Stratfor's Morning Intelligence Brief

Ret. Army Gen. Jay Garner, the U.S. civil administrator for Iraq, said Monday that a group of nine Iraqis would be appointed to head Iraq's interim government. The group, which is intended to cover a broad spectrum of groups and opinions, will include Ahmad Chalabi of the Iraqi National Congress; Massoud Barzani, who heads the Kurdistan Democratic Party; Jalal Talabani, who leads the Patriotic Union of Kurdistan; and Iyad Allawi, leader of the Iraqi National Accord. One of the more interesting appointments will be Abdul Aziz al-Hakim, whose brother heads the Supreme Council for Islamic Revolution in Iraq (SCIRI) -- a group based in Iran.

The selection looks good, with representation from appropriate groups. It is about as far as you can go toward having a representative group without elections. The fundamental question is whether the group can work. The interests represented -- including Shiites with close ties to Iran and two flavors of Kurds -- make it difficult to imagine how the group will function. However, given the overwhelming power of the United States and the fairly decisive way it dealt with the self-proclaimed mayor of Baghdad, the expectation is that all of these groups want to stay on Washington's positive side. On the other hand, fundamental decisions will have to be made, and some groups will have to get less than they wanted. It will be at that point that the system will be tested.

In the meantime, the news from Iraq has been reasonably good from the U.S. point of view. There has been violence, but no major outbreak of violence. Moreover, the refinery at al-Zubayr, near Basra, has reached an output level of 70,000 barrels per day and its manager predicted that it would double output within three weeks, which will bring it to more than 75 percent of capacity. The appointment of Thamir Ghadhban as the head of Iraq's oil establishment also indicates some progress. Therefore, the occupation is going well for the United States -- bearing in mind that as decisions are made, unhappiness is bound to mount, and people are not starting from a very positive baseline as it is. Still, there is no denying the progress.

Argentine elections are coming May 18 and the center-left candidate, Nestor Kirchner, is leading former President Carlos Menem by an amazing 40 points. The Argentine elections are important for a couple of reasons. First, Argentina was one of the countries worst hit by the economic meltdowns at the turn of the century. Some have blamed the meltdown on the free-market policies Menem pursued; others have argued that, because he rigidly pegged the peso to the dollar, there really wasn't a free market.

Theoretical arguments aside, the fact is the meltdown of Argentina's economy could have triggered a political meltdown as well in a country where political strife historically has had ugly consequences. Moreover, on a continent that has both economic and political problems -- some such as Venezuela's extreme -- there was a sense of dread that Argentina's problems would have a massive ripple effect.

They didn't, and that's important. The situation in Argentina economically and socially was terrible, but it did not infect the rest of the continent, nor did it simply shatter its political system. There will be many, particularly in the business community, who will not be happy with the election of Santa Cruz Gov. Nestor Kirchner, whose moderately left policies don't promise dramatic solutions to real problems. However, the mere fact that the election is being held and that someone is actually popular -- or that there is a general consensus that Menem is not -- should be regarded as a good sign.

So, Monday was a day of small steps, most good. Given the extraordinary thrill ride we have had in the past few months, a quiet day with modestly mixed-to-good news should actually be a relief. We hardly expect this to continue -- there are too many things out there that can shake the world -- but there is something to be said for a quiet day.

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SITUATION REPORTS - May 06 2003

1141 GMT - Russian Defense Minister Sergei Ivanov, speaking in Stockholm on May 6, told Interfax that "if the situation allows," Russia will continue to cut the number of military units in Chechnya and transfer more functions and responsibilities to the Russian and Chechen Interior Ministries. Ivanov added that "it is quite realistic that in the not very distant future, the Defense Ministry will leave only the 42nd Motorized Rifle Division in Chechnya, the commandant's office and special forces, which are continuing to successfully perform their duties."

1138 GMT - Philippines President Gloria Arroyo has suspended exploratory talks scheduled for May 9-11 in Kuala Lumpur, Malaysia, with the Moro Islamic Liberation Front (MILF). A government spokesman also said the Philippines armed forces would be shifted from what he described as an "active defense" posture to a new position of inflicting "punitive actions" on the MILF.

1133 GMT - Pakistani Information and Broadcasting Minister Rashid Ahmed said that Islamabad does "not accept the [Line of Control in Kashmir] as a permanent boundary -- no way at all," Pakistan's The News reported May 6. "Had we accepted the LoC as permanent border, then what was the justification for continuing such a long struggle?" Rashid said, adding, however, that Pakistan was eager for talks with India on the subject of Kashmir.

1130 GMT - Colombia's top two military commanders claim the Revolutionary Armed Forces of Colombia (FARC) and National Liberation Army (ELN) rebel groups are "losing the war," Bogota daily El Espectador reported May 6. Gen. Jorge Enrique Mora and Gen. Carlos Alberto Ospina, the commanders of the Colombian national armed forces and army, respectively, said that in the first four months of 2003, 584 rebels were killed in combat, 832 were captured and more than 500 deserted and surrendered to government security forces.

1128 GMT - The Israeli navy arrested two Palestinians on a fishing boat near the Gaza settlement of Dugit on May 6 and then destroyed the ship after suspecting it was wired with explosives. According to reports, the explosion from the ship suggested that there were no explosives on board.

1124 GMT - Swiss and U.S. prosecutors are investigating the alleged bribery of senior government officials in Kazakhstan by leading U.S. and European oil companies including Mobil Oil Corp., before it became part of ExxonMobil Corp., Bloomberg reports. The alleged bribes were channeled through accounts at Credit Agricole Indosuez, the private- and investment-banking subsidiary of Credit Agricole S.A., one of the largest banks in France.

1117 GMT - Brazilian President Luiz Inacio "Lula" da Silva is trying to revitalize the Mercosur customs union, whose members include Brazil, Argentina, Paraguay and Uruguay. Bolivia and Chile are "associate" members, meaning they are not bound by the group's trade rules. Da Silva's strategies for strengthening Mercosur include launching a common Mercosur currency, incorporating Bolivia and Chile as full members, and completing a bilateral trade agreement with the Andean Custom Union (Ancom) by Dec.31. Ancom's members include Colombia, Ecuador, Peru, Venezuela and Bolivia.

1112 GMT - Chinese officials have quarantined at least 10,000 people in the city of Nanjing after eight more deaths and 138 new cases of Severe Acute Respiratory Syndrome (SARS) were announced, the BBC reports. More than 16,000 people also have been quarantined in Beijing. However, it appears that Beijing's entire population of 13 million people has been placed under an unofficial quarantine. Flights to other areas have been canceled and highways leading out of Beijing have been blocked.

1109 GMT - French government officials in Syria secretly provided fleeing members of former Iraqi President Saddam Hussein's regime with passports that allowed the Iraqis to escape to Europe, the Washington Times reported May 6. A French Embassy spokeswoman in Washington denied the newspaper's report.

1104 GMT - Italian Prime Minister Silvio Berlusconi told a court in Milan, where he is being tried for allegedly bribing judges in the mid-1980s in a deal to purchase state-owned food company SME, that his actions were in the best interests of Italy. Berlusconi said he only bid for SME after then-Prime Minister Bettino Craxi "begged" him to outbid rival businessman Carlo de Benedetti. The trial likely will continue into next year, since Berlusconi said he would be unable to attend court hearings during the second half of 2003 while Italy holds the European Union's rotating presidency. Additionally, Berlusconi's lawyer presented the court with a list of 1,600 witnesses to be questioned in connection with the charges. While Berlusconi seeks to prolong his corruption trial, his ruling Forza Italia party is trying to amend the law in Parliament to restore immunity from prosecution to elected officials and senior officials of government.