountered some very, very difficult situations.

Maria, I first want to ask you, what was the experience like? And how concerned were you for your safety and the safety of your fellow colleagues?

MARIA FLEET, CNN PRODUCER: Well, it was a very different kind of war than what unfolded in the south of Iraq, that's for sure. But we had -- because the battle, the actual war did not come to the north the way we all expected that it would, because the northern front was largely static because of the fact that Turkey would not allow the U.S. to use its bases to base troops there.

However, there were threats, direct threats against Western journalists working in the north of Iraq by the Baghdad regime. And there were -- we were told that there were suicide squads that were out looking to target Western journalists, especially American journalists.

And CNN, in fact, was told by the Kurdish officials that we had a direct -- a plot against the hotel that we were staying at in Irbil, in the capital of northern Iraq. And they uncovered this plot, and actually, it was directed by the baghdad regime, according to those officials, and they thwarted it and managed to stop it before it happened.

NEISLOSS: Maria, there were pictures and very dramatic stories about what you went through with correspondent Brent Sadler. Your car was fired upon as you came into Tikrit. I saw a picture of you with a hole -- I don't know whether it was a bullet or a piece of glass -- in a flack jacket. What are your thoughts after this experience?

And also, there was someone, I guess, traveling along with you for protection, with a weapon, which is considered, I guess, somewhat controversial for journalists. What are your thoughts on all this?

FLEET: Yes, well, that day was the day before the Marines entered Tikrit, actually, and we were driving down to see what the situation was in Tikrit, what the defenses were. And we drove basically freely, all the way, almost right into Tikrit, along the way passing long, giant military compounds that had been abandoned by the Republican Guard and other army units.

And at that point, I mean, we didn't see -- we didn't see any defenses around Tikrit and decided to enter and see, on the basis of some information that we had from people who were driving out, they said it was fine to go inside and they would actually lead us in.

NEISLOSS: Maria, you took quite a chance. We're going to have to leave it there. Our thanks very much to you. Stay safe. Thank you for joining us from Baghdad.

Up next, the continued hunt for weapons in Iraq and a call to lift sanctions. Does the U.S. still need the U.N.? ON THE STORY" returns after this short break.

(BEGIN VIDEO CLIP)

HANS BLIX, CHIEF U.N. WEAPONS INSPECTOR: Well, it is true that the credibility of any finds, I think, would be much better with international inspection.

And I think we have credibility. I know that Washington was disappointed that we did not present evidence that would have suited their argument at a given time. But I think, if anything, that increased our credibility in the world.

(END VIDEO CLIP)

NEISLOSS: Chief U.N. weapons inspector Hans Blix this week, making the case for keeping the weapons hunt an international endeavor. Blix says inspectors are of course ready to go in, as Suzanne said, but Blix says he sees no sign that the U.S. wants his inspectors back.

Welcome to ON THE STORY."

Blix is really becoming a lot more open these days as his term comes to an end. He is now seeing the shoe is on the other foot for the U.S. They have to go in and try to play detective, the way his inspectors were accused by the U.S. of trying to be.

He sees this as still a very difficult task. He says, "Hey, let's see what Washington, let's see what London can find. It is not going to be an easy job."

KOPPEL: Well, Liz, I know that you were shocked, shocked when you heard that there was another impasse at the United Nations over lifting the U.N. sanctions, with France and Russia on one side saying, "You know, you've got to make sure that Iraq is free of weapons of mass destruction. You guys are the ones who said they were there." And the U.S. is saying, "Come on, the regime is gone. Lift the sanctions so that we can sell the oil." Right now they can't sell the oil.

NEISLOSS: Well, this is going to be a very difficult thing with several issues all intertwined. You have sanctions. You have oil for food, the selling of the oil. And there may be some -- may be ugly PR that may come out or may not.

The U.S. is already sort of positioning this as, "Look, you guys didn't want to come along with the war, and now we should be able to say what's happening with the peace."

Diplomats at the U.N. are not necessarily going to go along with this. They see that there will be some leverage that they may have. The U.S. has to come back to the U.N. to get sanctions lifted. According to resolutions that exist, the weapons inspectors have to certify that Iraq is weapons-free before sanctions can be lifted.

But there are ways, and there are hints from Washington that there will be ways found, maybe of going around those resolutions. One suggestion: Hey, these were all entered into when there was a government of Saddam Hussein. That doesn't exist anymore. So perhaps, that's a way of saying, let's write some new resolutions.

But, you know, as one diplomat who did not go along with the war coalition said to me, "Look, there's going to be a lot of horse trading at the table. It's going to come down to money."

WALLACE: Liz, what are diplomats in the hallways telling you? Are they surprised at how quickly this war pretty much wrapped up in Iraq? Are they angry at the U.S.? Are they worried about next steps? What's their main sentiment, as they really were on the sidelines during this entire war?

NEISLOSS: I think there is a bit of sort of amazement at how quickly things went. I don't think that the U.N. diplomats were prepared, the Security Council, were prepared to jump in as quickly as they will need to if they want to get a piece of the action, so to speak.

The U.S. is already steam-rolling ahead, in terms of setting up an interim government. The diplomats at the Security Council are going to have to make a decision.

At the U.N. though, the organization itself, they had been planning for a quite a while for what was going to unfold.

HAYS: Well, Liz, to kind of follow on that question to a certain extent, the reaction now to the U.S. and its fairly aggressive posture in the world, aggressive posture in the region, having won this victory in Iraq so quickly, throwing stones at Syria, if you can put it that way, or at least throwing down a gauntlet, what is the talk about that?

NEISLOSS: Well, regarding Syria, I mean, clearly there's still -- there is still a lot of residual anger and current anger over what happened in Iraq. And Syria being added along with that is not seen as helpful.

Kofi Annan actually took the step, the U.N. secretary general, of coming out and saying, "This is not good for an already unstable region."

So I think a lot of diplomats, and from many parts of the world, are somewhat surprised at what the U.S. is doing.

HAYS: Well, a little bit of surprise on Wall Street this week that some of the earning statements coming out as well as they did. We're going to go from diplomacy to Wall Street. Will victory in Iraq spark a strong U.S. economic recovery? We'll talk about that when ON THE STORY" returns.

(COMMERCIAL BREAK)

HAYS: Welcome back to ON THE STORY."

For me, it's been watching Wall Street these past few weeks, of course, fixated on the war, traders, investor strategists pretty much ignoring news on the economy and watching the dollar. Oil prices gyrate day in and day out. When it looked like we had a harsh battle and things were slowing down, maybe the stocks would fall. As soon as things picked up steam, more of a rally.

But the question really is now the economy. We can make excuses for the economy in February and March. A lot of bad weather across the country in February hurt. Then, of course, war worries. Then the war started.

But now, as the war winds down, there's a real question about, will firms start hiring again? Will businesses go ahead with those big investment decisions? And how much other problems -- think of the ailing airlines. Think of state and local governments that don't have money to spend. Those are problems that go beyond the war. And, again, now people are waiting eagerly to see how these various forces are going to play out.

WALLACE: Well, Kathleen, everyone expected there to be somewhat of a lift in the economy with the war winding down. What are the numbers showing? And do you have any good news for all our viewers today?

HAYS: Well, you know, I think if you look at it as two teams -- you know, recovering the economy versus maybe a move back towards recession -- they're kind of at a standstill right now.

The housing sector is holding up fairly well. We saw a good rebound in housing construction in March. The consumer isn't spending gangbusters, but you know, at least there's modest spending in the economy broadly. That's a good thing. And interest rates remain so low. Low mortgage rates will help keep that housing sector liquefied, will keep us refinancing. That puts money in our pockets.

On the minus side, though, we've seen the new claims for unemployment benefits get back to a high level. It shows that firms are still laying off. The latest manufacturing surveys make it look like in early April there were turndowns in some key regions of the country. And remember, broadly speaking, we carry a lot of debt as consumers, a lot of debt as businesses, and the government's debt is getting bigger in the form of a bigger budget deficit.

KOPPEL: Obviously, Kathleen, so much of the climate for investment is based on, you know, how people feel psychologically. I don't want to put you on the spot, but how would you -- if you could improve the atmosphere, what do you think would need to happen in order to get people investing again and to get those employers to start hiring?

HAYS: I think some people figure that if we saw a sustained move in the stock market, that would help. That would make everybody feel like we're back on track.

And I think some of the things working against that, again, are just some big questions about, for example, how Bush's policies were worked out. Bush, again, calling for very large tax cuts. He's backed away from this $726 billion package. They're talking about $550 billion; the Senate, $350 billion.

But step away from the numbers. I don't think anyone on Wall Street is convinced that tax cuts will do the trick. There's a debate there.

And again, with the state and local governments facing deficits, with communities raising their property taxes, that's a problem.

I think it's a very good question, Andrea, because we don't have any pickup from overseas. Japan weak, European economies are weak. And we know that paying for the reconstruction of Iraq is going to be a big bill as well.

We just have to hope, I guess, that consumers are going to -- you know, people like us are going to say, things are OK, I'll go ahead, I'll refinance, I'll buy a home, I'll get on with my life, and that's the thing that will pull us ahead.

NEISLOSS: On the subject of Iraq, it was described as something that would be potentially just a huge windfall for American businesses. So now we're starting to see the contracts coming out, and Bechtel, I guess, is a big winner. What can you tell us about how that happened?

HAYS: Well, it looks like they had the right bid at the right time, and certainly they have the right connections.

But Bechtel is one of the global construction giants. Remember, they helped build the Hoover Dam; they helped build the Chunnel that links the British Isles to the continent of Europe. So they have the right chops, they have the right experience.

Now, of course, do they have connections? Of course they do. George Schultz, former treasury secretary, sits on their board. Cap Weinberger, former secretary of defense. But this is very common in big businesses like this. I think what's interesting is that the Bush administration has so far allocated about $2 billion for actual rebuilding. We see $680 million going to Bechtel. The good thing is that Bechtel is talking about using a lot of subcontractors, a lot of Iraqi firms even. So that would, you would think, help build good will in the region.

But there's about $1.7 billion that the U.S. Agency for International Development has. I think some people are wondering how much more money is going to be needed, and again, not just for the physical rebuilding, but for paying teachers, civil servants. That's a very important part of rebuilding Iraq. And I think there's some question about how much the Bush administration has budgeted, actually in terms of dollars and in terms of their thinking.

KOPPEL: Just one footnote to all of that, Kathleen. I had a briefing at the USAID, and they did admit that this bidding process was not the way that they usually do it. It was closed. They invited seven companies to bid and -- or it may have even been six -- and it was based -- they all had to be American because of security reasons, and they said that they needed to expedite the reconstruction.

HAYS: I'm so glad you added that, because I think there are many questions about that. Now, we can take that at face value. Did it help the security process? Certainly, the administration is saying that it did, and USAID is backing that up. But we know there are a lot of other big construction companies in the world that would like to get into the action too and so far have not.

But I think it's interesting how this all feeds in, diplomatic questions, economic questions, business questions that still -- and we still end up sort of being pitted against a lot our traditional allies.

KOPPEL: Well, Professor Hays, I want to thank you for those comments...

(LAUGHTER)

... and thanks to all of my colleagues.

That is all the time we have today. And thank you for watching ON THE STORY." We'll be back next week.

Up next, "Inside the Regime," a CNN special on Saddam's palaces. And I'll be back in one hour, at noon Eastern, 9:00 a.m. Pacific, with my colleague Jonathan Karl for "CNN LIVE SATURDAY." And we continue with "CNN LIVE SATURDAY" at 1:00 p.m. Eastern.

A news alert is just after the break. Enjoy your weekend.

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Ranch; Economic Outlook Remains Mixed>