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On the Story

War in Iraq Alters Terror Fight Inside U.S.; Baghdad Residents Blame U.S. for 14 Deaths; U.N. Struggles to Find Role to Play in Iraq

Aired April 26, 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.


KELLI ARENA, CNN JUSTICE CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories that we covered this week.
I'm Kelli Arena in Atlanta. I'm on the story of how war in Iraq has altered the terrorism fight inside the United States, and put the feds on alert for smuggling of art and artifacts.

RULA AMIN, CNN CORRESPONDENT: I'm Rula Amin in Baghdad. Residents here are blaming the United States for the killing of at least 14 people, when a missile hit a residential building on the outskirts of the capital.

KELLY WALLACE, CNN CORRESPONDENT: I'm Kelly Wallace in Jerusalem, on the story of how changes inside the Palestinian government have pushed Yasser Arafat to one side and put new pressure on the United States.

LIZ NEISLOSS, CNN CORRESPONDENT: I'm Liz Neisloss in New York. The United Nations was sidelined by war in Iraq. Now it's struggling to get into the peace, rebuilding the country, and searching for weapons.

PATTY DAVIS, CNN CORRESPONDENT: And I'm Patty Davis in Washington, on the story of how winding-down war may be pumping up the number of Americans traveling by air, as one airline, American, fights off its financial tailspin.

We'll be talking about all of these stories, and we'll listen to the president's radio address.

We want to hear from you too. E-mail us at onthestory@cnn.com.

But first, a check on what's happening at this hour from CNN headquarters in Atlanta.

(NEWSBREAK)

AMIN: It's a holy pilgrimage that was banned for years. This time, hundreds and thousands of Shi'a Iraqis and Iranians took part. It was described as an outburst of power for the Shi'ite community, a flexing of muscles, some say. And some are concerned by the call from some Shi'ite clerics for the establishment of an Islamic state.

NEISLOSS: Rula, what are you hearing about the explosion at the dump? I'm sure you're hearing a lot. But there was an explosion at an ammunitions dump. What are you hearing from Iraqis, and what are you able to see that the Americans are doing in response to kind of calm things down?

AMIN: Well, what happened is that this missile came from an ammunition dump that the U.S. Army had put there. They were collecting arms that used to belong to the Iraqi army, and they were going to destroy it, and they have been destroying these arms.

Residents are angry, because they said that they have been appealing to the army to remove the weapons from that neighborhood for days now, because they were concerned for such an incident. The army is blaming outside attackers. They said they fired flares into the depot ammunition, and that what ignited the explosions and the missiles that hit that residential building.

But still, the neighbors and the residents who are digging in the rubble, trying to save their relatives and friends, were too angry to listen. They accused the U.S. Army of being responsible. They said that Saddam Hussein and George Bush are the same, and they don't care for Iraqi civilians. They are very angry and disappointed that this has happened.

NEISLOSS: Rula, does it seem to you that this has truly escalated that anti-American sentiment, or is this emotion that you have seen firsthand all along and that we are now seeing in full color for the first time?

AMIN: Well, it's been growing. Because I think many people who are very happy to see that the troops have removed Saddam Hussein were hoping and had very high ambitions on how things would look like the day after. And now they're a bit disappointed, and their frustration is going first, there are no basic services that have been restored. Still, most homes don't have enough electricity, not enough water.

Many came to us and said, "How come they were able to protect the oil fields, the oil ministry, and they've got the oil to be pumped again, but not the power?" So it seems suspicions are growing, and today's incident only inflamed these kinds of suspicions and the disappointment.

So people came here, even to the Palestine Hotel, and they were insisting they, themselves, are going to do everything possible to get the U.S. troops to leave Iraq.

WALLACE: Rula, going back to the Shi'ite Muslims, what's your sense about the thousands who marched, if they're going to be able to organize themselves into a political force to try and one day take control of the country?

AMIN: Well, we are hearing and seeing Shi'ite clerics actually trying to do that. They're trying to muster support among so many different sectors of the population. They're trying to offer social services, medical services, and security, in order to fill the power void after Saddam Hussein is gone and there is no central authority now. Now, people here, regular Iraqis, secular Iraqis, were very understanding for the outpouring of religious emotions during the pilgrimage, but some did say that they are worried, they do not want to see an Islamic state here.

But they know that when there's a void of power, when people cannot turn to a policeman or a court of law in order to protect themselves, they always turn to the mosque, to the church, to the religious establishment for such protection, and that's what concerns some secular Iraqis here.

DAVIS: Rula, what is taking so long to come up with these arrests? You've got Saddam Hussein still on the loose. You've got 45 of the 55 on those cards, that U.S. deck of cards, still not taken into custody by the U.S. What is taking so long?

AMIN: Well, because most people just disappeared and we don't know where. Saddam Hussein disappeared, his two sons, most of his aides and ministers. And people are just really puzzled, where did they go?

Because many people here are more than willing to give the U.S. troops tips on where they are hiding, but nobody has come forward with such information yet, or at least it's always at least 12 or 24 hours late. And that's why it seems those people are hiding among people who are very loyal.

What are they up to? We still don't know.

WALLACE: Rula, I wanted to ask you, what about the former deputy prime minister, Tariq Aziz, has been taken into U.S. custody. You also have the former Iraqi spy chief now in U.S. custody.

How significant is this for the U.S.? And are your sources telling you if these two men are talking at all, potentially about the whereabouts of Saddam Hussein?

AMIN: Well, the significance has two aspects. One is that people like Tariq Aziz had been long associates of Saddam Hussein, and so the U.S. officials believe they must know at least if he's dead or alive, where is he, and what is he up to.

On the other hand, people like Tariq Aziz have become the public face for Iraq. And even for Iraqis who hated them, they were still symbols of the regime. The fact that they were captured in U.S. custody actually cements the idea in Iraqis' heads that the regime is gone and there's no way back -- Kelly.

NEISLOSS: Is there, Rula, any discussion by Iraqis that you speak to about the Iranian role in all this? This is something the U.S. is fearing, what the Iranians are trying to do to set up a theocracy or a religious government. What is your sense, from what you hear, of what reaction there is to any Iranian influence?

AMIN: There is some Iranian influence, and the people in Iraq are aware of it. But it's not the only drive for these demonstrations and protests we have been seeing. Because even within the Shi'ite community there are divisions. There are those who are very loyal to Iran, and there are those who are more loyal to their Arab nationalism and they feel that they are Arab Shi'ites more than Iranian Shi'ites. And so there has been always a competition, where does the authority for the Shi'ite community come from, Najaf or Qom in Iran. And that is part of the division.

So it's not all an Iranian influence. There is an Iranian element, but there is also the element of people's anger and -- actually, it's the rise of anti-American sentiment, not only here in Iraq, but in the Arab world.

And it's an extension to that, because even the religious community here, who did not stand by Saddam Hussein, the clerics, they were happy to see him go, they were happy to see the U.S. forces come and take over his palaces, but now they want the forces out. They don't trust them. And they really have deep hatred for the U.S. policies.

So they're going to try their best in order, first, to fill the power void, and second, to make sure that they have a say in the future of Iraq.

DAVIS: Rula, how personally dangerous is Baghdad for you, for other Americans, and just the people who live there, the Iraqis, now that Saddam Hussein is gone? Are U.S. forces providing the protection there on the streets? And are the police -- the Iraqi police now restoring order?

AMIN: Well, there are joint patrols by the U.S. Army and local Iraqi policemen, but it's not enough. The streets are still dangerous.

I've heard from so many Iraqi women who were telling me that they can't go out at night anymore. They always have to make sure they're back at home before sunset.

At the same time the streets usually at night are empty, there is still sporadic violence.

And as far as journalists are concerned, I'll give you an example. Today, when CNN's crew went to that site where the missile hit the residential building, there were some angry crowds who were actually coming out against our crew, against Nic Robertson, our correspondent. One of our producers, Rida (ph), was actually hit because -- punched because people were so angry. And they considered them as the face of the West. And others were angry because they wanted to show them more, the aftermath. And they had to come back to deliver the tape and send the pictures out, and they couldn't. So they were angry at them for not staying.

So there is a lot of growing anger, growing frustration, and people don't know where to direct this anger.

WALLACE: Well, Rula, moving from Baghdad to Jerusalem. This part of the world is trying to figure out what happens next and whether an end to war means a new U.S. push for Mideast peace.

We're back on the story after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: Peace between the Israelis and the Palestinians is a major objective for the world. For all, other than those terrorists, for all who love peace, peace between the Israelis and the Palestinians is a major objective. And it is something that the president has worked on long and hard.

(END VIDEO CLIP)

WALLACE: White House Press Secretary Ari Fleischer sending a signal this week that Mideast peace is definitely back on the radar screen in the Bush administration.

Welcome back to ON THE STORY. I'm Kelly Wallace in Jerusalem.

Really, the most dramatic development this week, Palestinian President Yasser Arafat, who had been resisting giving up the power he has wielded over Palestinian affairs for decades, facing tremendous international pressure, and then in the final hours before a deadline, he ultimately backed down and approved the cabinet of his prime minister-designate, Mahmoud Abbas, commonly known as Abu Mazan.

Now, on Tuesday, the Palestinian parliament will vote on this cabinet. And then Abu Mazan is expected to get something that Yasser Arafat never received. The White House is indicating President Bush is likely to invite Abu Mazan to the White House very soon.

DAVIS: Is Yasser Arafat history? That is the big question here.

WALLACE: That is the key question, Patty, and one a lot of people wanted to know. The Americans and the Israelis say they will be watching very closely to see if Yasser Arafat is wielding any power behind the scenes.

And we should say that Yasser Arafat put up quite a fight. Abu Mazan, his prime minister-designate, ended up having to include in his cabinet a number of Arafat loyalists.

The question is, will there continue to be a power struggle behind the scenes? The Americans and the Israelis will be watching closely. They have made it clear they want to see Yasser Arafat sidelined, and they want Abu Mazan to be the one in control of day-to- day affairs.

NEISLOSS: But clearly the Americans are embracing this potential new cabinet. Does this -- it seems like this means the next step, the road map, is that much closer. Is this making the Israelis nervous? What sense are you getting from them that they're about to face the reality perhaps of really getting under way with this step toward Palestinian statehood? WALLACE: Well, the Americans have said, Liz, that once Abu Mazan's cabinet is approved and sworn in, that so-called road map paving the way for the creation of a Palestinian state by 2005 will, in fact, be published.

But there's likely to be a bumpy road. The Palestinians want that road map to be published and implemented as it stands. The Israelis are objecting. They say they have a number of changes they want to see made. The Americans are saying they'll hear comments from both sides and give careful consideration to both the Israeli point of view and the Palestinian point of view.

So definitely a bumpy road expected, but tremendous pressure, no doubt, on the American administration, especially with the anti- American sentiment in the Arab world, to try and do something now on this Israeli-Palestinian conflict.

AMIN: Kelly, I have a question. Abu Mazan doesn't have a lot of support, grassroots level at least, among most Palestinians, because most people perceive him as too soft. Now that if he needs to deliver, he needs to show them that he can deliver something.

What is it that he's likely to get, whether from the White House or from Israel, something tangible on the ground that he can tell people, "I can deliver"?

WALLACE: Rula, you raise a great point, because that's exactly right. Palestinians on the streets are somewhat skeptical of Abu Mazan. In fact, they're concerned, wondering if he's sort of the Israeli American man in the Palestinian territories.

So what he'll need to get, concessions from the Israelis. He will need to see some withdrawal of Israeli forces from Palestinians towns, the release of some Palestinian prisoners, the easing of some restrictions, travel restrictions and check points, on the Palestinian people to show that he is acting on behalf of the Palestinian people.

And that is so important. We were on the streets of Ramallah yesterday, Rula, and so many people said they're concerned. They wonder if he's not really just the hand-picked person for the Americans and the Israelis.

ARENA: Kelly, what kind of a role is Colin Powell playing in these negotiations?

WALLACE: Can you repeat that...

ARENA: Kelly, I don't think you heard me.

WALLACE: ... question? I didn't hear it so well.

ARENA: How key, how key is Colin Powell?

WALLACE: Well, very key. He is expected to come to the region very soon, in fact, soon after the road map is published. Perhaps a sense we're getting from U.S. officials is that he might wait for Abu Mazan to meet with some Arab leaders and have other meetings before he comes here, again, not to look at -- make it look as Abu Mazan is the Bush administration's man in the Palestinian territory.

So U.S. Secretary of State Colin Powell says he will be coming here and will be trying to put pressure on both the Israelis and the Palestinians to take steps. And the key question is, really, what moves both sides will make and whether or not they'll make them.

DAVIS: Is he just too close to the Bush administration, though, that that could possibly hurt him in Israel?

WALLACE: I think you're talking about Abu Mazen, if he's too close to the Bush administration. That certainly could hurt him.

And another question we should point out, or another point, which is the pressure on the United States is enormous, especially coming after the war in Iraq, the tremendous anti-American sentiment we're seeing on the streets in Baghdad and throughout the Arab world. There's a lot of pressure on the Bush administration to deliver here.

And President Bush, we all know, is going to face a reelection next year, reelection as president. He is going to be facing pressure from American Jews and Christian conservatives who don't want to see him force too many concessions from Israel, in which they feel might compromise Israel's security.

So many believe, if the White House is going to act, it needs to act now, because if we get closer to a campaign, any concessions for the president to push for might be much more politically difficult.

AMIN: Kelly, I have a question, which is, among Israelis, they know now that there's a Palestinian cabinet, the pressure may shift on the Israeli prime minister, Ariel Sharon. Are they welcoming that pressure? Do they want to see the peace process moving forward? Or are they actually concerned about such pressure?

WALLACE: Rula, you know this region so well. A lot of concern, really, on the streets. There's pessimism on the Palestinian streets. There's a little pessimism on the Israeli streets as well. People are concerned.

They do think this might be a window of opportunity, a moment to seize, a time to act. Many people would like to see, of course, if they believe Abu Mazen is a partner, a partner in peace, is taking tangible steps in their eyes to crack down on the Palestinian militants and stop the violence, they are going to want to see their prime minister take similar steps.

He, of course, is in a right-wing coalition government. He will not have the majority of his government supporting him, so that's another battle ahead for the prime minister.

I think it's fair to say Israelis will be watching. But if they see steps being taken by the Palestinian government, there's likely to be some pressure on the Israeli government to take similar steps as well. ARENA: Kelly, you mentioned before that, on the road map, that Israel had some problems with it, as it's drafted right now. What is the biggest problem, the biggest challenge that you're seeing from your vantage point?

WALLACE: I would say two, Kelli. One is the whole sense of, should these steps by the Israelis and the Palestinians be taken simultaneously or one after another? The Israelis would like to see the Palestinians take many steps to crack down on these Palestinian militants before the Israelis have to take some steps.

Patty, let me go back to you now for this development on the National Rifle Association.

DAVIS: Yes, other news in the world today, Charlton Heston, 78 years old, the former head of the National Rifle Association, now about to speak to the National Rifle Association convention in Orlando, Florida. Let's listen in. Wayne LaPierre introducing him.

(LIVE EVENT)

DAVIS: Charlton Heston and his wife, Lydia, announcing farewell to the National Rifle Association's national convention in Orlando, Florida. Heston has recently announced that he has symptoms of Alzheimer's disease, that he was stepping down as president of the NRA. He served three -- an unprecedented number of terms, six years, as president of the National Rifle Association and then announced he would be stepping down because of those symptoms.

Kelly Wallace, you were at the White House for a long time, obviously watched the National Rifle Association work its magic as a political -- a very potent political force in Washington.

WALLACE: Patty, there's no underestimating how powerful a political force the National Rifle Association can be for candidates at the state level, at the national level, members of Congress, members of the presidential campaign or the presidency. It has enormous get-out-the-vote effort, lobbying effort, enormous financial backing for candidates.

So it is a tremendous political force. What it does is watched closely. Candidates, obviously, watching very closely what the National Rifle Association does. And of course, on this day, saluting Charlton Heston for his service to this organization.

But again, I've been away from domestic politics for a few months now, but it is truly one of the most powerful political forces determining state and national politics in the United States.

ARENA: Well, thanks, Kelly. We're going to move on.

We want to thank Rula Amin, on the story of development in Baghdad.

Rula, what is on the agenda for today? AMIN: Today, we're working on a story of how schools are still closed here in Baghdad. Many of the schools have been looted. Others were used by the Iraqi army. Some are still occupied by the U.S. Army. The teachers are not getting salaries. Most of them stay at home, and so do the Iraqi children.

ARENA: Thanks so much, Rula.

Well, coming up, more fallout of war and a new crackdown here in the U.S. of items that may have been stolen from Iraq.

We're back on the story in two minutes.

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEO CLIP)

JEAN MARC DE LA SABLIERE, FRENCH AMBASSADOR TO THE U.N.: We think the only politically and credible thing to do is to suspend the sanction. And this is sort of nothing to do with being good or bad guys. You see, we think it's logical.

(END VIDEO CLIP)

NEISLOSS: That's French Ambassador to the United Nations Jean Marc de le Sabliere this week, as the struggle that began with talk of war now moves into the talk of peace.

We're ON THE STORY. Welcome back.

Well, France says, "Look, it has nothing to be done with good or bad guys," but the fact is that in the U.S. they are belong painted as that, as bad guys, only interested in the contracts, only interested in the money to be made in Iraq.

They came out very suddenly with this decision, "We should suspend the sanctions immediately." There were very few details that were available. Journalists were scrambling to find out, "Well, how will this work, what's going on?"

One diplomat said, "Look, the headline is, France wants to suspend sanctions, but they haven't got a clue as to the details."

ARENA: Liz, how would you describe the relationship right now? I mean, there's a lot of, obviously, public talk, but behind the scenes, the relationship between France and the U.S., where are we?

NEISLOSS: Well, it's very had to tell at the U.N. right now. What diplomats are saying is inside the Security Council, these conversations about Iraq have been very, sort of, tentatively done. They really are looking to try not to have that contentious head- butting, adversarial relationship that they have had. But they are heading into some seriously adversarial relations -- some seriously adversarial topics. It's going to be very difficult to maintain that sort of friendly diplomacy.

Some looked at this French move, the call to suspend sanctions, as an olive branch. It's an effort to meet the U.S. in some way, because the U.S. has called for the full lifting of sanctions. So it's an attempt by the French.

WALLACE: Liz, are you picking up from diplomats any sense that the United States is going to try to punish the French in any way, in any way through programs at the U.N. or elsewhere?

NEISLOSS: It's really not clear yet exactly what will happen. The U.S., possibly next week, will really lay its cards on the table when they put down a resolution that will define all these complicated issues. We'll see where that leaves France. They may appoint a U.N. administrator of some sort. They will spell out how oil will be dealt with, how oil for food will be dealt with.

But in all these issues, as one U.S. official said to me, "Look, the big elephant in the room is oil. Countries will say they care about the Iraqi people. That may be true to a certain extent. But you cannot ignore that big elephant." It all comes down to money and politics.

DAVIS: But doesn't the U.S. or the coalition have to find weapons of mass destruction in Iraq before those sanctions can officially be lifted?

NEISLOSS: Well, that goes back to the question of whether the resolutions still hold. And that argument possibly that may come from the U.S. that, "Hey, the government is gone. Those were resolutions for the old government. Now they don't apply anymore."

But France and Russia and probably China very much are sticking to that argument, even the U.K., that weapons inspectors, U.N. weapons inspectors, need to do the job, need to get back in. That's going to be a point of contention, because the U.S. right now and this week very clearly said, "Look, we've seen no role for the U.N. weapons inspectors, no role, at least right now, for Hans Blix."

ARENA: Liz, do you see any momentum building at all for a more involved U.N. role, in terms of setting up a legal system in Iraq? I mean, moving away from oil, but there's an infrastructure that needs to be set up that, at least from my side of the fence, the United States seems to be saying, "Well, wait a minute, you know, we're going to figure out how this is going to work and then bring everybody else in."

Do you get any sense from your side of the fence that things are taking a turn at all?

NEISLOSS: Well, I think a lot, again, will depend on what the U.S. is willing to put on the table. And the arguments will begin from there. The U.N. -- you mentioned legal structure. The U.N. certainly could say it has experience at helping to set up legal institutions. But in the case of Iraq, the U.N. has clearly said, "Look, we never wanted to manage the country, to administer the country. It's too big, it's too complex for the U.N."

But one argument that they do make, very interesting, one U.N. official recently said, "Look, we could be there to get the U.S. off the hook," that they put themselves on when, months down the road, years down the road, the patience runs out, they will want us to be there.

So the U.N. is prepared to play a role, a political role if they need to, maybe something like what they did in Afghanistan, where they helped broker the emergence of local government officials.

So it just -- but it all, again, goes back to how much is the U.S. going to give? The U.N. is being very cautious right now.

DAVIS: Liz, another outcome of the fall of Saddam Hussein, U.S. travelers are more confident, or at least a bit more confident, about returning to the air.

We'll be back on the story of how consumers and airlines are hoping for clear skies ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DON CARTY, CEO, AMERICAN AIRLINES: I want to offer my sincere and most heartfelt apology to the men and women of this airline and to the people and communities we serve.

(END VIDEO CLIP)

DAVIS: Sometimes saying you're sorry is just not enough. American Airlines boss Don Carty starting the week apologizing about executive perks, hoping to keep the company from bankruptcy. Bankruptcy is still a possibility. And by the end of the week, Carty is out of a job.

We're ON THE STORY. Welcome back.

American Airlines dodged a bullet now for the second time in a couple of weeks. It is able to stay out of bankruptcy for now. It got a $1.6 billion in concessions from its pilots, mechanics and flight attendants. But it was a rough road. Don Carty made a fatal mistake not disclosing executive bonuses to those very unions that took pay cuts themselves.

NEISLOSS: All right, this is one of those stories where you have to just says, "What was he thinking? What were they thinking?"

DAVIS: Well, absolutely, absolutely.

And the bottom line here, apparently Don Carty did not even tell his own board of directors that he had not informed the unions that those millions in executive bonuses and -- those are retention bonuses -- as well as bankruptcy pensions, pension protection, would be in place. Union's just very hot under the collar and forced him out.

ARENA: Patty, just the airline industry in general, you know, you had obviously the hike in oil prices, you had the 9/11 terror attacks, you had the war with Iraq, now you have SARS. I mean, it just keeps coming at this industry.

What is your sense? Is this industry really at the brink?

DAVIS: Well, this industry is in major, major trouble. You saw Congress come through with another $3 billion to try to help the industry just a couple of weeks ago.

But SARS definitely hurting traffic. You see traffic to the Asian Pacific still down 35 percent.

But with the war coming to an end now, we're seeing things bounce back a little bit. I'm told by my sources advanced bookings, which are not released, are picking up slightly.

However, traffic is not yet showing that. We're seeing still traffic in the U.S. down about 10 percent, going over to Europe still down about 25 percent. And you should have seen some kind of bounce back over Easter weekend. Not seeing it.

WALLACE: Patty, what are the problems with American Airlines and the rest of the industry? What does it all mean to us, the consumers? Is it going to be fewer flights? Are the flights more expensive, less choice? What does it mean?

DAVIS: Well, what it means to us right now is lower prices. And consumers are being, according to Travelocity, really driven by low prices right now. And you're seeing some of that pick up, perhaps associated with those low prices.

But what you may see as these airlines contract, they're going to have to -- there's just too much capacity out there -- you're going to see cutbacks. You're going to see more airlines are parking planes in the DESER (ph). And they're also cutting the number of seats that are available.

And in the future, what you may see is that, because there are -- as demand picks up, we're going into the summer travel season, you may see prices actually pick up a little bit. It's a supply and demand thing.

ARENA: Well, Patty, with more people returning to air travel and with a lowering of the terrorism alert, is the war on terrorism ratcheting back too?

We'll also touch on the new crackdown here in the U.S. of items that may have been stolen from Iraq.

We'll be back on those stories in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JASON AHERN, U.S. BUREAU OF CUSTOMS: We may differ in what art is, but there's no disagreement on the fact of what is meant by "Thou shall not steal." This is stealing, this is theft.

(END VIDEO CLIP)

ARENA: That was Jason Ahern of the U.S. Bureau of Customs, spelling out the new get-tough policy against items that might have been stolen from Iraq in the turmoil of the final days of the Saddam Hussein regime.

Welcome back. We are ON THE STORY.

There were, indeed, criminal charges filed against an engineer at Fox network for bringing in a dozen paintings from one of the palaces that he toured with the military while working in Iraq. He also brought back about 40 or so Iraqi bonds. He was charged for doing that.

He apparently lied, according to court papers, to customs agents when he came into the country, only declaring cigarettes. But the affidavit read that he got very, very nervous. He was visibly sweating. His hands were shaking. And so, Customs agents knew to pursue this a little bit further.

There have been other journalists that have come back with other items from Iraq. Those journalists have not been charged. There have been five incidents so far.

And when I talked to investigators to ask them why there was a difference, why one guy was getting charged and not another, is because they said the other journalists that came back into the country freely admitted that they had brought something, thinking that it was OK to bring back a souvenir from their time spent in Iraq. They figured, well, things are hanging around on the floor. Some of the military, they say, were taking some items. So they assumed that it was OK for them to take them.

But what you saw this week was a clear shot across the bough, saying, "Look, this did not look good to see the looting that went on over in Iraq. We don't want to be a party to this. If you come back with anything, whether you're military or part of the press corps, you're going to pay for it."

DAVIS: Well, obviously, the U.S. keeping a close eye on art dealers as well. That shot across the bough going out to them too, not to buy any of these items. But the U.S. can't police the entire world, only the U.S., right?

ARENA: Well, Patty, there are two distinctions. One, the items that came back with the journalists and at least one member of the military were not stolen from the national museum in Iraq. So you have two separate investigations going on. You have people coming back with stuff that they've gathered from a variety of palaces and other locations, and of course, you have the effort to recover antiquities and very valuable pieces of art that were stolen from the museum.

So Interpol is involved in that effort. You're right, very global effort there.

But there's a large argument over whether or not those items still remain in Baghdad hidden or have already been moved out of the country.

But the one good thing that the FBI has going for it is that, in the past, the United States has indeed been the largest purchaser of illegal, as well as legal, artwork. So they are going to be working eventually on their home turf.

WALLACE: Kelli, what are your sources telling you? Are they frustrated? Do they feel that the Bush administration should have had a plan in place to try and prevent any of this looting that ended up taking place in Baghdad and throughout the country?

ARENA: Well, Kelly, as you know, we've heard from a variety of people within other quarters, not within the law enforcement quarter, but within other quarters, that said, you know, the U.S. should have seen this coming. They heard from a variety of scholars and academics and people from within the art world, telling them something needs to be done. There were a few key, vital locations that need to be protected, just like those oil wells were protected.

But as far as law enforcement is concerned, they're not getting involved in that battle. They are coming in after the game has already been played. They're trying to sweep it up and figure out where to move from here.

NEISLOSS: Kelli, if we could just switch gears a little bit to move on to terrorism, there was a downgrade, I guess, in the alert system.

ARENA: That's right.

NEISLOSS: And I read a great quote from a psychologist who said, you know, "We trust people who tell us we're in danger more than we trust people who tell us we are not in danger." What does this mean, this downgrade, for what people should be thinking and what they should expect?

ARENA: Well, the reason that the threat level was lowered from orange to yellow was because intelligence had come in suggesting that there would be specific acts of violence relating to the U.S. action in Iraq.

When that did not happen, there was nothing else that was specific or credible that was coming into the intelligence community to warrant staying at orange, which also, by the way, costs state and local communities a large amount of money, because they have certain things that they have to do to maintain that status.

So now that we're at yellow, what does this mean? Well, it still is elevated. And FBI agents constantly say, look, the public's attention has been diverted. Some might think, "Oh, the war on terrorism is over, we don't need to be as vigilant." But what they are urging, consistently is for the public to remain vigilant, to look for suspicious activity. Most of the tips that come into FBI field offices around the country come from the public, and every single one of those tips is followed up.

We spent an entire day in the Washington, D.C., field office with the Joint Terrorism Task Force. And I can tell you that we saw these guy go out on calls. It didn't matter if they thought from the get-go that this was going to be a false alarm. They went, they had to check it out, and they run it to the ground. That's every single thing that comes into the office.

So the war on terrorism far from over. Obviously, Osama bin Laden and other top al Qaeda operatives still at large. Some experts are saying that the terrorist network may not be able to pull off a major attack like we saw September 11th, but still, they say that this organization is vital, poses a threat and can, indeed, pull off medium-sized to smaller attacks against the United States.

DAVIS: Well, thanks to my colleagues.

And thank you for joining us on the story. We'll be back next week.

Still ahead, "CNN LIVE SATURDAY" with what's making headlines right now. At 11:30 a.m. Eastern, "PEOPLE IN THE NEWS," focusing this week on the man who planned and lead the war in Iraq, General Tommy Franks. And at noon Eastern, "CNN LIVE SATURDAY" coming up just before the top of the hour, a news alert.

But first, the president's weekly radio address.

(BEGIN AUDIOTAPE)

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

As America continues to fight and win the war on terror, our government is also focused on another national priority: growing our economy and creating jobs.

America's economy has been through a lot. We experienced the shock of a terrorist attack. We have endured a recession. We had to deal with some major corporate scandals. We faced the uncertainty of war. And we have seen a slowdown in the global economy, which weakens demand for American goods and services.

In spite of all of this, the American economy is growing, and growing faster than most of the industrialized world.

There are great strengths in this economy. Lower interest rates have helped more Americans buy their own homes. Gas and other energy prices are coming down, and consumers are getting the savings immediately. Inflation is low, and America's families are seeing their incomes on the rise.

The entrepreneurial spirit is healthy in America, as small- business men and women put their ideas and dreams into action every day. And America's greatest economic strength is the pride, the skill and the productivity of American workers.

Yet, we know that America's economy is not meeting its full potential. We know our economy can grow faster and create new jobs at a faster rate. We also know that the right policies in Washington can unleash the great strengths of this economy and create the conditions for growth and prosperity.

On Monday members of Congress return from recess, and they will face some important decisions on the future of our economy. I have proposed a series of specific measures to create jobs by removing obstacles to economic growth.

My jobs and growth plan would reduce tax rates for everyone who pays income tax, provide relief for families and small businesses, and help millions of seniors in retirement by eliminating the double taxation of dividends.

With a robust package of at least $550 billion in across-the- board tax relief, we will help create more than a million new jobs by the end of 2004.

Some members of Congress support tax relief but say my proposal is too big. Since they are already agree that tax relief creates jobs, it doesn't make sense to provide less tax relief and, therefore, create fewer jobs. I believe we should enact more tax relief, so that we can create more jobs and more Americans can find work and provide for their families.

Americans understand the need for action. This week in Ohio, I met Mike Kovach, whose business is in Youngstown, Ohio. Mike started and runs a growing company, wants to hire new people and would benefit from lower taxes. Mike says, "Any time you can improve the bottom line of main street business, it's good for the city, it's good for the state, and it's great for the nation. It all trickles up, instead of trickling down."

I urge Congress to listen to the common sense of people like Mike Kovach. He and tens of millions of Americans like him need our help in building the prosperity of our country.

Tax relief is good for families and good for our entire economy. The jobs and growth plan I have proposed is fair. It is responsible. It is urgent. And Congress should pass it in full.

Thank you for listening.

(END AUDIOTAPE)

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Residents Blame U.S. for 14 Deaths; U.N. Struggles to Find Role to Play in Iraq>


Aired April 26, 2003 - 10:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KELLI ARENA, CNN JUSTICE CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories that we covered this week.
I'm Kelli Arena in Atlanta. I'm on the story of how war in Iraq has altered the terrorism fight inside the United States, and put the feds on alert for smuggling of art and artifacts.

RULA AMIN, CNN CORRESPONDENT: I'm Rula Amin in Baghdad. Residents here are blaming the United States for the killing of at least 14 people, when a missile hit a residential building on the outskirts of the capital.

KELLY WALLACE, CNN CORRESPONDENT: I'm Kelly Wallace in Jerusalem, on the story of how changes inside the Palestinian government have pushed Yasser Arafat to one side and put new pressure on the United States.

LIZ NEISLOSS, CNN CORRESPONDENT: I'm Liz Neisloss in New York. The United Nations was sidelined by war in Iraq. Now it's struggling to get into the peace, rebuilding the country, and searching for weapons.

PATTY DAVIS, CNN CORRESPONDENT: And I'm Patty Davis in Washington, on the story of how winding-down war may be pumping up the number of Americans traveling by air, as one airline, American, fights off its financial tailspin.

We'll be talking about all of these stories, and we'll listen to the president's radio address.

We want to hear from you too. E-mail us at onthestory@cnn.com.

But first, a check on what's happening at this hour from CNN headquarters in Atlanta.

(NEWSBREAK)

AMIN: It's a holy pilgrimage that was banned for years. This time, hundreds and thousands of Shi'a Iraqis and Iranians took part. It was described as an outburst of power for the Shi'ite community, a flexing of muscles, some say. And some are concerned by the call from some Shi'ite clerics for the establishment of an Islamic state.

NEISLOSS: Rula, what are you hearing about the explosion at the dump? I'm sure you're hearing a lot. But there was an explosion at an ammunitions dump. What are you hearing from Iraqis, and what are you able to see that the Americans are doing in response to kind of calm things down?

AMIN: Well, what happened is that this missile came from an ammunition dump that the U.S. Army had put there. They were collecting arms that used to belong to the Iraqi army, and they were going to destroy it, and they have been destroying these arms.

Residents are angry, because they said that they have been appealing to the army to remove the weapons from that neighborhood for days now, because they were concerned for such an incident. The army is blaming outside attackers. They said they fired flares into the depot ammunition, and that what ignited the explosions and the missiles that hit that residential building.

But still, the neighbors and the residents who are digging in the rubble, trying to save their relatives and friends, were too angry to listen. They accused the U.S. Army of being responsible. They said that Saddam Hussein and George Bush are the same, and they don't care for Iraqi civilians. They are very angry and disappointed that this has happened.

NEISLOSS: Rula, does it seem to you that this has truly escalated that anti-American sentiment, or is this emotion that you have seen firsthand all along and that we are now seeing in full color for the first time?

AMIN: Well, it's been growing. Because I think many people who are very happy to see that the troops have removed Saddam Hussein were hoping and had very high ambitions on how things would look like the day after. And now they're a bit disappointed, and their frustration is going first, there are no basic services that have been restored. Still, most homes don't have enough electricity, not enough water.

Many came to us and said, "How come they were able to protect the oil fields, the oil ministry, and they've got the oil to be pumped again, but not the power?" So it seems suspicions are growing, and today's incident only inflamed these kinds of suspicions and the disappointment.

So people came here, even to the Palestine Hotel, and they were insisting they, themselves, are going to do everything possible to get the U.S. troops to leave Iraq.

WALLACE: Rula, going back to the Shi'ite Muslims, what's your sense about the thousands who marched, if they're going to be able to organize themselves into a political force to try and one day take control of the country?

AMIN: Well, we are hearing and seeing Shi'ite clerics actually trying to do that. They're trying to muster support among so many different sectors of the population. They're trying to offer social services, medical services, and security, in order to fill the power void after Saddam Hussein is gone and there is no central authority now. Now, people here, regular Iraqis, secular Iraqis, were very understanding for the outpouring of religious emotions during the pilgrimage, but some did say that they are worried, they do not want to see an Islamic state here.

But they know that when there's a void of power, when people cannot turn to a policeman or a court of law in order to protect themselves, they always turn to the mosque, to the church, to the religious establishment for such protection, and that's what concerns some secular Iraqis here.

DAVIS: Rula, what is taking so long to come up with these arrests? You've got Saddam Hussein still on the loose. You've got 45 of the 55 on those cards, that U.S. deck of cards, still not taken into custody by the U.S. What is taking so long?

AMIN: Well, because most people just disappeared and we don't know where. Saddam Hussein disappeared, his two sons, most of his aides and ministers. And people are just really puzzled, where did they go?

Because many people here are more than willing to give the U.S. troops tips on where they are hiding, but nobody has come forward with such information yet, or at least it's always at least 12 or 24 hours late. And that's why it seems those people are hiding among people who are very loyal.

What are they up to? We still don't know.

WALLACE: Rula, I wanted to ask you, what about the former deputy prime minister, Tariq Aziz, has been taken into U.S. custody. You also have the former Iraqi spy chief now in U.S. custody.

How significant is this for the U.S.? And are your sources telling you if these two men are talking at all, potentially about the whereabouts of Saddam Hussein?

AMIN: Well, the significance has two aspects. One is that people like Tariq Aziz had been long associates of Saddam Hussein, and so the U.S. officials believe they must know at least if he's dead or alive, where is he, and what is he up to.

On the other hand, people like Tariq Aziz have become the public face for Iraq. And even for Iraqis who hated them, they were still symbols of the regime. The fact that they were captured in U.S. custody actually cements the idea in Iraqis' heads that the regime is gone and there's no way back -- Kelly.

NEISLOSS: Is there, Rula, any discussion by Iraqis that you speak to about the Iranian role in all this? This is something the U.S. is fearing, what the Iranians are trying to do to set up a theocracy or a religious government. What is your sense, from what you hear, of what reaction there is to any Iranian influence?

AMIN: There is some Iranian influence, and the people in Iraq are aware of it. But it's not the only drive for these demonstrations and protests we have been seeing. Because even within the Shi'ite community there are divisions. There are those who are very loyal to Iran, and there are those who are more loyal to their Arab nationalism and they feel that they are Arab Shi'ites more than Iranian Shi'ites. And so there has been always a competition, where does the authority for the Shi'ite community come from, Najaf or Qom in Iran. And that is part of the division.

So it's not all an Iranian influence. There is an Iranian element, but there is also the element of people's anger and -- actually, it's the rise of anti-American sentiment, not only here in Iraq, but in the Arab world.

And it's an extension to that, because even the religious community here, who did not stand by Saddam Hussein, the clerics, they were happy to see him go, they were happy to see the U.S. forces come and take over his palaces, but now they want the forces out. They don't trust them. And they really have deep hatred for the U.S. policies.

So they're going to try their best in order, first, to fill the power void, and second, to make sure that they have a say in the future of Iraq.

DAVIS: Rula, how personally dangerous is Baghdad for you, for other Americans, and just the people who live there, the Iraqis, now that Saddam Hussein is gone? Are U.S. forces providing the protection there on the streets? And are the police -- the Iraqi police now restoring order?

AMIN: Well, there are joint patrols by the U.S. Army and local Iraqi policemen, but it's not enough. The streets are still dangerous.

I've heard from so many Iraqi women who were telling me that they can't go out at night anymore. They always have to make sure they're back at home before sunset.

At the same time the streets usually at night are empty, there is still sporadic violence.

And as far as journalists are concerned, I'll give you an example. Today, when CNN's crew went to that site where the missile hit the residential building, there were some angry crowds who were actually coming out against our crew, against Nic Robertson, our correspondent. One of our producers, Rida (ph), was actually hit because -- punched because people were so angry. And they considered them as the face of the West. And others were angry because they wanted to show them more, the aftermath. And they had to come back to deliver the tape and send the pictures out, and they couldn't. So they were angry at them for not staying.

So there is a lot of growing anger, growing frustration, and people don't know where to direct this anger.

WALLACE: Well, Rula, moving from Baghdad to Jerusalem. This part of the world is trying to figure out what happens next and whether an end to war means a new U.S. push for Mideast peace.

We're back on the story after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: Peace between the Israelis and the Palestinians is a major objective for the world. For all, other than those terrorists, for all who love peace, peace between the Israelis and the Palestinians is a major objective. And it is something that the president has worked on long and hard.

(END VIDEO CLIP)

WALLACE: White House Press Secretary Ari Fleischer sending a signal this week that Mideast peace is definitely back on the radar screen in the Bush administration.

Welcome back to ON THE STORY. I'm Kelly Wallace in Jerusalem.

Really, the most dramatic development this week, Palestinian President Yasser Arafat, who had been resisting giving up the power he has wielded over Palestinian affairs for decades, facing tremendous international pressure, and then in the final hours before a deadline, he ultimately backed down and approved the cabinet of his prime minister-designate, Mahmoud Abbas, commonly known as Abu Mazan.

Now, on Tuesday, the Palestinian parliament will vote on this cabinet. And then Abu Mazan is expected to get something that Yasser Arafat never received. The White House is indicating President Bush is likely to invite Abu Mazan to the White House very soon.

DAVIS: Is Yasser Arafat history? That is the big question here.

WALLACE: That is the key question, Patty, and one a lot of people wanted to know. The Americans and the Israelis say they will be watching very closely to see if Yasser Arafat is wielding any power behind the scenes.

And we should say that Yasser Arafat put up quite a fight. Abu Mazan, his prime minister-designate, ended up having to include in his cabinet a number of Arafat loyalists.

The question is, will there continue to be a power struggle behind the scenes? The Americans and the Israelis will be watching closely. They have made it clear they want to see Yasser Arafat sidelined, and they want Abu Mazan to be the one in control of day-to- day affairs.

NEISLOSS: But clearly the Americans are embracing this potential new cabinet. Does this -- it seems like this means the next step, the road map, is that much closer. Is this making the Israelis nervous? What sense are you getting from them that they're about to face the reality perhaps of really getting under way with this step toward Palestinian statehood? WALLACE: Well, the Americans have said, Liz, that once Abu Mazan's cabinet is approved and sworn in, that so-called road map paving the way for the creation of a Palestinian state by 2005 will, in fact, be published.

But there's likely to be a bumpy road. The Palestinians want that road map to be published and implemented as it stands. The Israelis are objecting. They say they have a number of changes they want to see made. The Americans are saying they'll hear comments from both sides and give careful consideration to both the Israeli point of view and the Palestinian point of view.

So definitely a bumpy road expected, but tremendous pressure, no doubt, on the American administration, especially with the anti- American sentiment in the Arab world, to try and do something now on this Israeli-Palestinian conflict.

AMIN: Kelly, I have a question. Abu Mazan doesn't have a lot of support, grassroots level at least, among most Palestinians, because most people perceive him as too soft. Now that if he needs to deliver, he needs to show them that he can deliver something.

What is it that he's likely to get, whether from the White House or from Israel, something tangible on the ground that he can tell people, "I can deliver"?

WALLACE: Rula, you raise a great point, because that's exactly right. Palestinians on the streets are somewhat skeptical of Abu Mazan. In fact, they're concerned, wondering if he's sort of the Israeli American man in the Palestinian territories.

So what he'll need to get, concessions from the Israelis. He will need to see some withdrawal of Israeli forces from Palestinians towns, the release of some Palestinian prisoners, the easing of some restrictions, travel restrictions and check points, on the Palestinian people to show that he is acting on behalf of the Palestinian people.

And that is so important. We were on the streets of Ramallah yesterday, Rula, and so many people said they're concerned. They wonder if he's not really just the hand-picked person for the Americans and the Israelis.

ARENA: Kelly, what kind of a role is Colin Powell playing in these negotiations?

WALLACE: Can you repeat that...

ARENA: Kelly, I don't think you heard me.

WALLACE: ... question? I didn't hear it so well.

ARENA: How key, how key is Colin Powell?

WALLACE: Well, very key. He is expected to come to the region very soon, in fact, soon after the road map is published. Perhaps a sense we're getting from U.S. officials is that he might wait for Abu Mazan to meet with some Arab leaders and have other meetings before he comes here, again, not to look at -- make it look as Abu Mazan is the Bush administration's man in the Palestinian territory.

So U.S. Secretary of State Colin Powell says he will be coming here and will be trying to put pressure on both the Israelis and the Palestinians to take steps. And the key question is, really, what moves both sides will make and whether or not they'll make them.

DAVIS: Is he just too close to the Bush administration, though, that that could possibly hurt him in Israel?

WALLACE: I think you're talking about Abu Mazen, if he's too close to the Bush administration. That certainly could hurt him.

And another question we should point out, or another point, which is the pressure on the United States is enormous, especially coming after the war in Iraq, the tremendous anti-American sentiment we're seeing on the streets in Baghdad and throughout the Arab world. There's a lot of pressure on the Bush administration to deliver here.

And President Bush, we all know, is going to face a reelection next year, reelection as president. He is going to be facing pressure from American Jews and Christian conservatives who don't want to see him force too many concessions from Israel, in which they feel might compromise Israel's security.

So many believe, if the White House is going to act, it needs to act now, because if we get closer to a campaign, any concessions for the president to push for might be much more politically difficult.

AMIN: Kelly, I have a question, which is, among Israelis, they know now that there's a Palestinian cabinet, the pressure may shift on the Israeli prime minister, Ariel Sharon. Are they welcoming that pressure? Do they want to see the peace process moving forward? Or are they actually concerned about such pressure?

WALLACE: Rula, you know this region so well. A lot of concern, really, on the streets. There's pessimism on the Palestinian streets. There's a little pessimism on the Israeli streets as well. People are concerned.

They do think this might be a window of opportunity, a moment to seize, a time to act. Many people would like to see, of course, if they believe Abu Mazen is a partner, a partner in peace, is taking tangible steps in their eyes to crack down on the Palestinian militants and stop the violence, they are going to want to see their prime minister take similar steps.

He, of course, is in a right-wing coalition government. He will not have the majority of his government supporting him, so that's another battle ahead for the prime minister.

I think it's fair to say Israelis will be watching. But if they see steps being taken by the Palestinian government, there's likely to be some pressure on the Israeli government to take similar steps as well. ARENA: Kelly, you mentioned before that, on the road map, that Israel had some problems with it, as it's drafted right now. What is the biggest problem, the biggest challenge that you're seeing from your vantage point?

WALLACE: I would say two, Kelli. One is the whole sense of, should these steps by the Israelis and the Palestinians be taken simultaneously or one after another? The Israelis would like to see the Palestinians take many steps to crack down on these Palestinian militants before the Israelis have to take some steps.

Patty, let me go back to you now for this development on the National Rifle Association.

DAVIS: Yes, other news in the world today, Charlton Heston, 78 years old, the former head of the National Rifle Association, now about to speak to the National Rifle Association convention in Orlando, Florida. Let's listen in. Wayne LaPierre introducing him.

(LIVE EVENT)

DAVIS: Charlton Heston and his wife, Lydia, announcing farewell to the National Rifle Association's national convention in Orlando, Florida. Heston has recently announced that he has symptoms of Alzheimer's disease, that he was stepping down as president of the NRA. He served three -- an unprecedented number of terms, six years, as president of the National Rifle Association and then announced he would be stepping down because of those symptoms.

Kelly Wallace, you were at the White House for a long time, obviously watched the National Rifle Association work its magic as a political -- a very potent political force in Washington.

WALLACE: Patty, there's no underestimating how powerful a political force the National Rifle Association can be for candidates at the state level, at the national level, members of Congress, members of the presidential campaign or the presidency. It has enormous get-out-the-vote effort, lobbying effort, enormous financial backing for candidates.

So it is a tremendous political force. What it does is watched closely. Candidates, obviously, watching very closely what the National Rifle Association does. And of course, on this day, saluting Charlton Heston for his service to this organization.

But again, I've been away from domestic politics for a few months now, but it is truly one of the most powerful political forces determining state and national politics in the United States.

ARENA: Well, thanks, Kelly. We're going to move on.

We want to thank Rula Amin, on the story of development in Baghdad.

Rula, what is on the agenda for today? AMIN: Today, we're working on a story of how schools are still closed here in Baghdad. Many of the schools have been looted. Others were used by the Iraqi army. Some are still occupied by the U.S. Army. The teachers are not getting salaries. Most of them stay at home, and so do the Iraqi children.

ARENA: Thanks so much, Rula.

Well, coming up, more fallout of war and a new crackdown here in the U.S. of items that may have been stolen from Iraq.

We're back on the story in two minutes.

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEO CLIP)

JEAN MARC DE LA SABLIERE, FRENCH AMBASSADOR TO THE U.N.: We think the only politically and credible thing to do is to suspend the sanction. And this is sort of nothing to do with being good or bad guys. You see, we think it's logical.

(END VIDEO CLIP)

NEISLOSS: That's French Ambassador to the United Nations Jean Marc de le Sabliere this week, as the struggle that began with talk of war now moves into the talk of peace.

We're ON THE STORY. Welcome back.

Well, France says, "Look, it has nothing to be done with good or bad guys," but the fact is that in the U.S. they are belong painted as that, as bad guys, only interested in the contracts, only interested in the money to be made in Iraq.

They came out very suddenly with this decision, "We should suspend the sanctions immediately." There were very few details that were available. Journalists were scrambling to find out, "Well, how will this work, what's going on?"

One diplomat said, "Look, the headline is, France wants to suspend sanctions, but they haven't got a clue as to the details."

ARENA: Liz, how would you describe the relationship right now? I mean, there's a lot of, obviously, public talk, but behind the scenes, the relationship between France and the U.S., where are we?

NEISLOSS: Well, it's very had to tell at the U.N. right now. What diplomats are saying is inside the Security Council, these conversations about Iraq have been very, sort of, tentatively done. They really are looking to try not to have that contentious head- butting, adversarial relationship that they have had. But they are heading into some seriously adversarial relations -- some seriously adversarial topics. It's going to be very difficult to maintain that sort of friendly diplomacy.

Some looked at this French move, the call to suspend sanctions, as an olive branch. It's an effort to meet the U.S. in some way, because the U.S. has called for the full lifting of sanctions. So it's an attempt by the French.

WALLACE: Liz, are you picking up from diplomats any sense that the United States is going to try to punish the French in any way, in any way through programs at the U.N. or elsewhere?

NEISLOSS: It's really not clear yet exactly what will happen. The U.S., possibly next week, will really lay its cards on the table when they put down a resolution that will define all these complicated issues. We'll see where that leaves France. They may appoint a U.N. administrator of some sort. They will spell out how oil will be dealt with, how oil for food will be dealt with.

But in all these issues, as one U.S. official said to me, "Look, the big elephant in the room is oil. Countries will say they care about the Iraqi people. That may be true to a certain extent. But you cannot ignore that big elephant." It all comes down to money and politics.

DAVIS: But doesn't the U.S. or the coalition have to find weapons of mass destruction in Iraq before those sanctions can officially be lifted?

NEISLOSS: Well, that goes back to the question of whether the resolutions still hold. And that argument possibly that may come from the U.S. that, "Hey, the government is gone. Those were resolutions for the old government. Now they don't apply anymore."

But France and Russia and probably China very much are sticking to that argument, even the U.K., that weapons inspectors, U.N. weapons inspectors, need to do the job, need to get back in. That's going to be a point of contention, because the U.S. right now and this week very clearly said, "Look, we've seen no role for the U.N. weapons inspectors, no role, at least right now, for Hans Blix."

ARENA: Liz, do you see any momentum building at all for a more involved U.N. role, in terms of setting up a legal system in Iraq? I mean, moving away from oil, but there's an infrastructure that needs to be set up that, at least from my side of the fence, the United States seems to be saying, "Well, wait a minute, you know, we're going to figure out how this is going to work and then bring everybody else in."

Do you get any sense from your side of the fence that things are taking a turn at all?

NEISLOSS: Well, I think a lot, again, will depend on what the U.S. is willing to put on the table. And the arguments will begin from there. The U.N. -- you mentioned legal structure. The U.N. certainly could say it has experience at helping to set up legal institutions. But in the case of Iraq, the U.N. has clearly said, "Look, we never wanted to manage the country, to administer the country. It's too big, it's too complex for the U.N."

But one argument that they do make, very interesting, one U.N. official recently said, "Look, we could be there to get the U.S. off the hook," that they put themselves on when, months down the road, years down the road, the patience runs out, they will want us to be there.

So the U.N. is prepared to play a role, a political role if they need to, maybe something like what they did in Afghanistan, where they helped broker the emergence of local government officials.

So it just -- but it all, again, goes back to how much is the U.S. going to give? The U.N. is being very cautious right now.

DAVIS: Liz, another outcome of the fall of Saddam Hussein, U.S. travelers are more confident, or at least a bit more confident, about returning to the air.

We'll be back on the story of how consumers and airlines are hoping for clear skies ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DON CARTY, CEO, AMERICAN AIRLINES: I want to offer my sincere and most heartfelt apology to the men and women of this airline and to the people and communities we serve.

(END VIDEO CLIP)

DAVIS: Sometimes saying you're sorry is just not enough. American Airlines boss Don Carty starting the week apologizing about executive perks, hoping to keep the company from bankruptcy. Bankruptcy is still a possibility. And by the end of the week, Carty is out of a job.

We're ON THE STORY. Welcome back.

American Airlines dodged a bullet now for the second time in a couple of weeks. It is able to stay out of bankruptcy for now. It got a $1.6 billion in concessions from its pilots, mechanics and flight attendants. But it was a rough road. Don Carty made a fatal mistake not disclosing executive bonuses to those very unions that took pay cuts themselves.

NEISLOSS: All right, this is one of those stories where you have to just says, "What was he thinking? What were they thinking?"

DAVIS: Well, absolutely, absolutely.

And the bottom line here, apparently Don Carty did not even tell his own board of directors that he had not informed the unions that those millions in executive bonuses and -- those are retention bonuses -- as well as bankruptcy pensions, pension protection, would be in place. Union's just very hot under the collar and forced him out.

ARENA: Patty, just the airline industry in general, you know, you had obviously the hike in oil prices, you had the 9/11 terror attacks, you had the war with Iraq, now you have SARS. I mean, it just keeps coming at this industry.

What is your sense? Is this industry really at the brink?

DAVIS: Well, this industry is in major, major trouble. You saw Congress come through with another $3 billion to try to help the industry just a couple of weeks ago.

But SARS definitely hurting traffic. You see traffic to the Asian Pacific still down 35 percent.

But with the war coming to an end now, we're seeing things bounce back a little bit. I'm told by my sources advanced bookings, which are not released, are picking up slightly.

However, traffic is not yet showing that. We're seeing still traffic in the U.S. down about 10 percent, going over to Europe still down about 25 percent. And you should have seen some kind of bounce back over Easter weekend. Not seeing it.

WALLACE: Patty, what are the problems with American Airlines and the rest of the industry? What does it all mean to us, the consumers? Is it going to be fewer flights? Are the flights more expensive, less choice? What does it mean?

DAVIS: Well, what it means to us right now is lower prices. And consumers are being, according to Travelocity, really driven by low prices right now. And you're seeing some of that pick up, perhaps associated with those low prices.

But what you may see as these airlines contract, they're going to have to -- there's just too much capacity out there -- you're going to see cutbacks. You're going to see more airlines are parking planes in the DESER (ph). And they're also cutting the number of seats that are available.

And in the future, what you may see is that, because there are -- as demand picks up, we're going into the summer travel season, you may see prices actually pick up a little bit. It's a supply and demand thing.

ARENA: Well, Patty, with more people returning to air travel and with a lowering of the terrorism alert, is the war on terrorism ratcheting back too?

We'll also touch on the new crackdown here in the U.S. of items that may have been stolen from Iraq.

We'll be back on those stories in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JASON AHERN, U.S. BUREAU OF CUSTOMS: We may differ in what art is, but there's no disagreement on the fact of what is meant by "Thou shall not steal." This is stealing, this is theft.

(END VIDEO CLIP)

ARENA: That was Jason Ahern of the U.S. Bureau of Customs, spelling out the new get-tough policy against items that might have been stolen from Iraq in the turmoil of the final days of the Saddam Hussein regime.

Welcome back. We are ON THE STORY.

There were, indeed, criminal charges filed against an engineer at Fox network for bringing in a dozen paintings from one of the palaces that he toured with the military while working in Iraq. He also brought back about 40 or so Iraqi bonds. He was charged for doing that.

He apparently lied, according to court papers, to customs agents when he came into the country, only declaring cigarettes. But the affidavit read that he got very, very nervous. He was visibly sweating. His hands were shaking. And so, Customs agents knew to pursue this a little bit further.

There have been other journalists that have come back with other items from Iraq. Those journalists have not been charged. There have been five incidents so far.

And when I talked to investigators to ask them why there was a difference, why one guy was getting charged and not another, is because they said the other journalists that came back into the country freely admitted that they had brought something, thinking that it was OK to bring back a souvenir from their time spent in Iraq. They figured, well, things are hanging around on the floor. Some of the military, they say, were taking some items. So they assumed that it was OK for them to take them.

But what you saw this week was a clear shot across the bough, saying, "Look, this did not look good to see the looting that went on over in Iraq. We don't want to be a party to this. If you come back with anything, whether you're military or part of the press corps, you're going to pay for it."

DAVIS: Well, obviously, the U.S. keeping a close eye on art dealers as well. That shot across the bough going out to them too, not to buy any of these items. But the U.S. can't police the entire world, only the U.S., right?

ARENA: Well, Patty, there are two distinctions. One, the items that came back with the journalists and at least one member of the military were not stolen from the national museum in Iraq. So you have two separate investigations going on. You have people coming back with stuff that they've gathered from a variety of palaces and other locations, and of course, you have the effort to recover antiquities and very valuable pieces of art that were stolen from the museum.

So Interpol is involved in that effort. You're right, very global effort there.

But there's a large argument over whether or not those items still remain in Baghdad hidden or have already been moved out of the country.

But the one good thing that the FBI has going for it is that, in the past, the United States has indeed been the largest purchaser of illegal, as well as legal, artwork. So they are going to be working eventually on their home turf.

WALLACE: Kelli, what are your sources telling you? Are they frustrated? Do they feel that the Bush administration should have had a plan in place to try and prevent any of this looting that ended up taking place in Baghdad and throughout the country?

ARENA: Well, Kelly, as you know, we've heard from a variety of people within other quarters, not within the law enforcement quarter, but within other quarters, that said, you know, the U.S. should have seen this coming. They heard from a variety of scholars and academics and people from within the art world, telling them something needs to be done. There were a few key, vital locations that need to be protected, just like those oil wells were protected.

But as far as law enforcement is concerned, they're not getting involved in that battle. They are coming in after the game has already been played. They're trying to sweep it up and figure out where to move from here.

NEISLOSS: Kelli, if we could just switch gears a little bit to move on to terrorism, there was a downgrade, I guess, in the alert system.

ARENA: That's right.

NEISLOSS: And I read a great quote from a psychologist who said, you know, "We trust people who tell us we're in danger more than we trust people who tell us we are not in danger." What does this mean, this downgrade, for what people should be thinking and what they should expect?

ARENA: Well, the reason that the threat level was lowered from orange to yellow was because intelligence had come in suggesting that there would be specific acts of violence relating to the U.S. action in Iraq.

When that did not happen, there was nothing else that was specific or credible that was coming into the intelligence community to warrant staying at orange, which also, by the way, costs state and local communities a large amount of money, because they have certain things that they have to do to maintain that status.

So now that we're at yellow, what does this mean? Well, it still is elevated. And FBI agents constantly say, look, the public's attention has been diverted. Some might think, "Oh, the war on terrorism is over, we don't need to be as vigilant." But what they are urging, consistently is for the public to remain vigilant, to look for suspicious activity. Most of the tips that come into FBI field offices around the country come from the public, and every single one of those tips is followed up.

We spent an entire day in the Washington, D.C., field office with the Joint Terrorism Task Force. And I can tell you that we saw these guy go out on calls. It didn't matter if they thought from the get-go that this was going to be a false alarm. They went, they had to check it out, and they run it to the ground. That's every single thing that comes into the office.

So the war on terrorism far from over. Obviously, Osama bin Laden and other top al Qaeda operatives still at large. Some experts are saying that the terrorist network may not be able to pull off a major attack like we saw September 11th, but still, they say that this organization is vital, poses a threat and can, indeed, pull off medium-sized to smaller attacks against the United States.

DAVIS: Well, thanks to my colleagues.

And thank you for joining us on the story. We'll be back next week.

Still ahead, "CNN LIVE SATURDAY" with what's making headlines right now. At 11:30 a.m. Eastern, "PEOPLE IN THE NEWS," focusing this week on the man who planned and lead the war in Iraq, General Tommy Franks. And at noon Eastern, "CNN LIVE SATURDAY" coming up just before the top of the hour, a news alert.

But first, the president's weekly radio address.

(BEGIN AUDIOTAPE)

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

As America continues to fight and win the war on terror, our government is also focused on another national priority: growing our economy and creating jobs.

America's economy has been through a lot. We experienced the shock of a terrorist attack. We have endured a recession. We had to deal with some major corporate scandals. We faced the uncertainty of war. And we have seen a slowdown in the global economy, which weakens demand for American goods and services.

In spite of all of this, the American economy is growing, and growing faster than most of the industrialized world.

There are great strengths in this economy. Lower interest rates have helped more Americans buy their own homes. Gas and other energy prices are coming down, and consumers are getting the savings immediately. Inflation is low, and America's families are seeing their incomes on the rise.

The entrepreneurial spirit is healthy in America, as small- business men and women put their ideas and dreams into action every day. And America's greatest economic strength is the pride, the skill and the productivity of American workers.

Yet, we know that America's economy is not meeting its full potential. We know our economy can grow faster and create new jobs at a faster rate. We also know that the right policies in Washington can unleash the great strengths of this economy and create the conditions for growth and prosperity.

On Monday members of Congress return from recess, and they will face some important decisions on the future of our economy. I have proposed a series of specific measures to create jobs by removing obstacles to economic growth.

My jobs and growth plan would reduce tax rates for everyone who pays income tax, provide relief for families and small businesses, and help millions of seniors in retirement by eliminating the double taxation of dividends.

With a robust package of at least $550 billion in across-the- board tax relief, we will help create more than a million new jobs by the end of 2004.

Some members of Congress support tax relief but say my proposal is too big. Since they are already agree that tax relief creates jobs, it doesn't make sense to provide less tax relief and, therefore, create fewer jobs. I believe we should enact more tax relief, so that we can create more jobs and more Americans can find work and provide for their families.

Americans understand the need for action. This week in Ohio, I met Mike Kovach, whose business is in Youngstown, Ohio. Mike started and runs a growing company, wants to hire new people and would benefit from lower taxes. Mike says, "Any time you can improve the bottom line of main street business, it's good for the city, it's good for the state, and it's great for the nation. It all trickles up, instead of trickling down."

I urge Congress to listen to the common sense of people like Mike Kovach. He and tens of millions of Americans like him need our help in building the prosperity of our country.

Tax relief is good for families and good for our entire economy. The jobs and growth plan I have proposed is fair. It is responsible. It is urgent. And Congress should pass it in full.

Thank you for listening.

(END AUDIOTAPE)

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