Monday, June 18, 2012

Open letter to P Chidambaram on 'unfair' targeting of Muslims in the war against terror

For long I had followed P. Chidambaram's career and was impressed by his maturity and serious political image. However, recent disclosures, especially about his alleged role preceding Hashimpura massacre of innocent Mulim civilians at the hand of security forces, has shaken my confidence and I find a hidden monster of communal bigotry in him. He is not fit to be India's minister, much less India's Home Minister.

Ghulam Muhammed, Mumbai
<ghulammuhammed3@gmail.com>

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---------- Forwarded message ----------
From: S.M. Farooq <hellofarooq@hotmail.com>
Date: Sun, Jun 17, 2012 at 2:31 AM
Subject: [nrindians] Open letter to P Chidambaram on 'unfair' targeting of Muslims in the war against terror
To:



http://www.gulfindiatimes.com/full_news.php?id=4848


New Delhi: A protest against what the activists called the 'unfair' targeting of Muslim men in the name of fighting terror was called by various civil society organizations on Thursday at the residence of Home Minister P Chidambaram in the national capital. The activists had planned the protest outside Chidambaram's house, but they were detained by the police as soon as they gathered at the venue.

On May 13, a Bihar engineer Fasih Mahmood was picked from his home in Al Jubail in Saudi Arabia, and his whereabouts are still unknown. The government on Monday told the Supreme Court that Mahmood went missing in Saudi Arabia last month, was not in police custody in India and the Saudi authorities were not co-operating in tracing him. Mahmood hails from Barh Samaila village in Darbhanga district of Bihar.

Only last week another terror suspect, Qateel Siddiqui, who wasn’t yet chargesheeted seven months after his arrest, was murdered in Pune Jail. In the last week of May, two students of Jamiatul Falah were picked from Kaifiyat Express at Aligarh. They were produced in court seven days later. Concerned over what the activists called a growing and unfair trend, the activists released the following letter to Chidambaram during the protest.




To,
The Home Minister,
Government of India.
Mr Chidambaram,

We are forced to gather outside your residence today. We have broken with our tradition and etiquette of protest, i.e., to demonstrate at public offices rather than private residences because a large section of our population no longer feels safe in their own homes. Disappearances and illegal detentions have become rampant in the name of fighting terrorism. It is as though a new wave of counter-terrorism has been launched to terrorize the youth belonging to a community.

In this Kafkaesque world over which you preside, young men are picked up, some times snatched by one agency from another and presented to the world as dreaded terrorists. You may remember the case of Naquee Ahmed who was aiding the Special Cell in tracing two suspects in Mumbai when the Mumbai ATS abducted and kept him in illegal custody before announcing that a sensational arrest had been made. The Special Cell of course abandoned him. Competition between the agencies is costing innocents their life and liberty and when these squabbles spill into the media, your Ministry merely considers them bad PR rather than genuine concerns of a democracy.

You have stated, Sir, that Fasih Mahmood, the engineer picked up from Jubail in Saudi Arabia, is not in the custody of any of your agencies. Is it of no relevance that Indians accompanied the Saudi Arabian police when Fasih was taken away from his home? It is another matter that a red corner notice was issued for his arrest after his wife moved a habeas corpus petition in the Supreme Court. Another matter also that an affidavit submitted by the Karnataka police in the SC had details of his employment and an itemized list of his alleged guilt. And still, the Government of India claims to be clueless, even as to whether he is alive or dead.

Talking of death, Qateel Siddiqui, alleged IM operative arrested last November in Delhi, was killed in the Yerwada Jail, Pune by fellow inmates. Taken to Maharashtra by the Mumbai ATS on remand, to probe his role in a blast in a temple that did not take place (and of which there is no evidence except of course in now-dead Qateel’s disclosures). But this non-existent blast ostensibly enraged his fellow inmates to the extent that they strangulated him the day his remand was to end. A murder in broad day light in a high security prison. And what a convenient answer. An inmate booked for murder takes all blame. ‘Nationalist’ and ‘patriotic’ Mafiosi have been attributed with such killings in the past. Remember Shahid Azmi, Sir? The courageous lawyer with his own troubled past?

We think it’s important to recall the deep links of these ‘nationalist’ forces of the underworld with our very own Intelligence Bureau. In 2005, when the Mumbai Police swooped down on Vicky Malhotra, close aide of Chota Rajan, whom did they find sitting next to him in the car? Mr Ajit Kumar Doval, recently retired head of the IB. And the man who pulled the trigger on Azmi was himself eliminated later. So certainly, the theory that these were lone hit men, out to avenge their nationalist hurt, must be treated with a lot of circumspection.

Is it too much to ask that DK Basu guidelines for arrest be followed by your agencies? Is due process of investigation and law only to be followed in its violation? We are not opposed to any investigation, but surely, the law of the land must be followed? Agencies cannot be handed over a license to pick and detain anyone at will. Will we continue to pick one Muslim dominated town after another, branding it the hub of terrorism?

In the meeting of the Chief Ministers held to discuss the NCTC — whose unbridled powers to arrest suspects under UAPA will further aggravate the situation — you lamented that “in practically every case, a small section of the people springs to the support of persons who are detained for interrogation or arrested and charged. There is no apparent reason for such support other than the affinity of religion or sect.” With one sentence, you dismissed the genuine fears and demands about the rife misuse of powers by agencies being articulated by civil rights groups as sectarian (and as though the articulation of such fears by religious groups somehow rendered it illegitimate).

You ask us Sir to “observe caution and restraint and place faith in the integrity and impartiality of the investigation.” How can we, when the lessons from Malegaon and Mecca Masjid are not being heeded? When the NIA drags its feet in the cases of Hindutva terror? When we see that the Special Cell, despite its claim of a water-tight case against the senior journalist Syed Qazmi, asks for 90 more days to file a chargesheet?

From a poor construction worker like Qateel to a veteran journalist like Syed Qazmi, respected for his vast experience and bold views, all Muslims appear to be under the scanner. We have come here today to say to you that this ceaseless assault must end. Investigating agencies’ reign of terror must stop. This is not a sectarian issue, Sir. The very future of justice and democracy rests on this.

All India Students Association (AISA),
Aman Biradari,
ANHAD,
Bhartiya Muslim Mahila Andolan,
Centre for Policy Analysis,
Champa - The Amiya & B.G. Rao Foundation,
Citizens for Democracy,
Jamia Teachers' Solidarity Association (JTSA),
JNU Students' Union,
Movement for Empowerment of Muslim Indians (MOEMIN),
National Campaign against Fabrication of Cases ( www.fabricated.in),
NCDHR (National Campaign for Dalit Human Rights),
PUCL (Delhi unit),
Revolutionary Youth Association,
Syed Kazmi Solidarity Committee.
--

A HIGH VOLTAGE DRAMA By Seema Mustafa - The Free Press Journal, Mumbai, India

http://www.freepressjournal.in/news/69857-a-high-voltage-drama.html

logo


A high voltage drama
  • India

  • Jun 18, 2012
  • Seema Mustafa
  
clip

Sonia was caught between VP and Pranab. She preferred the VP, but could not get away from Dadas declared keenness. Thats when he felt the tension of possible rejection and told scribes ''''If the Congress let him down at this stage then…

The medias obsessive coverage of the Presidential election lost sight of a few pertinent points thrown up in the chaos and confusion. The mood in television studios shifted with the minute, with the morning heralding a doomsday scenario for the Congress party and the afternoon screaming 'victory'for Congress president Sonia Gandhi and her party managers. Every little comment was seized upon to draw wild conclusions, often quite contrary to the truth.

The woes of India - including the massive water shortage staring us in the face - were discarded for 24- hour coverage of not even the election, but the selection of a candidate for Rashtrapti Bhawan.

The story began somewhere here: Mrs Sonia Gandhi could not really make up her mind whether the party candidate should be her Finance Minister Pranab Mukherjee or Vice President Hamid Ansari. She seemed to prefer the VP, but could not get away from Mukherjees declared keenness to get into Rashtrapati Bhawan now that he was certain he would never be her choice for Prime Minister.

So the party did not formally announce either, but the adept managers were instructed to let it be known to the media that these were the two chosen ones. However, the process of consultation continued and in her talks with the allies the Congress president left the issue wide open, seeking their views without really indicating her preference. If anything she seemed to be leaning a little in favour of Ansari.

Mukherjee felt the tension of possible rejection and started meeting select journalists to let them know that he was a determined candidate and if the Congress let him down at this stage then……. The rest was never really spelt out but the enthusiastic media rushed to fill in the blanks and let it be known that Mukherjee could walk out of the party if it did not support him.

Meanwhile another hopeful PA Sangma became the choice of two regional parties, the Biju Janata Dal and the AIADMK in a clear indication that they were quite in the mood for a contest. And that in the confusion created by Congress vacillation Sangma could become a serious candidate.

The BJP did not quite reject this move, and indicated possible support for Sangma if the circumstances worked out in his favour. The Left of course continued to maintain a studied silence, and except for Comrade AB Bardhans suggestion that someone should field a Dalit woman, there was no move from the Communists to even float a worthwhile name.

They had decided not to muddy the waters, including their own, by joining the cacophony.
Trinamool Congress leader Mamata Banerjee sensed an opportunity. And fed up with the Congress efforts to woo the Samajwadi Party to negate her influence on the UPA, she rushed to Mulayam Singh Yadav to work out a 'deal'. The wily Yadav was also willing to give the Congress a jolt and joined Mamata Banerjee in declaring three candidates for the presidential post, Prime Minister Manmohan Singh, former Speaker Somnath Chatterjee, and former President Abdul Kalam. The first was to light a fire under the Congress and critique the performance of the Prime Minister by suggesting he was fit for the ceremonial post; the second was of course a non serious attempt to irritate the Left whose relationship with Chatterjee remains strained; and the third was a plausible name with the intention of convincing the skeptics that the two were serious in contesting the Congress choice for President.

The Congress party that was till then taking no position at all, was galvanized into action. In the rush and hurry, the party finally announced Pranab Mukherjee as its candidate but that too after he made a few telephone calls and was able to convince Sonia Gandhi that he had the necessary support. One of the newspapers was not too far wrong in quoting a 'source'as saying that Pranab Mukherjee was of the view that he had done all the work to make himself the President- elect with little help from the party. Mulayam Singh, happy that he had succeeded in making the Congress aware of his power and influence, agreed to go along, leaving Mamata Banerjee isolated.

Till last heard of she was lashing out at all, but again the media has gone wrong in presuming that her relationship with the UPA is over. Far from it, neither she nor the Congress at the Centre will let this relationship end.

Several political signals emerged from the entire drama. One, the Congress is its own worst enemy and its indecisiveness is proving extremely costly, to the party and often to the nation. A simple issue assumed the dimensions of a war, created solely by the Congress that could have declared Pranab Mukherjee at its candidate right at the very beginning, and spared him and itself much grief.

Two, the regional parties are quite confident of their own strength and although it was a momentary ruse, they again made it clear to the Congress and the BJP that they were quite able to make their own decisions now.

Three, that no one is willing to rock the boat for an early election at this stage. The possible exception could be Mamata Banerjee but when the chips are down it is not certain whether she too will plunge into the vagaries of an early poll.

Four, the BJP is in no position to turn a Congress mistake into an opportunity. It has been at best a bystander in this issue, trying to fire from the shoulders of individuals and the state parties without much success. Bereft of a strategy and sufficient support it has been unable to mark its presence in the presidential polls, at least so far.

Five, Sonia Gandhi has not left either Pranab Mukherjee or her Prime Minister too happy in the process. Her unwillingness to defend her colleagues in times of crisis has cost her considerable goodwill within the party, although of course no one has the independence or the ability to even indicate this. Mukherjee might have thanked her and the party for selecting him but in a sense he selected himself with the support of others; and Prime Minister Singh could not be happy with the total silence of the party when he was virtually humiliated by the SP- TMC who wanted him to be, as the popular phrase goes, " kicked upstairs." 

What should have been a routine, sober election - with or without contest - was turned into a high voltage drama with the media of course at its voyeuristic best.

Perhaps Mulayam Singh and Mamata Banerjee did everyone a favour with their announcement, as otherwise the drama would have dragged on till the penultimate day with speculation driving the news completely.

Sunday, June 17, 2012

The Empire Strikes Back - By Ghulam Muhammed | Egypt elections: Voting enters second day - bbc.co.uk

Sunday, June 17, 2012

THE EMPIRE STRIKES BACK

There is widespread feeling in the Muslim world, that the West and Israel were caught by surprise at the winning streak of Islamists, both Muslim Brotherhood and Salafists in the Egypt's first free democratic elections ever held. The Egyptian military in cahoots with the West and Israel, was bound to strike back ---in the old manner of the Empire Strikes Back.

The Empire got the Mubarak appointed constitutional court to struck down the Parliamentary Elections on mere technicality and that too within 2 days of the upcoming Presidential Elections, seriously undermining the public confidence, if the army will ever let free democratic process to succeed. It may contrive to see that Mubarak’s chosen former Prime Minister Ahmed Shafik, wins a majority.

BBC in its hourly news coverage already proclaims a ‘turnaround’ favoring Shafik. Surprisingly BBC gets Egyptian women in scarf lining up to vote, to be vouching not for Mohammed Morsi, but Ahmed Shafik. That is BBC’s contribution to the ‘turnaround’ based on blatant disinformation.

If Morsi wins, the court may struck down this election too, with the spacious argument that there is no approved constitution to legitimize any handover of power to Morsi, if he wins.

The liberals who had shared much in conjunction with the Islamists, to make the Egyptian revolution a historical success, now apparently disillusioned by their own scanty representation in the new democratic set-up, would probably resigned to a West sponsored Army coup. This time around Islamists will have to fill the Tahrir Square on their own.

The more things change, the more they remain the same.

Ghulam Muhammed, Mumbai


Egypt elections: Voting enters second day

Egyptian women line-up to cast their vote, as a list with the names of local residents registered to vote, hangs on the wall at a polling station on June 16, 2012 in Giza, Egypt Correspondents say the turnout appears to be lower than the first round
Polls have opened in Egypt for a second and final day of voting to elect the country's first president since Hosni Mubarak was forced from office in 2011.
Islamist candidate Mohammed Mursi is up against former Mubarak official Ahmed Shafiq in a second-round run-off.
The vote also comes amid a bitter row over the dissolution of parliament following a court ruling on Thursday.
Mr Mursi's Muslim Brotherhood has denounced the step as unlawful and a coup against democracy.
The movement urged Egyptians to protect their revolution after the ruling Supreme Council of Armed Forces (Scaf) declared the parliament null and void on Saturday.
Two days earlier, the Supreme Constitutional Court ruled that last year's legislative polls were unconstitutional, in a decision made by judges appointed under Mr Mubarak.
The dispute has laid bare the fears of some that the military council is trying to consolidate power and resist the democratic changes demanded during last year's demonstrations.
Continue reading the main story

Mohammed Mursi

Mohammed Mursi
  • Aged 60
  • US-educated engineering professor
  • Head of Muslim Brotherhood's Freedom and Justice Party (FJP)
  • Served as independent MP 2000-05
  • Quietly spoken, viewed by some as lacking charisma
  • Has promised "stability, security, justice and prosperity" under an Islamic banner
'People's will' Mr Shafiq, Mubarak's last prime minister, has campaigned on a platform of a return to stability and law-and-order which, correspondents say, many find attractive after months of political turmoil.
But to his critics, the former air force officer is the army's unofficial candidate and a symbol of the autocratic days under Mubarak.
Mr Mursi, meanwhile, has cast himself as a revolutionary and part of the movement that overthrew Mubarak, and has promised economic and political reform.
He has also softened his religious stance in an attempt to attract liberals and minorities.
His Freedom and Justice Party won almost half of seats in the legislature in the 2011 polls.
The BBC's Jon Leyne says that there is less enthusiasm in the run-off election than there was for previous rounds of voting, and some have called for a boycott or spoiled ballots.
Our correspondent says that the lack of young people voting on Saturday was particularly noticeable.
Continue reading the main story

Ahmed Shafiq

Ahmed Shafiq
  • Aged 70
  • Veteran fighter pilot and former air force chief
  • Appointed Egypt's first aviation minister, earning reputation for competence and efficiency
  • Promoted to PM during February 2011 protests
  • Associated with Mubarak regime, though denies being backed by ruling military council
  • Campaigned on a promise to restore security
While state TV has been urging people to vote, some activists have been distributing flyers in several Cairo metro stations calling for a boycott.
On Saturday, the top official in parliament, Sami Mahran, said he had received a letter from the ruling Supreme Council of the Armed Forces (Scaf) confirming for the first time that the lower house, the People's Assembly, had been dissolved.
In response, the Muslim Brotherhood said the move was a "coup against the whole democratic process".
"We are asking for the people to be the ones who decide that the parliament gets dissolved, as such a decision should be taken by the people's will and not the executive authority," FJP deputy leader Essam el-Erian told Reuters.
The move followed Thursday's supreme court ruling that the law governing Egypt's first democratic elections in more than six decades was unconstitutional because party members were allowed to contest seats in the lower house reserved for independents.
Scaf officials have told state media that it now plans to issue a new interim constitution and potentially select a replacement constitutional panel itself.
The ruling Supreme Council of the Armed Forces (Scaf) has vowed to hand over power to the winner by 30 June.
But the decision to dissolve parliament so swiftly means that the new president could take office without the oversight of a sitting parliament and without a permanent constitution to define his powers or duties.
On Saturday afternoon, Mr Mursi's campaign held a news conference in which it said several electoral violations had been reported, and urged voters to report any incidents.
Mr Shafiq came second in last month's first round, in which turnout among the 52 million eligible voters was only 46%. Official results gave Mr Mursi 24.8% and Mr Shafiq 23.7%.
Final results from the Higher Presidential Election Commission (HPEC) are due by 21 June, but are expected to arrive much earlier.

Tuesday, June 12, 2012

Collapse At Hand By Dr. Paul Craig Roberts

http://www.paulcraigroberts.org/2012/06/05/collapse-at-hand/

Collapse At Hand


Ever since the beginning of the financial crisis and quantitative easing, the question has been before us: How can the Federal Reserve maintain zero interest rates for banks and negative real interest rates for savers and bond holders when the US government is adding $1.5 trillion to the national debt every year via its budget deficits? Not long ago the Fed announced that it was going to continue this policy for another 2 or 3 years. Indeed, the Fed is locked into the policy. Without the artificially low interest rates, the debt service on the national debt would be so large that it would raise questions about the US Treasury’s credit rating and the viability of the dollar, and the trillions of dollars in Interest Rate Swaps and other derivatives would come unglued.

In other words, financial deregulation leading to Wall Street’s gambles, the US government’s decision to bail out the banks and to keep them afloat, and the Federal Reserve’s zero interest rate policy have put the economic future of the US and its currency in an untenable and dangerous position. It will not be possible to continue to flood the bond markets with $1.5 trillion in new issues each year when the interest rate on the bonds is less than the rate of inflation. Everyone who purchases a Treasury bond is purchasing a depreciating asset. Moreover, the capital risk of investing in Treasuries is very high. The low interest rate means that the price paid for the bond is very high. A rise in interest rates, which must come sooner or later, will collapse the price of the bonds and inflict capital losses on bond holders, both domestic and foreign.

The question is: when is sooner or later? The purpose of this article is to examine that question.

Let us begin by answering the question: how has such an untenable policy managed to last this long?

A number of factors are contributing to the stability of the dollar and the bond market. A very important factor is the situation in Europe. There are real problems there as well, and the financial press keeps our focus on Greece, Europe, and the euro. Will Greece exit the European Union or be kicked out? Will the sovereign debt problem spread to Spain, Italy, and essentially everywhere except for Germany and the Netherlands?

Will it be the end of the EU and the euro? These are all very dramatic questions that keep focus off the American situation, which is probably even worse.

The Treasury bond market is also helped by the fear individual investors have of the equity market, which has been turned into a gambling casino by high-frequency trading.

High-frequency trading is electronic trading based on mathematical models that make the decisions. Investment firms compete on the basis of speed, capturing gains on a fraction of a penny, and perhaps holding positions for only a few seconds. These are not long-term investors. Content with their daily earnings, they close out all positions at the end of each day.

High-frequency trades now account for 70-80% of all equity trades. The result is major heartburn for traditional investors, who are leaving the equity market. They end up in Treasuries, because they are unsure of the solvency of banks who pay next to nothing for deposits, whereas 10-year Treasuries will pay about 2% nominal, which means, using the official Consumer Price Index, that they are losing 1% of their capital each year. Using John Williams’ (shadowstats.com) correct measure of inflation, they are losing far more. Still, the loss is about 2 percentage points less than being in a bank, and unlike banks, the Treasury can have the Federal Reserve print the money to pay off its bonds. Therefore, bond investment at least returns the nominal amount of the investment, even if its real value is much lower. (For a description of High-frequency trading, see: http://en.wikipedia.org/wiki/High_frequency_trading )

The presstitute financial media tells us that flight from European sovereign debt, from the doomed euro, and from the continuing real estate disaster into US Treasuries provides funding for Washington’s $1.5 trillion annual deficits. Investors influenced by the financial press might be responding in this way. Another explanation for the stability of the Fed’s untenable policy is collusion between Washington, the Fed, and Wall Street. We will be looking at this as we progress.

Unlike Japan, whose national debt is the largest of all, Americans do not own their own public debt. Much of US debt is owned abroad, especially by China, Japan, and OPEC, the oil exporting countries. This places the US economy in foreign hands. If China, for example, were to find itself unduly provoked by Washington, China could dump up to $2 trillion in US dollar-dominated assets on world markets. All sorts of prices would collapse, and the Fed would have to rapidly create the money to buy up the Chinese dumping of dollar-denominated financial instruments.

The dollars printed to purchase the dumped Chinese holdings of US dollar assets would expand the supply of dollars in currency markets and drive down the dollar exchange rate. The Fed, lacking foreign currencies with which to buy up the dollars would have to appeal for currency swaps to sovereign debt-troubled Europe for euros, to Russia, surrounded by the US missile system, for rubles, to Japan, a country over its head in American commitment, for yen, in order to buy up the dollars with euros, rubles, and yen.

These currency swaps would be on the books, unredeemable and making additional use of such swaps problematical. In other words, even if the US government can pressure its allies and puppets to swap their harder currencies for a depreciating US currency, it would not be a repeatable process. The components of the American Empire don’t want to be in dollars any more than do the BRICS.

However, for China, for example, to dump its dollar holdings all at once would be costly as the value of the dollar-denominated assets would decline as they dumped them. Unless China is faced with US military attack and needs to defang the aggressor, China as a rational economic actor would prefer to slowly exit the US dollar. Neither do Japan, Europe, nor OPEC wish to destroy their own accumulated wealth from America’s trade deficits by dumping dollars, but the indications are that they all wish to exit their dollar holdings.

Unlike the US financial press, the foreigners who hold dollar assets look at the annual US budget and trade deficits, look at the sinking US economy, look at Wall Street’s uncovered gambling bets, look at the war plans of the delusional hegemon and conclude: “I’ve got to carefully get out of this.”

US banks also have a strong interest in preserving the status quo. They are holders of US Treasuries and potentially even larger holders. They can borrow from the Federal Reserve at zero interest rates and purchase 10-year Treasuries at 2%, thus earning a nominal profit of 2% to offset derivative losses. The banks can borrow dollars from the Fed for free and leverage them in derivative transactions. As Nomi Prins puts it, the US banks don’t want to trade against themselves and their free source of funding by selling their bond holdings. Moreover, in the event of foreign flight from dollars, the Fed could boost the foreign demand for dollars by requiring foreign banks that want to operate in the US to increase their reserve amounts, which are dollar based.

I could go on, but I believe this is enough to show that even actors in the process who could terminate it have themselves a big stake in not rocking the boat and prefer to quietly and slowly sneak out of dollars before the crisis hits. This is not possible indefinitely as the process of gradual withdrawal from the dollar would result in continuous small declines in dollar values that would end in a rush to exit, but Americans are not the only delusional people.

The very process of slowly getting out can bring the American house down. The BRICS–Brazil, the largest economy in South America, Russia, the nuclear armed and energy independent economy on which Western Europe (Washington’s NATO puppets) are dependent for energy, India, nuclear armed and one of Asia’s two rising giants, China, nuclear armed, Washington’s largest creditor (except for the Fed), supplier of America’s manufactured and advanced technology products, and the new bogyman for the military-security complex’s next profitable cold war, and South Africa, the largest economy in Africa–are in the process of forming a new bank. The new bank will permit the five large economies to conduct their trade without use of the US dollar.

In addition, Japan, an American puppet state since WWII, is on the verge of entering into an agreement with China in which the Japanese yen and the Chinese yuan will be directly exchanged. The trade between the two Asian countries would be conducted in their own currencies without the use of the US dollar. This reduces the cost of foreign trade between the two countries, because it eliminates payments for foreign exchange commissions to convert from yen and yuan into dollars and back into yen and yuan.

Moreover, this official explanation for the new direct relationship avoiding the US dollar is simply diplomacy speaking. The Japanese are hoping, like the Chinese, to get out of the practice of accumulating ever more dollars by having to park their trade surpluses in US Treasuries. The Japanese US puppet government hopes that the Washington hegemon does not require the Japanese government to nix the deal with China.

Now we have arrived at the nitty and gritty. The small percentage of Americans who are aware and informed are puzzled why the banksters have escaped with their financial crimes without prosecution. The answer might be that the banks “too big to fail” are adjuncts of Washington and the Federal Reserve in maintaining the stability of the dollar and Treasury bond markets in the face of an untenable Fed policy.

Let us first look at how the big banks can keep the interest rates on Treasuries low, below the rate of inflation, despite the constant increase in US debt as a percent of GDP–thus preserving the Treasury’s ability to service the debt.

The imperiled banks too big to fail have a huge stake in low interest rates and the success of the Fed’s policy. The big banks are positioned to make the Fed’s policy a success. JPMorgan Chase and other giant-sized banks can drive down Treasury interest rates and, thereby, drive up the prices of bonds, producing a rally, by selling Interest Rate Swaps (IRSwaps).

A financial company that sells IRSwaps is selling an agreement to pay floating interest rates for fixed interest rates. The buyer is purchasing an agreement that requires him to pay a fixed rate of interest in exchange for receiving a floating rate.

The reason for a seller to take the short side of the IRSwap, that is, to pay a floating rate for a fixed rate, is his belief that rates are going to fall. Short-selling can make the rates fall, and thus drive up the prices of Treasuries. When this happens, as these charts illustrate, there is a rally in the Treasury bond market that the presstitute financial media attributes to “flight to the safe haven of the US dollar and Treasury bonds.” In fact, the circumstantial evidence (see the charts in the link above) is that the swaps are sold by Wall Street whenever the Federal Reserve needs to prevent a rise in interest rates in order to protect its otherwise untenable policy. The swap sales create the impression of a flight to the dollar, but no actual flight occurs. As the IRSwaps require no exchange of any principal or real asset, and are only a bet on interest rate movements, there is no limit to the volume of IRSwaps.

This apparent collusion suggests to some observers that the reason the Wall Street banksters have not been prosecuted for their crimes is that they are an essential part of the Federal Reserve’s policy to preserve the US dollar as world currency. Possibly the collusion between the Federal Reserve and the banks is organized, but it doesn’t have to be. The banks are beneficiaries of the Fed’s zero interest rate policy. It is in the banks’ interest to support it. Organized collusion is not required.

Let us now turn to gold and silver bullion. Based on sound analysis, Gerald Celente and other gifted seers predicted that the price of gold would be $2000 per ounce by the end of last year. Gold and silver bullion continued during 2011 their ten-year rise, but in 2012 the price of gold and silver have been knocked down, with gold being $350 per ounce off its $1900 high.

In view of the analysis that I have presented, what is the explanation for the reversal in bullion prices? The answer again is shorting. Some knowledgeable people within the financial sector believe that the Federal Reserve (and perhaps also the European Central Bank) places short sales of bullion through the investment banks, guaranteeing any losses by pushing a key on the computer keyboard, as central banks can create money out of thin air.

Insiders inform me that as a tiny percent of those on the buy side of short sells actually want to take delivery on the gold or silver bullion, and are content with the financial money settlement, there is no limit to short selling of gold and silver. Short selling can actually exceed the known quantity of gold and silver.

Some who have been watching the process for years believe that government-directed short-selling has been going on for a long time. Even without government participation, banks can control the volume of paper trading in gold and profit on the swings that they create. Recently short selling is so aggressive that it not merely slows the rise in bullion prices but drives the price down. Is this aggressiveness a sign that the rigged system is on the verge of becoming unglued?

In other words, “our government,” which allegedly represents us, rather than the powerful private interests who elect “our government” with their multi-million dollar campaign contributions, now legitimized by the Republican Supreme Court, is doing its best to deprive us mere citizens, slaves, indentured servants, and “domestic extremists” from protecting ourselves and our remaining wealth from the currency debauchery policy of the Federal Reserve. Naked short selling prevents the rising demand for physical bullion from raising bullion’s price.

Jeff Nielson explains another way that banks can sell bullion shorts when they own no bullion. (See, http://www.gold-eagle.com/editorials_08/nielson102411.html) Nielson says that JP Morgan is the custodian for the largest long silver fund while being the largest short-seller of silver. Whenever the silver fund adds to its bullion holdings, JP Morgan shorts an equal amount. The short selling offsets the rise in price that would result from the increase in demand for physical silver. Nielson also reports that bullion prices can be suppressed by raising margin requirements on those who purchase bullion with leverage. The conclusion is that bullion markets can be manipulated just as can the Treasury bond market and interest rates.

How long can the manipulations continue? When will the proverbial hit the fan?

If we knew precisely the date, we would be the next mega-billionaires.

Here are some of the catalysts waiting to ignite the conflagration that burns up the Treasury bond market and the US dollar:

A war, demanded by the Israeli government, with Iran, beginning with Syria, that disrupts the oil flow and thereby the stability of the Western economies or brings the US and its weak NATO puppets into armed conflict with Russia and China. The oil spikes would degrade further the US and EU economies, but Wall Street would make money on the trades.

An unfavorable economic statistic that wakes up investors as to the true state of the US economy, a statistic that the presstitute media cannot deflect.

An affront to China, whose government decides that knocking the US down a few pegs into third world status is worth a trillion dollars.

More derivate mistakes, such as JPMorgan Chase’s recent one, that send the US financial system again reeling and reminds us that nothing has changed.

The list is long. There is a limit to how many stupid mistakes and corrupt financial policies the rest of the world is willing to accept from the US. When that limit is reached, it is all over for “the world’s sole superpower” and for holders of dollar-denominated instruments.

Financial deregulation converted the financial system, which formerly served businesses and consumers, into a gambling casino where bets are not covered. These uncovered bets, together with the Fed’s zero interest rate policy, have exposed Americans’ living standard and wealth to large declines. Retired people living on their savings and investments, IRAs and 401(k)s can earn nothing on their money and are forced to consume their capital, thereby depriving heirs of inheritance. Accumulated wealth is consumed.

As a result of jobs offshoring, the US has become an import-dependent country, dependent on foreign made manufactured goods, clothing, and shoes. When the dollar exchange rate falls, domestic US prices will rise, and US real consumption will take a big hit. Americans will consume less, and their standard of living will fall dramatically.

The serious consequences of the enormous mistakes made in Washington, on Wall Street, and in corporate offices are being held at bay by an untenable policy of low interest rates and a corrupt financial press, while debt rapidly builds. The Fed has been through this experience once before. During WW II the Federal Reserve kept interest rates low in order to aid the Treasury’s war finance by minimizing the interest burden of the war debt. The Fed kept the interest rates low by buying the debt issues. The postwar inflation that resulted led to the Federal Reserve-Treasury Accord in 1951, in which agreement was reached that the Federal Reserve would cease monetizing the debt and permit interest rates to rise.

Fed chairman Bernanke has spoken of an “exit strategy” and said that when inflation threatens, he can prevent the inflation by taking the money back out of the banking system. However, he can do that only by selling Treasury bonds, which means interest rates would rise. A rise in interest rates would threaten the derivative structure, cause bond losses, and raise the cost of both private and public debt service. In other words, to prevent inflation from debt monetization would bring on more immediate problems than inflation. Rather than collapse the system, wouldn’t the Fed be more likely to inflate away the massive debts?

Eventually, inflation would erode the dollar’s purchasing power and use as the reserve currency, and the US government’s credit worthiness would waste away. However, the Fed, the politicians, and the financial gangsters would prefer a crisis later rather than sooner. Passing the sinking ship on to the next watch is preferable to going down with the ship oneself. As long as interest rate swaps can be used to boost Treasury bond prices, and as long as naked shorts of bullion can be used to keep silver and gold from rising in price, the false image of the US as a safe haven for investors can be perpetuated.

However, the $230,000,000,000,000 in derivative bets by US banks might bring its own surprises. JPMorgan Chase has had to admit that its recently announced derivative loss of $2 billion is more than that. How much more remains to be seen. According to the Comptroller of the Currency http://www.occ.treas.gov/topics/capital-markets/financial-markets/trading/derivatives/dq411.pdf the five largest banks hold 95.7% of all derivatives. The five banks holding $226 trillion in derivative bets are highly leveraged gamblers. For example, JPMorgan Chase has total assets of $1.8 trillion but holds $70 trillion in derivative bets, a ratio of $39 in derivative bets for every dollar of assets. Such a bank doesn’t have to lose very many bets before it is busted.

Assets, of course, are not risk-based capital. According to the Comptroller of the Currency report, as of December 31, 2011, JPMorgan Chase held $70.2 trillion in derivatives and only $136 billion in risk-based capital. In other words, the bank’s derivative bets are 516 times larger than the capital that covers the bets.
It is difficult to imagine a more reckless and unstable position for a bank to place itself in, but Goldman Sachs takes the cake. That bank’s $44 trillion in derivative bets is covered by only $19 billion in risk-based capital, resulting in bets 2,295 times larger than the capital that covers them.

Bets on interest rates comprise 81% of all derivatives. These are the derivatives that support high US Treasury bond prices despite massive increases in US debt and its monetization.

US banks’ derivative bets of $230 trillion, concentrated in five banks, are 15.3 times larger than the US GDP. A failed political system that allows unregulated banks to place uncovered bets 15 times larger than the US economy is a system that is headed for catastrophic failure. As the word spreads of the fantastic lack of judgment in the American political and financial systems, the catastrophe in waiting will become a reality.

Everyone wants a solution, so I will provide one. The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved, merely gambling on notional values, the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system. The financial gangsters who want to continue enjoying betting gains while the public underwrites their losses would scream and yell about the sanctity of contracts. However, a government that can murder its own citizens or throw them into dungeons without due process can abolish all the contracts it wants in the name of national security. And most certainly, unlike the war on terror, purging the financial system of the gambling derivatives would vastly improve national security.


About Dr. Paul Craig Roberts

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following.

Monday, June 11, 2012

Facebook Meets Brick-and-Mortar Politics - By THOMAS L. FRIEDMAN - The New York Times

Thomas L. Friedman, a Jewish American writer and columnist with The New York Times, has a rare gift of insight in most common situations picking up the essence of a broader perspective on world events. Here, as is typical with western writers, he is not happy with the developments in both Egypt and Turkey, he is courageous enough to acknowledge the reality that faces the West, as well as the people around the world, where changes for democracy are to be forced to be inaugurated by the West, wrongly assumes that the Left liberals are the true inheritors of the new changes. In fact, they are now belatedly realizing that their initiatives to bring in change is more effectively by injecting chaos through Facebook mobilization is faltering, and inadvertently to the chagrin of western planners,  only as the more organized movements can emerge to take charge, their preferred Left is far from organized. After military, the democratic forces that can inspire confidence in people, at least in the Middle East, are Islamists, who naturally are anathema to the West.

The article and the happenings in Turkey as highlighted by Friedman, have relevance for India, where democratic forces are taking a beating due to their sheer blunderings and rampant corruption; thus making it easy for fascist forces from both left and right to first destabilize the country and then impose an authoritarian regime.

Ghulam Muhammed, Mumbai
<ghulammuhammed3@gmail.com>

--------------------------------------

http://www.nytimes.com/2012/06/10/opinion/sunday/friedman-facebook-meets-brick-and-mortar-politics.html

New York Times

The Sunday Review


Op-Ed Columnist

Facebook Meets Brick-and-Mortar Politics


Tyler Hicks/The New York Times
Supporters of Mohamed Morsi of the Muslim Brotherhood at a campaign stop in Menoufia, Egypt, on Wednesday.

By

Published: June 9, 2012 70 Comments
Istanbul
Josh Haner/The New York Times
Thomas L. Friedman
I HAD just finished a panel discussion on Turkey and the Arab Spring at a regional conference here, and, as I was leaving, a young Egyptian woman approached me. “Mr. Friedman, could I ask you a question? Who should I vote for?”
I thought: “Why is she asking me about Obama and Romney?” No, no, she explained. It was her Egyptian election next week that she was asking about. Should she vote for Mohamed Morsi, the candidate of the Islamist Muslim Brotherhood, or Ahmed Shafiq, a retired general who served as Hosni Mubarak’s last prime minister and was running as a secular law-and-order candidate? My heart went out to her. As Egyptian democracy activists say: It’s like having to choose between two diseases. How sad that 18 months after a democratic revolution, Egyptians have been left with a choice between a candidate anchored in 1952, when Egypt’s military seized power, and a candidate anchored in 622, when the Prophet Muhammad gave birth to Islam.

What happened to the “Facebook Revolution”?







Actually, Facebook is having a bad week — in the stock market and the ideas market. As a liberal Egyptian friend observed, “Facebook really helped people to communicate, but not to collaborate.” No doubt Facebook helped a certain educated class of Egyptians to spread the word about the Tahrir Revolution. Ditto Twitter. But, at the end of the day, politics always comes down to two very old things: leadership and the ability to get stuff done. And when it came to those, both the Egyptian Army and the Muslim Brotherhood, two old “brick and mortar” movements, were much more adept than the Facebook generation of secular progressives and moderate Islamists — whose candidates together won more votes than Morsi and Shafik combined in the first round of voting but failed to make the runoff because they divided their votes among competing candidates who would not align.

To be sure, Facebook, Twitter and blogging are truly revolutionary tools of communication and expression that have brought so many new and compelling voices to light. At their best, they’re changing the nature of political communication and news. But, at their worst, they can become addictive substitutes for real action. How often have you heard lately: “Oh, I tweeted about that.” Or “I posted that on my Facebook page.” Really? In most cases, that’s about as impactful as firing a mortar into the Milky Way galaxy. Unless you get out of Facebook and into someone’s face, you really have not acted. And, as Syria’s vicious regime is also reminding us: “bang-bang” beats “tweet-tweet” every day of the week.

Commenting on Egypt’s incredibly brave Facebook generation rebels, the political scientist Frank Fukuyama recently wrote: “They could organize protests and demonstrations, and act with often reckless courage to challenge the old regime. But they could not go on to rally around a single candidate, and then engage in the slow, dull, grinding work of organizing a political party that could contest an election, district by district. ... Facebook, it seems, produces a sharp, blinding flash in the pan, but it does not generate enough heat over an extended period to warm the house.”

Let’s be fair. The Tahrir youths were up against two well-entrenched patronage networks. They had little time to build grass-roots networks in a country as big as Egypt. That said, though, they could learn about leadership and the importance of getting things done by studying Turkey’s Islamist Justice and Development Party, known as A.K.P. It has been ruling here since 2002, winning three consecutive elections.

What even the A.K.P.’s biggest critics will acknowledge is that it has transformed Turkey in a decade into an economic powerhouse with a growth rate second only to China. And it did so by unlocking its people’s energy — with good economic management and reformed universal health care, by removing obstacles and creating incentives for business and foreign investment, and by building new airports, rail lines, roads, tunnels, bridges, wireless networks and sewers all across the country. A Turkish journalist who detests the A.K.P. confessed to me that she wished the party had won her municipal elections, because she knew it would have improved the neighborhood.

But here’s the problem: The A.K.P.’s impressively effective prime minister, Recep Tayyip Erdogan, has not only been effective at building bridges but also in eliminating any independent judiciary in Turkey and in intimidating the Turkish press so that there are no more checks and balances here. With the economic decline of the European Union, the aborting of Turkey’s efforts to become an E.U. member and the need for America to have Turkey as an ally in managing Iraq, Iran and Syria, there are also no external checks on the A.K.P.’s rising authoritarianism. (Erdogan announced out of the blue last week that he intended to pass a law severely restricting abortions.)

So many conversations I had with Turks here ended with me being told: “Just don’t quote me. He can be very vindictive.” It’s like China.

This isn’t good. If Erdogan’s “Sultanization” of Turkey continues unchecked, it will soil his truly significant record and surely end up damaging Turkish democracy. It will also be bad for the region because whoever wins the election in Egypt, when looking for a model to follow, will see the E.U. in shambles, the Obama team giving Erdogan a free pass and Turkey thriving under a system that says: Give your people growth and you can gradually curb democratic institutions and impose more religion as you like.

70 Comments

Readers shared their thoughts on this article.
    • blackmamba
    • IL
    NYT Pick

    "Arab Democracy" ?

    Is that like " Jewish Democracy" or " Christian Democracy"?

    Or is it like the "democracy" in apartheid South Africa and slavery/Jim Crow America?

    Or the democracy in the People's Republics of the world?

    What happens to you if you if you are not part of the group that modifies democracy?

    What happens to you if you are part of that group but do not agree with your fellows?
    • Trillian
    • New York City
    NYT Pick

    Facebook and Twitter have always been, and always will be, empty, enervating and worthless tools that discourage action and involvement. They're actually worse than doing nothing because at least if you do nothing you can't have the illusion that you're doing something.
    • blackmamba
    • IL
    NYT Pick

    They must feel like all of those Americans who had such high hopes on July 5, 1776.

    Only to realize that all of the high minded rhetoric about liberty, freedom, democracy, equality and unalienable rights was only intended to apply to white Protestant men from North/West Europe who owned land.

    And they also must realize that America favors the rights intended by it's Founding Father's for some people somewhere to some extent some of the time.

    History is a tale of human nature written in blood and tears to match the reality with the rhetoric.

    It is all very ordinary. Nothing exceptional unless you presume that human nature is selfish and callous.

    But all we see is altruism, compassion, honor, respect, love, trust and beauty in the mirror.
    • f.azzarto03parknyc
    • Newton,MA
    NYT Pick

    Mr. Friedman, as much as you would like everyone in the world to be as “Free” as we are in the US you continue to ignore the long, history that is Egypt, Syria, Iraq, Iran and more than any country, is Turkey.
    In the “Non-USA” nations, history is on their side. We are children in history’s timeline.
    Istanbul is the face of that long history. You just do not get it!
    Democracy as practiced in the USA is not and should not be the way other countries of this diverse world and especially the Middle East and Turkey should, will and must function and live.
    America’s hubris is our greatest Achilles Heel.
    And you put too much into the Facebook Bubble.
    In 5 years the next generation will barely remember it as my generation only faintly recalls the slide rule. The internet has yet to mature. Steve Jobs understood it but didn’t have the gift of time to see his dreams come true.
    Real Change has yet to come.
    The world will mature when you see the World Summer Olympics celebrated in Tel Aviv or Teheran.
    Facebook is a small blip on the Timeline that is humanity’s very long history.
    • Petey Tonei
    • Massachusetts
    NYT Pick

    Not so fast. History has Proven that everything is in a state of flux, there is no such thing as permanent. And there is nothing as powerful as hope, human spirit. Six hundred years, thousand years, two thousand years...these are still pretty recent in relative terms of human history on earth.

Sunday, June 10, 2012

Operation Samson Israel's Deployment of Nuclear Missiles on Subs from Germany - By SPIEGEL - AFP

http://www.spiegel.de/international/world/israel-deploys-nuclear-weapons-on-german-built-submarines-a-836784.html

 

Operation Samson Israel's Deployment of Nuclear Missiles on Subs from Germany

Photo Gallery: Germany Supplies Israel with Nuclear-Capable Subs
Photos
AFP
Many have wondered for years about the exact capabilities of the submarines Germany exports to Israel. Now, experts in Germany and Israel have confirmed that nuclear-tipped missiles have been deployed on the vessels. And the German government has long known about it. By SPIEGEL
The pride of the Israeli navy is rocking gently in the swells of the Mediterranean, with the silhouette of the Carmel mountain range reflected on the water's surface. To reach the Tekumah, you have to walk across a wooden jetty at the pier in the port of Haifa, and then climb into a tunnel shaft leading to the submarine's interior. The navy officer in charge of visitors, a brawny man in his 40s with his eyes hidden behind a pair of Ray-Ban sunglasses, bounces down the steps. When he reaches the lower deck, he turns around and says: "Welcome on board the Tekumah. Welcome to my toy."

He pushes back a bolt and opens the refrigerator, revealing zucchini, a pallet of yoghurt cups and a two-liter bottle of low-calorie cola. The Tekumah has just returned from a secret mission in the early morning hours. The navy officer, whose name the military censorship office wants to keep secret, leads the visitors past a pair of bunks and along a steel frame. The air smells stale, not unlike the air in the living room of an apartment occupied solely by men. At the middle of the ship, the corridor widens and merges into a command center, with work stations grouped around a periscope. The officer stands still and points to a row of monitors, with signs bearing the names of German electronics giant Siemens and Atlas, a Bremen-based electronics company, screwed to the wall next to them.

The "Combat Information Center," as the Israelis call the command center, is the heart of the submarine, the place where all information comes together and all the operations are led. The ship is controlled from two leather chairs. It looks as if it could be in the cockpit of a small aircraft. A display lit up in red shows that the vessel's keel is currently located 7.15 meters (23.45 feet) below sea level.

"This was all built in Germany, according to Israeli specifications," the navy officer says,"and so were the weapons systems." The Tekuma, 57 meters long and 7 meters wide, is a showpiece of precision engineering, painted in blue and made in Germany. To be more precise, it is a piece of precision engineering made in Germany that is suitable for equipping with nuclear weapons.

No Room for Doubt

Deep in their interiors, on decks 2 and 3, the submarines contain a secret that even in Israel is only known to a few insiders: nuclear warheads, small enough to be mounted on a cruise missile, but explosive enough to execute a nuclear strike that would cause devastating results. This secret is considered one of the best kept in modern military history. Anyone who speaks openly about it in Israel runs the risk of being sentenced to a lengthy prison term.

Research SPIEGEL has conducted in Germany, Israel and the United States, among current and past government ministers, military officials, defense engineers and intelligence agents, no longer leaves any room for doubt: With the help of German maritime technology, Israel has managed to create for itself a floating nuclear weapon arsenal: submarines equipped with nuclear capability.

Foreign journalists have never boarded one of the combat vessels before. In an unaccustomed display of openness, senior politicians and military officials with the Jewish state were, however, now willing to talk about the importance of German-Israeli military cooperation and Germany's role, albeit usually under the condition of anonymity. "In the end, it's very simple," says Israeli Defense Minister Ehud Barak. "Germany is helping to defend Israel's security. The Germans can be proud of the fact that they have secured the existence of the State of Israel for many years to come."

On the other hand, any research that did take place in Israel was subject to censorship. Quotes by Israelis, as well as the photographer's pictures, had to be submitted to the military. Questions about Israel's nuclear capability, whether on land or on water, were taboo. And decks 2 and 3, where the weapons are kept, remained off-limits to the visitors.

In Germany, the government's military assistance for Israel's submarine program has been controversial for about 25 years, a topic of discussion for the media and the parliament. Chancellor Angela Merkel fears the kind of public debate that German Nobel literature laureate Günter Grass recently reignited with a poem critical of Israel. Merkel insists on secrecy and doesn't want the details of the deal to be made public. To this day, the German government is sticking to its position that it does not know anything about an Israeli nuclear weapons program.

'Purposes of Nuclear Capability'

But now, former top German officials have admitted to the nuclear dimension for the first time. "I assumed from the very beginning that the submarines were supposed to be nuclear-capable," says Hans Rühle, the head of the planning staff at the German Defense Ministry in the late 1980s. Lothar Rühl, a former state secretary in the Defense Ministry, says that he never doubted that "Israel stationed nuclear weapons on the ships." And Wolfgang Ruppelt, the director of arms procurement at the Defense Ministry during the key phase, admits that it was immediately clear to him that the Israelis wanted the ships "as carriers for weapons of the sort that a small country like Israel cannot station on land." Top German officials speaking under the protection of anonymity were even more forthcoming. "From the beginning, the boats were primarily used for the purposes of nuclear capability," says one ministry official with knowledge of the matter.

Insiders say that the Israeli defense technology company Rafael built the missiles for the nuclear weapons option. Apparently it involves a further development of cruise missiles of the Popeye Turbo SLCM type, which are supposed to have a range of around 1,500 kilometers (940 miles) and which could reach Iran with a warhead weighing up to 200 kilograms (440 pounds). The nuclear payload comes from the Negev Desert, where Israel has operated a reactor and an underground plutonium separation plant in Dimona since the 1960s. The question of how developed the Israeli cruise missiles are is a matter of debate. Their development is a complex project, and the missiles' only public manifestation was a single test that the Israelis conducted off the coast of Sri Lanka.

The submarines are the military response to the threat in a region "where there is no mercy for the weak," Defense Minister Ehud Barak says. They are an insurance policy against the Israelis' fundamental fear that "the Arabs could slaughter us tomorrow," as David Ben-Gurion, the founder of the State of Israel, once said. "We shall never again be led as lambs to the slaughter," was the lesson Ben-Gurion and others drew from Auschwitz.

Armed with nuclear weapons, the submarines are a signal to any enemy that the Jewish state itself would not be totally defenseless in the event of a nuclear attack, but could strike back with the ultimate weapon of retaliation. The submarines are "a way of guaranteeing that the enemy will not be tempted to strike pre-emptively with non-conventional weapons and get away scot-free," as Israeli Admiral Avraham Botzer puts it.

Questions of Global Political Responsibility

In this version of tit-for-tat, known as nuclear second-strike capability, hundreds of thousands of dead are avenged with an equally large number of casualties. It is a strategy the United States and Russia practiced during the Cold War by constantly keeping part of its nuclear arsenal ready on submarines. For Israel, a country about the size of the German state of Hesse, which could be wiped out with a nuclear strike, safeguarding this threat potential is vital to its very existence. At the same time, the nuclear arsenal causes countries like Iran, Syria and Saudi Arabia to regard Israel's nuclear capacity with fear and envy and consider building their own nuclear weapons.

This makes the question of its global political responsibility all the more relevant for Germany. Should Germany, the country of the perpetrators, be allowed to assist Israel, the land of the victims, in the development of a nuclear weapons arsenal capable of extinguishing hundreds of thousands of human lives?

Is Berlin recklessly promoting an arms race in the Middle East? Or should Germany, as its historic obligation stemming from the crimes of the Nazis, assume a responsibility that has become "part of Germany's reason of state," as Chancellor Merkel said in a speech to the Israeli parliament, the Knesset, in March 2008? "It means that for me, as a German chancellor, Israel's security is never negotiable," Merkel told the lawmakers. The perils of such unconditional solidarity were addressed by Germany's new president, Joachim Gauck, during his first official visit to Jerusalem last Tuesday: "I don't want to imagine every scenario that could get the chancellor in tremendous trouble, when it comes to politically implementing her statement that Israel's security is part of Germany's reason of state."

The German government has always pursued an unwritten rule on its Israel policy, which has already lasted half a century and survived all changes of administrations, and that former Chancellor Gerhard Schröder summarized in 2002 when he said: "I want to be very clear: Israel receives what it needs to maintain its security."

Part 2: Franz-Josef Strauss and the Beginnings of Illegal Arms Cooperation

Those who subscribe to this logic are often prepared to violate Germany's arms export laws. Ever since the era of Konrad Adenauer, the country's first postwar leader, German chancellors have pushed through various military deals with Israel without parliamentary approval, kept the Federal Security Council in the dark or, as then Defense Minister Franz-Josef Strauss, a member of the conservative Christian Social Union (CSU), did, personally dropped off explosive equipment. That was what happened in an incident in the early 1960s, when Strauss drove up to the Israeli mission in Cologne in a sedan car and handed an object wrapped in a coat to a Mossad liaison officer, saying it was "for the boys in Tel Aviv." It was a new model of an armor-piercing grenade.

Arms cooperation was a delicate issue under every chancellor. During the Cold War, Bonn feared that it could lose the Arab world to East Germany if it openly aligned itself with Israel. Later on, Germany was consumed by fears over Arab oil, the lubricant of the German economic miracle.

Cooperating with Germany also had the potential to be politically explosive for the various Israeli administrations. Whether and in what form the Jewish state should accept Germany's help was a matter of controversy for the Israeli public. The later Prime Minister Menachem Begin, for example, who had lost much of his family in the Holocaust, could only see Germany as the "land of the murderers." To this day, financial assistance for Israel is in most cases referred to as "reparations."

Cooperation on defense matters was all the more problematic. It began during the era of Franz-Josef Strauss, who recognized early on that aid for Israel wasn't just a moral imperative, but was also the result of pragmatic political necessity. No one could help the new Germany acquire international respect more effectively than the survivors of the Holocaust.

In December 1957, Strauss met with a small Israeli delegation for a discussion at his home near Rosenheim in Bavaria. The most prominent member of the Israeli group was the man who, in the following decades, would become the key figure in Israel's arms deals with Germany, as well as the father of the Israeli atomic bomb: Shimon Peres, who would later become Israel's prime minister and is the current Israeli president today, at the age of 88.

No Clear Basis

It is now known that the arms shipments began by no later than 1958. The German defense minister even had arms and equipment secretly removed from Germany military stockpiles and then reported to the police as stolen.

Many of the shipments reached Israel via indirect routes and were declared as "loans." The equipment included Sikorsky helicopters, Noratlas transport aircraft, rebuilt M-48 tanks, anti-aircraft guns, howitzers and anti-tank guided missiles.

There was "no clear legal or budgetary basis" for the shipments," a German official admitted in an internal document at the time. But Adenauer backed his defense minister, and in 1967 it became clear how correct he was in making this assessment, when Israel preempted an attack by its neighbors and achieved a brilliant victory in the Six-Day War. From then on, Strauss's friend Peres consistently reminded his fellow Israelis not to forget "what helped us achieve that victory."

The fact that the German security guarantee was not a question of partisan politics became evident six years later, when Social Democrat Willy Brandt headed the government in Bonn -- and Israel was on the verge of defeat in the 1973 Yom Kippur War. Although Germany was officially uninvolved in the war, the chancellor personally approved arms shipments to Israel, as Brandt biographer Peter Merseburger reported. As those involved recall today, Brandt's decision was a "violation of the law" that Brandt's speechwriter, Klaus Harpprecht, sought to justify by attributing the chancellor's actions to a so-called emergency beyond law. The chancellor apparently saw it as an "overriding obligation of the head of the German government" to rescue the country created by survivors of the Holocaust.

DID THE GERMAN GOVERNMENT FINANCE THE ISRAELI NUCLEAR WEAPONS PROGRAM?

In the 1960s, Israel's interests had moved past conventional arms. Ben-Gurion had entrusted Peres with a highly sensitive project: Operation Samson, named after the Biblical figure who is supposed to have lived at the time when the Israelites were being oppressed by the Philistines. Samson was believed to be invincible, but he was also seen as a destructive figure. The goal of the operation was to build an atomic bomb. The Israelis told their allies that they needed cheap nuclear energy for seawater desalination, and that they planned to use the water to make the Negev Desert fertile.

The German government was also left in the dark at first -- with Strauss being the likely exception. The CSU politician was apparently brought into the loop in 1961. This is suggested by a memo dated June 12, 1961, classified as "top secret," which Strauss dictated after a meeting in Paris with Peres and Ben-Gurion, in which he wrote: "Ben-Gurion spoke about the production of nuclear weapons."

One can speculate on the reasons that Ben-Gurion, a Polish-born Israeli social democrat, chose to include the Bavarian conservative Strauss in his plans. There are indications that the Israeli government hoped to receive financial assistance for Operation Samson.

Israel was cash-strapped at the time, with the construction of the bomb consuming enormous sums of money. This led Ben-Gurion to negotiate in great secrecy with Adenauer over a loan worth billions.

According to the German negotiation records, which the federal government has now released in response to a request by SPIEGEL, Ben-Gurion wanted to use the loan for an infrastructure project in the Negev Desert. There was also talk of a "sea water desalination plant."

No Reason for Concern

Plants for a civilian desalination plant operated with nuclear power did in fact exist, and the development of the Negev was also one of the largest projects in Israel's brief history. When Rainer Barzel, the conservatives' parliamentary floor leader, inquired about the project in Jerusalem, the Israelis explained that obtaining water through desalination was an "epochal task." An official who accompanied Barzel noted that the Israelis had said that "the necessary nuclear power would be monitored internationally and could not be used for military purposes, and that we had no reason to be concerned."

But a desalination plant operated with nuclear power was never built, and it remains unclear what exactly happened with the total of 630 million deutsche marks that Germany gave the Israelis in the period until 1965. The payments were processed by the Frankfurt-based Kreditanstalt für Wiederaufbau (Reconstruction Credit Institute). The head of the organization said in internal discussions that the use of the funds was "never audited." "Everything seems to suggest that the Israeli bomb was financed also with German money," says Avner Cohen, an Israeli historian at the Monterey Institute of International Studies in California who studies nuclear weapons.

Finally, in 1967, Israel had probably built its first nuclear weapon. The Israeli government dismissed questions about its nuclear arsenal with a standard response that stems from Peres: "We will not introduce nuclear weapons to the region, and certainly we will not be the first." This deliberately vague statement is still the Israeli government's official position today.

When dealing with their German allies, however, Israeli politicians used language that hardly concealed the truth. When the legendary former Defense Minister Moshe Dayan visited Bonn in the fall of 1977, he told then Chancellor Helmut Schmidt about neighboring Egypt's fear "that Israel might use nuclear weapons." Dayan said that he understood the Egyptians' worries, and pointed out that in his opinion the use of the bomb against the Aswan dam would have "devastating consequences." He didn't even deny the existence of a nuclear weapon.

Part 3: First Submarines Are Secretly Assembled in England
A country that has the bomb is also likely to search for a safe place to store it and a safe launching platform -- a submarine, for example.

In the 1970s, Brandt and Schmidt were the first German chancellors to be confronted with the Israelis' determination to obtain submarines. Three vessels were to be built in Great Britain, using plans drawn up by the German company Industriekontor Lübeck (IKL).

But an export permit was needed to send the documents out of the country. To get around this, IKL agreed with the German Defense Ministry that the drawings would be completed on the letterhead of a British shipyard and flown on a British plane to the British town of Barrow-in-Furness, where the submarines were assembled.

Assuring Israel's security was no longer the only objective of the German-Israeli arms cooperation, which had since become a lucrative business for West German industry. In 1977, the last of the first three submarines arrived in Haifa. At the time, nobody was thinking about nuclear second-strike capability. It was not until the early 1980s, when more and more Israeli officers were returning from US military academies and raving about American submarines, that a discussion began about modernizing the Israeli navy -- and about the nuclear option.

A power struggle was raging in the Israeli military at the time. Two planning teams were developing different strategies for the country's navy. One group advocated new, larger Sa'ar 4 missile boats, while the other group wanted Israel to buy submarines instead. Israel was "a small island, where 97 percent of all goods arrive via water," said Ami Ayalon, the deputy commander of the navy at the time, who would later become head of the Israeli domestic intelligence agency, Shin Bet.

Strategic Depth

Even then it was becoming apparent, according to Ayalon, "that in the Middle East things were heading toward nuclear weapons," especially in Iraq. The fact that the Arab states were seriously interested in building the bomb changed Israel's defense doctrine, he says. "A submarine can be used as a tactical weapon for various missions, but at the center of our discussions in the 1980s was the question of whether the navy was to receive an additional task known as strategic depth," says Ayalon. "Purchasing the submarines was the country's most important strategic decision."

Strategic depth. Or nuclear second-strike capability.

At the end of the debate, the navy specified as its requirement nine corvettes and three submarines. It was "a megalomaniacal demand," as Ayalon, who would later rise to become commander-in-chief of the navy, admits today. But the navy's strategists had hopes of a budgetary miracle.

Alternatively, they were hoping for a rich beneficiary who would be willing to give Israel a few submarines.

KOHL AND RABIN TURN ISRAEL INTO A MODERN SUBMARINE POWER

The two men who finally catapulted Israel into the circle of modern submarine powers were Helmut Kohl and Yitzhak Rabin. Rabin's father had fought in World War II as a volunteer in the Jewish Legion of the British army, and Rabin himself led the Israeli army to victory, as its chief of staff, in the 1967 Six-Day War. In 1984, having served one term as prime minister in the mid-1960s, he moved to the cabinet, becoming the defense minister.

Rabin knew that the German government in Bonn had introduced new "political principles" for arms exports in 1982. According to the new policy, arms shipments could "not contribute to an increase in existing tensions." This malleable wording made possible the delivery of submarines to Israel, especially in combination with a famous remark once made by former Foreign Minister Hans-Dietrich Genscher: "Anything that floats is OK" -- because governments generally do not use boats to oppress demonstrators or opposition forces.

After World War II, the Allies had initially forbidden Germany from building large submarines. As a result, the chief supplier to the German navy, Howaldtswerke-Deutsche Werft AG (HDW), located in the northern port city of Kiel, had shifted its focus to small, maneuverable boats that could also operate in the Baltic and North Seas. The Israelis were interested in ships that could navigate in similarly shallow waters, such as those along the Lebanese coast, where they have to be able to lie at periscope depth, listen in on radio communications and compare the sounds of ship's propellers with an onboard database. The Israelis obtained bids from the United States, Great Britain and the Netherlands, but "the German boats were the best," says an Israeli who was involved in the decision.

A few weeks after the fall of the Berlin Wall in 1989, the German government, practically unnoticed by the general public, gave the green light for the construction of two "Dolphin"-class submarines, with an option for a third vessel.

But the strategic deal of the century almost fell through. Although the Germans had agreed to pay part of the costs, this explicitly excluded the weapons systems -- the Americans were supposed to also pay a share.

But in the meantime, the Israelis had voted a new government into office that was bitterly divided over the investments.

'An Inconceivable Scenario'

In particular Moshe Arens, who was appointed defense minister in 1990, fought to stop the agreement -- with success. On Nov. 30, 1990, the Israelis notified the shipyard in Kiel that it wished to withdraw from the contract.

Was the dream of nuclear second-strike capability lost? By no means.

In January 1991, the US air force attacked Iraq, and then Iraqi dictator Saddam Hussein reacted by firing modified Scud missiles at Tel Aviv and Haifa. The bombardment lasted almost six weeks. Gas masks, some of which came from Germany, were distributed to households. "It was an inconceivable scenario," recalls Ehud Barak, the current Israeli defense minister. During those days, Jewish immigrants from Russia arrived, "and we had to hand them gas masks at the airport to protect them against rockets that the Iraqis had built with the help of the Russians and the Germans."

A few days after the Scud missile bombardment began, a German military official requested a meeting at the Chancellery, presented a secret report and emptied the contents of a bag onto a table. He spread out dozens of electronic parts, components of a control system and the percussion fuse of the modified Scud missiles. They had one thing in common: They were made in Germany. Without German technology there would have been no Scuds, and without Scuds no dead Israelis.

Once again, Germany bore some of the responsibility, and that was also the message that Hanan Alon, a senior Israeli Defense Ministry official, brought to Kohl during a visit to Bonn shortly after the war began. "It would be unpleasant if it came out, through the media, that Germany helped Iraq to make poison gas, and then supplied us with the equipment against it, Mr. Chancellor," Alon said. According to Israeli officials, Alon also issued an open threat, saying: "You are certainly aware that the words gas and Germany don't sound very good together."

Part 4: The Shipyards of Kiel

The Germans got the message. "Israel-Germany-gas" would sound like a "horrible triad" in the rest of the world, then Foreign Minister Genscher warned in an internal memo.

On Jan. 30, 1991, two weeks after the beginning of the Gulf War, the German government agreed to supply Israel with armaments worth 1.2 billion deutsche marks. This included the complete financing of two submarines with 880 million deutsche marks. The budgetary miracle had come to pass. Israel had found its benefactor.

According to military wisdom, a country that buys one or two submarines will also buy a third one. One submarine is usually in dock, while the other two take turns being deployed during operations. "After we had ordered the first two boats, it was clear that we had entered into a deal which would involve repeat orders," says an individual who was a member of the Israeli cabinet at the time.

On a winter's day in 1994, at about 6 p.m., an Israeli Air Force plane landed in the military area of Cologne-Bonn Airport. Its passengers wanted to discuss the future of Israel and the Middle East. On board were three men: Prime Minister Yitzhak Rabin, his national security adviser and Mossad chief Shabtai Shavit. The small delegation was driven to the chancellor's residence, where Kohl was waiting with his foreign policy adviser, Joachim Bitterlich, and his intelligence coordinator, Bernd Schmidbauer.

Wheat Beer for Israel

On that evening, Kohl and Rabin discussed the path to peace in the Middle East. Rabin and Palestinian leader Yasser Arafat had been jointly awarded the Nobel Peace Prize the year before, together with Peres. For the first time in a long time, conciliation seemed possible between the Jews and the Palestinians, with Germany serving as a middleman.

In Bonn, Rabin spoke at length about the German-Israeli relationship, which was still difficult. At dinner, Kohl surprised his visitors by serving wheat beer. The Israelis were delighted. "The beer tastes great," Rabin said. The ice had been broken.

On that evening, the Israeli premier asked the Germans for a third submarine, and Kohl spontaneously agreed. At around midnight, Schmidbauer took Rabin back to airport. Kohl, who was virtually unsurpassed in the art of male bonding in politics, sent a case of wheat beer to Israel for Christmas in 1994.

A few months after the secret meeting in Bonn, in February 1995, the contract for the third submarine, the Tekumah, was signed. The German share of the costs totaled 220 million deutsche marks.

THE WELL-PROTECTED SECRETS OF THE SHIPYARD IN KIEL

Since then, one of the most secretive arms projects in the Western world has been underway in Kiel, where a special form of bonding between the German and the Israeli people developed. Around half a dozen Israelis work at the shipyard today on a long-term basis. Friendships, some of them close, have formed between HDW engineers and their families and the Israeli families, and special occasions are celebrated together. But despite these friendships, the Israelis always make sure that no outsiders are allowed near the submarines. Even managers from Thyssen-Krupp, which bought HDW in 2005, are denied access. "The main goal of everyone involved was to ensure that there would be no public debate about the project, neither in Israel nor in Germany," says former Israeli navy chief Ayalon. This explains why everything related to the equipment on the ships remains hidden behind a veil of secrecy.

One of the special features is the equipment used in the Dolphin class, which is named after the first ship. Unlike conventional submarines, the Dolphins don't just have torpedo tubes with a 533-millimeter diameter in the steel bow. In response to a special Israeli request, the HDW engineers designed four additional tubes that are 650 millimeters in diameter -- a special design not found in any other submarine in the Western world.

What is the purpose of the large tubes? In a classified 2006 memo, the German government argued that the tubes are an "option for the transfer of special forces and the pressure-free stowage of their equipment" -- combat swimmers, for example --, who can be released through the narrow shaft for secret operations. The same explanation is given by the Israelis.

Keeping Options Open

In the United States, however, it has long been speculated that the wider shafts could be intended for ballistic missiles armed with nuclear warheads. This suspicion was fueled by an Israeli request for US Tomahawk cruise missiles in 2000. The missiles have a range of over 600 kilometers, while nuclear versions can even fly about 2,500 kilometers. But Washington rejected the request twice. This is why the Israelis still rely on ballistic missiles of their own design today, such as Popeye Turbo.

Their use as nuclear carrier missiles is readily possible in the Dolphins. Contrary to official assumptions, HDW equipped the Israeli submarines with a newly developed hydraulic ejection system instead of a compressed air ejection system. In this process, water is compressed with the help of a hydraulic ram. The resulting pressure is then used to catapult the weapon out of the shaft.

The resulting momentum is limited, however, and it isn't enough to eject a three to five-ton mid-range missile out of the ship, at least according to insiders. This is not the case with lighter-weight missiles weighing up to 1.5 tons -- like the Popeye Turbo or the American Tomahawk, which weighs just that, nuclear warhead included.

There are indications that, with the expanded tubes, the Israelis wanted to keep open the option of future, more voluminous developments.


Part 5: The Germans and the Atomic Question: No Questions, No Problems

The Germans don't want to know anything about that. "It was clear to each of us, without anything being said, that the ships had been tailored to the needs of the Israelis, and that that could also include nuclear capabilities," says a senior German official involved during the Kohl era. "But in politics there are questions that it's better not to ask, because the answer would be a problem."

To this day, former German Foreign Minister Genscher and former Defense Minister Volker Ruhe say they do not believe that Israel has equipped the submarines with nuclear weapons.

For their part, experts with the German military, the Bundeswehr, do not doubt the nuclear capability of the submarines, but they do doubt whether cruise missiles could be developed on the basis of the Popeye Turbo that could fly 1,500 kilometers.

Some military experts suggest, therefore, that the Israeli government is bluffing, in a bid to make Iran believe that the Jewish state already has a sea-based second-strike capability. That alone would be enough to force Tehran to commit considerable resources to defending itself.The first person to publicly voice suspicions that the German government was supporting Israel in its nuclear weapons program was Norbert Gansel, an SPD politician from Kiel. Speaking in the German parliament, the Bundestag, he stated that the SPD opposed the shipment of "submarines suitable for nuclear missions" to Israel.

Clearly Squirming

The German government did make at least one stab at clearing up the nuclear issue. It was in 1988, when Defense Ministry State Secretary Lother Rühl, during a visit to Israel, asked then Deputy Chief of General Staff Ehud Barak what the "operational and strategic purpose of the ships" was. "We need them to clear maritime maneuvering areas," Barak replied. The Israeli mentioned the Egyptian naval blockage of the Gulf of Aqaba ahead of the Six-Day War. The Israelis wanted to be armed against such a step, he said. It sounded plausible, but Rühl didn't believe it.

Every German administration has been keenly aware of how explosive the issue is. When the German Finance Ministry had to report the funds for the financing of submarines 4 and 5 in 2006, the ministry officials were clearly squirming. The planned weapons system is "not suitable for the use of missiles equipped with nuclear warheads. The submarines are therefore not being constructed and equipped for launching nuclear weapons," reads a classified document from Finance Ministry State Secretary Karl Diller to the Bundestag budget committee dated Aug. 29, 2006.

In other words, the government was saying that Germany delivered a conventional submarine -- what the Israelis did with it afterwards was their own business. In 1999, the then State Secretary Brigitte Schulte wrote that the German government could not "rule out any armament for which the operating navy has capability, following the appropriate retrofitting."

THE WAR OVER THE BOMB: THE CONFLICT BETWEEN ISRAEL AND IRAN

The conflict between Israel and Iran has intensified steadily since 2006. War is a real danger. For months now, Israel has been preparing governments around the world, as well as the international public, for a bombing of the nuclear facilities at Natanz, Fordu and Isfahan using cutting-edge conventional, bunker-busting weapons. Prime Minister Benjamin Netanyahu and his Defense Minister Ehud Barak are convinced that the "window" is closing in which such an attack would be effective, as Iran is in the process of moving most of its nuclear enrichment activities deep below ground.

In his recent controversial poem "What Must Be Said," Günter Grass describes the submarines, "whose speciality consists in (their) ability / to direct nuclear warheads toward / an area in which not a single atom bomb / has yet been proved to exist," as the potentially decisive step towards a nuclear disaster in the Iran conflict. The poem met with international protests. Comparing Israel and Iran was "not brilliant, but absurd," said German Foreign Minister Guido Westerwelle. Netanyahu spoke of an "absolute scandal" and his interior minister banned Grass from entering Israel.

But some people agreed with the author. Gansel, the SPD politician, says that Grass has triggered an important debate, because Netanyahu's "ranting about preventive war" touches on a difficult aspect of international law. In reality, it is unlikely that Israel will use the submarines in a war with Iran as long as Tehran does not have nuclear missiles -- even though the Israeli government has considered using the "Samson" option on at least two occasions in the past.

The country's military situation following the Egyptian and Syrian surprise attack during the 1973 Yom Kippur holiday was so desperate that Prime Minister Golda Meir -- as intelligence service reports have now revealed -- ordered her Defense Minister Moshe Dayan to prepare several nuclear bombs for combat and deliver them to air force units. Then, just before the warheads were to be armed, the tide turned. Israel's forces gained the upper hand on the battlefield, and the bombs made their way back to their underground bunkers.

Unwillingness to Compromise

And in the first hours of the 1991 Gulf War, an American satellite registered that Israel had responded to the bombardment by Iraqi Scud missiles by mobilizing its nuclear force. Israeli analysts had mistakenly assumed that the Scuds would be armed with poison gas. It remains unclear how Israel would have acted if a Scud missile tipped with nerve gas had hit a residential area.

Only Netanyahu and Iran's supreme leader, Ayatollah Ali Khamenei, probably know how close the world stands today to a new war. The Israeli prime minister and Khamenei have "one thing in common," says Walther Stützle, a former state secretary in Germany's Federal Defense Ministry: "They enjoy conflict. If Israel attacks, Iran slips out of the aggressor role and into that of victim." The UN won't provide the mandate that would legitimize such an attack, which means Israel would be breaking the law, argues Stützle, who is now at the German Institute for International and Security Affairs (SWP), a Berlin-based think tank.

"True friendship," he believes, "requires the German chancellor to stay Netanyahu's arm and prevent him from resorting to an armed attack. Germany's obligation to protect Israel includes protecting the country from embarking on suicidal adventures."

Helmut Schmidt went even further, long before Grass. "Hardly anyone dares to criticize Israel here, out of fear of being accused of anti-Semitism," the former chancellor told Jewish American historian Fritz Stern. Yet Israel is a country, Schmidt suggests, that "makes a peaceful solution practically impossible, through its policies of settlement in the West Bank and, for far longer, in the Gaza Strip." He also condemns the current chancellor for, in his view, allowing herself to be essentially taken hostage by Israel. Schmidt says, "I wonder whether it was a feeling of closeness with American policies, or nebulous moral motives, that led Chancellor Merkel to publicly state in 2008 that Germany bears responsibility for the security of the State of Israel. From my point of view, this is a serious exaggeration, one that sounds very nearly like the type of obligation that exists within an alliance."

Schmidt considers it plain that Berlin has no business participating in adventurous policies, and he draws clear boundaries: "Germany has a particular responsibility to make sure that a crime such as the Holocaust never again occurs. Germany does not have a responsibility for Israel."

From the start, Merkel viewed the matter differently from her predecessor Schröder, who approved the delivery of submarines number 4 and 5 on his last working day in office in 2005. For Chancellor Merkel, on the other hand, there was never any doubt that she would do what Israel asked, even at the cost of violating Germany's own arms export guidelines. The rules, amended in 2000 by the SPD-Green coalition government, do allow weapons to be supplied to countries that are not part of the EU or NATO in the case of "special foreign or security policy interests." But there is a clear regulation for crisis regions: The rules state that supplying weapons "is not authorized in countries that are involved in armed conflicts or where there is a threat of one." There is no question that that rule would include Israel. But that did not stop the chancellor from making a deal for the delivery of submarine number 6 -- just as she was not deterred by Netanyahu's unwillingness to make compromises.
Part 6: The Deal for Submarine Number Six

In August 2009, Netanyahu, who had recently been re-elected as prime minister as head of the conservative Likud party, came to Berlin. Netanyahu explained to Merkel how important the submarines were for Israel; that wherever an Israeli looks, to the north, south, or east, there is no strategic hinterland to work with, and only airspace and sea to serve as buffer zones. "We need this sixth boat," participants in the meeting say Netanyahu told Merkel during his Berlin visit, coupling the statement with a request that Germany donate this submarine, as it had the previous ones.

Merkel's response included three specific requests in exchange. First, Israel should halt its policy of settlement expansion, and second, the government should release tax assets it had frozen, which belong to the Palestinian National Authority. Third, Israel must allow construction of a sewage treatment plant in the Gaza Strip, funded by Germany, to continue. The critical factor, the chancellor added, was absolute discretion. If details leaked out, the deal would be off, because resistance from the Bundestag would be too much to overcome. The two leaders agreed that German diplomat Christoph Heusgen and Netanyahu's security advisor Uzi Arad would work out the details.

Arad is known as an impulsive and hotheaded individual who has no problem with verbally attacking the Germans. When Merkel criticized Israel's settlement policy in a July 2009 address to the Bundestag, Arad called the Chancellery and fired off a volley of angry complaints at Heusgen. Arad ended the call with the demand that Merkel should not only apologize, but also retract her statements.

Asking for Help

The fact that Arad was supposed to be leading the negotiations delayed the talks over the sixth submarine once again. In the end, Netanyahu asked Yoram Ben-Zeev, Israel's ambassador to Germany, to help out.
Ben-Zeev returned to Israel when his term as ambassador ended on November 28, 2011. He was standing outside his house in Tzahala, a suburb of Tel Aviv, when his cell phone rang. It was Jaakov Amidror, Netanyahu's new security adviser.

"Are you sitting down?" Amidror asked.

"I'm standing in my neglected garden," Ben-Zeev replied.

"Netanyahu has one more request," Amidror told him. "Germany is ready to sign the submarine deal. You need to get on the next flight to Berlin."

Ultimately, Ben-Zeev and Heusgen agreed on the final details over the phone, and the contract was signed on March 20, 2012, at the Israeli ambassador's residence in Berlin. Defense Minister Barak flew in especially for the meeting and Rüdiger Wolf, a state secretary in the Federal Defense Ministry, signed on behalf of the German government. Since the Israeli government had financial problems once again, Germany made further concessions, agreeing to pay €135 million ($170 million), a third of the submarine's cost, and to allow Israel to defer payment of its part until 2015. Netanyahu dutifully expressed his thanks with a hand-written letter.

Still, disappointment within the Chancellery is running high, as Netanyahu has simply ignored Merkel's requests. Israel's policy of settlement continues unabated and no further progress has been made on the sewage treatment plant. The Israeli government only released the Palestinian tax money. Merkel has apparently reached the conclusion that there's no point in saying anything further to Netanyahu, since he's sure not to listen in any case.

Missed an Opportunity

But should the German government take this as cause to halt submarine production? That would send Israel a signal that German support comes with certain stipulations -- but it would also amount to showing less solidarity, and that's something Merkel doesn't want.

The chancellor has missed an opportunity to use one of the few sources of leverage the German government has at its disposal to exercise influence on the Israeli government, which behaves like an occupying power on Palestinian territory. The fourth submarine, known as Tannin, was first launched in early May and its delivery is set for early 2013. Submarine number five will follow in 2014 and number six by 2017.

These latest submarines are especially important for Israel, because they come equipped with a technological revolution: fuel cell propulsion that allows the ships to work even more quietly and for longer periods of time.

Earlier Dolphin class submarines had to surface every couple days to start up the diesel engine and power their batteries for continued underwater travel. The new propulsion system, which doesn't require these surface breaks, vastly improves the submarines' possible applications. They will be able to travel underwater at least four times as long as the previous Dolphins, their fuel cells allowing them to stay below the surface at least 18 days at a time. The Persian Gulf off the coast of Iran is no longer out of the operating range of the Israeli fleet, all thanks to quality engineering from Germany.

In the Haifa harbor, the Tekumah's diesel engines growl loudly enough that conversation is just barely possible. Out at sea, though, when the submarine is in true operation and all systems are functioning cleanly, "you can barely hear the motors at all," says the naval officer in charge of the boat. The Tekumah can plow through the water at speeds of 20 knots and above, a sleek and powerful predator. But the real skill, says the officer, comes in the low-speed operations carried out near enemy coasts, places where the Israeli Navy works covertly, where the Tekumah and the other submarines have to approach their targets with great care, moving as if on tiptoe.

'Everything Possible'

The naval officer sees his submarine as "one of the places where Israel is being defended" and his determined tone leaves no doubt he will take whatever action necessary if he considers his homeland to be under attack. "The Israeli Navy needed this boat," he says.

He also says he followed the controversy over Günter Grass' poem and was surprised by the intensity of the debate. His own family originally came from Germany -- his grandparents managed to escape before the Holocaust, fleeing their Munich suburb in 1934 and later becoming part of Israel's founding generation. "We can never forget the past," he says, "but we can do everything possible to prevent a new Holocaust."

This naval officer will likely be needed to serve onboard submarines for some time to come. In Israel, Berlin and Kiel, they are already talking about the fact that the Israelis will soon want to order their 7th, 8th and 9th submarines.

BY RONEN BERGMAN, ERICH FOLLATH, EINAT KEINAN, OTFRIED NASSAUER, JÖRG SCHMITT, HOLGER STARK, THOMAS WIEGOLD and KLAUS WIEGREFE

Translated from the German by Christopher Sultan