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THE SITUATION ROOM

Stunning Blow to U.S. Efforts in Iraq; Brazil's Energy Solution

Aired June 21, 2007 - 17:00   ET

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


WOLF BLITZER, HOST: And to our viewers, you're in THE SITUATION ROOM.
Happening now, another stunning blow to the U.S. effort in Iraq. Even as U.S. forces go on the offensive in Baghdad, a dozen more troops are killed in the Iraqi capital in a two day period. One reward for troops who risk their lives -- Iraqi orphans found abused and neglected now getting some proper care. We're going to have a report on this.

As Congress grapples with an energy problem, Brazil may have found a sweet solution, as millions of cars go and fuel themselves on sugar cane. We're watching the story.

And they used to wear the uniform of the Israeli Army. Now they wear bikinis in a men's magazine.

Can their images somehow boost Israel's image?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

U.S. troops in Iraq right now on the offensive, trying to fight the insurgents. But the insurgents are taking a heavy toll. As American losses mount, the military warning of more tough fighting ahead.

Let's go immediately to our Pentagon correspondent, Barbara Starr.

She's watching the story for us.

A very, very stunning blow to U.S. troops today -- Barbara.

BARBARA STARR, PENTAGON CORRESPONDENT: Well, Wolf, since Tuesday, it has simply been a horrific week for U.S. troops across Iraq.

(BEGIN VIDEO TAPE)

STARR (voice-over): Since Tuesday, 14 soldiers and Marines were killed in Iraq. In one roadside bomb attack alone, five U.S. troops died. Sixty-eight U.S. troops have lost their lives so far this month.

Defense Secretary Robert Gates indicated it's all to be expected.

ROBERT GATES, SECRETARY OF DEFENSE: They are in the middle of a battle and we just -- we just will have to deal with that.

STARR: Once again, the argument being made -- the U.S. is taking the fight to the enemy.

GENERAL PETER PACE, JOINT CHIEFS CHAIRMAN: Our troops and the Iraqi troops are going into areas where they haven't been for some time. And they anticipated that there would be a high level of combat as they did that.

STARR: But insurgents are not on the run. A series of mortar and rocket attacks slammed into the U.S.-controlled green zone.

GATES: The enemy is a thinking enemy and he has soldiers at his disposal. And they can decide to surge or not surge, like we can surge or not surge.

STARR: Gates also acknowledges the U.S. has now taken the extraordinary step of arming some Sunni insurgents who may have fought against and perhaps killed U.S. troops.

GATES: If we refuse to work with or ally with everybody who has been on the other side of the fence, then the prospects for making any progress in Iraq are pretty slim.

(END VIDEO TAPE)

STARR: Now, Wolf, both Secretary Gates and General Pace clearly are trying to change the conversation away from just what are the levels of violence. They say that's not a good measure of progress.

But Secretary Gates also said it would be naive to think that the country will not be focused on that September report assessing what progress there is in Iraq -- Wolf.

BLITZER: It could be a long, long, hot summer, and I'm sure it will be, in Iraq.

Barbara, thanks very much.

The latest casualties, by the way, bring the overall U.S. military death toll since the start of the war to 3,545.

Despite an agreement loaded with incentives, North Korea has still not pulled the plug on its nuclear program. Now the top U.S. nuclear envoy has made a surprise visit to the communist North.

Let's get right to our State Department correspondent, Zain Verjee -- Zain, what's this all about?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Well, Wolf, remember how North Korea agreed to shut down its nuclear reactor in exchange for international aid?

Well, that shut down never happened. But North Korea is getting something anyway -- a high level visit.

(BEGIN VIDEO TAPE)

CHRISTOPHER HILL, ASSISTANT SECRETARY OF STATE: We got the message on Monday.

UNIDENTIFIED MALE: Yes?

HILL: We had to work fast.

VERJEE (voice-over): A last minute invitation from North Korea delivered to U.S. envoy Chris Hill while he was in the neighborhood trying to jumpstart stalled North Korean talks.

President Bush, Secretary Rice and U.S. allies told him go for it. So, for the first time in five years, a top U.S. official flew to Pyongyang, North Korea's capital.

HILL: We hope that we can make up for some of the time that we lost this spring.

VERJEE: There had been a breakthrough deal earlier this year, but it fell apart over a financial standoff. The U.S. froze $25 million in North Korean funds at a bank in Macau -- a bank the U.S. said was involved in counterfeiting.

North Korea refused to shut down its nuclear reactor until it got its money back. So the U.S. gave it back. But still, no nuclear shutdown.

Now the U.S. says no excuses, let's get back to business.

SEAN MCCORMACK, STATE DEPARTMENT SPOKESMAN:

We are testing the proposition that North Korea has made that strategic decision to abandon its nuclear weapons programs and to abandon its nuclear programs.

VERJEE: But one of President Bush's former top advisers on Asia wrote a scathing op-ed column accusing the U.S. of rewarding bad behavior, undermining a policy of isolation he says was working: "It is, therefore, perplexing to see the U.S. now take a series of unilateral steps to unravel this policy and reward North Korea for doing, well, nothing."

But Michael O'Hanlon, with the more left-leaning Brookings Institution, says the gesture could pay off.

MICHAEL O'HANLON, BROOKINGS INSTITUTION: A visit from an assistant secretary of state to Pyongyang can help grease the skids. Maybe it helps the North Koreans with a little bit of faith.

(END VIDEO TAPE)

VERJEE: Michael O'Hanlon also says that the key here, Wolf, is really to make sure that North Korea delivers on the promises before the U.S. makes any more concessions. He also said, Wolf, that North Korea always engages in brinkmanship and the U.S. shouldn't allow them do that.

BLITZER: You have some news on another nuclear hot spot, Zain.

Tell our viewers what you've learned.

VERJEE: Well, Wolf, we know Pakistan has one plutonium production reactor. We also know they're in the process of building a second one. Now there's new pictures emerging to show they're actually also building a third one.

I want you to take a look at these pictures, Wolf.

The first one you see at the top is from August of 2006. And what it shows is just a dirt foundation, really, no structures. And then you see the second one below that only 10 months later. There's a significant amount of development that's occurred and there are structures there.

Now, analysts say that Pakistan may be expanding its nuclear arsenal because it wants a higher quality and lighter development on this front and so that they can build more powerful weapons.

But these are the latest developments -- Wolf.

BLITZER: Zain Verjee watching a lot of stories for us at the State Department.

Thanks, Zain, very much

Let's check back with Jack Cafferty for The Cafferty File -- Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Remember that great old "Pogo" comic strip -- "We have met the enemy and it is us?"

BLITZER: Yes.

CAFFERTY: OK.

Well, the French have met a new enemy and it is the Blackberry. The French newspaper "Le Monde" reports that French defense experts are telling French government officials not to use the Blackberries. They're worried about snooping by U.S. intelligence agencies and losing commercial and other secrets. That's because e-mails sent from Blackberries pass through servers in the United States and Britain and the French government officials are worried that makes the messages vulnerable to folks like the National Security Agency.

The company that makes the Blackberries, Research In Motion, says it's all poppycock. They say that the Blackberry e-mail cannot be read by the NSA or any other spy agencies. They say the messages are more encrypted than online banking Web sites.

Nevertheless, French officials are urging caution. A memo from a top official says: "It's up to everyone to be responsible." Although he did add that it's not a problem if people are writing to their mothers-in-law, only for official business.

So, here's the question -- does the French government have more important things to worry about than the U.S. spying on their Blackberry messages?

E-mail caffertyfile@cnn.com or go to cnn.com/caffertyfile -- Wolf.

BLITZER: You think U.S. officials visiting France should be worried that the French are spying on us when we're using our Blackberries?

CAFFERTY: Well, I hadn't even thought of it that way. I mean maybe we should get a memo out on this side of the pond.

BLITZER: And go back to sort of like scribbling notes to each other.

CAFFERTY: Yes.

BLITZER: Thanks, Jack, very much.

Up ahead, newly released documents offering a new look at a time of shock and chaos in the days after 9/11.

And what if this country had a cheap and very efficient fuel for tens of millions of vehicles?

Our Frank Sesno shows us how Brazil found a sweet solution to its energy problem.

And former female soldiers -- they're trading in their uniforms for bikinis.

Can their new look give Israel a new look?

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

Thousands of people dead, U.S. landmarks destroyed or shattered.

Amid the shock and chaos after the 9/11 attacks, how did the family -- the relatives of Osama bin Laden living here in the United States actually get out of the country?

Let's go to CNN's Brian Todd.

He's watching this story -- Brian, I take it there's been some new documents that have been released and that's causing a bit of a stir.

BRIAN TODD, CNN CORRESPONDENT: That's right, Wolf.

In those frightful days after 9/11, U.S. officials dealt with a fog of information and these newly released documents seem to add to the confusion.

(BEGIN VIDEO TAPE)

TODD (voice-over): More than a week after the attacks, a couple of days after more than 100 Saudi nationals, including members of Osama bin Laden's family, are flown out of the U.S. on chartered flights, an FBI document mentions one of the flights: "The plane was chartered either by the Saudi Arabian royal family or Osama bin Laden."

The plane in question left on September 19th. The FBI document was written on September 21st.

Was the FBI still sure not sure if bin Laden was involved in arranging a flight carrying his family members even after it had left?

The bureau is eager to clarify.

RICHARD KOLKO, FBI SPOKESMAN: By the time that flight ever left the U.S. we knew, A, for a fact, Osama bin Laden had nothing to do with it; And, B, the people on that flight had no information pertinent to the investigation.

Still, observers say this about the document's seemingly second guessing.

CRAIG UNGER, "VANITY FAIR": What this suggests is the sloppiness of the FBI's records, of its documents.

TODD: How did that get into the FBI's records at a time they knew bin Laden wasn't involved?

An FBI official says it got caught up in a swirl of information circulating at the time.

KOLKO: And what's in that report filed by an FBI agent from Los Angeles is information that he had gathered from the airport. We were able to quickly determine that it was not Osama bin Laden that had chartered that flight.

TODD: The group Judicial Watch, which requested the documents be released, also questions whether the FBI adequately screened everyone on a flight carrying some members of bin Laden's family.

FBI officials say they did.

We asked a member of the 9/11 Commission.

TIM ROEMER, 9/11 COMMISSIONER: We were satisfied that they did that, that they were very concerned about who was on these flights and who was leaving the country, and that they did a good job on that front. (END VIDEO TAPE)

TODD: So who did arrange for those chartered flights of Saudi nationals?

The 9/11 Commission says an official at the Saudi embassy made some of the contacts and a member of the royal family, the former ambassador to the U.S. Prince Bandar bin-Sultan, has said he called the FBI and top counter-terrorism officials of the United States to make that request -- Wolf.

BLITZER: What about the accusation, Brian, that some Saudis were allowed to fly out on charter flights before the U.S. actually reopened its air space after 9/11?

TODD: Well, these documents mention only that some Saudis may have tried to get on charter flights before air space reopened. But these papers and the 9/11 Commission report say that none of the Saudis were allowed to take off before the air space reopened on September 13th.

BLITZER: Brian Todd watching this story for us, a very confusing story.

Thanks, Brian, very much.

Osama bin Laden actually was granted an award today. A group of hard-line Pakistani Muslim clerics says it's bestowing upon bin Laden the title -- and I'm quoting now -- "sword of god" -- once again, quoting -- "for serving Muslims by waging Jihad against infidels."

The move is a protest against Britain's decision to grant a knighthood to the author, Salman Rushdie, accused of insulting Islam in his novel, "The Satanic Verses." The knighthood has led Pakistani protesters to burn the British flag and to burn Salman Rushdie in effigy.

This week, we brought you the shocking story of how troops found neglected and abused youngsters at a orphanage.

Now, let's have a follow-up to that story. But we must caution you that some of the images in this report may be disturbing.

CNN's Frederik Pleitgen is in Baghdad.

(BEGIN VIDEO TAPE)

FREDERICK PLEITGEN, CNN CORRESPONDENT (voice-over): Fourteen- year-old Saddam is tired and weak, his body bruised, but he's alive. Saddam and 23 other disabled boys were saved from a Baghdad orphanage more than a week ago.

This is what Saddam looked like when U.S. and Iraqi forces raided the Hanan Orphanage -- starved and neglected, many of the children were too weak to move. Others were tied to their beds in a room with no windows. These pictures were obtained by CBS News. The U.S. military says it found supplies at the orphanage that could have helped the children.

The boys were brought here, to another location of the same orphanage in Baghdad, where Firdos Salman takes care of them.

(on camera): What are you doing now to help them? What can you do to help them?

(voice-over): "We give them the best care, almost everything, starting from food to health care to social care," Firdos says.

(on camera): When the U.S. military found Saddam and the other children, many of them were barely alive. Now, only a few days later, they've received food and clothing and they've improved considerably.

(voice-over): Some of them have even found the strength to smile. Since taking the children in, this orphanage has received a wave of donations from inside and outside Iraq -- food, clothing and medicine from aid organizations, but also from individual donors.

The story is making headlines in Iraq. Even in this country, where so many die in everyday violence, many say they're appalled by the neglect these children faced.

"This is a criminal act and we should not accept that," this man says.

"This is absolutely cowardly, perpetrated by someone with no shame or conscience," he says.

Iraqi authorities detained four employees of the orphanage on the orders of the prime minister. Staff members at the Hanan Orphanage won't comment on the neglect allegations. The important thing now, they say, is that Saddam and the other children get the care they need to recover.

(on camera): The staffers we talked to also say they feel all of this is being blown out of proportion. They say all of this could have happened because the orphanage was massively understaffed and, also, because of the difficult conditions here in Baghdad under which this orphanage has to operate.

Now, a lot of the Iraqis that we've heard from today say they are not buying that. They say there could never be a justification for tying a kid to a bed post and denying it food and water -- Wolf.

BLITZER: What a story.

Frederik Pleitgen reporting for us from Baghdad.

Coming up, a close-up look at an airborne laser that can shoot missiles out of the sky. But the project is in the crosshairs of some budget cutters. We'll tell you what's going on. And Senate negotiators reaching a compromise on fuel economy requirements for vehicles. But Brazil apparently has an even sweeter solution.

Could it actually work here in the United States?

Frank Sesno is standing by with that.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Senators today reached an agreement on a proposal to boost automobile fuel economy standards. It would require all cars, SUVs and pickups to average 35 miles a gallon by the year 2020.

Let's bring in our special correspondent, Frank Sesno.

He's watching this story for us -- Frank, what's going on?

FRANK SESNO, SPECIAL CORRESPONDENT: And what if?

What if they actually produced a bill?

Don't hold your breath, Wolf.

Here we go again, OK?

You mentioned they reached agreement on the fuel standards, but they did not reach agreement -- in fact, fell a couple of votes short -- on a big tax proposal to take $25 billion plus from oil companies to help offset and provide the costs for some of this alternative energy development. And the finger pointing has begun already. From one source on the Hill, the grand old oil party -- this is a Democrat saying the grand oil party mounted a fierce defense of their benefactors from the oil patch and stopped the tax package just short of the 60 votes need for passage.

But the National Association of Manufacturers is urging senators to vote against the bill because they say it's bad for business, bad for the energy needs of the country and bad for the future of energy itself.

So it leads to this question -- what if we had energy policy instead of energy politics?

(BEGIN VIDEO TAPE)

SESNO (voice-over): What if I told you that millions of people can change the way they drive, live and work?

That a sprawling country with giant cities and congested roads can kick its addiction to imported oil?

And what if I told you the United States has been left in the dust by Brazil, which leads in ethanol production?

Not from corn, where U.S. ethanol comes from, but from sugar cane, which produces about seven times more energy than corn.

Brazil's program began 30 years ago, after the first oil shocks. The government ordered it, then subsidized it, then stuck with it. Auto makers built cars that ran on alcohol. Gas stations had to install ethanol pumps. It didn't all go well. When sugar prices spiked and oil prices fell, ethanol production dried up and people driving alcohol cars were out of luck.

But when oil prices rose, the industry recovered, then boomed when car makers introduced flex fuel vehicles a few years ago. More than three quarters of new cars now in Brazil are now flex. Forty percent of their transportation fuel is ethanol -- 40 percent. In the U.S. ethanol represents just about 3 percent of our fuel.

For three decades, we have been talking about energy independence. Brazil recently declared it.

So, what if we could get an energy policy and stick with it, think long-term?

What if we led the world in energy innovation?

(END VIDEO TAPE)

SESNO: Yes, what if we led the way?

Well, Wolf, what we're seeing now on Capitol Hill now is this very messy business of democracy and how difficult it is to bring all of these constituencies together. The corn growers here want ethanol. The coal states want more coal. The oil companies want to protect their tax breaks. And on and on it goes.

The Brazil example is a very interesting one.

But you know what?

It took a military government to force that through and keep everybody's foot to the pedal.

BLITZER: Fortunately, we don't have a military government here.

SESNO: Fortunately we don't. But we sure could use an energy bill.

BLITZER: That's correct.

Thanks very much.

Frank Sesno watching this for us.

Let's check back with Carol Costello.

She's monitoring some other stories incoming into THE SITUATION ROOM right now -- Carol, what do you have?

CAROL COSTELLO, CNN CORRESPONDENT: Well, let's start with a mystery, Wolf. A bizarre geological occurrence in Southern Chile. A lake has mysteriously vanished. It just disappeared. Experts say the ground may have opened up and actually swallowed it. Scientists have found only chunks of ice on the dry lake bed and a huge fissure. One theory is that a crack in the ground acted as a drain.

It's Prince William's birthday. He just turned 25 years old. And, as a result, the heir to the British thrown is now entitled to part of the inheritance from his mother, Princess Diana. That means he gains access to the interest accrued on the $13 million he was left in her will. Experts say that amounts to at least $500,000 a year.

In news effecting small businesses concerned about hard sell tactics, the Supreme Court has ruled athletic associations can enforce limits on recruiting high school athletes. A private school outside of Nashville challenged a rule of the Tennessee Secondary School Athletic Association. It prohibited schools from using undue influence in recruiting prospective students about their sports programs. The court ruled that does not violate the school's free speech rights.

That's a look at what's happening now -- Wolf.

BLITZER: Thanks, Carol, for that.

Coming up, a few years ago, it was science fiction -- a laser mounted in an aircraft which could shoot down missiles. But could it soon be reality?

And they wore the uniform of the Israeli Army. Now they're wearing a whole lot less.

Can these bikini-clad former soldiers change Israel's image?

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, the shuttle's planned landing today has been scrubbed because of bad weather down in Florida. It has five more landing opportunities over the next three days. We're watching the story for you.

The Pentagon says a computer hacker has penetrated the Defense Department's unclassified e-mail system. And that's forced the situation of e-mail service to one third of the staff working for the defense secretary, Robert Gates. The Pentagon says military operations are not -- repeat -- not, affected.

And Lebanese Army units are sweeping through a Palestinian refugee camp near Tripoli, searching for remnants of an Islamic militant group. The operation comes as Lebanon's defense minister announces that government troops have prevailed in the month-long siege against the militants.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

It sounds like science fiction, but the U.S. military put its prototype airborne laser on display today. It's meant to shoot down missiles.

But will Congress kill this would-be missile killer?

Our senior Pentagon correspondent, Jamie McIntyre, was one of the first reporters to get a close up look at this highly classified project -- Jamie.

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Wolf, here at Andrews Air Force Base, we're getting the first close up look at the airborne laser which is designed to shoot down missiles in flight. But right now it's in the cross hairs of budget cutters on Capitol Hill.

(BEGIN VIDEOTAPE)

MCINTYRE (voice over): Before it ever fires a single beam of light, the Pentagon will afford $5 billion into the airborne laser project producing one very sophisticated and expensive prototype.

If you believe the contractor's animation, the modified 747 will, a few years from now, be the first, best defense against ICBMs fired by potential foes like North Korea or Iran. The idea is for the jumbo jet to fly offshore, and when a missile is first launched, when it's laden with fuel, and easy to spot from it's bright plume, to hit it with a laser hot enough to make it explode.

(On camera): This is what they call the business end of the airborne laser. That turret has a lens on it that is about five feet in diameter. And it puts out a laser beam about this big, about the size of a basketball. It's a megawatt-class chemical laser, meaning millions of watts. How many millions? That's classified.

COL. JOHN DANIELS, AIRBORNE LASER PROGRAM DIRECTOR: Very simply it's like a giant flashlight.

MCINTYRE (voice over): Colonel Jon Daniels, project manager for the airborne laser showed me around the plane.

DANIELS: Think of the turret as the lens, and the bulb in a flashlight. We direct that very, very powerful flashlight at a boosting missile and we shoot it down.

MCINTYRE: Not everyone is buying that.

JOHN ISAACS, COUNCIL FOR A LIVABLE WORLD: The laser has to go through many miles of sky to hit the missile, burn a whole through it, and destroy it, that's the theory, that's the animation, but that's not the reality. Because, again, there's no evidence it's going to work.

MCINTYRE: For now, supporters are trying to get Congress to restore $200 million cut from this year's budget so the prototype can be tested as planned two years from now. If it works, eventually, the air force would have a fleet of seven planes at a cost of well over $16 billion.

(END VIDEOTAPE)

MCINTYRE: Now, the Missile Defense Agency says if they don't get the money they need, it won't kill the program, it will just slow it down. Instead of testing in 2009, they probably won't be able to test until probably 2011 -- Wolf.

BLITZER: Jamie McIntyre reporting for us from Andrews Air Force Base. Jamie, thanks.

As we noted at the top of the hour, a top U.S. envoy has made a surprise visit to North Korea, trying to jump start a deal aimed at freezing the North Korean nuclear program. Let's get some analysis from our world affairs analyst, the former Defense Secretary William Cohen. He's chairman and CEO of the Cohen group here in Washington.

What do you think? Are the North Koreans, when all is said and done, really going to do what they were supposed to do by this deal? All of these incentives, get them to freeze the program?

WILLAM COHEN, FMR. SEC. of DEFENSE: This is what the trip is designed to elicit. This is sort of a last chance in terms of dealing with the North Koreans. They do play games. They do engage in brinksmanship.

I recall when I was at the Pentagon, James Bodnar (ph), of my staff, went to meet with the North Koreans and they were eager to continue this dialogue and have President Clinton make a visit to North Korea. At the time we decided the timing was too close to the election and there wasn't enough preparation for it. This will put them to the test. Are they serious about now, discontinuing and dismantling that nuclear program? If so, a lot of good things can happen. If not, we're going to have to turn to the Chinese and to others to really start cracking down on the North Koreans.

BLITZER: Because a lot of experts believe that Kim Jong-il will never give up that nuclear program. He sees it as his real guarantee for staying in power.

COHEN: Well, that may be the case, but he has to then make a judgment. Does he want to continue starving his nation, which he has done over the years, in order to pursue this program? Or does he want to enter the family of nations and say I have a better life, can prepare a better life for my people. If he wants to continue the program, then life is going to continue to be quite hard for the North Koreans -- and dangerous for all of us. BLITZER: From one hot spot to another, let's go to the Middle East, right now. It looks like the situation is deteriorating all around, but there's word now the U.S., the Bush administration would be very happy if outgoing British Prime Minister Tony Blair took on a new assignment, and became a special envoy to the Israeli/Palestinian conflict. Normally a job done by U.S. officials, but Tony Blair, I guess -- what do you think? Is this something the U.S. would like to see, a European, if you will, take the main lead road in trying to negotiate some sort of peace process between the Israelis and the Palestinians?

COHEN: First, I have enormous respect for Tony Blair. He's an incredible individual and a great leader. I think it would be a terrific thing if he would accept this position. But I think also, it's a bit premature the way it's been handled.

For example, it should not be seen as the U.S. sort of leading this effort to bring Tony Blair into it, but rather this is something the big four, the quartet, Russia, the EU, U.N. and the U.S., otherwise, it may tend to undermine the position itself, looking as though we're outsourcing this responsibility to Tony Blair. I don't think he wants that or anyone else wants that.

I think he would be a great choice if he's willing to do that. There are some dangers in it. On the one hand, he does represent a European view, which has been much tougher in dealing with the Israelis. On the other, he may have greater appeal to the Palestinians and to the Arab nations. But this would have to be played very, very subtly as he tries to -- if he accepts this position, tries to strike that balance.

This is something we should are done, we, the United States, should have done several years ago. You and I have discussed this for the past two or three years. We have not done nearly enough to empower Mahmoud Abbas. This is coming pretty late in the game. It's not over, but it's a worthwhile endeavor, if we can get Tony Blair in there.

BLITZER: And I know you, like a lot of people, have watched this Middle East situation very closely and been very frustrated by the lack of leadership, if you will, in taking the initiative and trying to move that peace process forward.

Thanks very much. William Cohen joining us here on THE SITUATION ROOM.

Still ahead, for the past seven years, Ralph Nader has been trying to live down being blamed for spoiling Al Gore's presidential bid. Now Ralph Nader is talking about possibly running for president again. He's standing by to join us live, right here in THE SITUATION ROOM.

Also, they're trading in their fatigues for bikinis. Carol Costello taking a look at the new image of the Israeli army. What's going on? Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The idea of Ralph Nader running for president has some candidates a little bit worried. Ralph Nader is joining us here in THE SITUATION ROOM.

Let's talk about it. Thanks very much for coming in. Are you running for president?

RALPH NADER, FMR. GREEN PARTY PRES. CANDIDATE: It's too early to say. The reason why I say that is it is too early. The others are getting in the race because they have to raise hundreds of millions of dollars. We have to raise thousands of volunteers. Unless we have a lot of volunteers to overcome the Democrats perspective, efforts to get us off the ballot. You can't run.

BLITZER: At least you've been saying some things over the past day or two to suggest you're giving this really serious thought that in 2008, once again, you're going to be a candidate for president.

NADER: There are serious issues they're not addressing. They still don't do anything about --

BLITZER: When you say they, who are you talking about?

NADER: Both parties.

BLITZER: Democrats and Republicans.

NADER: They're not cleaning up the political system, the election rackets, and the monies that's involved. They haven't touched the horrendous tax system. The military budget is out of control, waste, fraud, abuse documented by their own congressional investigation the GAO Pentagon audits. They're thumbing their nose at the workers. This is the 60th anniversary of the worst law, the Taft- Hartley law, shackling American labor, and the Democrats will not make an event of it.

BLITZER: You heard the Democratic debate, the one we did in New Hampshire, the Republican debate that followed. If you listen carefully, not even all that carefully, there were significant differences between the Democrats and Republican as to how to end the war in Iraq, on health care, on tax cuts, on whether gays should be allowed to several openly in the military. There were two very different positions. When you say there are no real differences between Democrats and Republicans, there are significant differences.

NADER: There are significant differences, but not enough. Because there is this whole spectrum of issues, like who is making solar energy conversion as a national mission in our country. I mean, Gore is talking about it. But who -- they're tip-toeing here and there, and they're avoiding some very important issues that we call concentration of power issues.

Giant corporations have absolutely too much power in this country. And they have too much power to abandon this country with their factories and with their jobs. BLITZER: If Michael Bloomberg ran as a third party candidate, would that satisfy you? Would you then step aside?

NADER: That would make it very interesting.

BLITZER: Why do you like him so much?

NADER: One, he'll turn it to a three-way race, clearly, even more than Perot. Number two, he has a spectrum of issues coming from the New York City background and experience, and managerial experience, that the other two can't match.

I don't think we would have the post-Katrina situation if we had some kind of managerial competence running the federal government.

BLITZER: And his business background, you like that?

NADER: Yeah. I was in Bloomberg News getting interviewed, and he called me over before he --

BLITZER: When was this?

NADER: This was before he announced for mayor.

BLITZER: Years ago?

NADER: Yeah. And he said, you know, I just want to tell you, tomorrow, I'm going down and switching my registration from Democrat to Republican. I said, he's running for mayor. He now has switched it from Republican to independent. He is seriously considering it. He looks at the field. He's not impressed. A lot of the Republicans, they're all pro-war. This country is not going to even come close to electing a pro-war Republican. And he's saying, look, this could be a three-way race.

My prediction is that he's going to go in. He doesn't have to go in early because he has so much money. He can go in late.

BLITZER: He can go in and get on all of the ballots.

NADER: Yes.

BLITZER: And if he does, that would reduce the incentive for you to get in?

NADER: No, it would make it all the more interesting. There wouldn't be just a two-party --

BLITZER: And that would reduce your incentive?

NADER: No, no. It would make it more interesting. Because it would open up to the American people more voices, more choices.

BLITZER: Well, I'm a little confused. If Bloomberg runs as a third party candidate, will Ralph Nader, that would be you, will you run as a fourth party candidate? NADER: I said before, it's too early to say.

BLITZER: But does --

NADER: The answer to your --

BLITZER: Does the Bloomberg decision affect your decision?

NADER: It makes it more interesting and more useful. You know why? Because you reduce the political bigotry against the small party candidate, because you have a three-way race, it's more mixed, more diverse and they'll be otherwise preoccupied, shall we say, with Michael Bloomberg.

BLITZER: So as much as you say you like some of the things he stands for, even if he ran, you might still run anyhow.

NADER: Yes.

BLITZER: I just want to be very clear on that.

NADER: I haven't made a decision at all. I said, you can't run a locomotive without fuel. The fuel are pro bono lawyers, and thousands of volunteers to overcome the Democratic move to get us off the ballot. It's a big issue.

BLITZER: I saw this quote the other day. I want to make sure if it accurately conveys your attitude toward Senator Clinton, Senator Hillary Clinton.

If Senator John F. Kennedy's best-selling book, "Profiles In Courage" was updated, nothing Hillary Clinton has done in the Congress would come close to being a footnote. Is that an accurate quote?

NADER: Yes, it is.

BLITZER: You don't like her?

NADER: It isn't a matter of liking her, it's a matter that she has great name recognition. She's got a terrific political machine, she's not using her political capital to shift power, to challenge abuses of power. Done nothing on the bloated wasteful Pentagon budget; she's on the Senate Armed Services Committee; done nothing on these huge subsidies going to corporations.

She hasn't even done anything for the ghettos in terms of the -- you know, the serious economic exploitation in the inner city, not to mention as asbestos and lead in children's bodies. I mean, she knows all about that!

BLITZER: But you know Republicans would be salivating if you decided to jump in because they feel -- correctly or incorrectly -- you would be taking votes away from a Democratic candidate.

NADER: Well, that's because they are, themselves, inhibited. If they saw what we were doing they would say, hey, let's grab some of these issues ourselves, like a real living wage, an authentic health insurance plan. A real reform of the tax system, public funding of public campaigns -- you know, public transit -- there are a 1,000 issues they're shying away from because they're dialing for the same corporate dollars as the Republicans, are dialing for. By the way, it's amazing how they never looked at my critique of Bush, in 2000 and 2004.

BLITZER: Well, you were very critical of Bush.

NADER: Very critical.

BLITZER: But you know, to this day -- to this day --

NADER: Not once.

BLITZER: It's something you have had to live with all of the years since the Florida recount down, in 2000, Ralph Nader effectively got George W. Bush elected president.

NADER: Factual errors. You see, it's the dynamic before election day you have to look at. Pushing Gore to more progressive positions actually got him more votes; 25 percent of my vote, according to the Democratic exit poll, would have gone to Bush. I was very, very critical of Bush.

I think Gore won. By the way, I have spoken to him, I think he knows he won in Florida, it was taken from him. From Tallahassee to the Supreme Court, before, during, after election day.

Let's get over that, because we all have equal right to run for election. We're either all spoilers of one another, trying to get votes for none another, or none of us are spoilers. Let's go to the American people with so many wonderful solutions to the problems that are on the shelf, but are not being deployed on the ground.

BLITZER: Ralph Nader, thanks for coming in.

NADER: Thanks, Wolf.

BLITZER: And remember, the next presidential debate to be featured here on CNN will take place on July 23rd. We're teaming up with YouTube, it will be the first debate where all of you can submit your questions to the candidates online.

Lou Dobbs is getting ready for his show, that begins right at the top of the hour. Lou is standing by to tell us what he's working on.

Hi, Lou.

LOU DOBBS, CNN ANCHOR, LOU DOBBS TONIGHT: Hi, Wolf. Thank you.

We'll be reporting tonight on charges that pro amnesty senators are using underhanded tactics to ram amnesty through the Senate. Opponents of that so-called grand compromise say the illegal alien lobby is trying to stifle democracy. Two lawmakers at the center of the debate, Senator Claire McCaskill and Senator Bernie Sanders, among our guests tonight.

Also, troubling new evidence that the Bush administration is hell bent on creating what amounts to a North American Union, without the consent of voters or the Congress. We'll have that report.

And we'll continue our coverage of what is nothing less than a national crisis in our public school system. Millions of high school students at risk of dropping out and in many cases, parents are to blame. All of that, and more, at 6:00. Please join us.

Wolf, back to you.

BLITZER: Lou, thanks very much.

Still ahead here, in THE SITUATION ROOM, the French are giving the Blackberry the raspberry. Officials fearing U.S spies may monitor the messages from these portable e-mail devices. Jack Cafferty is wondering if they, the French, have more important things to worry about?

And they're out of uniform and in bikinis. By shedding their clothes can these former Israeli soldiers help Israel shed some bad PR? Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: As soldiers they wore the uniform of the Israeli army. Now they're wearing bikinis, posing as pin-ups in a men's magazine. Their images meant to boost Israel's image. Let's go to CNN's Carol Costello once again.

Carol, what is behind all of this?

CAROL COSTELLO, CNN CORRESPONDENT: Well, Wolf, Israel says it's misunderstood. It's hip, it's fun, and it wants to attract a whole new crowd, those young men who like sexy girls.

(BEGIN VIDEOTAPE)

COSTELLO (voice over): They're drop dead gorgeous and military trained. The girls in "Maxim" are former Israeli soldiers, who know low to wield a weapon. Take Yardin (ph), she loved taking apart her M- 16. Or Gal, who was in charge whipping Israeli soldiers into shape.

GAL GADOT, FMR. ISRAELI SOLDIER/MODEL: It was great. The service in the military. I contributed to my country. It was a great experience.

COSTELLO: It's the sort of thing you usually see in "Playboy" with features like the "Women of Enron", and the "Girls of 7/11", photo spreads not endorsed by their respective companies. But the "Maxim" spread is different. It was orchestrated by the Israeli government.

ARYE MEKEL, ISRAELI CONSUL GENERAL: Israel has always mentioned in context of war and terror, you know? We're trying to change that. We're trying to create a situation where you think about Israel in a different way.

COSTELLO: The ambassador says tourism in Israel is steady, but it should be higher. Pictures of violent attacks in the Middle East are part of the problem. He wants young tourists to know that Israel is hip, sexy, fun.

"Maxim's" party celebrating the soldiers' spread was packed. That's Gal Gedot with the Israeli ambassador, surrounded by Israeli media. When word hit the street there, it wasn't completely embraced as a brilliant idea. The former Counsel General Collette Avatal (ph), called the campaign pornographic and wonders if the best way to encourage tourism is by advertising sex.

MEKEL: Oh, these days we're trying to use a new tool in order to reach new audiences.

COSTELLO: And what about the image of the Israeli military, which took a hit during last year's conflict with Hezbollah in Lebanon? Critics call the campaign inept and ineffective. How could this possibly repair the damage?

UNIDENTIFIED FEMALE: We don't walk around with Uzi guns in Israel. We lead a normal life. We're going out, we're having fun.

COSTELLO: Whatever affect the "Maxim" spread on Israel's image, "Maxim", the magazine, is thrilled. Sexy soldiers and its young male readership certainly mesh nicely.

(END VIDEOTAPE)

COSTELLO: Oh, they do. Ambassador Mekel told me it was "Maxim's" idea to use female soldiers. As for how the campaign is working, well, it will certainly get a lot of attention from "Maxim's" 2.5 million young male readers who hopefully like to travel, Wolf.

BLITZER: Thank you very much, Carol Costello with a good report for us. Thanks, Carol.

And we're just getting this story in from the Associated Press. The AP reporting that the Bush administration is now nearing a decision to close the Guantanamo Bay Detention Facility in Cuba, and move terror suspects from Guantanamo to military prisons here in the United States or elsewhere.

According to the AP, President Bush's top national security and legal advisers will meet as early as tomorrow to consider this decision, to consider what is going on. It says it appears a consensus is developing. We're watching this story. Our reporters at the White House, at the Pentagon are checking it out. We'll be updating it to you and let you know what is going on.

Up next, Jack Cafferty wants to know why French officials are so worried about possible U.S. spying on their Blackberry messages. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK) BLITZER: We're back with Jack Cafferty for the "Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR, THE SITUATION ROOM: Wolf, the question is does the French government have more important things to worry about, then the U.S. spying on their Blackberry messages. The government sent out a memo saying that the U.S. government might be snooping.

Rod in Georgia writes, "What a dumb question."

Why do you say that to me? Now, we work very hard on these.

"Do you think the Bush administration would spy on the French? They sure has hell did on the average American citizens. I don't blame the French for thinking they would do the same thing, if they had the opportunity. I don't trust this administration in the least. And I can understand why France would be concerned."

Brian in Florida writes, "It seems to me the French memo about Blackberry devices has demonstrated that bureaucratic incompetence is not just a U.S. phenomenon. At least they're concerned about substantive issues instead of partisan crap, go figure.

Kylie in Ohio, "No, what else would they have to worry about. Everything is smooth sailing over there. They just elected a competent president, they have a health care system that's running smoothly; they have an operable public transportation system and they're not losing six soldiers a day in an endless war. Maybe the U.S. would benefit from the messages they've intercepted.

Uwe, in Carrollton Texas, "Would you trust this administration if you knew they had access to tools that would allow them to spy on you. I think the French are justified. It is the most intrusive government in my life time, and I'm over 60."

Tom in Arizona: "The French have become so irrelevant in the global community that they have to say something outrageous every once in a while, just to stay in the news.

And Carl in Louisiana, "I think the French have nothing better to worry about. I'm glad that they're worrying about nothing. It's getting old for us to be the only ones doing it. Look, there's a terrorist. Look, the planet's overheating. Look, Congress is working."

IF you didn't see you email here, you can go to CNN.com/Caffertyfile. We post more of them online, along with video clips of the Cafferty File.

The guy starts right out, what a dumb question. I don't know.

BLITZER: I think you get one of those guys, almost everyday, saying that to you, right?

CAFFERTY: I know. BLITZER: But you're tough, you can handle it.

CAFFERTY: I'm a tough guy.

BLITZER: See you back here, in one hour, in THE SITUATION ROOM. Jack Cafferty, he's with us every single day. We'll be back at 7 p.m. Eastern. In the meantime, I'm Wolf Blitzer in Washington, let's go to Lou, in New York -- Lou.

DOBBS: Wolf, thank you.

Tonight, new charges that pro-amnesty senators are using underhanded tactics to ram amnesty through the Senate.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.voxant.com

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