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Hezbollah Leader Declares Open War on Israel; Oil Prices on the Rise; Interview with Syrian Ambassador to United States Imad Moustapha

Aired July 14, 2006 - 20:00   ET


PAULA ZAHN, CNN ANCHOR: And welcome, everybody. Glad to have you with us tonight.
We're covering tonight's top stories in depth, starting with the crisis in the Middle East, which is getting deeper and more dangerous by the minute.

In our control room, we're monitoring the situation in Beirut, where it is 3:00 in the morning on Saturday. This is a live picture of the Lebanese president's house, just a couple of miles from the nearest shelling by Israel, which, tonight, is trying to wipe out Hezbollah.

Meanwhile, Hezbollah is fighting back, hitting towns and villages in northern Israel. Attacks and counterattacks are happening around the clock. Here's what you need to know right now.

Hezbollah's leader is declaring open war against Israel and promising to hit Israel again, and harder. That comes just moments after the Israelis bombed a home and hit other targets in Beirut. Overall, at least 63 Lebanese are dead, 167 wounded.

Hezbollah guerrillas are on the attack as well, firing dozens of rockets from Lebanese territory into Israeli towns and settlements. A woman and child died a few hours ago, bringing the total Israeli death toll to 12. At least 100 Israelis are wounded.

President Bush is making urgent phone calls to Mideast leaders, but, as of now, it seems nothing can stop the fighting.

We have correspondents all across the Middle East tonight. Some are right in the middle of the war zones, including John Vause, along the Israeli-Lebanese border, and senior international correspondent Nic Robertson in the Lebanese capital of Beirut.

Nic, let's get started with you first.

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Paula, it's been a day of bombing throughout the country. It's been a day where many -- many Lebanese have feared bombs falling on them, where people have stayed out of the capital.

But the day really didn't take a dynamic turn until much later. But it has been the bombing through the day that has set the pace for what's been happening. (BEGIN VIDEOTAPE)

ROBERTSON (voice-over): Beirut seems to be unraveling in real time. Throughout Lebanon, throughout the day, Israeli bombs and missiles caused chaos, much of the fire focused on infrastructure in the south of the country and Beirut's densely-packed southern suburbs, heartland of Shiite Hezbollah guerrillas, who stole across the border into Israel Wednesday, captured two Israeli soldiers, and continue to fire rockets into Israel.

FUAD SINIORA, PRIME MINISTER OF LEBANON: Lebanon should not really be dealt this way. Actually, the retaliation of Israel against the abduction of the two -- of the two soldiers in -- in the -- across the Blue Line is in no way proportionate.

ROBERTSON: In an exclusive CNN interview, I asked Lebanese prime minister Fuad Siniora the question many people outside Lebanon want answered.

SINIORA: Why we are being asked to stop Hezbollah, but at the same time nobody is putting the necessary pressure on Israel to resolve the problem? I mean, the problem -- the problem is causing the presence of Hezbollah.

ROBERTSON (on camera): Beirut and Lebanon are slowly being cut off from the outside world, bridges, like this one, bombed, reduced to bits of concrete and twisted steel. And outside of the city, the government says the ports are being blockaded. And, over there, the smoke is still rising from the airport that's been the site of repeated attacks over the last few days.

(voice-over): Right after our interview, we went out to get reaction to the bombing. We didn't know it was the beginning of an incredible two hours in the city.

Here, an Israeli missile exploded. A construction worker tells me it nearly killed him. It's inhumane, he says.

I asked who is to blame.

UNIDENTIFIED MALE: Israel. Bush. Britannia.

ROBERTSON: Young Lebanese, sightseeing the damage on motorbikes, told me the same, swearing to avenge the destruction.

"God willing, we will join together," they insist, "and fight Israelis for Sheikh Hassan Nasrallah," the Hezbollah leader. But, as we left the area, artillery shells fell close by. We drove around the corner.

(on camera): What was that we heard?


ROBERTSON (voice-over): Smoke filled the street where Sheikh Hassan Nasrallah has his headquarters. (on camera): We were just out on the street then when there were several loud explosions. There's absolutely no indication they're coming, just boom, boom, and then smoke coming up from the buildings, everyone jumping in their cars, running away, trying to get cover. That's what we're doing, driving away as quick as we can.

(voice-over): Within minutes of the bombing, the Hezbollah leader was speaking on TV, showing he wasn't killed in the attack.

"You want an open war? We will go to an open war. And we are ready for it, war, war on every level," he said, then, taking most people by surprise, announcing an attack. "The surprises will begin today in the middle of the sea," he said, "across from Beirut. Look at it burning, sinking with Israeli soldiers."

Around Beirut, south and north, celebratory gunfire erupted. And, in fact, just 20 minutes later, Israeli officials confirmed, one of their ships off the coast of Beirut had been damaged in an attack. Incredibly, it was only hours before that, Lebanon's prime minister had been talking of peace.

SINIORA: I believe -- I believe that we should try to arrive at an immediate cease-fire.

ROBERTSON: But the problem is, the prime minister appears to have no influence with Hezbollah, which is now driving Lebanon towards war.


ZAHN: So, Nic, is it a matter of having no influence at all, or not wanting to have any leverage over Hezbollah?

ROBERTSON: I think it's very much a case that the government here isn't strong. The prime minister said -- and he was very careful with his language -- that he didn't believe kidnapping was the right way to go.

He also said that he essentially thought that Hezbollah's tactics in kidnapping were an error in judgment. But he didn't outrightly criticize them. If he does that, the government will collapse. He's very aware of that.

He isn't strong enough to do it. Hezbollah have said, anyone who tries to disarm them will be attacked. They will -- they will resist with violence. That would divide this country. He's not in a position to do it. At this time, he appears very, very weak -- Paula.

ZAHN: Nic, you have been on duty in a lot of war zones. Always frightening to see you fleeing any kind of bombing activity. What is going on right now, pretty much in the middle of the morning there?

ROBERTSON: It's very quiet right now.

It was about half-an-hour, an hour later than this yesterday morning, when there was another round of attacks. Everyone here is on tenterhooks. The city is silent. Much of it is dark. There's a lot of electricity out, out -- been a lot of outages in the city. At this time, I think people are very concerned that there could be, over the next few hours, more bombing, more shelling. They just don't know -- Paula.

ZAHN: Nic Robertson, thanks for the update.

Now, as of right now, Israel is rejecting all calls for a cease- fire. It's demanding, Islamic militants give back three captured Israeli soldiers, but, so far, all that's coming across its borders are Hezbollah rockets.

John Vause is taking advantage of the lull right now to join us live from the Israeli-Lebanese border.

John, describe to us what's happening.

JOHN VAUSE, CNN CORRESPONDENT: Well, Paula, many residents here tonight are spending another night in bomb shelters and safe rooms. They have been advised to do that by the Israeli military.

But, tonight, the head the Israeli military is warning that Hezbollah may, in fact, have a missile capable of traveling more than 40 miles, further than any rocket so far. If that is true, it means towns and cities up to 25 miles north of Tel Aviv could soon come under attack.

Residents here have been advised by military to take cover. And those around the port city of Haifa have been told to stay off the streets, to stay indoors. Military officials now believe that the two rockets which hit Haifa on Thursday evening were in fact made in Iran.

They have offered no proof, though, to support those claims. Today, the Israeli military says that Hezbollah fired more than 90 Katyusha rockets, more than 300 now in the past 48 hours. And two more Israeli civilians have been killed. A woman and her 4-year-old grandson died when their house took a direct hit.

Here in Nahariya, there have been two rounds of Katyusha attacks, one in the morning, one in the evening as well. At least 30 people have been hurt, and at least a dozen more have been injured in the town of Safed -- Paula.

ZAHN: Talk about living on the edge.

John Vause, thanks so much. I know that you will be smart to seek shelter, if you think you need to find it. Thanks so much.

It is hard to imagine the nerve-racking ordeal of living in the war zone right now, never knowing if the next incoming rocket will shatter your life or your neighbor's.

Paula Hancocks just sent us this report, after spending the day with people who are supposed to be hunkered down, but can't resist the sights and sounds of danger.


PAULA HANCOCKS, CNN CORRESPONDENT (voice-over): This is what a Katyusha rocket sounds like. It's a sound the residents of Safed, 10 miles from the Lebanese border, are getting used to.

One rocket hits this apartment block. Police tell residents to stay indoors. But many can't resist coming to look. One neighbor stands next to what is left of his car and tells me, he's scared, he's afraid of staying in this town, and he doesn't know what to do.

This rocket, less deadly than some, but two people were injured.

UNIDENTIFIED MALE: And the windows also shattered in people's houses, you know?

HANCOCKS: Gabriel Mardel (ph) lives just a block away. He moved to Israel from New York 28 years ago.

(on camera): How do you feel when you actually hear these Katyusha rockets?

UNIDENTIFIED MALE: Terribly frightened.

HANCOCKS (voice-over): On Thursday, he sent some of his 11 children to Tel Aviv, in the hope that Hezbollah doesn't have rockets that reach that far.

This is the where the rest of his children sit all day, away from all the windows.

UNIDENTIFIED FEMALE: Sometimes, I get in panic. I can't do anything. I -- my hands are shaking. And it's -- my heart. It's very -- very scary.

HANCOCKS: It's the first time in their lives that they have felt in danger, not so for their father.

UNIDENTIFIED MALE: I tell you the truth that I feel all over the country, in -- and what I see, the tension and the fright is more now than it used to be.

HANCOCKS: His wife, Sara (ph), has little sympathy for international calls for Israel to show restraint.

UNIDENTIFIED FEMALE: Condoleezza Rice told us that we should be -- hold back. And we say, well, if Pennsylvania, New Jersey, or New York had to sit in a bomb shelter, would you like anybody to tell you to hold back?

HANCOCKS: As the parents prepare for the Jewish sabbath, the children prepare to spend another night in a neighbor's basement. It's not reinforced, but it does face south, away from Lebanon. For them, that's enough.

Paula Hancocks, CNN, Safed, northern Israel.


ZAHN: And, across the world tonight, there is real concern the Middle East crisis is spiraling out of control.

Shortly before we went on the air tonight, I spoke with Ra'anan Gissin, who is an adviser to Israeli Prime Minister Ehud Olmert.


ZAHN: We heard just hours ago the Hezbollah chief say: If you wanted war, an open war, it will be open war.

What is it that Israel is concerned that Hezbollah has left in its arsenal?

RA'ANAN GISSIN, SENIOR ADVISER TO ISRAELI PRIME MINISTER: Well, look, we know what they have in their arsenal.

We know that, up to now, they fired rockets which have a range of about 30 kilometers. They have rockets that go beyond the al-Fajar, three and five, up to 70 kilometers, or 50 miles, if you want. We don't fear. We prepared our population. And we took into consideration that there will be a barrage of missiles. We hope that we can make this as short as possible.

ZAHN: You had a Lebanese representative go to the U.N. today and said, we want a cease-fire. We want to lift the naval and the air blockade of Lebanon. What are the chances of that happening?

GISSIN: Right.

Well, definitely, it could happen tomorrow. We are ready to stop. But we want something very clear, a quick and safe return of the two kidnapped soldiers, which were kidnapped from Israeli soil, a complete cessation of all terrorist activity from the border, and a removal of Hezbollah from the border area, and dismantling it from its weapons.

Look, I want to tell you something that perhaps the audience forgot. A year ago, no one believed that the Syrian forces could be ousted from Lebanon, and they were, under international pressure. The pressure should not be directed against Israel.

The pressure should be directed against Hezbollah, and the pressure on Iran and on Syria to enable the Lebanese government to exercise its full sovereignty, and deploy the Lebanese army along the border, together with UNIFIL forces there.

ZAHN: Given the threat you're talking about that Iran poses through Hezbollah, how do you see this crisis playing out?

GISSIN: Well, I think the important thing is to contain it. We have no intention of escalation. We sent very clear warnings to Syria, not only to stay out of this of this -- of this game, over this conflict, but also to exercise its influence over Hezbollah, to stop it, and to take them back. Look, Iran is the supplier. Iran is the supporter. I think this is something that people don't realize. This is the war. This is a test case of the war Iran is launching against the West. And, if we fail here, the West will fail elsewhere in trying to stop Iran.

ZAHN: Dr. Ra'anan Gissin, thank you very much for your thoughts tonight.


ZAHN: And we just got this breaking news report in just seconds ago.

According to Reuters, a missile fired at an Israeli naval vessel off Lebanon early Saturday, their time, missed its target. And, according to an Israeli defense spokeswoman, it hit an Egyptian ship instead. We're going to bring you more details as soon as they come in to us.

Right now, on to our countdown on the top 10 most popular stories on

And, for that, we turn to Melissa Long of CNN Pipeline, our broadband news service.

Hi, Melissa.

MELISSA LONG, CNN PIPELINE: Good evening, Paula.

More than 20 million people have been clicking on today to try to keep up with what's happening in the news.

And number 10 on our countdown this evening -- supermodel Naomi Campbell is facing yet another lawsuit from an ex-employee. And a former assistant says Campbell attacked her physically and emotionally and even accused her of stealing. Campbell, you will recall, is also facing similar lawsuits from two former maids.

Coming in at number nine tonight -- in New Orleans, a 19-year-old man is under arrest for allegedly shooting five teenagers to death last month. That crime brought the National Guard back to the city. It also heightened fears about a resurgence of street crime.

We have more stories from the countdown still to come -- Paula.

ZAHN: Look forward to it, Melissa. Thanks.

LONG: Mmm-hmm.

ZAHN: So, we are going to check back in a little bit later on.

Our top story, though, tonight: the Mideast crisis. How is it affecting you and every other American?

(BEGIN VIDEOTAPE) ZAHN (voice-over): As the noose tightens around Lebanon, thousands of Americans are caught in the deadly crossfire. And getting them out gets more difficult and dangerous by the minute.

The Mideast crisis comes to your corner gas station, as the price of crude keeps setting records. Is $4 gas close behind?

All that and more just ahead.



ZAHN: Our top story tonight: the crisis in the Mideast.

Coming up.: Where is President Bush? Who's he calling? And exactly what is he saying? Can he and the world's most powerful leaders make a difference or even find any common ground at all? We're going to get to that in a few minutes.

But there is another urgent problem right now for the president, the safety of some 25,000 Americans in Lebanon. That also happens to be in his hands tonight. And the latest travel advisory from the State Department is ominous, warning Americans that they could be caught in the crossfire, warning them to keep a low profile, to consider leaving Lebanon, if they can find a way out, of course. It's also the warning of anti-American demonstrations and escalating violence, triggering a sudden mandatory evacuation.

Tonight, the U.S. military has rescue plans ready to launch at any moment.

Here is CNN senior Pentagon correspondent Jamie McIntyre with more. .


JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT (voice-over): The open warfare between Israel and Hezbollah has essentially trapped an estimated 25,000 Americans in Lebanon. The State Department says, all U.S. citizens, except essential embassy personnel, should consider leaving what has become a war zone.

The American Embassy in Beirut has put an authorized departure policy in effect. But with no safe way out, for now, most Americans are on their own.

SEAN MCCORMACK, STATE DEPARTMENT SPOKESMAN: Conditions permitting, we have urged American citizens to leave -- consider leaving Lebanon. But, again, they have to take into account their own personal security. That's going to be a decision that they have -- that they have to make themselves.

MCINTYRE: With Beirut's main airport cratered by Israeli bombs, the usual manner of evacuating Americans, chartering commercial aircraft, is not an option, although, under a brief cease-fire, Israel allowed Lebanon to move five airliners to safety and also permitted the former Lebanese prime minister's private plane to take off, before the runway was bombed again.

Pentagon sources say the U.S. military is considering a number of options if an emergency evacuation is ordered. The nearest U.S. ships with helicopters are part of a seven-ship task force headed by the Iwo Jima, which is in the Red Sea. It would take several days, though, for it to move back through the Suez Canal to the Mediterranean, because it would first have to collect many of its 2,200 Marines, who are ashore in Jordan on an exercise.

Another option would be to move helicopters to the nearby island of Cyprus, roughly 150 miles from Beirut, close enough for un-refueled helicopter runs back and forth.

(on camera): It's also possible the U.S. may work out a brief cease-fire to use the Beirut international airport, given its close ties with the Israeli government.

Whatever the U.S. does, it won't be in secret. The last thing the U.S. military wants to do is draw ground fire by sending in evacuation helicopters that could be confused for Israeli helicopter gunships.

Jamie McIntyre, CNN, the Pentagon.


ZAHN: Talked a little bit earlier on about some 25,000 Americans who are trapped in Lebanon at this hour. And, at this very moment, one American woman from Dearborn, Michigan, is experiencing the terror of being trapped there, with no foreseeable way out.

Ola Faraj joins us now by phone tonight. She happens to be on vacation with her little brother and her mother, visiting family in Lebanon.

Ola, thanks so much for joining us. Where is your family living now?

OLA FARAJ, AMERICAN TRAPPED IN LEBANON: Well, we just left -- been to Israel, and we're about 25 minutes away from Beirut.

ZAHN: And is it true you had to seek shelter with a family you didn't even know?

FARAJ: Yes. We had to be leave Vintageville (ph) as soon as possible.

ZAHN: Where were you when the bombs and the artillery first came?

FARAJ: We were in Vintageville (ph).

ZAHN: Describe to us what that was like. FARAJ: It was terrifying, because I -- me and my family weren't really used to any of this happening. And it's just really bad conditions, and there was no way to get out of the village, because all the bridges are broken. And airplanes were, like, circling around our house all the time.

ZAHN: How close did any of the fire get to the home where you were seeking shelter?

FARAJ: Well, it was -- it wasn't really close. It's just they were on the border of our -- of our village, shooting the bombs, and -- but nothing really was close to our house.

ZAHN: You know, it's one thing for adults who have been subjected to this before in waves of violence. Obviously, you have never been exposed to this before. How terrified is it for you -- how terrified are you right now, not knowing how you and your family are going to get out?

FARAJ: Well, actually, it's very terrifying. Just like I told you before, we're not used to this. And we don't know how to act in such situations. But, hopefully, we will be able to get out as soon as possible.

ZAHN: Yes. I don't know whether you heard from our report leading into this, but U.S. government does have a plan. And if a mandatory evacuation needs to be issued, hopefully, you and your family will get some help.

Ola, thank you, and good luck.

FARAJ: Thank you. You, too.

We're going to continue our countdown now with Melissa Long from CNN Pipeline.

The numbers go on -- Melissa.

LONG: Yes. We're counting down, reaching number eight right now.

And we take you to Virginia. At least 80 people are hospitalized tonight, after being exposed to high levels of carbon monoxide in a dorm at Roanoke College. One man died, but officials have not determined his cause of death.

Coming in at number seven on the list -- beer company executive and former Senate candidate Pete Coors is confirming that he was arrested back in may for allegedly driving under the influence of alcohol. Coors was pulled over after leaving a wedding in his hometown of Golden, Colorado. We will continue to count down the list coming up -- Paula.

ZAHN: Thanks, Melissa. We will check back with you soon.

Next, in our top story coverage: Should Syria do more to stop the fighting? Will it be Israel's next target? And how much control does it have over Hezbollah? Its ambassador is standing by to talk with me live.

Also, the number-one way this crisis will affect you.


ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Gas is well over $3 a gallon, and heading higher, as the fighting continues in the Mideast. I'm Allan Chernoff. And I will tell you how the rise in oil prices is squeezing all of us, even those who don't drive -- when PAULA ZAHN NOW continues.



ZAHN: Welcome back.

Within the past hour, we have gotten yet another sign that the Middle East crisis could be escalating soon. It's an announcement from Syria's ruling party. Listen to this.

It promises -- quote -- "full support of the Lebanese people and their heroic resistance to remain steadfast and confront the barbaric Israeli aggression and its crimes" -- end quote.

That statement doesn't go into details, but it's a clear warning that the situation can get easily much more dangerous.

Joining me now live from Washington is Imad Moustapha, Syria's ambassador to the United States.

Thanks so much for being with us, sir.

We just read out loud what the statement says from your country's ruling party. Does this mean that you're willing to help Hezbollah, not only financially, but militarily as well?

IMAD MOUSTAPHA, SYRIAN AMBASSADOR TO UNITED STATES: What we have said clearly is that we are supporting the Lebanese people in their plight. Would you agree with me...

ZAHN: All right. But Hezbollah represents...

MOUSTAPHA: Would you agree with me that...


ZAHN: ... a lot of people in Lebanon.

MOUSTAPHA: Would you agree with me that any decent human being will support Lebanese in this -- in their plight against the barbaric attacks and aggressions of the Israelis?

ZAHN: Militarily? MOUSTAPHA: The Lebanese are being killed now, while we are talking.

ZAHN: But are you going to make a pledge to help them militarily?


What we want to do -- we have been saying this in the past two days. Really, really, we believe that the international community should immediately engage in a diplomatic initiative. Syria, of course, is most willing to help. And we have been helping.

Let me tell you something you have just mentioned about the plight of the American citizens in Lebanon. We have opened our borders to all -- all foreigners in Lebanon. And we have instructed our checkpoints, border checkpoints, to allow them safe entry into Syria, without requiring any visas, so that they can use the -- the -- the -- Syria as a crossing point, and they can travel safely to their countries.

This is one example of how positive and constructive we have been.

ZAHN: Mr. Ambassador, let me ask you this.

MOUSTAPHA: While Israel is killing...


MOUSTAPHA: ... people, we are trying to save people.

ZAHN: Mr. Ambassador, hang on one second, because I want you to clarify something.

You don't seem to be making any distinction at all between the Lebanese government and members of Hezbollah that make up that government. You have President Bush and other world leaders telling your country to back off from supporting Hezbollah, not the Lebanese government as a whole. Are you thumbing your nose at all of them?

MOUSTAPHA: Are you telling me that the Israelis who are right now destroying the Lebanese infrastructure and killing the Lebanese are making a distinction between anybody and anybody else? Civilians in Lebanon are paying their blood as a price for this aggression by Israel.

This is what's happening today in Lebanon. Why people are comfortably discussing what is happening around the world. Lebanon is being destroyed for the second time in one decade by Israel. This is not the first time that Israel has totally destroyed Lebanon.

ZAHN: All right, but we're specifically asking...

MOUSTAPHA: For the past 10 years, the Lebanese worked very hard to rebuild their country. ZAHN: But Mr. Ambassador, briefly in closing, we're specifically asking about your country's involvement with Hezbollah at the end of the day and we don't have much time left here.

MOUSTAPHA: Of course.

ZAHN: Do you think Syria is going to be drawn into this conflict? And are you expecting a military attack by Israel on Syrian soil?

MOUSTAPHA: Syria does not want to be drawn into this conflict. It's the other way around. We want the United States to play the role that it historically played in the Middle East.

Whenever there was a conflict in the past, the United States administration or government would immediately dispatch high-level envoys to the Middle East to try to mediate and calm down the situation, reach a compromise or something. Not with this administration.

This administration only assigns blame here and there, while they ignore the actual killing of the Lebanese people and of course they are ignoring. They have been ignoring the daily clinging of the Palestinians.

ZAHN: All right, Mr. Ambassador, we've got to leave it there. Thank you so much for your time tonight.

MOUSTAPHA: You are welcome.

ZAHN: Appreciate your input.

We're going to move along now. We are going to quickly go back to Melissa Long from CNN Pipeline. Melissa?

LONG: Continuing to check on the stories that are piquing the interests of readers. Falling at No. 6, one sign that 12 years of Republican rule in Congress could end in November. A new Associated Press/Ipsos poll showing now, registered voters are leaning toward Democratic candidates, 51 percent to 40 percent.

And No. 5 on the countdown, the creators of "South Park" are taking on Comedy Central over its summer repeat schedule. Trey Parker and Matt Stone say the network tried to make sure an episode that made fun of Tom Cruise and Scientology would not reair, but Comedy Central says it always planned to repeat that episode and it would be shown again if in case you are interested, next week, Paula.

ZAHN: And you can always tape it and replay it over and over again at home if you want to see it. Thanks, Melissa.

LONG: So, let's talk about how this crisis in the Middle East might affect you. And it already is, whether you want it or not. Just drive to a gas station, if you dare. Our next story, just how high will prices go?


ZAHN: Continuing our look at the top story tonight, the war effect already hitting American consumers. The Mideast attacks pushing the Dow more than 100 points lower. Oil soaring to $77 a barrel. And so far, average gasoline prices are stable.

Here is our "Crude Awakening's" look at gas prices all over the country. States with today's highest gas prices are in red. The lowest prices in green. And the average, $2.95 per gallon for unleaded regular. You can see where they've been heading since May.

Now sharply higher oil prices are already hurting consumers and the gas pump is only the start. Here's Allan Chernoff.


ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Three-dollar gas is a fond memory for drivers in Manhattan where prices are skyrocketing, as rockets are falling in the Mideast.

UNIDENTIFIED MALE: Could be $5 a gallon tomorrow.

CHERNOFF: Not quite. But prices at the pump almost certainly will rise next week due to the Mideast crisis. Already taxi driver Francis Flaush Menta (ph) is spending $55 a day on gas.

UNIDENTIFIED MALE: Yellow Cab drivers, we're all dying.


CHERNOFF: Something steep.


CHERNOFF: In California, the average price for regular is $3.25 a gallon. Nationwide, it's just below $3. A few pennies shy of the record hit last year following Hurricane Katrina.

The nation's truckers estimate they'll pay over $100 billion this year on diesel fuel, an increase of $16 billion from last year. Guess who's paying that?

(on camera): It's now more expensive to deliver every single item to the grocery store. Add to that, the cost of plastic packaging, which of course is made from petroleum. And then are there products that are entirely plastic, containers, sandwich bags, garbage bags. They're all going up because the cost of oil is soaring.

(voice-over): Considering a home improvement like a new roof? That's escalating as well. Because those asphalt shingles, yes, they're always made from crude oil. Roofer Joseph Guinta says his material costs are up nearly a third since January.

JOSEPH GUINTA, ROOFER: This is the worst. This is the worst.

CHERNOFF: Contractors like Guinta have to pass much of that expense along to you, the consumer. Even those who are not spending and trying to invest for the future, they're getting hit by the jump in oil prices.

The Dow Jones industrial average has tumbled about 400 points, four percent since Wednesday. As investors fear high oil price will squeeze American consumers, the economy and corporate profits. Allan Chernoff, CNN, New York.


ZAHN: All right, so tonight with oil pushing towards $80 a barrel, can $100 crude be far away? Ali Velshi has a talent for getting to the bottom line. He joins us now. And of course the bottom line for everybody out there is going to be what the heck are we going to be paying for gas a week from now?

ALI VELSHI, CNN ANCHOR: Gasoline is going to go up. You're going to see it happen. We always know it happens faster than it goes down. You might see eight, 10, 12 cents within a week. It's going to hit people right in the bottom line and if this doesn't stop in the Middle East, if it gets any worse, it could go worse. We have heard people talking about $80 a barrel, up to $100 a barrel and that equates to $4 a gallon for gasoline.

ZAHN: Four dollars a gallon? How long would it take to that get to that point? And are you going to have shortages in that process if we hit that kind of price mark?

VELSHI: We haven't seen one rig in the Gulf Coast have to shut down because of hurricanes or because of weather when yet. If that happens, that means there is actually less oil in the system.

Remember, Paula, in the last 24 hours, not a single barrel of oil hasn't been pumped because of what's been going on in Lebanon. If that happens, if one of these oil-producing companies stops pumping oil, then we have a serious problem.

It we have to shut down production in the Gulf, then we have a serious problem. That could be shortages, that could send the price of gasoline up.

ZAHN: So how else are we going to feel the punch -- pinch, that is?

VELSHI: Well, it's going to feel like a punch. You're going to feel it because you're going to feel it in deliveries, in travel, in airfares. It's all going to be passed on. Companies can't sustain this anymore. They're going to pass it onto the consumer and it's going hurt.

ZAHN: And you just wonder who we're going to blame. We're going to have a lot of people to blame, aren't we, when that happens, if it happens?

VELSHI: There is a lot of blame to pass around on this one.

ZAHN: Except for you, of course. We would never attack you. Ali Velshi, always good to see you, thanks for dropping by tonight.

We're going to quickly go back to Pipeline anchor Melissa Long for the countdown. Melissa?

LONG: And continuing in with the countdown, No. 4, the FAA says another disaster like the explosion of TWA flight 800 in 1996 will probably happen again. Why? Because so few airlines have made the changes it recommended after the crash.

You can learn more about this, this weekend in the special "CNN PRESENTS."

Coming in at number three, I see why so many people are interested in this story. Here it is. An Oregon woman called 911 to ask for the return of the sheriff's deputy who she found attractive. She got something a lot less attractive: A date in court for the misuse of the emergency system. The deputy had originally been called to investigate a noise complaint. So rather than a romantic date, a date in court. Oops.

ZAHN: Yeah, but it still didn't answer the nagging question of whether she got to so see her favorite sheriff's deputy again. Maybe she faces him in the courtroom?

LONG: Possibly.


LONG: No, I don't think so.

ZAHN: Thanks, Melissa. See you in a little bit.

Tonight's top story in politics: The spy who sued Karl Rove, Dick Cheney and others. Is this former CIA analyst serious, or is this just a publicity stunt?

And another top story out of California. The state burning up, or at least parts of it. Will a pair of rampaging wildfires get together tonight and wreak a lot more havoc? We'll be right back.


ZAHN: Well, the top story in politics features the country's best known former CIA agent. And Valerie Plame Wilson says that is the problem. She is accusing some the most powerful people in the Bush administration, including the vice president and presidential adviser Karl Rove of betraying her by leaking her name to the press. And now she's suing them. Brian Todd is on the story.


BRIAN TODD, CNN CORRESPONDENT (voice-over): Three years to the day after a newspaper column revealed her classified identity, we hear former CIA operative Valerie Plame Wilson's voice for the first time.

VALERIE PLAME, FORMER CIA OPERATIVE: I and my former CIA colleagues trusted our government to protect us as we did our jobs.

TODD: Plame has come out of the shadows because she's suing some of the most powerful people in the Bush White House.

PLAME: That a few reckless individuals within the current administration betrayed that trust has been a grave disappointment to every patriotic American.

TODD: Wilson and her husband, former Ambassador Joe Wilson, accuse Vice President Dick Cheney, his former top aide Lewis "Scooter" Libby, Deputy White House Chief of Staff Karl Rove, and 10 unnamed John Does of conspiring to destroy their careers. The suit claims they did this after Joe Wilson wrote a newspaper op-ed piece questioning President Bush's case for the Iraq war.

PLAME: I would much rather continuing my career as a public servant than be a plaintiff in a lawsuit.

TODD: Representatives for Cheney and Libby won't comment on the lawsuit. A spokesman for Rove says, quote, "the allegations are absolutely and utterly without merit."

Legal experts say the White House will fight hard not to allow Cheney and the others to give sworn pretrial depositions out of concern sensitive information could be compromised. And, they say, given the official positions of the defendant, the Wilsons have other hurdles.

JONATHAN TURLEY, GEORGE WASHINGTON UNIVERSITY: Public officials come with a number of immunities and privileges that apply to their official conduct. You can lose those if you engage in unlawful conduct, or you act with malicious intent. But it's a tough thing to prove.

TODD (on camera): Tough to prove, tough to win damages even if they do prove a conspiracy, according to our experts. As for other legal matters involving these defendants, the Wilson's attorney say the prosecutor's decision not to indict Karl Rove played no part in this. And they say they don't want to interfere in the criminal case against Scooter Libby.

Brian Todd, CNN, Washington.


ZAHN: And we've got a top story panel that stretches all the way across the political spectrum. On the conservative side is "The Wall Street Journal's" John Fund, and proud of it. On the liberal end is Joe Conason of "The New York Observer," equally proud. And from Washington, Savannah Guthrie of Court TV, right down the middle tonight. Glad to have all three of you with us.

Savannah, we heard the explanation of how many public officials, in many cases, are granted immunity. So do you think this case even ends up in court? SAVANNAH GUTHRIE, COURT TV: Well, they're going to have a very hard time even getting to first base on this lawsuit, because the law is set up to protect officials who have these jobs from being sued all of the time and having the burden of fighting litigation. So, unless the Wilsons can prove that this was an obvious constitutional violation, and that any reasonable official would know that, they may not get even to the point where you would have somebody like Vice President Cheney sitting down for a deposition in a place where we would even have a trial in this case.

ZAHN: All right, gentlemen, we have heard what the White House has said about this, that these charges are meritless, that in fact these charges are politically motivated. But, Joe, you believe that this is something that can't be that quickly...

JOE CONASON, NEW YORK OBSERVER: The White House said that Karl Rove didn't talk to anybody about this originally. That we know is not true. We know that's false. The White House said that Scooter Libby didn't talk to anybody about it originally. I'm sure you recall and you have tape of the press conference where Scott McClellan said they both had nothing to do with this. We now know that is entirely false. They knew they were lying about it at the time. So why would we believe what Karl Rove says about this now? That's just ridiculous.

ZAHN: But that's a different question of whether they have immunity or not.

CONASON: That's the same question -- oh, I am not going to address the legal issue. I have no idea whether they have immunity or not.

JOHN FUND, WALL STREET JOURNAL: Oh, I will. This lawsuit gets a B-plus for media attention and D-minus for legal (inaudible)...

ZAHN: B-plus? Come on, it's getting a lot of attention.

FUND: B-plus is a good grade. I'm a tough grader.


FUND: But three people here that you have to pay attention to, one is Patrick Fitzgerald, the special prosecutor. He did not find that Valerie Plame was covered as a covert agent under the law. Secondly, the Senate Intelligence Committee has put out a bipartisan respect, unanimous, both parties, pointing out all of the flaws in Joe Wilson's story and that, frankly, he lacks credibility.

CONASON: I think you are wrong about that.

FUND: Let me finish. And the third point is, even the person who originally fingered Karl Rove as being a target of the investigation, Lawrence O'Donnell of, says this is a completely weak case, and he doesn't believe the White House was out to smear Valerie Plame.

ZAHN: Joe, go back two points ago where you wanted to challenge John.

CONASON: First, the legal determination will be made by a judge as to whether the case has merit.

ZAHN: Sure.

CONASON: Secondly, it's very clear that Valerie was a covert employee at the CIA...

ZAHN: Not necessarily at the time under the law.

CONASON: Patrick Fitzgerald -- no, no, she's covered for five -- it's five years. The law covers you for five years whether you're...

FUND: She was last overseas in '97. It doesn't work, Joe.

CONASON: No, she worked for Brewster Jennings long after that, and she was a covert employee, and Pat Fitzgerald said so at his press conference. So that's a ridiculous argument.

The fact that they ruined her career and that it was done to punish her and Joe for speaking out against the war, which is the real issue here, is something that will be determined, if and when this case goes to trial.

ZAHN: Savannah, final thoughts on the key issues we need to continue to look at as this plays out?

GUTHRIE: Well, I know that these administration officials are going to fight hard and they are going to fight so that we never see Vice President Cheney sitting down for a sworn deposition, and that goes for Karl Rove and Scooter Libby as well.

ZAHN: John Fund, Joe Conason, Savannah Guthrie, thank you all for joining us on a hot summer night.

Let's quickly go back to Melissa Long for our countdown.

LONG: Paula, readers are fascinated by your top story tonight. Coming in at number two, the rapidly escalating crisis in the Middle East. Israel says one of its warships off Lebanon has been damaged by a Hezbollah rocket or drone. The Associated Press is now quoting the Israeli military as saying four of its sailors are missing. The attack came as the leader of Hezbollah declared open war with Israel. And still to come, the top story on, outrage over a newly-revealed picture from nearly nine years ago. Paula?

ZAHN: Yes, that one makes me sick and we're not going to reveal what it is so people will hang around when we come after this commercial break. Thanks, Melissa.

Our top story here in the U.S. tonight, huge, out of control wildfires. Are two of California's worst fires coming together? Stay with us for an update.

(COMMERCIAL BREAK) ZAHN: Some of the top stories around the country tonight. In Washington, homeland security announcing new, more accurate nuclear detectors are making their way to the nation's ports. And border crossings by this fall. The new detectors costing more than $1 billion.

In Santa Monica, a jury awards a former Michael Jackson adviser only $900,000 in a multimillion dollar money dispute. But Jackson wins, too. The jury awards him $200,000 in a cross complaint.

And the top story in southern California tonight, these are pictures, live pictures of two uncontrollable fires merging, devouring more than 60,000 acres and dozens of homes along the way, raising fears of a monstrous inferno, generating unpredictable winds and an even more explosive fire.

Chris Lawrence is in Morongo Valley, California, where they're fearing that possibility. Describe to us what's going on right now, Chris.

CHRIS LAWRENCE, CNN CORRESPONDENT: Well, Paula, you mentioned that the fires have merged. Officials tell us right now, that could be a good or a bad thing. You know, you're talking about a fire that is so large. It's about four times the size of Manhattan.

So it could conceivably burn so hot, that it literally creates its own weather system of wind and flame. On the other hand, that same heat could eliminate a lot of the patches of unburned fuel, like brush and trees. So that would save firefighters from having to go in on foot and mop-up.

ZAHN: So what's the biggest challenge that lies ahead, Chris?

LAWRENCE: Well, right now, they're just trying to contain the fire, with the elements that they're dealing with. You're still talking about very steep terrain. You take a look at this fire, you can see the sheer size of it.

They've got about -- nearly 3,000 firefighters out there, working on this fire. But again, with the sheer size of it, it's about 25 percent contained. And you're talking about men -- men and women out there working in temperatures, well above 110 degrees, with almost no humidity.

ZAHN: It is impossible to describe to our audience just how hot it feels getting anywhere close to that fire, isn't it Chris? I have covered a bunch of brushfires, but this one is different. This one is so bad.

LAWRENCE: Oh definitely. I mean, when you talk to some these guys, they'll tell you that they'll drink a lot of water and literally 30 minutes later, they're just parched and it's been tough here on the residents as well.

Although many of them were ordered to evacuate. And have said, the firefighters have done such a good job of keeping the flames in the mountains, they do not feel it is necessary for them to leave their homes right now.

ZAHN: We hope it stays that way. Chris Lawrence, thanks so much, please stay safe.

Time to wrap up our countdown with Melissa Long. Melissa?

LONG: Paula, as we mentioned it, the 9-year-old photograph topping the countdown today. There is outrage in England tonight after an Italian magazine has printed a photograph of Princess Diana's final moments.

Several British tabloids are condemning the decision to publish the picture of the princess receiving oxygen in the wreckage of that car crash that killed her in 1997. Diana's son, Princes William and Harry, also speaking out in a statement. They said they were, and I quote, "deeply saddened that such a low had been reached." And that's the top 10 this evening. Paula?

ZAHN: Yes Melissa, you and I both know that sells a lot of newspapers, but I don't know who really wants to look at an image like that. I certainly don't.

LONG: Nor do I.

ZAHN: Melissa, thanks. We're going to take a short break. We'll be right back.


ZAHN: And that wraps it up for all of us here today, tonight, that is. Our coverage of the crisis on the Middle East continues with "LARRY KING LIVE" and a little bit later on, Anderson Cooper will be broadcasting live from the Israeli/Lebanese border. Again, thanks for dropping by tonight. Have a great weekend, we'll be back on Monday.


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