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U.S. and Iraq Discuss When To Withdraw U.S. Troops; Alleged Plot Against President Bush; General's "Luxury Capsules"; Oil Prices Lowest Since June

Aired July 18, 2008 - 17:00   ET


Happening now, when to withdraw U.S. troops from Iraq -- as Iraqi leaders show signs of impatience, the Bush administration comes up with a new set of words that hints at a schedule.

Has the clock started ticking in the White House?

An alleged plot against President Bush -- Israel announces arrests amid fresh concerns that Al Qaeda is trying to gain a foothold in that part of the world.

An Air Force general flying in style by adding luxury features to no frills transport planes.

Are they paying for the upgrades with anti-terrorism funds?

I'm Wolf Blitzer.


There's a new set of words out there that the White House is using on U.S. troop reductions in Iraq. The Bush administration has long resisted the idea of a schedule or a timetable. But now, nudged along by the Iraqi government itself, U.S. officials are talking about "a time horizon."

In my exclusive interview with the secretary of State, I asked her about that new phrase.


CONDOLEEZZA RICE, SECRETARY OF STATE: I think that you will find that both United States and Iraq want to be very attentive to what is actually going on the ground. And to the degree that you can turn over provinces to the Iraqis because they are stronger, because their enemies are weaker, because political and economic activities are taking hold, of course you'll want to do that. And there's no problem in having an aspirational, if you will, time horizon for doing that.


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

She's working the story for us -- an aspirational time horizon -- Barbara, are we seeing a shift here?

What are we seeing?

BARBARA STARR, PENTAGON CORRESPONDENT: Well, Wolf, I don't even think you have to read between the lines, read right on top. For months now, the president, General Petraeus, Secretary Gates all talking about conditions-based withdrawal of troops. Now today there are new words.


STARR (voice-over): With the last of the surge brigades pulling out of Iraq and July on track for the lowest troop casualty rate of the year, suddenly President Bush and Iraqi Prime Minister Nuri Al- Maliki are talking about when to withdraw U.S. troops. The two governments were hoping to reach a new security agreement this month. But Maliki, needing to appear independent from Washington, is now pressing the U.S. to set a time frame, if not a timetable, for getting most, if not all, the U.S. troops out.

SEAN MCCORMACK, STATE DEPARTMENT SPOKESMAN: Certainly, from our perspective there are certain things that we'll need -- we'll need to see. And, of course, the Iraqis have certain things that they need and certain things that their political system will need.

STARR: So the new word in Washington is not timetable, but horizon. According to a White House statement, the two leaders now have agreed that improving conditions should allow for the agreements now under negotiation to include a general time horizon for meeting aspirational goals, such as the resumption of Iraqi security control in their cities and provinces and a further reduction of U.S. combat forces in Iraq.

But a U.S. official familiar with the talks says the U.S. doesn't want to sign any agreement with firm withdrawal dates and specific troop drawdown levels. Still, the U.S. knows Maliki may have different ideas.

MCCORMACK: He is exercising his prerogatives.


STARR: Now, Wolf, what U.S. officials tell us is over the last several weeks, as this phraseology "horizon" has really come to the fore, they are agreeing to it to help out Prime Minister Maliki to demonstrate in his own country that he can get U.S. troops out of Iraq. But still, it remains to be seen how far the Iraqis will go with this and whether that horizon will eventually turn into a timetable -- Wolf.

BLITZER: A new diplomatic phrase and we'll watch it very closely.

Barbara, good work.

Thank you. An alleged plot against President Bush -- that stunning charge today from Israeli authorities, who revealed they're holding a number of Arab suspects. And it raises some fresh concerns that Al Qaeda itself is trying to establish a foothold in that part of the world, specifically in Israel.

Let's go to CNN's Ben Wedeman in Jerusalem -- Ben?

BEN WEDEMAN, CNN CORRESPONDENT: Wolf, the surprise announcement came out today, making us look back in a different way at the first visit by George W. Bush as president to Israel last January.


WEDEMAN (voice-over): Shin Bet, the Israeli internal security service, announced Friday that six individuals, two Israeli Arab citizens and four Palestinians from East Jerusalem, had been arrested on suspicion of trying to establish a cell linked to Al Qaeda.

One of the suspects, Mohammed Najan, a student at Jerusalem's Hebrew University, is alleged to have taken cell phone video footage of a helipad later used by President George W. Bush during his January visit to Israel.

According to the Shin Bet statement, Najan raised the possibility of targeting Bush's aircraft on a chat room frequented by Al Qaeda supporters. In addition, Shin Bet claimed investigators found bomb- making instructions downloaded from the Internet on the personal computers of several of the suspects.

Earlier this month, Israeli police revealed they had arrested two other Israeli citizens of Bedouin origin, who allegedly were passing information to Al Qaeda over the Internet on military bases and other strategic facilities, including Tel Aviv's Ben-Gurion International Airport.

Until now, al Qaeda has been unable to establish a presence in Israel, Gaza or the West Bank.


WEDEMAN: No statement has been issued on behalf of the six suspects, who will be charged with membership in a terrorist organization -- Wolf.

BLITZER: Ben Wedeman in Jerusalem for us working this important story.

Thanks, Ben.

Let's go back to Jack.

He's got The Cafferty File -- Jack, that's a pretty worrisome development. If Al Qaeda could establish a foothold in Israel, which they haven't been able to do so far, that would be a significant -- significant blow to the Israelis. CAFFERTY: Well, yes, it would. And it would probably get some of those Israeli intelligence guys called on the carpet, too. They are, arguably, as good as they are anywhere in the world. And if al Qaeda is at all successful in infiltrating that country, heads will roll.

Al Gore, former vice president, says it will be like the challenge of landing a man on the moon. He's calling on the U.S. to switch all of this country's electricity production to wind, solar or other carbon-free sources within 10 years. Gore says our dependence on the carbon-based fuel is at the core of our economic, environmental and national security crisis.

He sums it up this way. He says: "We're borrowing money from China to buy oil from the Persian Gulf and then burn it in ways that destroy the planet. Every bit of that has to change".

The former vice president and Nobel Peace Prize winner says the most important policy change will be to tax carbon dioxide pollution. Gore's bipartisan group estimates the 30 year cost of all of this is between 1.5 trillion and 3 trillion -- with a T -- dollars.

Some energy experts say Gore's plan moves way too fast, the country won't be able to go cold turkey and get off fossil fuels in a decade.

Others are even more critical. Republican Senator George Voinovich says it's "ridiculous" -- his word -- to think the nation could go carbon-free in 10 years. He says: "We could take and put windmills from the Atlantic to the Pacific. Yes, it would increase the amount of carbon-free energy production. But the fact of the matter is it's not going to get the job done."

Coal supplies about half this country's electricity. It's also responsible for more than one third of the country's carbon dioxide pollution, which is most often blamed for global warming.

So here's the question -- is Al Gore's call for carbon-free electricity in 10 years doable or ridiculous? You can post a comment on my blog -- Wolf.

BLITZER: Thanks, Jack.

Some of the stories we're working on this hour.

Uproar over generals demanding some first class accommodations with luxury compartments on military flights.

And oil prices falling dramatically.

But when will we see some relief at the gas pump?

Will we see any?

And more than a dozen people killed in a surge of lightning strikes. The roof, by the way, is leaking, the wallpaper is peeling, there's an asbestos problem, as well -- all this not fit for a queen -- a queen of England.

But who should pay?

Stick around.



BLITZER: First class amenities on a military flight -- the word is out about demands by some top U.S. generals who wanted to pay for some luxury accommodations with anti-terror funds.

Brian Todd is working the story for us.

What's going on -- Brian?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, one watchdog group calls this "an egregious failure of leadership."

The Air Force is pushing back on that.

We're talking about special capsules for top brass. These are the capsules we're talking about, that they can fit in these massive transport planes.

Now, how Air Force officials wanted to pay for them and what they wanted inside them has upset some junior officers and enlisted.


TODD (voice-over): By definition, this is supposed to be no frills flying -- big, clunky Air Force transport planes that carry troops, cargo and occasionally top brass all over the world. Now, Air Force generals are on the defensive over their efforts to upgrade their own accommodations on these aircraft. They've ordered so-called conference capsules that can be placed inside the massive planes -- pods with comfortable chairs, desks, convertible sofas, sleeping areas.

But a watchdog group is calling the generals out for trying to pay for them with nearly $20 million from the government's counter- terrorism funds.

NICK SCHWELLENBACH, PROJECT ON GOVERNMENT OVERSIGHT: The war on terrorism budget is supposed to be for funding the wars abroad and the troops on the front line, not for generals and their cushy flights around the world.

TODD: The Air Force's funding request was denied by Congress and Air Force officials tell us they've drastically cut down the number of these capsules on order and that it's all now coming out of the Air Force's own budget.

But there are other complaints about the project. According to internal Air Force e-mails provided to CNN by the defense watchdog group, Project On Government Oversight, which also gave us these images, top Air Force generals personally ordered features in the design of the capsules that drove up the cost by thousands.


BLITZER: All right, it looks like we had a little technical problem there.

But go ahead. Finish off. Tell us what the main thrust of this is.

TODD: Well, the thrust of the argument here is that Air Force officials drove up the cost of these special pods by ordering features like full length mirrors and aesthetically pleasing wall coverings, which drove up the cost of these. This watchdog group complained. Junior officers and enlisted complained.

What the Air Force people tell us is that, look, we designed these so that top brass on these really long trips into theater could have a place to work, to plug in computers. They also need secure areas for teleconferencing. And that's what they need it for.

But this watchdog group, Project On Government Oversight, says that they already have small areas that are already outfitted for planes that are like that. These are what they call just kind of souped up versions of those.

BLITZER: You know, as a former Pentagon correspondent, I've been on a lot of these transport planes. And, you know, it's not -- they're not comfortable. In fact, we have a picture of a flight I was on when I went to Iraq. And, you know, you're strapped in along the side.

TODD: Absolutely.

BLITZER: You can barely hear anything. It's so loud. These generals have to prepare, presumably, for some sort of operation. That's why they're heading into theater. There's a case that can be made they should be in an area where they're secure...

TODD: Right.

BLITZER: ...they can talk to her commanders back at the Pentagon and where they can rest up, getting ready so they're alert and ready o go when they hit the ground.

TODD: Absolutely. I've flown on these things, too. They're loud, they're dark, hard to get work done in here. Nobody's really arguing that they should have some kind of a special space.

But when you get into things like ordering mirrors and aesthetically pleasing wall coverings that drive up the cost, that's where some of the tough questions come in.

There was a general who was involved in this project who complained about the cost of carpeting and upholstery. And even a defense contractor that was going to get paid for this work talked about it being a little too excessive.

So they are -- they're facing some really tough questions.

BLITZER: So they can strip it down.

TODD: Sure.

BLITZER: Although I think the concept is probably a good one, to have an area where they can get ready to do what they need to do.

TODD: Right. The concept is OK. It's just kind of how they went about it that caused some problems.

BLITZER: All right.

Good work, Brian.

Brian Todd reporting for us.

The cost of crude falling once again today, the fourth day in a row. And while the price per barrel is still more than 70 percent higher than it was a year ago, some experts are saying the worst may be over, at least for now.

CNN's Susan Lisovicz is over at the New York Stock Exchange with details -- Susan?

SUSAN LISOVICZ, CNN CORRESPONDENT: Wolf, some analysts predicted oil would hit $200 this year. And it got within $3 of $150 a barrel last week. So the change in direction was a huge relief on Wall Street.


LISOVICZ (voice-over): Oil dropped more than $16 this week, marking the biggest four day dollar drop ever. Some traders said China's industry shut down ahead of the Olympics was a factor. Another possibility -- Mexico's prediction that oil won't go higher over the next few years. And let's not forget, Americans are using less gas now that it's above $4 a gallon.

Whatever the factor...

DENNIS GARTMAN, "THE GARTMAN REPORT": I think we've seen the top. I think it's an important top. And I think it's unlikely, at least in the six months to a year, that we will revisit those same levels that we saw only earlier this week.

LISOVICZ: And that inspired triple digit gains on Wall Street Wednesday and Thursday -- something that hasn't happened since March.

ART HOGAN, MARKET STRATEGIST: I think the biggest impact for the broad market has been to see the energy market trade off -- the commodity market trade off for three days in a row. I think everybody took a sigh of relief and said, OK, it's not going to $200 by the end of the month, we can get back in equities. LISOVICZ: Oil just under $129 a barrel still cuts into consumer spending and corporate profits. And with political instability, weather disruptions, rising global demand and speculation, this could be a short-term reprieve.

But consumers should not expect a reprieve from high gas prices so soon. First of all, there's a lag between crude and gas prices of about a week.

Also, refiners tend not to pass along the savings as quickly on the way down because of how narrow those margins are on the way up -- Wolf.

BLITZER: All right, Susan.

Susan Lisovicz working the story for us.

A John McCain supporter is being blasted for something he said on an official press call. It's a questionable comment about Muslims. You're going to hear what he said and how the candidate is now reacting.

And a parachutist off target -- the band plays on, but not for long.


BLITZER: Carol Costello is working some other stories incoming into THE SITUATION ROOM right now -- what's going on -- Carol?

COSTELLO: Well, Wolf, residents in the flood-ravaged Midwest might have found a buyer for their damaged properties. Five states are considering buyouts of properties found in the flood zone -- Illinois, Indiana, Wisconsin, Iowa and Missouri are all considering the action. Some state say it could be up to a year before any buyouts happen.

The National Hurricane Center is issuing a warning today for those living along the coast of the Carolinas. A tropical depression could form later today or tomorrow. So if you live on the coast of Georgia, South Carolina or North Carolina, get ready for heavy rain and gusty winds during the next couple of days. The NHC is also tracking another storm forming over the Caribbean. We will continue to monitor this situation and, of course, keep you updated.

Talk about your super-sized calamari side dish -- this 545-pound squid is the largest to be caught in Australian waters. Scientists say they decided to do a public dissection to increase public awareness of the little known and rarely seen deep sea creature. The squid was caught last month after getting tangled in a fishing net.

Take a look at this, Wolf. A military review in Kansas started off with a bang and then that parachutist had a little trouble staying on target. And as you can see, he had a close encounter with the brass section. Only a few minor injuries, but two tubas weren't so lucky.

You might want to be careful walking outside if you travel to Russia. More than a dozen people were killed or injured by lightning in the past two weeks. A weather official tells CNN that he believes the surge in lightning strikes is connected to the increased use of electronics, such as cell phones and iPods.

So, something to keep in mind in stormy weather.

BLITZER: Well, here's a little footnote to that story, Carol. Listen to this -- lightning strikes the ground approximately 25 million times each year in the United States. This year, there have been 18 deaths from lightning in the United States, seven of them this month alone. Ninety percent of people struck by lightning do survive, but many of the survivors suffer severe life-long injury and disabilities. Scary stuff.

A John McCain supporter on an official conference call makes a shocking remark about Muslims. But now the campaign is scrambling to put out another fire.

And it's a village with a Sunni mosque and soldiers taking mortar fire from insurgents. But guess what -- it's in California, where not everything is what it seems.

And here's some proof the economy is impacting everyone -- everyone. I'm referring to Queen Elizabeth. She's having some serious money woes and it's affecting Buckingham Palace.


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

Happening now, high oil prices prompting a change of heart in New Hampshire. State officials now say they will accept free home heating oil from Venezuelan President Hugo Chavez, an offer that they had rejected in the past.

Also, a deadly crane collapse at a refinery in Houston. Officials there now say four people are dead, at least six injured, some of them in critical condition.

And that salmonella scare changed the way a lot of Americans eat. Forty-six percent of those asked say they've change their eating habits after tomatoes were initially named as a suspect. They've since been cleared, but the industry lost $100 million.

I'm Wolf Blitzer.


It's a remark that had to make the McCain camp cringe. A fellow former POW, speaking on behalf of the candidate, telling reporters that Muslims are "going to kill unless Americans kneel before them."

Let's go to Carol Costello.

She's working this story for us.

What's the McCain campaign saying about that -- Carol?

COSTELLO: Well, Wolf, the McCain camp is saying it's all a misunderstanding. But the most decorated living war veteran was speaking on behalf of the Florida GOP when he stumbled into controversy.


COSTELLO (voice-over): The GOP conference call with reporters was billed as a discussion with Colonel Bud Day, a long-time McCain supporter.

COL. BUD DAY (RET.), MCCAIN SUPPORTER: John is head and shoulders the best candidate to be president of this country.

COSTELLO: And a long-time friend. Day and McCain were captured in Vietnam and held prisoner at the infamous Hanoi Hilton.

But as Dave veered off the subject of Vietnam and onto why McCain believes we ought to fight on in Iraq, the call turned controversial.

DAY: The Muslims have said either we kneel or they're going to kill us. I don't intend to kneel and I don't advocate to a anybody that we kneel and John doesn't advocate to anybody that we kneel.

COSTELLO: It didn't take long for Muslim groups to hear Day's comments and denounce them. In their world, kneeling means one is praying to Allah, not forcing others to bend to their will.

COREY SAYLOR, COUNCIL ON AMERICAN-ISLAMIC RELATIONS: The Department of Homeland Security and the National Counter-Terrorism Center has stated clearly that use of terminology like Islamic terrorism isn't helpful. In fact, what we should do is call these people criminals, we should call them terrorists. But we shouldn't even hint that any faith would endorse their barbaric behavior.

COSTELLO: Day has long been a lightning rod. He's the one who was involved in those outside advocacy ads, or 527 ads back in 2004, questioning Senator John Kerry's record as a Vietnam War hero.


GEORGE ELLIOTT: John Kerry has not been honest.


COSTELLO: John McCain did not comment on Day's latest remarks, but the McCain camp did, Press Secretary Brooke Buchanan tells CNN: "Day was clearly referring to radical Islamic extremists."


COSTELLO: And, Wolf, others within the McCain camp says Day was by no means speaking ill of the Muslim community at large.

But there are already calls from Muslim groups that Senator McCain repudiate what Day said -- McCain himself, that is -- Wolf.

BLITZER: All right Carol, thanks very much.

Let's discuss this explosive remark and more with our CNN political contributor, the democratic strategist James Carville and republican consultant Alex Castellanos, who was an adviser to the Romney presidential campaign. Not any longer, though. What do you think about this because Muslims are legitimately concerned when they're lumped together as a bunch of terrorists?

ALEX CASTELLANOS, FORMER ROMNEY PRES. CAMPAIGN CONSULTANT: Sure, I think both candidates, Senator Obama and Senator McCain, are being very careful in this campaign not to paint any religious faith believers with one broad brush. But the fact is, we do know that there's a schism in the Muslim world. And that there are some radical Islamist extremists, who are recidivist who want to crawl back into the past, they want to destroy us and what we believe in. And that's what Senator McCain says the campaign is all about is protecting us from that.

BLITZER: What do you think James?

JAMES CARVILLE, CLINTON-GORE PRES. CAMP. MANAGER: You know, obviously he was a war hero and I recognize that. But no, he's still a blow-hard. He was on this Kerry thing, which all has been proven wrong. Every piece of it was proven wrong.

CASTELLANOS: America doesn't think it was --

CARVILLE: But it's been proven wrong. You can't argue that. But I've got to (INAUDIBLE) somebody in the Obama campaign will say something stupid, maybe not this stupid, but something pretty stupid, and it will go on from there. And obviously we're trying to tell Muslims, we're trying to engage them, not attack them like this. I think people ought to just let it go.

CASTELLANOS: We should make clear, too, this was the Republican Party in Florida this was not the McCain campaign making the statement.

BLITZER: He's an elderly man. Do you give him a little benefit of the doubt?

CARVILLE: Yeah, sure, I'll give him the benefit of the doubt. I don't think ill about him.

CASTELLANOS: One of the reasons the freedom we enjoy today we have is because of guys like him, so let's give him the benefit of the doubt.

CARVILLE: You know, he was wrong in attacking Senator Kerry, but we'll let that go.

BLITZER: Al Gore, the man you would've liked to have seen presumably, you've set in (INAUDIBLE) Barack Obama select him as his vice presidential running mate. He said yesterday, you know what he has a two-term limit on being vice president. He has already served his two terms, doesn't want to do it anymore.

CARVILLE: Oh I guess he didn't take my counsel. But I thought, my larger point is I think it would be good if Senator Obama really demonstrated a real, real commitment to this alternative energy. I mean I'm watching like T. Boone Pickens' idea of talking about using the city of Houston converting this alternative energy. I think this is where the future of this country is. I know Senator Obama is for that, I thought Gore would be a strong statement in that direction.

CASTELLANOS: That's a difference that I think it's important to note, there's a difference between a commitment to alternative energy and a commitment to American energy independence. Comprehensive energy reform that uses not only the energy we could have, but the energy we've got now. And I think that's a big difference in the two campaigns.

BLITZER: He's having an impact already, spending a lot of his own money, T. Boone Pickens, he's going to be testifying next week. We've all seen his commercials running on television. But he's got ideas for what a lot of people call clean energy.

CARVILLE: Right. And they were talking about, you know, the Republican Party thinks that oil is the fuel of the future. And people like T. Boone Pickens, Al Gore and other people say, look, you'll be energy independent as he can be.

BLITZER: He's an oil man, his whole life he's been an oil man.

CASTELLANOS: The Republican Party doesn't think oil is the fuel of the future, the Republican Party thinks that American energy independence is important, and the sooner we can get to it the better. And that means use what we've got and develop new.

BLITZER: What is the biggest pitfall, James that Barack Obama has over the next several days? He's going to be over in Europe, in the Middle East talking about, you know, Iraq, Afghanistan, big international issues. While Senator McCain is back here at home talking about issue number one, the economy.

CARVILLE: I might add initially, he admits that he doesn't know very much about it. The biggest pitfall to be honest with you, you don't want to say, you don't want to have a gaffe when you're on this trip. This is his trip over there.

BLITZER: Especially in foreign policy. Every nuance is --

CARVILLE: If I'm his campaign manager or strategist, I'm monitoring the television all the time, and I don't think that he will. He's a very smart guy. I expect him to have a very good trip. But obviously that's the thing that you get a pit in your stomach about.

BLITZER: And you know it's not just the scripted speeches he's going to be doing, he's taking all the major anchors from the broadcast networks. He's going to be giving them all interviews so there is a potential there for a mistake. CASTELLANOS: There always is, but you know at the end of the day, he's being treated like he's already the president of the United States. So I think in some ways he's already won a big PR battle here. I think the bigger danger for him is, and the challenge for him is, right now his vote is stuck. He's at about 45, 46 percent and he seems to have hit a wall. He wasn't really winning a lot of states at the end against Hillary Clinton and he can't seem to move. He needs to demonstrate that he has strength and stature to be an American president.

CARVILLE: (INAUDIBLE) a wall at 46 as opposed to hitting the wall at 40. But if I had to hit one wall, I would rather it be a six- point lead. I said there's a danger, but there's a real upside to this trip. He goes over there, he's given his ideas, I kind of applaud that, I think that's real good, he looks knowledgeable in stuff and people say, hey, this guy knows what he's talking about. There's a real upside on this trip for Senator Obama. We talked about the potential downside, but there is a real --

BLITZER: What's the biggest pitfall for McCain right now?

CASTELLANOS: Right now it's the media blackout. You've got the three network anchors, the cable news networks covering Obama. And Obama having the stage I think is a big pitfall. But I'll disagree with James on one thing, having 46 percent is not good enough for Obama because, really, he's the incumbent in this race in a way. Really he is. It's almost as if he's running for reelection. He's the guy people are looking at first. He has to pass the test --

BLITZER: A lot of people would say McCain is closer to the incumbent.


Obama will get what he gets in the survey. He's not going to bump up on Election Day. He may bump down, but if he's at 46 and that may be what he gets. So he's got to break through that. He's trying to do that with this trip.

CARVILLE: I would change the word dissent to vigorously dissent.

BLITZER: We accept your dissent, we accept your position. Guys, thanks very much. Have a great weekend.

CARVILLE: Thank you.

BLITZER: Iran and the United States certainly have plenty of tensions, they've had a lot of tensions over the years. Now the two countries are going head to head, look at this, out on the basketball court. How the NBA is stepping in to try to promote some peace.

And Condoleezza Rice, in an exclusive interview with me. We speak to her about some major reversals, at least some people calling that, that the Bush administration has involving meetings with Iran. Stick around, you're in THE SITUATION ROOM.


BLITZER: A fake Iraq in the California desert, where U.S. troops play war games, and try to prepare for the real thing. It's like a big movie set. In fact, a new film has actually been shot there. CNN's Brooke Anderson takes us behind the scenes. Brooke?

BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT: Wolf, troops heading to Iraq are training at a unique facility in the middle of a California desert. Using their imagination, and a little Hollywood magic.


ANDERSON (voice-over): Fierce fighting, angry crowds. This may look like the war in Iraq, but in fact these battles are being fought on U.S. soil, orchestrated by the army.

JESSE MOSS, CO-DIRECTOR, "FULL BATTLE RATTLE": It seems too strange to be true that in the Mojave Desert in southern California the army had constructed a fake Iraq.

ANDERSON: The new documentary, "Full Battle Rattle," goes inside the national training center at Fort Irwin, California, where Hollywood-like sets have been erected creating faux Iraqi towns where simulated war is waged.

(On camera): The film was shot here, in the fake village of (INAUDIBLE), populated by Iraqi actors, but real American soldiers. Put them together and you have training meant to prepare the troops for the real thing.

(Voice-over): Three-week cycles, 10 times a year, soldiers en route to Iraq, live in this pretend world. Complete with a coffee shop, hotel and marketplace.

(On camera): This village looks very realistic. Take this Sunni mosque, for example. But when you get a little closer, this hollow wall is one indication not everything is as it seems.

UNIDENTIFIED MALE: It's like a big expensive army laser tag.

ANDERSON: Lasers used instead of bullets. Pyrotechnics versus real explosives. Prosthetics and fake blood to resemble injuries.

TONY GERBER, CO-DIRECTOR, "FULL BATTLE RATTLE": There's no preparation that can prepare these young men and women for the actuality of battle. But maybe it mitigates some of the fear.

ANDERSON: The film follows not only the Americans' experiences, but the Iraqi natives. Who act out scenarios crafted by a team of writers.

UNIDENTIFIED MALE: Your occupation is going to be an Iraqi police officer.

ANDERSON: Nagi Moshi fled Iraq to live in America. He's been working at the training center for three years and sees the value of these exercises for soldiers.

NAGI MOSHI, IRAQI ACTOR: They make a mistake over here to not do it over there. Because when they do it over there, they're going to cost them a lot.

ANDERSON: A sentiment shared by everyone in this simulated reality.


ANDERSON: "Full Battle Rattle" is now playing at New York film's 4 and will expand to Seattle, San Francisco and possibly more cities soon. Wolf, back to you.

BLITZER: All right Brooke, thank you.

A different kind of tension between Americans and Iranians, this time on the court and in the name of sports. CNN's Ted Rowlands is joining us now with some details of what some people Ted are calling basketball diplomacy. What's this all about?

TED ROWLANDS, CNN CORRESPONDENT: Yeah, obviously a reference to ping-pong diplomacy. What we're talking about now is the U.S. against Iran, not on the battlefield, but on the basketball court.


ROWLANDS (voice-over): Missile testing in Iran and tough talks from both sides has increased tensions recently between Washington and Tehran. But the two countries seem to be getting along just fine on the basketball court. The Iranian basketball team is in Utah for a six-day four-game tour against U.S. professional teams sponsored by the NBA. The hope is that a little friendly competition on the court can promote understanding. Iranian players Samid Bahrami says Michael Jordan is his all-time hoops hero, and the Los Angeles Lakers is his favorite team.

SAMID BAHRAMI, IRANIAN NATIONAL TEAM: It's an amazing experience for us to come here and play with good players.

ROWLANDS: Oshin Sahakian shares his teammate's excitement and says he's hoping people will come out and cheer for his team.

OSHIN SAHAKIAN, IRANIAN NATIONAL TEAM: I'm so happy. I'm excited, because it's my dream to play basketball in the United States. Because the United States is the best country in basketball in the world.

ROWLANDS: The Iranians were invited in part as a result of the 2006 change in policy at the State Department, which for the first time since 1979, includes Iran in cultural exchanges. They're also here because they're good. They won last year's Asian championship, which qualifies them for the Olympics, their first in 60 years. David Levy, a psychologist at Pepperdine University says unlike other cultural exchanges, sports competition has the potential to actually increase animosity between countries, unless the game's clean and played with respect.

DAVID LEVY, PEPPERDINE UNIVERSITY: Whether it's a handshake during, before or after the game, whether it's eye contact, it's just the way people treat each other that's most important.

ROWLANDS: In 1971 China invited the American table tennis team to visit. A year later President Richard Nixon made his historic trip there with many crediting the ping-pong matches for opening the door. The Iranians lost their first game Thursday night against an NBA development league team, but regardless of outcomes, both countries should benefit from what happens on the court.


ROWLANDS: And Wolf, the Iranian basketball team plays the Dallas Mavericks summer team and the Utah Jazz summer team. They also supposedly get to sample some U.S. culture. You never know, maybe we'll meet them again in Beijing during the Olympics.

BLITZER: All right, I love this story, basketball diplomacy as opposed to ping-pong diplomacy. Let's see what happens as a result Ted. Thank you.

Her majesty has a mess on her hands, literally. From the leaky roof to the peeling wallpaper, Buckingham Palace has become a fixer- upper. Can the royals afford to repair it?

Jack Cafferty is asking, is Al Gore's call for carbon free electricity in 10 years is really doable or is it ridiculous? Stay with us, you're in THE SITUATION ROOM.


BLITZER: Keeping up with home repairs is never very easy. But imagine this, how difficult it could be if your home has 775 rooms. CNN's Mallika Kapur is in London where the main royal residence is fast becoming a fixer-upper. Mallika?

MALLIKA KAPUR, CNN CORRESPONDENT: Wolf, we're all watching our household bills these days. When your house or one of your houses happens to be Buckingham Palace, well, the costs add up. The queen's household bills were almost twice the rate of inflation in the last financial year.


KAPUR (voice-over): Despite the pomp and ceremony, Buckingham Palace has seen better times. The roof is leaking, the wallpaper's peeling and there's an asbestos problem. Some state rooms haven't been redecorated since the queen came to the thrown in 1952. And the leaky roof is about the picture gallery, which houses paintings by masters like Rembrandt. Frankly speaking, her majesty's house is a mess.

CHARLES MOSLEY, DEBRETT'S: What is at stake is, somebody being killed by fallen masonry, another risk is for people to be electrocuted by faulty wiring which goes back to 1948. The third risk is fire. And the government's always telling us how keen they are on health and safety. Come on, government, cough up.

KAPUR: Problem is, there's no spare cash. The government has turned down the royal household's request for an extra $8 million a year for repair works. Partly because of the rising cost of the London Olympics four years from now. Partly because of this year's credit crunch.

(On camera): At the time when millions of Britons are feeling the pinch themselves, a request for more money to redecorate the palace isn't going down too well. Critics say if you can't afford to live in your house, perhaps it's time to move out.

UNIDENTIFIED MALE: The building should be used as a museum or an art gallery. The queen has plenty of her own private houses, buildings that do actually belong to her, where she can go and live out the rest of her days.

KAPUR (voice-over): Palace officials say the royal family is good value. It costs each British taxpayer an average of $1.32 per year, that's less than two pints of milk or the cost of a download to an iPod.


KAPUR: The keeper of the Privy Purse in other words, the queen's accountants says the royal household is disappointed that the government isn't giving it the extra funds needed for repair work and it predicts that will cost an extra $60 million by 2018 if the government doesn't help. Wolf?

BLITZER: All right Mallika. They need help, the queen, Buckingham Palace. By the way, this isn't the first time the royals have hit up British taxpayers for some serious home repair. The government helped foot the bill to restore Windsor Castle after a devastating fire back in 1992. But a huge public outcry prompted reforms making royal finances more open to the public. Since then they've been cut by 57 percent according to the queen's money manager.

Let's go back to Jack Cafferty. He's watching this story. I guess they've got to go to Home Depot. They need some help over there at Buckingham Palace.

JACK CAFFERTY: I had no idea. Here I was worrying about our million homes in foreclosure, we've got $4.50 gasoline, and we're losing jobs. The queen is in trouble over there. I mean I had no idea. This is a problem and aid should be rendered post haste. Question this hour is Al Gore's call for carbon free electricity in 10 years doable or ridiculous? Kristina says, "Not impossible to become energy independent in 10 years as long as everybody in Washington and the companies who profit from fossil fuels are on board with the idea. That, however, is impossible."

Ward in Gainesville, Florida, "At least it's a plan. Probably 20 years too late, but it's a plan. What's yours?" Brian in Trinidad says, "Gore's entire global warming sky is falling cry and anything associated with it is the phoniest thing since they told me I'd go to hell if I ate meat on Fridays."

Escobar, "It's doable normally but keep in mind this nation put a man on the moon before we put wheels on luggage." I didn't realize that, but I guess it's true. "Eventually and gradually things will change but not for the future. Things will change only when people hurt more in their pocket books."

Vinny in Connecticut, "Yeah, Al, let's go back to the Stone Age too. The older Gore gets, the weirder and crazier he becomes. Even if we did go "carbon free" in 10 years, what about the rest of the world, Al? Will they listen to you, the Nobel Prize winner, expert in sage? Give me a break Al."

Rick in Texas, "It's neither doable nor ridiculous but it's a goal worth establishing. Like in sports, the goal is to score every time you're on offense. But that doesn't happen. This goal won't happen either, but it will be much better for all of us if we try to reach it." Dick writes, "The more Gore talks, the more convinced I am that the Supreme Court got it right."

If you didn't see your e-mail here, go to my blog, Look for yours there among hundreds of others. Passionate views on both sides of the aisle about the former vice president.

BLITZER: On a lot of stuff Jack, but especially on Gore. All right, I'll see you in a few moments Jack.

Condoleezza Rice responding to critics of talks with Iran. I have an exclusive interview with the secretary of state.

Laci Peterson's killer husband speaking out online from death row and its outraging Laci's mother. She's voicing her anger to our Larry King.

It's being called daring and extraordinary. The capture of a submarine carrying tons of cocaine.


BLITZER: We have a follow-up story about those death row inmates who now have their own web pages. The families of some of their victims are simply outraged, including the mother of Laci Peterson, whose husband Scott Peterson was sentenced to die for her murder. Laci's mom voiced her anger to CNN's Larry King. Let's go to our internet reporter Abbi Tatton, she's working this story for us. What's going on Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, the outrage is that this recent post, mail from San Quentin and posted at the Peterson family website, Scott Peterson writes, "Through notes we receive in the mail, messages sent to our website, we learn of the tremendous support that we have in this situation." Last night, Laci Peterson's mother responded. (BEGIN VIDEO CLIP)

SHARON ROCHA, LACI PETERSON'S MOTHER: Being on death row is supposed to eliminate an inmate's privileges. And this just flies in the face of justice as far as I'm concerned that, ok, so they say they can't use the internet. They go around it and they use it in another way. It is outrageous.


TATTON: Lieutenant Eric Messic is litigation coordinator at San Quentin and he explains that these posts are made through a third party. The inmates don't have access to the internet but they do have mail privileges and as he explains, that's within their rights. Wolf?

BLITZER: All right, thank you Abbi for that. Barack Obama and John McCain are hedging when it comes to cutting the cost of a key presidential perk. Let's go to Lou. He's working this story, he's going to have a lot more coming up in an hour on it. We're talking about marine one, the president's helicopter.

LOU DOBBS, CNN ANCHOR: Absolutely. What you can get for $400 million is precisely -- with a few add-ons what you can get for about 45 million in Europe. The Lockheed Martin contract has just -- it's doubled, the cost overruns are outrageous. By the way, Senator John McCain did call it scandalous and then decided that he would take back that word. Point of fact, it is a scandal. It's ridiculous. And the money is going -- most of it -- to European subcontractors.

BLITZER: It's hard to believe because I'm just looking at the associated press story. As you point out, $400 million per marine one helicopter. The British basically have sought the same base model for about $57 million. How do you get an extra $350 million cost per helicopter?

DOBBS: You put in there anti-impulse equipment, you put in there radio communications. You put in a bunch of junk that no one needs for a 10 minute ride to Andrews Air Force base, which is where marine one normally is going, as you know. And then you put it into the mentality of the pentagon and the military industrial complex in this country and you get yourself a $400 million ticket. Two people running for president, one a reform candidate, John McCain, the other a change candidate, Barack Obama, neither one of them with the guts to say, stop this nonsense now.

BLITZER: Lou is going to have a lot more on this story coming up in one hour. We'll see you then Lou.

DOBBS: Got a deal Wolf, thanks.

BLITZER: Thank you. To our viewers, you're in THE SITUATION ROOM. Happening now, Condoleezza Rice delivers a message to anyone thinking the United States is flip-flopping when it comes to talking to Iran. She has a firm message for Tehran. She delivers both right here in an exclusive interview. Israeli officials investigate as some people try to reform an Al Qaeda linked terror cell in Israel. And if there was an actual assassination plot against President Bush during his trip to Israel this year.