The Tomb of Queen Sesheshet

"Let's start from the beginning," Abdel Hakim Karar suggests as he scampers up the north side of an archaeological dig of sun-bleached pink stone and gravel.

When you make your living unearthing the royal riches of ancient Egypt, the beginning is a very distant place indeed – more than four millennia away, during the time of the 6th dynasty. We are standing on the rim of the necropolis of King Teti at Saqqara, where Karar and his team of archaeologists are excavating the tomb of Queen Sesheshet, Teti's mother. The tomb, and the once five-story-high pyramid that accommodates it, was until recently a dump for the sand and detritus of surrounding digs. But the intuitive power of Karar and his inimitable boss, Zahi Hawass, secretary general of Egypt's Supreme Council of Antiquities, rescued it from oblivion last November. It was a once-in-a-lifetime strike – how often does one "discover" a pyramid? – and it may shed light on a particularly notorious episode in a pharaonic tradition of court intrigue and murder most foul.

Egyptian archaeologists work at an ancient burial ground in Saqqara, dating back to 2,700 B.C.

"We suspected this was the mother's pyramid," says Karar, as he gestures to a horizon line interrupted only by the iconic step pyramid of Saqqara, the Eiffel Tower of its time, built by the legendary 3rd dynasty ruler Imhotep. "Then we came across stones carved with the characters for 'Seshi' and we knew what it was."

The surrounding complex was discovered and unearthed by a fraternity of French and British archaeologists in the mid-19th century. Its centerpiece is the pyramid of Teti, the first ruler of the 6th dynasty, and the subsidiary pyramids of his two principal wives, queens Iput I and Khuit. Like many such digs in Egypt -- a country that, because of its strategically vital location, has played host to several great civilizations -- Saqqara offers a bounty of archaeological wealth beyond what was once the property of pharaohs. Enveloping the site is a containing wall of dung-colored mud bricks built in 330 B.C. by Ptolemy I, the Macedonian general who campaigned with Alexander the Great and who may have been mentored by Aristotle. The U-shaped wall contained a drawing of the funeral procession that followed the death of a sacred bull as ordained under Serapis, the Greek deity promoted by Ptolemy as a way to fuse Hellenist and Greek religions.

Hawass, who began working at the Saqqara necropolis in 1988, says Sesheshet's pyramid "might be the most complete subsidiary pyramid ever found" in the area. It is certainly one of the largest. The remains of its 72-square-foot base suggests a pitch of 51 degrees, a common feature of 5th and 6th century pyramidal design, and a height of 46 feet. Large, smoothly carved blocks of limestone around the southern end of its foundation is all that's left of the casing that gave Egyptian pyramids of the time their clean, elegant lines. The entire structure would have been built with bronze tools.

Beginning in the 4th dynasty, the kings of Egypt were careful to commemorate their wives and mothers with regal monuments. (In a monograph published in a 2000 edition of Archiv orientalni, a quarterly Czech archaeological journal, Hawass hinted at the possibility of a third subsidiary pyramid in honor of Teti's mother.) Yet the size and grandeur of Sesheshet's pyramid is as much a political statement as it is an expression of filial piety. Sesheshet came from a powerful family at a time of civil war within the royal clan and she protected Teti for much of his 20-year rule. Sadly for Teti, her talismanic powers did not extend from the grave; after her death, according to the Ptolemaic historian Manetho, Teti was murdered by his own bodyguards working in league with the treacherous Userkare. In testament to the hardboiled political culture of the time, Userkare himself was ousted by Pepy I, son of Queen Iput I, only a few years after he had seized the throne. While Manetho is vague as to Userkare's fate, there are few surviving monuments to his rule, the modern-day equivalent of being airbrushed out of the history books and a fate worse than death in edifice-obsessed ancient Egypt.

While Sesheshet's tomb is believed to have been plundered by thieves, like many Egyptian pyramids, the artifacts discovered in Iput I's burial chambers offer a glimpse of what might have been kept there: vessels and dishes made of alabaster and red clay, tools lacquered in gold, a sarcophagus carved from limestone and layered with gypsum, and canopic jars filled with the royal viscera in storage for the afterlife. The walls and pillars of the tomb may depict scenes of court life and religious rites and there will likely be granite stele with inscriptions identifying the royal matron as a "mother of the king of Upper and Lower Egypt."

Karar, who studied at Cairo University and has spent half of his 50 years digging up ancient relics, says he hopes the tomb will also yield new details about how the ancient Egyptians related to other such geopolitical powers as Rome, Nubia, Syria, Greece and Persia. The record of Sesheshet's era is particularly incomplete, he says, which is another reason why the discovery of her pyramid is so significant.

"It's never boring," says Karar of his profession. "Egyptians now appreciate what we do because of the attention it is getting in the media. They no longer take their heritage for granted." Sesheshet, whose name evokes a goddess of history and writing, would have approved.

Exorcism By Half

Senator Barak Obama entered the 2008 presidential campaign with a full ledger, and the entries on either side more or less balanced out.

His liabilities were daunting: a black man with a Muslim heritage, young and with limited experience as a federal legislator. He opposed far more seasoned pretenders, including Hillary Clinton, his fellow senator and presumed heir apparent to the dynasty begun by her husband and rudely slashed by the Bush interregnum.

His assets were equally formidable. Not since John F. Kennedy’s 1960 presidential run have voters beheld so universally attractive a candidate: He was articulate in a society where oratory had become a rare artifact. He was at once cool, cunning, and fiercely intelligent, as elegant a public speaker as Ronald Reagan and as seductive a stage presence as Bill Clinton, minus the gluttony. Clearly a shrewd judge of character, he surrounded himself with men and women whose reserves of competence and discipline were at parity with his own.

Then there were the extraordinary items, which thankfully for Mr. Obama broke almost exclusively his way. He would campaign amid the rubble of an incumbent presidency that began sabotaging itself almost immediately after its re-election in 2004 with a disastrous plan to privatize Social Security. This was followed by Hurricane Katrina, the sectarian holocaust in Iraq, the indictment of a top White House aid for compromising a CIA operative, revelations of warrantless wiretapping, the politicalization of the country’s once-sacred Justice Department, and finally and decisively, the collapse of Wall Street and the onset of economic recession. When measured against the tragic-comic demise of the Bush presidency, Mr. Obama’s liabilities seem to deflate significantly.

That being the case, was the young Senator’s victory truly the historic, transcendent event it is held to be? Were Americans really converted by Mr. Obama’s accomplishments and his humanist appeals to tolerance and civility? Or did they simply rebel against eight years of Republican misrule, which clung to Republican challenger John McCain like the smell of death?

Certainly Mr. Obama’s election is historic and should be celebrated as such. His campaign was a testament to the power of restraint and reason at a time when citizens – in America and around the world – were weary of the arrogance, fear-mongering and labored hyperbole of the incumbent regime. Many voters, no doubt, saw in Mr. Obama deliverance from Mr. Bush who did more to undermine American interests at home and abroad than any foreign power or terrorist cell. In the aftermath of last week’s conclusive Democratic victory, America’s two-party political system is now in peril; thanks to Mr. Bush and his ghostly commissar, Vice President Dick Cheney, to say nothing of the creepy Sarah Palin and her anti-intellectual claque, the Republican Party – the party of Lincoln, the world’s oldest political movement – has been reduced to a gated community of aging, southern white people.

Voters were also impressed by the brilliance of the Obama campaign, which melded the internet with grass-roots intimacy to decisive effect. As the current administration consumed itself with its own incompetence, and as the field of candidates vying to replace it were felled by one gaffe after another, the flawlessness of the Obama bid became irresistible. As Mr. McCain graciously conceded on election night, his rival ran the superior race, and the voters decided appropriately. Presidential historians will no doubt study the Obama campaign the way military men dissect Wellington’s victory at Waterloo. (An imperfect analogy, actually, as Mr. McCain was no Bonaparte.)

And yet, in Mr. Obama’s triumph for the forces of light there was disturbingly dark subtext. Attempts by Mr. Obama’s enemies to identify him as a Muslim, though not so compelling as to derail his quest, were serious enough to keep him on the defensive. He was careful not to be photographed with Muslims anywhere, let alone in a mosque. His loyalty oath to Israel before the American-Israel Political Affairs Committee was as convincing a parody of a Beltway pol as was Tina Fey’s sendup of Sarah Palin, only without the laughs. During his tour of the Middle East, he kibbutzed heartily with Israelis but allocated a desultory 45 minutes with Palestinians. While touring the West Bank, he did not stand for photo opportunities nor did he give a press conference, pointedly shunning the very people who represent one half of a negotiated peace in that benighted region.

On the Republican side, a woman at a McCain rally told the candidate she could never vote for Mr. Obama because “he’s an Arab.” Mr. McCain’s response was an authentic, if unintentional measure of American Islamophobia.

“No,” Mr. McCain said. “He’s a decent family man.”

The editorial pages of America’s liberal heralds – the New York Times, the Washington Post, Newsweek – largely ignored Mr. McCain’s reply as well as Mr. Obama’s tactical snubbing of the country’s Muslim community. It took Colin Powell, America’s first black Secretary of State and apparently its sole statesman, to acknowledge the appalling bigotry of it all. His comments on CBS Television’s Meet the Press is worth quoting at length:

"I'm also troubled by, not what Senator McCain says, but what members of the [Republican] party say, and it is permitted to be said. Such things as 'Well you know that Mr. Obama is a Muslim.' Well the correct answer is 'He is not a Muslim, he's a Christian, he's always been a Christian.' But the really right answer is 'What if he is? Is there something wrong with being a Muslim in this country?' The answer is 'No. That's not America.' Is there something wrong with some 7-year old Muslim-American kid believing that he or she can be president? Yet I have heard senior members of my own party drop the suggestion he's a Muslim and he might be associated with terrorists. This is not the way we should be doing it in America.”

In politics there are always red lines. Mr. Obama can be forgiven for appeasing a largely anti-Muslim electorate while pandering to its Likudnik proxies, assuming he would sup with the devil today in exchange for a lasting and just Middle East peace tomorrow. But it says something about the character of a society where any serious attempt to relieve a long-suffering people would need to come calling the same way Mr. Obama’s forbearers did – through the back door.

The outcome of America’s 2008 presidential campaign was a welcome salve against two centuries of violent discrimination against black Americans. Yet however redemptive, it also sanctioned a new reality in the politics of ethnicity and religion: American Muslims, particularly Arab ones, are the new darkies.

Oil's Dirty Laundry

Remember the giant companies that once dominated the world oil market as the Seven Sisters? Of course, they have long since been expelled as owners from the Middle East to Mexico, and must now beg and barter for access to oil. The majority stake in world oil reserves that they held is now in the hands of nation-states. The result is a critically important anomaly: a vast global free market for oil, in which all the power players are nationalized, often highly inefficient state monopolies. One might call them the Seven (Or So) Sovereigns.

These new giants are far less controversial than the old ones. As oil prices continue to hover around record highs of $75 a barrel or more, the heated public discussion in the West still is focused on oil states and multinationals: Saudi Arabia and ExxonMobil, not Saudi Aramco. Yet, shielded from market forces, the state oil companies have a very clear impact on prices. In comparison with private companies like ExxonMobil, they pump a smaller share of their reserves, using less modern technology, with much more erratic management, and spend much less on finding new wells. All of this works to tighten supply, raise uncertainty and push up prices.

From the market viewpoint, the problem with state oil companies comes down to "inefficiency," says Jean-François Seznec, an oil expert at Columbia University. "The market fears that there will not be enough oil in the future, that production will decline because of these inefficiencies, and prices react."

From the largest (Aramco) to the smallest (the Libya National Oil Co.) the Seven Sovereigns face no shareholder pressure to maximize short-term profit and are husbanding their oil-pumping 4 percent of their proven reserves each year, half as much as the big multinationals. The stifling impact on supply is growing, as state oil companies are now often the winning bidders in the hunt for new reserves worldwide. Newly aggressive Russian and Chinese buyers are active from America to Africa, and even smaller state oil companies like Norway's Statoil are now regular players. As more reserves end up in the hands of state firms that are in no rush to deliver them to market, supply will be increasingly restrained.

The Seven Sovereigns are also increasingly reluctant to open up at home. This is true for all of them from Russia, which has been blunt about its intention to protect oil as a national strategic asset, to Saudi Arabia, which in 1998 had signaled (under Western pressure) plans to release Aramco's grip on oil and gas reserves. Instead, they played the major bidders off one another and "dragged their feet until the big boys were no longer interested," says Edward Chow, an oil consultant and former Chevron executive who has worked closely with Aramco.

Many big state oil companies are equally slow to adopt the latest technologies, designed to suck crude out of the cracks and folds of aging shafts. Those in Libya, Venezuela and Russia are badly in need of foreign help to rebuild dilapidated infrastructure and upgrade technology. The result is that while private companies typically recover 50 percent of the oil in a well, national companies recover only 20 percent.

"They had no reason to use advanced technology because they were blessed with such ample supplies," says Leonardo Maugeri, a senior vice president for the Italian energy company ENI.

For example, the second largest oil well in the Persian Gulf-Kuwait's Burgan-is plumbed by derricks that were first erected by the original Seven Sisters in the 1950s. Often state oil companies confront nationalist opposition to modernizing, particularly if it means more foreign influence. The Kuwait Petroleum Co. has for years been promoting a $7 billion, 25-year plan to nearly double its capacity but has met resistance from politicians who fear foreigners out to "steal" Kuwaiti oil. So many skilled oilmen have left Iran since the 1979 revolution that President Mahmoud Ahmadinejad was hard pressed to find even one clearly acceptable candidate to become Energy minister last year.

National oil companies are also far more opaque than private companies, adding to uncertainty about future supplies. Few divulge detailed accounts of the size of their oil reserves, as publicly traded companies are required to do by stock-market regulations. Even Saudi Aramco, widely regarded as the most transparent of state-owned oil firms, is not entirely forthcoming about the size of its wells, fueling speculation about the sustainability of the world's oil supplies.

Often the Seven Sovereigns are used as cash cows to bankroll social programs, not to reinvest in oil supply. Most state oil companies are obliged to send their revenue directly to the Finance Ministry. Venezuelan President Hugo Chávez, for example, is famous for using oil money to fund his socialist agenda, but the practice is now quite common, from Iran to Russia. With much of their revenue diverted to political ends, state oil companies spent about a third less on exploration in 2003 than the big multinationals did.

Consider Pemex of Mexico. The world's fourth largest oil and gas producer must transfer nearly two thirds of its $66 billion in yearly revenue to the government in royalties and taxes, supporting a third of the federal budget. Its total debt is four times that of ExxonMobil Corp., and output from its biggest oilfield will begin to taper off this year-by as much as 14 percent annually, according to some estimates. Fitch Ratings has warned that the company, threatened by debt and declining reserves, needs greater corporate autonomy and freedom to enter into joint ventures and partnerships globally.

"Pemex's job is to provide oil cheaply, not make money off it," says Manouchehr Takin, an analyst at the London-based Centre for Global Energy Studies. "It's more a civil-service organization. That's what happens when governments interfere beyond their regulatory responsibility."

Get used to it. In the global oil market, the state-for better or worse-is the guiding hand. And it's going to cost you.

All the President's Venom

The subtext of Nixonland, Rick Perlstein’s brilliant morality play about Richard Nixon and his times, is both unstated and immediately recognisable. Not less than 30 pages into the work, there is the man himself, winning a Congressional seat in his first bid for national office by declaring his opponent a communist. A few pages later, he wins a Senate seat by calling his rival “pink right down to her underwear”. The inference is clear: Nixon as patriarch to the political rhetoric, culture and ecology of George W Bush’s America, as if the old man had sired a litter of squealing albino Rotweillers as his political heirs.

The end of the Second World War produced a new generation of Republicans – Richard Nixon and Ronald Reagan were most prominent among them, and Barry Goldwater was their patron saint – who bridled at the party’s restrained, Brahmin establishment. Fear of communist infiltration was a wedge issue for the taking, and Nixon, who catalogued and cross-indexed grudges and calumnies like a prissy librarian does books, was the first to understood its full potential. He attacked Franklin D Roosevelt’s inner circle as “appeasers” and kept a list of enemies that included academics, peace activists, homosexuals, civil rights leaders, the counter-culture movement, the press, and anyone else with the potential to provoke fear and loathing among malleable middle-class voters. Playing the victim, Nixon submerged his opponents under a slurry of raw innuendo, sly implication and dirty tricks.

For those who think contemporary American politics are singularly vicious, Nixonland is a superbly written and healthy corrective. Relentless and uncompromising, Perlstein reanimates a mean and violent era when race riots gutted cities, assassins thinned the country’s political ranks, racists occupied high office, hippies fouled the urban landscape, terrorists bombed government agencies and Southeast Asia was reduced to a charnel house. After detailing the brutal murder in 1965 of a 21-year-old women in her home in a leafy Chicago suburb, Perlstein quotes from an article that appeared later that year in the New York Times Magazine: “The policeman’s inner world is bound by ‘us’ and ‘them’.” All a cop can swing in a milieu of marijuana smokers, interracial daters and homosexuals is a nightstick.” (This from the grey lady of liberalism.) Confronting swastika-clad demonstrators while marching peacefully in Richard J Daley’s Chicago in the early 1960s, Martin Luther King suggested “the people of Mississippi ought to come to Chicago to learn how to hate”. Hate – tribal hate, blind hate, blood-feud hate – is Nixonland’s leitmotif.

But no one can accuse Perlstein of bias. His narrative, exhaustively researched and well annotated, is lousy with terrorists, brigands, liars and demagogues of all stripes, of which the principal character is merely the scoundrel-in-chief. There are no heroes here, only perpetrators in a nation gone mad with primal fear and those who would exploit it. This is what gives Nixonland resonance in our present-day renditions of “us” and “them”.
True, the levels of rancour, nativism, and constitutional subversion ran deeper under Nixon than they have under Bush. But the difference is of degree rather than kind. While the war in Vietnam destroyed many more American lives than has the war in Iraq, both conflicts were needless; Nixon spied on his enemies and expanded wars in secret, while Bush has been favoured with a supine Congress that enables his assault on civil liberties, as it did just this month by legalising warrantless surveillance. Nixon’s crimes were caught on tape; Bush and his advisers were smart enough to purge entire databases of White House e-mail traffic. Both men obstructed justice, but (unlike Nixon) Bush has yet to pay a price proportionate to his transgressions.

Perlstein resists overt comparisons between the ad hominem style of politics as practised by Nixon and Bush, though he is certainly winking at readers with recounts of how Nixon and his acolytes thrived in a nuance-free political culture. “Pat had the greys and Reagan had the black and whites,” he quotes a Bobby Kennedy aide responding to Ronald Reagan’s 1966 defeat of California incumbent governor Pat Brown. Nixon, warns George McGovern in his failed bid to unseat the incumbent president in 1971, “is out to destroy the Democratic Party” – a goal embraced openly by Karl Rove, Bush’s attack dog. (Rove makes a brief cameo in the book as a young Nixon campaign operative.) “If we don’t fight them over there, we’ll have to fight them in San Francisco,” the Labour boss and Nixon supporter George Meany said in 1965, anticipating by nearly 40 years the intellectual truss for Bush’s “war on terror.”
Just as Bush leveraged post-September 11 fears for political coin, Nixon mined grass-roots anxiety, bigotry, and ignorance to sustain an endless struggle against a nebula of confected threats. At the crest of his investigation into Alger Hiss, the State Department official accused of treason and later indicted for perjury, Nixon warned that “communists are everywhere … and each carries the germs of death for society”. Defending his decision to continue fighting in Vietnam, he warned in an address to the nation that “if, when the chips are down, [we] act like a pitiful, helpless giant, the forces of totalitarianism and anarchy will threaten free nations”. On the eve of voting in 1971, Nixon reminded voters how “the leaders in Hanoi will be watching” to see if they choose “peace with honour or peace with surrender”. It was cheap, gratuitous hyperbole. And it worked conclusively against Democrats who could find no way to counter.

“Republicans really believe that if they can make you afraid enough or angry enough, you can be tricked into voting against yourself”, was the best presidential candidate Ed Muskie could do. Muskie lost badly in the primary elections to McGovern, who insisted on taking the high ground against Nixon. A Second World War bomber pilot from South Dakota, McGovern campaigned largely against the war in Vietnam, which was hugely unpopular with voters. He ended up losing to Nixon by one of the largest margins in US presidential election history.

In that regard, Nixonland is as much a mediation on middle America as it is political biography. It is sadly instructive that Americans could abide as divisive a figure and as maladroit a campaigner as Nixon, let alone a white supremacist like George Wallace, whose sequential bids for the White House were so compelling that Nixon had to appeal to southern hardliners by promising to stall racial integration. Fans of The Daily Show and The Colbert Report will be amused to learn that a 1968 survey revealed most Americans got their news from humour columnists, and only one in four respondents said they trusted the national newscasts. A day after that year’s riots at the Democratic convention in Chicago, during which Daley unleashed truncheon-welding police on peaceful protesters, a factory worker defended the violence.

“Those hippies … were wearing beards,” he told Democratic Senator Abe Ribicoff, who had condemned the police attacks, “and anyone who wears a beard, he deserves to get beat up.” Hippies then. Muslims now.

Perlstein’s conceit does stretch things a bit. Richard Nixon didn’t “invent” the politics of hate and division any more than Ernest Hemingway invented the martini. But it’s fair to suggest that Nixon – both “serpent and sage,” as the author elegantly distils this most paradoxical of men – refined the black art of modern politics for a new generation of thugs and knee-cappers. Nixonland is not for the faint-hearted; it offers little to inspire and much to repulse. But it is an indispensable account of how vulnerable democracy is to demagogic pandering and how short are the memories of its benefactors.

Olympian Appetites

Sure, there's competition this month in Beijing's spanking-new stadiums. But if you really want to get a sense of the rivalries that obsess this town, pull up a chair among the locals in one of the newly hot provincial restaurants.

Read the article here.

The New Silk Road

Victor Chu was an elusive quarry. For years Sameer Al Ansari, the chief executive at Dubai International Capital, was trying to recruit the Hong Kong investor as a director on his board. But Chu, the chairman of First Eastern Investment Group and a prescient booster of Chinese-Arab trade, was always too busy sharing his expertise with other companies

Finally, between workshops at the 2005 World Economic Forum in Davos, Al Ansari won Chu over. It was just the kind of deal, consummated with a firm handshake over weak coffee, that one would expect from the rich and powerful who inhabit the forum's corridors. But economists may one day mark it as a historic convergence of guanxi and wasta--the ancient Chinese and Arabic terms for entrée--and a key milestone in the epic revival of the old Silk Road.

"Asia is just as it is here," Al Ansari says from his office at the Dubai International Financial Center, home to the city's ever ripening stock exchange. "It's important to have the right connections. Victor knows the languages of Asian markets. He's the partner I wanted."

Since then Sino-Arab commerce has evolved into the world's fastest-growing commercial relationship. While the developed world, led by the U.S., staggered through a global credit crunch, China's gross domestic product grew 11% in the first quarter, and the Gulf Cooperation Council--the oil-rich federation of Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates--averaged nearly 7% growth in the same period. Last year trade between the two regions totaled $240 billion, double what it was in 2000. While Persian Gulf investment in China last year was estimated at $20 billion, a report by JL McGregor & Co., a Beijing consulting firm that advises U.S. hedge funds and other clients, estimates that Gulf investors will shift a third of their portfolios, or about $250 billion, to China over the next five years.

While Sino-Arab commerce began as very much a one-way affair, with the Gulf providing the capital and China the opportunities, deals are now flowing in both directions. Last year Beijing's Zhongon Construction Group set aside $100 million for the purchase of Dubai real estate, while Dalian's Dashang Group announced plans to invest $200 million in Dubai's retail industry. The problem, investors point out, is that neither side has well-developed capital markets. Without fixed-income securities the best way to put their riches to work is through acquisitions. Private-equity specialists are lacing the two regions ever closer, and Victor Chu, who launched First Eastern in 1988 and has more than $1.5 billion under management, has an impressive ball of string.

In April Chu, 50, redeemed his bullish talk about the future of Sino-Arab trade when he and Al Ansari, 44--a British-trained accountant who worked for consultant and financial-advisory firm BDO Seidman in London before moving to Ernst & Young in Dubai--launched China Dubai Capital. It's a $1 billion vehicle that aims to invest in Chinese companies with the potential to expand to the Gulf or go public on Arab stock markets, and it hopes to list the first outfit within two years. Al Ansari will take the lead in gathering funds from Gulf and Asian institutions and leading family investment offices, and Chu will harvest the companies. The plan is to purchase 20% to 40% stakes in Chinese companies looking for capital to expand. The fund's average investment in a company will be $20 million to $50 million.

It's a common strategy in the way private equity is practiced in both China and the Gulf. Unlike leveraged buyouts in the U.S., where firms take over mature assets with borrowed capital, Sino-Gulf investors eschew debt, limit themselves to minority stakes and target companies that are still in formation. "We do buy-ins rather than buyouts," Chu says in a phone interview from Shanghai, where he was spending a day on his way back to Hong Kong after a tour of the Gulf states. "Unlike the Carlyles of the world, we'll help companies develop their business before going public. It's more a venture-capital strategy than an lbo."

While neither Chu nor Al Ansari will reveal which companies they're looking at, they do say they favor the construction and health care sectors. The main objective, according to Al Ansari, is to use China's surplus of quality unlisted companies to boost the Gulf's capital markets. That's certainly fine by Dubai's securities regulators, who last fall entered into a $6.5 billion cross-shareholding agreement with Nasdaq, the London Stock Exchange and the Nordic exchange operator OMX Group in a bid to make the Arab boomtown a leading financial center. "We're working with [the Dubai exchange] to pave the way," says Al Ansari. "There are 800,000 Chinese companies looking to list."

For Chu, the Dubai China Fund is only the most recent expression of his faith in the Middle East as China's once and future primary market for its companies. After all, he likes to point out, Arab-Chinese commerce dates back to at least the 4th century, when Arab seafarers established settlements near Canton. "I've been talking about the new Silk Road for years," says Chu, whose clipped English accent is the legacy of British schooling in colonial Hong Kong and a university education in London. "China needs a secure energy source, and Gulf investors need a high-growth market to invest their capital. The two regions have had diplomatic relations dating back a thousand years. This is a very strategic relationship."

Chu's first business trip to the Middle East was more than 15 years ago. At a time when most Asian investors were focusing on high-growth markets close to home, he was nurturing contacts and making introductions between Chinese construction and engineering companies and Gulf contractors and officials. In 1998 he opened an office in Bahrain, where First Eastern has a banking license.

His timing couldn't have been better. A year later the U.S. would respond to the Sept. 11 terrorist attacks with regulations against suspect money flows, which annoyed and inconvenienced many Arabs. Over the next six years, turned off by America's sluggish economy as well as a perceived hostility to Arabs, Gulf investors would divest themselves of an estimated $200 billion in U.S. assets, according to a JL McGregor report on Middle East investment in China.

The U.S. loss would be China's gain, thanks in no small part to Chu's foresight. "We were always a few steps faster than the others," says First Eastern managing director Elizabeth Kan. "When our Arab partners wanted to diversify and started looking at Asia, we were ready."

A lot could happen to preempt a Silk Road revival. Oil prices could tank. China's double-digit growth could finally sputter. An attack on Iran could torpedo the Middle East and the global economy, given the effect it would have on energy prices. But even then, the indefatigable optimist Chu suggests, he'll be an early buyer among the rubble. "We'd be back to the drawing board, but only in the short term," he says. "Either way, this region will define history over the next quarter-century."

The Merchant Marine

The new port of Gwadar will be unveiled April 6 as the "Dubai of Pakistan," even if it lacks the theme-park glitz of the Gulf's fantasy city. The point, say Chinese officials, who bankrolled 80 percent of the $248 million project, is that this new deepwater cargo port is "strictly commercial." But hawks in Washington and New Delhi believe Pakistani President Pervez Musharraf has given Beijing the nod to use Gwadar as a port of call for the Chinese Navy. "Gwadar's a strategic location, just 400 kilometers from the Strait of Hormuz," says William Triplett III, a Washington-based conservative analyst who warns Gwadar will become a Chinese naval base "on little cat feet."

Alarm bells are ringing in Washington, where some see a pattern in Beijing's naval build-up, combined with a foreign-port building spree and efforts to secure maritime oil-transport routes. An internal report circulated among Pentagon officials late last year says Beijing is assembling a "string of pearls"--including ports, listening posts and naval agreements from Pakistan to Bangladesh to Burma--to protect its fragile oil-supply routes. Gwadar is critical, because it would provide the Chinese a listening post for monitoring ship traffic to and from the oil-rich Middle East, according to the report, which asserts that China is building up naval power at maritime "chokepoints... to deter the potential disruption of energy supplies from potential threats, including the U.S. Navy." China's naval outreach program is of concern to New Delhi, too, and was an underlying theme during U.S. Secretary of State Condoleezza Rice's visit to India last week.

Until a few years ago, China's hunt for energy resources was confined largely to the economic sphere, spearheaded by its state-owned oil and gas firms. But Chinese officials came to see U.S.-led conflicts in Afghanistan and Iraq as wars over oil, just as its own oil demands were booming. Two years ago China surpassed Japan as The World's second biggest oil importer, after the United States. Now crude-oil prices are hitting record highs, topping $57 a barrel last week, amid warnings from strategists of a coming "energy cold war." What began as a commercial rivalry for oil supplies engaging the United States, Japan and China now seems poised "to spill over into the political and military spheres," according to Chietigj Bajpaee, a researcher for Civic Exchange, a Hong Kong think tank. In the event of conflict over Taiwan, say mainland strategists, Beijing should expect the United States to try to starve China of oil with a naval blockade.

China is now lavishing funds on its Navy, long a neglected arm of the military services. Since George W. Bush took office, China has been building up its fleet of amphibious assault ships and submarines, and last December launched its first in a new class of nuclear subs, years earlier than anticipated by U.S. intelligence. In November, Japan chased a Chinese sub out of its territorial waters, near a disputed and gas-rich area of the East China Sea. Almost as soon as Beijing apologized for that incident, a Chinese research vessel intruded into Japanese waters, apparently surveying the seabed for oil and gas deposits.

Meanwhile, India has pursued closer military contacts with the United States, and last year issued a new naval doctrine stressing the need to protect energy routes and respond to Beijing's inroads in the Arabian Sea. Ziad Haider, an analyst at the Henry L. Stimson Center think tank in Washington, says the port at Gwadar could monitor U.S. naval activity in the Gulf, Indian naval activity in the Arabian Sea and future U.S.-Indian maritime cooperation in the Indian Ocean. Gwadar may not be a full-fledged Chinese naval base, says Haider, "but it could facilitate a [Chinese] naval presence."

China also helped build the Chittagong port in Bangladesh where, says the Pentagon report, Beijing is "seeking much more extensive naval and commercial access." Beijing is even discussing a deal with Phnom Penh that would provide Chinese patrol boats and naval training to Cambodia. The Pentagon report puts far more stress on the billions of dollars in military aid China has provided the junta in Myanmar "to support a de facto military alliance." China has helped build several ports, road and rail links from the Chinese province of Yunnan to the Bay of Bengal, and a listening post on Myanmar's Coco Islands to monitor sea traffic. Myanmar is well positioned for policing the chokepoint that concerns Beijing most: the Malacca Strait. Eighty percent of China's energy supplies pass through this pirate-infested waterway, which is 1,000 kilometers long but only 2.4 kilometers wide at its narrowest point. Last year pirate attacks in the area left more than 400 ship-crew members dead, injured, taken hostage or missing. Less than a year ago, Chinese counterterrorism forces conducted the first exercise simulating the rescue of an oil tanker from attackers.

Another solution may lie in the Isthmus of Kra, a neck of land linking Thailand's north and south. Thai and Chinese authorities have discussed building a canal across the isthmus, which would allow oil tankers from the Middle East to bypass the Malacca Strait. This "Asian Panama Canal" carries a price tag somewhere between $20 billion and $28 billion, and Washington is watching its development closely. "We know [the Chinese] are looking at a variety of things with regard to the security of the Malacca Strait," says a State Department official. "We have a particular interest that these proposals are not exclusionary or against our interests."

Last month Thai authorities revived an alternate plan for a $700 million Kra oil pipeline and refinery, in which Chinese firms have been invited to participate. Bangkok will tread cautiously, says Paitoon Sayswang, an adviser to Thailand's Senate, because "Thais don't want to take on the risk of a turf battle between China and America." No Asian state does. But if they stand on an oil-supply route, there may be no way to avoid the struggle.

The Modern Silk Road

The most hard-boiled forms of human enterprise tend to be the most prolific. Thus commerce along the legendary Silk Road flourished as it did for some 1,600 years because it was negotiated between merchants, not ministers or politicians. Having predated the nation-state and the borders that define them, the world's main commercial artery was lightly taxed and regulated, and free of the political set-asides and subsidies that weigh on today's free-trade agreements. For better or for worse, there were no labor unions demanding living wages for workers, no environmental groups clamoring for high emission standards and no human-rights organizations calling for boycotts of authoritarian regimes.

History repeats itself. In just a few short years, a new generation of merchants have spontaneously revived the ancient spice trade and restored its centrality with a host of modern wares. As opportunities closed in the United States-its economy sluggish, its investment environment increasingly hostile to Arabs and Chinese-new ones have opened between Asia and the Gulf. Unlike China's emerging ties to Africa, which have been attacked as a form of resource imperialism, Beijing's renewed tie to the Middle East is a joining of equals-newly rich Chinese manufacturers cutting deals with flush petro-princes from a tradition of unfettered trade as rich and old as China's. The process began with the simple exchange of Arab oil for Chinese capital and it has since expanded into a web of two-way deals in banking, property development, industry and tourism.

The world's two most liquid economies are creating a new commercial bloc that is rebalancing the global economy. With much of the world teetering on the brink of recession, China and the Middle East continue to expand and converge at a brisk pace. The transatlantic route is still the richest of the world's major trade channels (worth $1.5 trillion in trade and investment last year), and the European Union and the United States remain the largest export markets for both China and much of the oil-rich Middle East. But the new Silk Road is growing at a faster rate. Trade between China and the Middle East has doubled since 2000, to $240 billion, according to the Dubai International Financial Centre, and is estimated to grow by several times that amount over the next decade. To take just one example, the United Arab Emirates projects that its two-way trade with China will grow by a factor of seven by 2015, to $100 million from $14.2 billion in 2006. "We see the world economy as revolving around us," David Rubenstein, cofounder of the U.S.-based-Carlyle private-equity giant, said at an investment forum recently. "But the economic center of the world is beginning to shift from the U.S. and Europe to the Middle East and Asia."

It's not only trade in goods and oil. Asia and the Middle East are home to the world's largest pools of surplus cash, much of which is managed by six of the top 10 sovereign wealth funds. That makes the new Silk Road a key nexus for the next generation of blockbuster financial deals. A report issued this month by JL McGregor & Co., a Beijing-based consultancy, estimates that the amount of Middle East money flowing into China could reach $250 billion over the next five years. The report compares that figure with the $200 billion it says Gulf investors have divested from the United States since 2003, a consequence of post-9/11 safeguards against suspect money flows and hostility to Arab investment.

In a world where trade is getting the rap for everything from global warming to food shortages, the new Silk Road is largely free from nagging NGOs. Here only money talks. While U.S. President George W. Bush struggles to gain congressional approval for minor free-trade agreements with countries like Colombia and Venezuela-deals, he argues, that are vital for both democracy and U.S. national security-Arab and Chinese businessmen are building a formidable economic bloc one laissez-faire transaction at a time. In part, business gravitates to the most receptive market. And America's cultish obsession with national security has created a backlash against foreign-in particular Arab and Chinese-investment. Since 2006, two high-profile Chinese companies, Cnooc and Huawei telecommunications, have been forced to abandon plans to buy stakes in U.S. companies amid politically charged security concerns. Dubai Ports World was forced to divest itself of its U.S. assets in a similar dust-up. It's no surprise that all three companies have since found a more receptive business environment on the new Silk Road. Earlier this year Dubai Ports World announced a plan to co-develop a container port in Tianjin, China. Just last month, Cnooc and Huawei signed major deals in Qatar and the United Arab Emirates, respectively. "Ask any businessman on the street about doing business in the U.S.," says Ashraf Hamdi Fouad, an adviser to Mubadala, Abu Dhabi's state-owned investment arm, "and he'll tell you: 'It's not worth it. Let's wait for the Americans to get over all this'."

In a striking vote of confidence in the future of Middle Eastern capital markets, Dubai International Capital and Hong Kong-based First Eastern Investment Group announced last month they were launching a $1 billion investment fund in part to prepare Chinese companies for listings on Arab stock markets.

The fund-raising offers benefits for both sides: Gulf capital markets get new listings and liquidity, while Chinese companies, frustrated at the red tape that delays public offerings at home, have new sources of money in an equally dynamic economy. "There are about a half-million Chinese companies waiting to list their shares on local markets, and it's taking too much time," First Eastern managing director Elizabeth Kan said between sessions at a conference hosted at the opulent Emirates Palace in Abu Dhabi. "If we can list some of these companies in the Persian Gulf, we can get higher multiples."

If developing countries are indeed maturing into a web of largely self-sustaining regional blocs, as some economists believe, then the epicenter of the process is the Sino-Arab convergence. While both sides have larger trading partners in Europe and the United States, the heat from those commercial links have given way to much lower rates of growth (two-way trade between the U.S and China is growing at its slowest rate since the late 1990s). Deals between China and Africa are robust and growing fast, but the money flows in one direction only. Resource rich Latin America is an increasingly important target for Beijing, but this trade channel is still minor, at $30 billion last year.

It's possible, of course, that the renaissance of Sino-Middle East trade will collapse if oil prices do, cutting off the funds that are making the Gulf states a serious partner for China. Financial accounting in China and the Middle East is notoriously murky, so no one really knows how much money is sloshing about the New East, which still lacks adequate debt markets to harness it. Inflation is reaching perilous heights, fueled by high spending levels and a weak dollar, to which the Chinese and Gulf currencies are fixed. And while the Asian-Middle East combine continues to hum, it may yet feel the undertow of a sharp plunge in U.S. consumption, still the bunker oil for global growth.

Fortunately for China and its partners in the Gulf, the emerging Sino-Arab bloc is largely protected from the global credit crunch because neither side is heavily in debt. Most private- and state-owned companies in China and the Arab world are debt-free, and the vast majority of consumers have no bank accounts, pension funds or stock positions, much less exposure to the exotic derivatives behind the credit crisis. A share-market crash in the GCC and China is harrowing for speculators: with relatively few players, price swings can be wild. Since 2006, Arab stock exchanges have plummeted from record highs to record lows-twice. But since the markets are small, they have had little impact on the real economy, which continues to grow strongly in both regions.

The tendency in post-9/11 America is to regard anything it can't control as a threat. Already, the commercial integration of China and the Middle East, two regions with which Washington has complex relations at best, is being looked upon with alarm in Washington. If anything, the United States should welcome the addition of a spare growth engine for a global economy that has relied for generations on the once irrepressible, now fatigued American consumer.

Rainmaker

The meeting was going nowhere. For months private equity specialist Kathy Xu had been tracking the success of Gao Mengzhong, the founder of China's leading staff-outsourcing firm. The first time she cold-called him to discuss a partnership, he had politely begged off. Last June, when Xu finally got her foot in the door of Gao's Suzhou office, he was stiff and uncommunicative. He didn't need investment capital, he told her. His company, Huishi Manpower, was profitable. It had no debt, and he was paying dividends each year. The pauses in the conversation seemed interminable.

Finally Xu had had enough. She told Gao that Huishi Manpower, though good, could be even better and she was prepared to write him a check for $10.5 million to prove it. Otherwise, she'd write one for Gao's closest competitor. That rival could then raise its salaries to $425 a month, compared with Huishi's base pay of $280, and incur losses as it expanded its market share. Eventually, she told Gao drily, it would overtake Huishi.

After one more long pause, Gao asked Xu to lunch. It lasted five hours. Several months later a 20% share of Huishi Manpower became the latest asset in Xu's growing portfolio.

Gao is in good company. Xu, the founder of Shanghai private equity firm Capital Today Group and a key interlocutor between official Beijing and China's cantonment of private equity specialists, is known informally as Tie Niangzi, the "iron lady" of rainmakers. Last year, she says, the 11 companies in her China fund generated an average revenue growth of 141% (she won't disclose the size of the fund). None of them is listed, and she doesn't expect her first initial public offering for another couple of years. That's roughly when the fund's five-year investment period ends, and backers--which include the International Finance Corp., the World Bank's investment arm; London's Caledonia Investments; and Switzerland's Partners Group--can begin expecting returns. The payoff for investors, she says, "is the big money from an IPO or sale."

The 41-year-old Xu, who grew up in once sleepy Sichuan province, where the people are known to be as piquant as the peppery food for which they are famous, is playing the long game. In China intellectual property laws are so porous even the best products can get caught in an un-winnable price war with knockoffs. Success requires a strong brand, says Xu, and strong branding takes time. "A good brand gives you pricing power," she says during a recent visit to Beijing for a quick round of meetings with entrepreneurs and board members.

"With a good brand you can expand your market share to the point where your competitor will never catch you." It's also a strategy that's vindicated by the current storm of market instability.

Xu targets prospective assets by studying a market and its half-dozen or so leading companies for three to six months. By the time she makes her fateful cold call, Xu knows the business better than its top performers. Three-quarters of the calls yield at least a first meeting, she estimates. Once she buys a stake in the targeted company, usually putting up $10 million to $40 million, she helps it develop an upmarket brand name that no rival can afford to match. Capital Today companies tend to have little debt, and they withhold dividends in favor of capital investment. "It's a build-and-hold strategy," she says, "not a quick flip."

Xu radiates a quiet intensity and has a flair for free-market sloganeering. Like a plant manager rallying laborers to meet production quotas, she dares clients and partners alike in meetings and memos to be "Audacious, Heroic and Visionary." In each asset added to her portfolio, she aims to cultivate a "wolf" culture--a killer instinct for meeting customer needs and exploiting market opportunities.

It's a persona she honed as Baring Private Equity Partners' top Chinese rainmaker, crafting the group's debut mainland deals. Her departure in 2005 to launch Capital Today arched more than a few eyebrows. Until then few mainland Chinese had bolted a big foreign firm to set up their own shop. But Xu's timing was perfect: China's stock markets were primed to begin a lucrative ascent after trundling through a five-year funk. Today she has two partners and 20 employees. "It took vision and courage because no one knew you could raise money for independent firms," says Ludvig Nilsson, managing partner of Shanghai investment firm Jade Invest.

Until recently it seemed that China's private equity industry would thrive indefinitely as a small but lucrative subculture in an otherwise highly regulated financial sector. The business was developed in the 1990s by the big Western players--Goldman Sachs, Morgan Stanley--and a number of homegrown firms operating from Hong Kong and buying and selling in U.S. dollars. Back then firms could freely transfer the ownership of Chinese assets to Cayman Islands-registered holding companies and then sell them or list them on a market of their choice, a process known as "round-tripping." Many of the top dealmakers were arrivistes--second- and even third-generation members of the Chinese diaspora who leveraged their heritage and M.B.A.s for a share of a virgin market. Nearly all of them were men who knew more about the exotica of high finance than they did about the business culture of mainland China.

That made Xu--she claimed her English first name from a character in Noble House, James Clavell's novel about Hong Kong--exceptional as much for her ethnicity as for her sex. "Kathy has credibility because of her background and because she's clear in her intentions," says Robert Woll, head of the Asia corporate practice and a comanaging partner of the Beijing office of law firm WilmerHale, which has worked with Xu on some of her biggest deals. "She's not perceived as a returnee who's here to make [U.S. private equity firm] Carlyle rich in China."
It was such authenticity that made Xu a natural spokeswoman for her industry once it got too big for Chinese regulators to ignore. In 2005 the government restricted round-tripping in order to promote capital markets at home. A deluge of new and often contradictory regulations followed--and the volume of private equity deals in 2006 dropped to just under half its 2005 level.

As governor of the China Venture Capital Association, Xu worked with regulators to liberalize the investment laws. She and a group of negotiators managed to win some limited concessions only to see the Ministry of Commerce and other agencies repeal them last year. Last November, at a conference of private equity investors and venture capitalists in Beijing, Xu stood before a panel of senior regulators and asked if they would ease restrictions on technology-centric Chinese companies listing on Nasdaq, where such mainland powerhouses as Baidu and Focus Media had gone public when round-tripping was still tolerated. But the regulators declared that the restrictions would remain.

In any event, fundraising and dealmaking rebounded last year, according to the Zero2IPO Group in Beijing. Some 64 new private equity funds in China--60% more than in 2006--raised $35.6 billion, a 151% increase. At the same time, $12.8 billion was invested in 177 deals, a jump of 37%

Xu, who has dealt with controlling communists most of her life, rolls with such mulishness the way an expert parachutist breaks a landing. "The government says we need to build a domestic market and we believe that is a reasonable proposition," she says, sipping a cup of green tea between meetings at Beijing's China World Hotel. "So for now we're focusing on onshore deals."

It is a respectful, composed response from an authentic daughter of the revolution, both the communist one she was born into and the capitalist one that has grown up with her. Xu was raised in Dazu, near Sichuan's provincial capital of Chengdu. Her father was the general manager of a state-owned auto factory who regularly hosted visitors from the plant to discuss business while Xu poured tea for the guests.

"When your father is a GM you always have people over talking about product quality, sales and salaries," says Xu, who easily disarms strangers with a combination of candor, enthusiasm and fierce eye contact. "I listened and learned."

At Nanjing University Xu studied English, a language she knew well having spent so much of her childhood listening to language records on a gramophone her father bought her in the waning days of the Cultural Revolution. She credits her British and American instructors for her cosmopolitan outlook and self-esteem. One of them, an American woman, made a particularly deep impression. On the first day of class, says Xu, "she walked into the room and said aloud to the students: 'You are unique, you are a marvel. There has been no person like you in the last 500 years and there will be no person like you in the next 500 years.' It was an eye-opening experience for a Chinese student from Sichuan."

After graduating in 1988 Xu was hired as a clerk at the Bank of China's headquarters in Beijing. Merit pay hadn't yet arrived at the state-owned bank--she was paid 78 yuan a month, about $10, as were the rest of her colleagues. Enthusiastic and diligent, she became a leader of the Communist Youth League and spent tea breaks teaching English to colleagues. Within 18 months Xu was named the bank's best female employee--the honor translates roughly into "Woman Banner Holder"--out of a field of 2,000. She was awarded a certificate and a bed sheet.

In 1992, eager to see the world outside mainland China and ambitious to succeed in business, Xu applied for an entry-level auditor's position at Price Waterhouse's Hong Kong office. Applicants had to take an exam in accounting, a discipline she knew nothing about. Fortunately for Xu, the test was in English, which few of the other applicants understood. After spending several nights reading an entire accounting textbook, she passed the test and was offered the job.

It was a tough transition for a Sichuan girl who had never stepped foot outside China. Back home, bank employees rarely worked past 5 p.m.; in the corporate corridors of Hong Kong, eating dinner at your desk was considered a badge of honor. To make matters worse, Xu was a mainlander from the provinces, in Hong Kong the equivalent of a hayseed. Staff condescended to her as "little cousin," a reference to the lead role in Hello Cousin, a hit film at the time about a mainland girl who gets overwhelmed by the chaos and glamour of Hong Kong. "There was a bias against mainlanders in Hong Kong," says Xu. "We didn't even speak Cantonese."

Having worked so hard to get out of Sichuan, Xu found herself with little to do. So she adopted Price Waterhouse's Japanese clients, an orphaned portfolio of small-business owners who spoke reasonably good English. Her time sheet quickly filled up.
After three years Xu joined Peregrine Direct Investment, the private equity arm of the upstart investment bank. Chinese capital markets had sprung to life, and Xu was dividing her time between Peregrine's Hong Kong headquarters and the mainland. After Peregrine fell victim to the 1997--98 Asian currency collapse, she was hired by Baring, where she became a formidable turnaround artist.

Following the collapse of the global dot-com bubble, Xu helped revive Guangzhou Internet service provider NetEase, a Baring portfolio company that was listed on Nasdaq in 1999. Working with NetEase's 28-year-old founder, William Ding Lei, Xu retooled the company into one of China's leading online gaming and advertising vehicles. Within two years its stock was trading above $80 a share, up from its low of 60 cents. In 2003 forbes named Ding the richest man in China. By then Xu had delivered Baring an eightfold return on its investment.

Next Xu homed in on Chinahr, an online recruiter dogged by leadership problems and stagnant revenue growth. She overhauled the company's management and in 2004 tapped Jason Zhang, then a 41-year-old vice president of human resources at telecom giant Huawei Technologies, as its chief executive. Her offer to Zhang was more a dare than an enticement. "I told him he'd have to put his own money in the company and live off the equity because he'd have a low salary," she says. "So he sold his house and went to work."

As an indication of the premium Xu places on marketing, she paid ChinaHR's marketing manager more than she did Zhang. She boosted its capital with the help of a few rich "angel" investors. The company eventually caught the eye of Monster.com's Andrew McKelvey, who was eager for his jobs site in the U.S. to get a foothold in China. During a conference call in the fall of 2004 Xu and McKelvey immediately clicked.

Within six weeks McKelvey agreed to buy a 40% stake in ChinaHR for $50 million--$35 million of which went directly to the angel shareholders--despite the company's meager earnings and the absence of a big investment bank in Xu's corner. The deal inked, a very pregnant Xu went straight to the nearest HSBC branch to ensure that the wire transfer to each of the angel investors was handled properly. The next day she checked into a hospital and delivered her second son.

In each of the last three years, according to Xu, ChinaHR's revenue has doubled. Zhang remains at the company helm, where he's presided over a staff increase from 5 employees to 1,400.

Xu is now training her sights on China's retail sector, a growth market in a country where private consumption accounts for only 38% of gross domestic product, compared with 70% in the U.S. She recently invested $11 million in Xiangyi, a $14-million-a-year herbal cosmetics seller. Her first step was to have the sales teams report their revenue figures every 24 hours instead of every month, with the top gainers identified each day by e-mail.

Xu has also sunk $11 million into Kung Fu, a fast-food company with 245 outlets, no debt and ambitions to replace KFC as China's most popular food-and-beverage chain within the next decade. Kung Fu University, where new hires will be trained and senior employees will learn new management skills, is under construction next to the company's headquarters in Guangdong province.

Xu expects to take Kung Fu public in 2010 in what could be her first IPO. "A lot of investment bankers are chasing it," she says. "But what's the rush? We're in no hurry."

Giving Until it Hurts

STEPHEN LINTON IS BEING HUSTLED THROUGH THE DARKENING CORRIDORS of Hadan Tuberculosis Hospital in western North Korea. It took him three hours to get here from Pyongyang, the capital, which is linked tenuously to Hadan by 50 miles of deeply rutted and washed-out roads. A diminutive man with a craggy face and patrician silhouette, Linton has just finished unloading a cache of medical supplies and now the hospital director wants him to observe a surgery. But they’ll have to hurry: It’s already late in the November day and, in a country where electricity is tightly rationed, a surgery’s outcome can hinge on how much sunlight is pouring through operating room windows.

Surgery in Hadan, North Korea

With orderlies and aides struggling to keep up, the two men canter through the hospital’s drafty administrative building, with its faux-Palladian facade and faded, royal-blue window shutters, and across the dry empty fields that envelop the compound. The operating room is a two-story concrete blockhouse; to get to its main entrance, visitors must pick their way through spent oxygen tanks strewn along the pathway.

The patient is a young woman whose lower spine has been corroded by tuberculosis. She is lying on her side on the operating table and an orderly is coating her lumbar region with disinfectant iodine. The surgeons will try to repair the damaged vertebra by grafting onto it a slice of bone taken from the patient’s pelvis. There is no heat. Barring complications, the operation should take two hours - plenty of timeduring the summer months but potentially a close call this late in the year.

Linton, 57, stops to peer through a window from the operating room’s antechamber.

“I’ve seen doctors who tried to capture sunlight by reflecting it from a mirror,” he says.

By North Korean standards, the patient is fortunate. She’s been given a local anesthetic, which is rare in a country where surgeons routinely etherize patients, strap them down and try to finish the operation before they come to. The operating table is less than a year old, as are the surgeon’s instruments and the handcarts on which they’re arrayed. Also new are the hospital’s X-ray machines, electrocardiogram, oxygen tanks and wheelchairs. All this is courtesy of Linton’s Eugene Bell Foundation, a Maryland-based nongovernmental organization that has spent the past decade battling a raging tuberculosis epidemic in areas of North Korea where few foreigners have been allowed to travel.

It’s not easy work. Of the 36 NGOs that began operations in North Korea as famine gutted the rural population in the mid-1990s, all but a handful have left in frustration. And Linton is particularly demanding: He insists on delivering his supplies personally, lest they be diverted to another facility or end up on the black market. When government officials balk, Linton refuses to resupply the site. So each of his two resupply visits annually is preceded by lengthy and sometimes rancorous negotiations. “Our donors feel very passionate about where their money goes,” Linton says. “A lot of them are part of the Korean diaspora, and some are even from North Korea, and they know exactly what kind of facilities they want to help.”

It has taken Linton years of resupply missions to build a redeemable store of trust with the North Korean government. On this visit, he has brought with him the first cycle of medicine for tuberculosis victims who have become resistant to the drugs most commonly prescribed for the disease — a condition known as multidrug resistance, or MDR. Success hinges on Linton’s direct access to the patients — including ones at care centers near remote military bases and other sensitive areas. Without that, he’ll take the MDR kits back with him to Seoul.

“What strikes me about Steve is his ability to persevere in a system that does not work well and maintain the integrity to say, ‘No,’” says Charles “Jack” Pritchard, who, as a former special envoy for negotiations with North Korea and a member of the National Security Council, has known Linton for years. “He’s had problems from Day One, but he’s overcome.”

The progeny of several generations of Christian missionaries, Linton spent most of his youth in South Korea. He speaks flawless Korean, marshaling it to shame obstructive bureaucrats in Pyongyang, charm hospital staffs in Kosong and bring assemblies of donors in Seoul to tears. He has insinuated himself into one of the world’s most forbidding and totalitarian regimes with strategic gifts: tuberculosis drugs for the elites (in Pyongyang, the disease carries a social stigma that can ruin a career) and, say, rebuilt carburetors for parts-starved truck drivers.

South Korean sources suggest that tuberculosis has affected as much as 5 percent of North Korea’s population of 23 million. Linton estimates the Eugene Bell Foundation has treated up to 250,000 patients, 70 percent of whom might have otherwise died. The foundation has a staff of seven full-time and three part-time employees, and it raises $2 million to $3 million annually. But for him, personally, the work has come with some costs: estrangement from his family, a divorce.

Health risks are ever-present. At each site, Linton interviews tuberculosis victims for a videotaped log that will be featured in his next presentation to potential donors. He’s frequently warned by his North Korean minders, physicians who accompany him from site to site, to wear a mask, but he refuses.

“I can’t raise money wearing a mask,” he says.

Linton making his rounds.

LINTON’S FOUNDATION IS NAMED AFTER ONE OF HIS GREAT-GRANDFATHERS. A farmer’s son and Presbyterian missionary from Kentucky, Eugene Bell went to Korea with his family in the 1890s as part of a post-bellum onslaught to Christianize the East. The connection has endured through generations: Eugene’s son William founded what is now Hannam University in Taejon, South Korea; his son Hugh, Stephen’s father, brought his wife and children over in 1954, after serving in South Korea during the war. Stephen attended schools there and obtained graduate and postgraduate degrees in Seoul and the United States, including a PhD in Korean history at Columbia University. In the early ’90s, while Linton was working at Columbia, the late evangelist Billy Graham tapped him as an interpreter on two visits to North Korea.

In 1997, with North Korea nearly extinguished by famine, Linton left Columbia to help the country’s ministry of public health organize international aid efforts. It was a formative experience. While in the city of Sinuiju on the North Korea-China border, Linton leased a freight car and loaded it with packages of instant meals meant for famine-relief centers. But bureaucratic snarls meant he had to wait two weeks to distribute the cargo. “I still have nightmares from watching children picking out kernels of corn from railroad ties,” he says.

Linton has been battling North Korea’s health crisis and its commissars ever since.

“THIS IS A NASTY BUSINESS,” LINTON SAYS, grimly spooning mocha mix into his morning coffee on the first day of the fall mission. His eyes are bleary. He spent much of the night before negotiating with health ministry officials over rounds of soju, the potent Korean liquor. “They say they want to save wear and tear on the vehicles, so they need to cut our sites by a third. Fine. I’ll cut theirs as well. Mary, I’ll need a red marker.”

Linton and his six-person delegation have settled in at the Kobangsan Guest House in Pyongyang, where they were installed by government minders after flying in from Beijing the day before. The Kobangsan, a four-story villa perched regally on the banks of a man-made lake, once accommodated visiting heads of state. The ministry of foreign affairs now runs it as a lodge for NGOs and deep-pocketed VIPs. The building affords sweeping views of Pyongyang’s stark rural outskirts and boasts a bowling alley, a banquet hall, a billiards room, a karaoke lounge and a lavishly appointed VIP suite with an eight-track stereo player in the bed’s headboard.

Linton’s delegation breakfasts in a well-lit dining area, served by female attendants in red dresses. (When not seeing to guests — which is often, as the Kobangsan appears to be otherwise vacant — staff members occupy themselves by watching old films on a television in the lobby.) Linton is fatigued and agitated. The previous evening, the ministry of public health, the agency responsible for Eugene Bell’s work in North Korea, had suddenly announced that a banquet honoring Linton and his delegates would begin an hour early.

“They knew what was coming,” Linton says. “We were up until 1:30 a.m., negotiating. They thought if they got me liquored up I’d let things pass. But I told them I wasn’t drinking because I was so concerned about the scheduling.”

Most of the cancellations involve small sanatoriums in rural areas — the very sites his donors are so keen to support. Linton suspects his hosts want to avoid those facilities because, relative to the urban care centers, their poor sanitation makes them legitimately hazardous. And the wear-and-tear issue isn’t just a red herring. Spending days crisscrossing the countryside on unpaved roads takes a huge toll on the delegation’s fleet of SUVs — vehicles that, between Linton’s visits, the ministry is allowed to use for its own purposes. In resource-starved North Korea, even government officials must barter to replace broken fan belts and transmissions. The last thing the bureaucrats want is to risk losing a precious automobile.

Whatever the reason for the recalcitrance, Linton decides to meet his hosts head-on by matching each canceled visit with a cancellation of his own — mostly at the expense of hospitals the ministry appears to favor. This choice comes with real consequences for both sides: Some patients will die without the fresh supply of drugs. And some of Linton’s donors will be angry that the care unit or hospital wings they gave money to support ended up being passed over.

Linton has requested an afternoon meeting with health ministry officials in a bid to get back at least some of the canceled visits.

“This is a nasty business,” he repeats. “But we’ll get through it.”

THE MEETING CONVENES PROMPTLY AT 2 p.m. in the Kobangsan’s imposing conference room. Surveying the proceedings from just below the 16-foot ceiling are five-foot-tall portraits of North Korea’s late founder, Kim Il Sung, and his son and current strongman, Kim Jong Il. On another wall is a vast mural of a snarling tiger set against a range of snow-swept mountains.

Linton, in coat and tie, unveils his schedule revisions. He produces a Eugene Bell “memento book” — a binder with profiles of each center and the donor or donor group that supports it — and slashes through five separate pages with a pink highlighter. (Mary Lyso, his able assistant, was unable to find the requested red marker, but the point is made.) He asks that the directors of care centers that the health ministry struck from the original schedule be gathered in Pyongyang so they can obtain their MDR kits from him.

Linton’s three Korean counterparts are seated beside him in midnight-blue tukinyubus — closed-collared tunics and matching trousers that resemble Mao suits. They take notes feverishly, and the meeting concludes with awkward handshakes and forced smiles. Linton later explains that the North Koreans agreed to restore only one care unit to the list. They said they’d consider his request about the MDR kits but couldn’t make a decision yet. Thin gruel, but Linton claims a tactical victory. “Fewer visits means we’ll be able to spend more time with the care centers and their staff,” he says. And things may still change. “It’s only a matter of time before the ministry starts getting angry calls from physicians demanding to know what happened to their shipments. Hopefully that will persuade the ministry that we must have access to those sites next year.”

After dinner that evening, Linton brings the Bell delegates to his room to show them the MDR formulas. Drug resistance among tuberculosis patients is a problem anywhere treatment regimens are either improperly administered or simply not completed. Often a patient will ask to be discharged, thinking himself cured, only to return home and spread the disease to his family. Even in Pyongyang, where tuberculosis is not nearly the prolific killer it is in the countryside, the disease is frequently misdiagnosed as a persistent cold.

When patients show obvious symptoms but do not respond to medicine taken orally, doctors inject isoniazid and ethambutol, part of a common four-drug tuberculosis regimen, directly into their lungs. It is a painful process: In North Korea, the needles required are often so dulled by repeated use that they can only be inserted with pliers. And the more of the regimen the patient receives, the stronger his or her resistance becomes.

The MDR kits are stacked in a corner of Linton’s room, which is cluttered with everything from stethoscopes to auto parts. There are 20 kits in all, sealed in boxes about a foot square, each costing about $1,000 and bearing the name of the patient whom, based on sputum samples Linton collected during his previous visit, it was designed to treat. If distributed, the kits will supply patients with the first third of an 18-month treatment.

Snaking out from the Kobangsan grounds the next morning, the Eugene Bell convoy — two Mitsubishi Pajeros, a Kia sedan and a cargo truck — prompts curious looks from ordinary North Koreans and salutes from soldiers. First stop is a warehouse district on the outskirts of Pyongyang, where international aid agencies store their goods. The road there leads past a coal mine district, where laborers draped in mantles of black dust squat not far from the roadside, scooping rice out of a bucket with cupped fingers. Nearer to the city, farmhouses give way to residential complexes — warrens for the proletariat, many with ground-floor windows protected by security bars.

The warehouse district is located near a bus terminal and surrounded by housing blocks with corrugated steel roofs. Clustered together are Quonset huts identified by the logos of the NGOs that use them. Linton is encouraged to see Eugene Bell goods stacked neatly with the foundation’s logo facing outward. He takes inventory and then distributes gifts of spare auto parts and a bicycle to the warehouse staff.

The Eugene Bell logo, a schematic image of two people in a rowboat, is a reference to a Korean folk tale about two brothers who feud with each other over an ingot of gold. When the dispute threatens to destroy their family, the siblings row out to sea and toss the gold overboard. It is a metaphor for Korea’s geopolitical divide, but it could also stand for the Linton family’s own breach.

In the late 1990s, as Linton was making the transition from academia to full-time aid work, two of his siblings and a close friend quit Eugene Bell in a dispute over donor solicitations. Linton was left with $10,000 and a Rolodex of donors. For a while he lived off his savings. Then his wife of 20 years left him for someone else. “All of this took place on a stage,” he says, “where everyone is watching in horror and fascination and you can’t just disappear.”

Today, Linton lives in a Victorian-era house in the Howard County town of Clarksville spending most of his free time renovating a guesthouse on the small estate. He has since remarried.

Physicians pouring over textbooks distributed by The Eugene Bell Foundation

EUGENE BELL’S FALL RESUPPLY CIRCUIT covers hospitals and care centers from the west-central part of the country north to the border with China. The group averages two resupply visits a day, and much of the time is spent on the road. The convoy passes collectives of farmers busy wrapping cornstalks into enormous hourglass-shaped bundles and storing them for fuel, and army units gathering the remains of the cabbage crop.

The roads are lined with the ligaments of a sclerotic state: laborers shouldering homemade shovels and pickaxes, youth-brigade members, soldiers, students, oxen-drawn carts, swarms of bicyclists. Vehicular traffic consists of military convoys, the occasional passenger car smuggled in from China and a contraption known as a moktan cha, or “charcoal truck,” which is powered by cornstalks converted into carbon monoxide by a retrofitted burner. A similar technology was employed by taxis in postwar Japan, according to Linton, who is something of a gearhead.

Despite its poverty, the North Korean countryside displays a tidy bucolic tableau: rows of squat farmhouses with whitewashed plaster walls trimmed in apricot or blue, and dried cornhusks suspended above the entryway. Children attempt to ice-skate across frozen rice paddies. Thrust among these delicate vignettes are imposing billboards and monuments, usually superimposed with portraits of Kim Il Sung, imploring citizens to struggle, to resist, to endure, to work hard, to observe clean work habits, to smile.

The site visits assume a familiar rhythm. Fresh supplies are stacked neatly in front of the administration offices with the Eugene Bell logo clearly visible. Unboxed goods, such as wheelbarrows and tractors, are lined up nearby. Aside from international inspections of Pyongyang’s nuclear facilities, the Eugene Bell resupply tour could be North Korea’s most thoroughly documented event. Once the Bell delegation arrives, Linton performs what he calls a “hello-how-are-you” shot, a brief videotaped exchange with the facility’s director and a quick explanation of what supplies are being delivered and who donated them. Staff members are summoned to hold banners with the donor’s name in front of the shipment, or attach stickers with the proper logos onto each box. When the cargo is funded by several donors, teams of staff members are rotated before the cameras with the appropriate banners. Every delivered item is accounted for on a manifest that is signed on camera by the site director. It is an exhausting archive of data and images that over the next several months will be edited and collated to create both a report for each donor and a memento book that Linton will present to the hospital or sanatorium on his next visit, complete with extra photos for the staff.

On the fourth day of the tour, Linton and his delegates stop at the Kosong People’s Hospital, a whitewashed building with rounded corners and neatly painted gray windowpanes. A team of physicians in threadbare, stain-spattered scrubs escorts them into the head office and sits down at a long table that extends perpendicularly from the director’s desk, which is set parallel to the wall opposite the doorway. Above the desk are framed photos of the elder and younger Kims. On the desktop are two phones from the Sputnik-era East Bloc and a day-per-page datebook made of coarse recycled paper. (During the two-week tour, the delegates are received by 12 directors, and each office is identical to the other. The telephones rarely ring, and the daybooks are blank.)

The Bell delegates are treated to helpings of sweet potatoes and whole chestnuts, peanuts in their shells, apples and tea. Like the rest of the facility, the office is unheated, so coats stay on. Linton sits closest to the director as, for about an hour, the two men discuss the hospital’s future needs. The meeting could be wrapped up in less time, but Linton doesn’t want to risk appearing rude. By the end of the discussion, two small pyramids of potato peels and chestnut skins have accumulated on the desk before him.

The director then escorts the delegation on a tour of the hospital and its equipment, much of which predates the Cuban missile crisis. Like most hospitals and care centers in North Korea, the facility employs a direct-fluoroscopy machine, an X-ray device that irradiates the patient from behind while the doctor examines an image projected on a fluoroscopic plate of glass between them. “The negative is the doctor’s retina,” says Linton, who frequently admonishes physicians for submitting themselves to the machines’ potentially fatal doses of radiation. Most physicians in North Korea use them regularly, and suffer the consequences. The radiologist at Kosong, for example, has receding gums and low hemoglobin, common signs of radiation sickness. Three of his colleagues have died over the years — one from radiation overdose, another from cancer and a third from tuberculosis.

Like their counterparts throughout a country isolated by international sanctions, the physicians at Kosong have become expert scavengers and foragers. They fashion their own surgical instruments with the help of local blacksmiths. The hospital’s tuberculosis wards — long, narrow dormitories warmed by wood stoves — share space with thickets of cotton plants that provide the fibers needed for gauze or bandages. A common Eugene Bell donor item is plastic sheeting for greenhouses to nurture fresh vegetables and other produce for the patients’ nutritional needs. Physicians even harvest one another: Earlier, the director and three of his colleagues had lowered their trousers to reveal fresh scars on their inner thighs where patches of flesh had been sliced away to be used in skin grafts.

One thing North Korea’s medical community cannot jury-rig, however, are medical textbooks. When Linton opens a carton of South Korean books, Kosong staff members set upon them hungrily. Forty minutes later, when orderlies are asked to gather the books for registration with the health ministry, a nurse holds hers tight to her chest, clearly loath to relinquish it.

Before saying goodbye, Linton inspects the hospital’s emergency vehicles, bantering with the maintenance crew as he distributes fresh shock absorbers and air filters. In mock reproach, he scolds a mechanic for having dirty fingernails, then rewards him with a wristwatch for keeping detailed service records. The damaged auto parts have already been removed and sorted on a burlap sack, like freshly removed organs.

Linton will take these back with him to Seoul. “Otherwise,” he says, “they’ll end up in some black-market stall.”

THE IMAGES THAT MELT LINTON’S DONORS’ HEARTS is footage of him interviewing tuberculosis patients in their wards. With a practiced hand, he pins a microphone on the patient’s clothing — more often than not Eugene Bell-issued pajamas — and begins a short interview. At a sanatorium in Dongdaewon on the eighth day of the tour, Linton meets a 27-year-old woman who contracted tuberculosis after her discharge from the military. She was diagnosed in a city hospital and sent to the care unit after she failed to respond to treatment, which suggests MDR.

“I took my medicine just like everyone else, but I was the only one who didn’t get well,” she tells Linton almost apologetically, her eyes darting nervously from one corner of the room to the other.

Linton addresses her in his light South Korean drawl. “You’re my model today,” he says soothingly, and she manages a weak smile.

The quiet is perforated by the sound of patients in the corridors hawking up expectorant for sputum samples. The woman has already given hers, which is stored along with the others in a cooler that Linton will take with him to South Korea for testing. With luck, he’ll bring a treatment kit to her in the spring.

THE TWO-WEEK TOUR ENDS WITH A VISIT TO A TUBERCULOSIS FACILITY NEAR SADONG, a district in a distant part of the Pyongyang municipality. Like other care centers on the capital’s periphery, this one is near an army base and a cemetery. Linton and his team are welcomed warmly by the director, a tall man with facial fluoroscopy burns that give him a perpetual blush.

While inspecting the wards, Linton enters a cell crowded with five men of varying ages. They have three cots among them and give in to fits of deep, gravelly coughs. Most wear ragged army fatigues. The sun is setting, and the atmosphere is sepulchral. Linton manages to get a few wan laughs but shakes his head as he steps back into the receding daylight.

“It’s the end of the line in there,” he says. “I doubt if any of ‘em will make it, save one or two.” Nevertheless, the men’s sputum samples are collected and deposited with the others.

It is getting late. The delegates will have to hurry back to Pyongyang to beat curfew. They hastily say goodbye to the staff and board their SUVs.

On the road back, no lamps illuminate the highway, and many of the vehicles on the road have no working headlights. The Bell convoy sweeps past the relentless procession of workers, students and soldiers, going from daylight into night, stopping only for the occasional military checkpoint.

That evening, from a room now eerily vacant of MDR kits and spare car parts, Linton will begin preparations for the spring tour.

©

Quiet Christianity

Pastor Douglas Shin has learned the cost of good intentions-especially in North Korea. Every time the Seoul-based Protestant missionary goes in with another shipment of food for the hungry, the regime’s officials grab much if not all of it for themselves, he says. Once, when he tried to negotiate a visit to the capital, Pyongyang, they demanded that he bring a whole rail car loaded with 60 tons of flour and supplies. He finally bargained them down to a 10-ton food shipment, delivered just inside the border by truck from China. At least they let him hand out some of it to people on the streets.

Shin says every relief group encounters the same problem in North Korea. Regime officials demand more and more kickbacks from humanitarian agencies-and South Korea’s church groups are particularly easy marks. “Northerners know how to take advantage of zealous southerners,” Shin says. “But in some way both sides use each other.”

That willingness to cut deals is making North Korea increasingly dependent on Christians from the peninsula’s southern end. While nongovernmental agencies like World Vision and Save the Children, fed up with the North’s rampant corruption and lack of transparency, have closed down or sharply reduced their activities there, South Koreans are racing into the void. Lighthouse Foundation, a Seoul-based Presbyterian group that works with handicapped children, is working with the North to build a center for disabled kids in Pyongyang. The Rev. Kim Jin Gyung, a Korean-American protestant, will soon open a $30 million science and technology university in Pyongyang financed by donations from South Korean Christians.

North Korea’s few churches-Potemkin temples to give the illusion of religious freedom, critics say-are getting costly makeovers courtesy of religious groups on the far side of the DMZ. Seoul’s Presbyterians are spending nearly $3 million to rebuild Bongsu Church in Pyongyang, while Baptist groups are planning to invest a similar sum in nearby Chilgol Church, which was once attended by the mother of North Korean founder Kim Il Sung.

The southerners aren’t competing for converts; proselytizing remains strictly forbidden in the atheist North. The real prizes (for now, at least) are trophy assets-the kind that look good on church Web sites and help fill the collection plates.

By that measure it’s tough to beat the Rev. Yonggi Cho of Seoul’s Full Gospel Church, the world’s largest single house of worship, with 780,000 congregants. Early last month Cho and 250 fellow South Koreans attended the groundbreaking ceremony for the Full Gospel’s $22 million cardiac center on the banks of Pyongyang’s Daedong River. A month earlier the church had sent 23 trucks loaded with heavy equipment, such as cranes and cement mixers, across the DMZ. Construction of the seven-story, 260-bed heart clinic will be financed with individual donations and Cho’s own retirement pay, which he says he’ll transfer after stepping down next year.

There was one snag: the facility’s name. Cho’s first choice-Pyongyang Gospel Heart Hospital-sounded a bit too liturgical for the regime’s tastes, so the preacher backed down. The Rev. Cho Yonggi Heart Hospital is scheduled to open in 2010.

Anything is an improvement on North Korea’s present health-care system. Even in privileged Pyongyang hospitals lack electricity and running water as well as basic equipment and supplies. And the facilities outside the capital are far worse. At the People’s Hospital in Kusong, some 30 miles north of Pyongyang, patients are X-rayed by a 40-year-old Hungarian-built fluoroscopy machine that emits dangerous levels of radiation. Orderlies fashion bandages from cotton grown on the hospital grounds, and intravenous drugs are administered with upended soda bottles. Conditions at Kusong would be even more desperate without donor groups like the Maryland-based Eugene Bell Foundation, which insists on delivering aid directly its final destination. If North Korean officials refuse, the foundation warehouses its aid until permission is given.

Regular site visits by donor representatives are basic to responsible NGO work, not only in North Korea but everywhere else, says Eugene Bell director Stephen Linton. “People who think otherwise are kidding themselves.”

Lack of oversight, however, hasn’t stopped some South Korean religious groups from planting their flags-both spiritual and humanitarian-throughout the north. In 2005 a South Korean Christian denomination authorized construction of a church with $1 million in donations. But the building doesn’t even have a cross, say defectors interviewed in Seoul, and there’s nothing the group can do about it.

The South’s Jogye Buddhist denomination recently spent $8 million to rebuild a temple on Mount Kumkang that was bombed during the Korean War. After the new temple was dedicated in October, however, the southern monks’ northern partners seized control of it, prompting a public expression of regret from the Jogye leader who oversaw the three-and-a-half-year project.

Two years ago representatives of Seoul’s Youngnak Presbyterian Church were in advanced negotiations to build a children’s health center in the North Korean city of Sinuiju, which is on the Chinese border. Blueprints were drawn up and approved, and delegations from the church met with senior officials in Sinuiju’s North Pyongan province. But negotiations came to a halt when the North Koreans demanded that the facility be built in the capital instead. Youngnak says it’s holding firm.

The South Korean government is discouraging such ambitious projects, at least by example, because of the difficulties in supplying such facilities once they’ve been completed. The health ministry in Seoul, smarting from unsuccessful attempts in the past to stock North Korean hospitals directly, now provides a modest $1 million worth of medical materials to the north annually. Two years ago it began supporting a hospital on Mount Kumkang, a popular destination for South Korean tourists. Doctors from the South regularly visit the hospital to treat patients alongside local physicians, who can then benefit from their southern counterparts’ expertise. “We focus on treating patients, not building hospitals,” says an official involved in the Mount Kumkang program.

What the north really needs, say officials in Seoul, is small-scale clinics and medicine for needy people, both in and outside Pyongyang, rather than big hospitals that can benefit only the elites. The average surgery at the Rev. Cho’s hospital, they point out, will cost $3,000 in a country with a per capita income of $760. But given how hard it is to operate outside Pyongyang, South Korean aid groups seem quite content to busy themselves in the big city.

© 2008 Newsweek, Inc

The U.S. and China: Back to Bludgeoning Each Other

The War on Terror has burned through America’s human and financial resources and empowered radical Islam. But for China, it’s been a lucrative reprieve.

However weakened are Sino-US ties – and they’ve taken a beating this year – the most important trans-Pacific relationship would be a lot worse if not for the Bush administration’s pre-occupation with the Middle East. His predecessor will likely declare a victory of sorts in Iraq and Afghanistan and slowly draw down the US military presence there. The White House will focus on domestic concerns like health care, immigration, and trade. Media interest in the terrorist threat will wane. (If there is a clash of civilizations and no one around to videotape it, does it get posted on YouTube?)

And with that, imperial America and once-and-future imperial China can get on with the serious business of bludgeoning each other. The two nations’ shared interests, of which there are many, will be subverted by cheap politicking on both sides. For a glimpse at how this will play out, consider the sagging trajectory of the Strategic Economic Dialogue, the launch vehicle that was to propel Sino-American ties from a feeding frenzy into a high-brow affair.

The SED, as it is called, is a biannual round of meetings between senior officials from Washington and Beijing. It was conceived by investment banker Henry Paulson as a pre-condition for his appointment as US Treasury Secretary. Paulson was an inspired choice for the job. At Goldman Sachs, he arranged the public listings of some of China’s top state-owned companies, which placed him on intimate terms with the country’s senior officials and businessmen. Paulson knew the Chinese and enjoyed the rarest coin in a realm awash in liquidity: respect.

The SED’s charter was to engage China in a sustained, workmanlike way. Paulson’s experience and expertise, it was assumed, would buy him enough credibility from Congress to vouchsafe the round from partisan politics. In return, he would negotiate “deliverables” from Beijing on such controversial issues as market access and the dollar-yuan exchange rate. But his enthusiasm was never matched on the Chinese side. From the outset, Paulson’s expectations for diplomatic parity with Premier Wen Jiabao were dashed. When the new Treasury Secretary hand-delivered a letter to Wen requesting he represent China’s side in the dialogue, Wen gave it a quick read and passed it to Vice Premier Wu Yi. (“Too bad, you get me,” she told Paulson jokingly, according to someone close to Paulson’s office.)

The first session of the SED was held a year ago in Beijing. It yielded nothing but understandings on procedural matters, despite a US delegation that included 13 US cabinet members and Federal Reserve Chairman Ben Bernanke.

Since then, China has come under growing criticism in the US. Lawmakers have passed bills that would impose punitive tariffs on Chinese-made goods in retaliation for Beijing’s manipulation of its currency, the yuan. Pundits like CNN’s Lou Dobbs have intensified their already high-decibel attacks on China for “stealing” American jobs and menacing US interests abroad. Most Democratic presidents campaigning for the Fall ’08 election, and even a few Republican ones, talk about the need to “deal” with China. American nativism, never far from the surface since 9/11, has assumed a decidedly Sino-phobic veneer.

By the time SED III came and went – the three-day event was held in Beijing last week – the US-China relationship had been damaged further by the controversy over tainted and defective Chinese exports, the Dali Lama’s reception in Washington, and Beijing’s decision to block a US aircraft carrier from entering Hong Kong harbor. A week prior to the round, Vice Premier Wu betrayed symptoms of dialogue fatigue when she berated a visiting EU delegation for constantly nagging Beijing about its undervalued currency. No one was surprised when the concessions made by both sides at the most recent SED were largely symbolic. The round is now hobbling alongside the lame duck president who bought into it and Paulson is preoccupied with America’s credit crisis.

In retrospect, the SED was doomed from the start, led as it was by a man who knows China and Wall Street better than he does Congress, and compromised by legislators who know little about anything beyond Washington and Main Street.

Historians may note the SED as the last such diplomatic initiative of the unipolar world. China’s emergence as a regional hegemon is inevitable and it will require bold leadership in Washington to accept this. America has built an empire – its far-flung garrisons and deep-water fleets – on the pretense that it alone should be entrusted as custodian of the world’s natural resources. It markets this not so much as a burden but as an obligation, one that obviates the need for other powers to challenge US access to oil fields and gas terminals. But China is not coming along. It is building a strategic waterway linking its ports to the Persian Gulf while sewing up excavation rights to energy-rich, and mostly authoritarian states in Africa. The Pentagon characterizes this as an ominous “Eastern Way” of energy security: controlling fuel supplies rather than the “Western Way” of buying them in the open market. (Saudi Aramco was a beneficent mentor, apparently.)

The Chinese respond by condemning the US for wanting to deny it the resources it needs to become a power in its own right. Washington deploys long-range F-22 fighter-bombers to Japan and flirts with the idea of selling them to Tokyo. Beijing accelerates the modernization of its military by privatizing its once state-run defense sector. Soon, China will have its own military-industrial complex which, should it bear any resemblance to its US counterpart, will be an empire in itself.

Under the Bush administration, American “engagement” with the world has become as debased as the dollar. The next US president would be wise to refresh it. For all its faults, the SED was at least a good try. It would be sad and possibly tragic if it turns out to be the last one.

Ox Carts and Euros: The New Wealth of North Koreans

In Sinuiju, a city perched on the North Korean side of China’s Yalu River, I awoke at dawn to the tinny strands of martial music broadcast from megaphones hitched to slow-moving vehicles. Soon there was an odd accompaniment: the sound of metal scraping against tarmac.

A snowstorm had just passed through the region and North Koreans – gathered in work brigades, farm collectives and youth leagues – were busy clearing the road to Pyongyang about a hundred miles south. By the tens of thousands they converged, armed with shovels, pick-axes, claw-hammers, and tree branches bundled to form a kind of gigantic egg-whisk.

It was an impressive deployment of human capital and a reminder that North Korea, isolated by a generation of international sanctions, remains a labor-intensive economy of almost medieval character. (And to mixed effect, at least as far as road maintenance goes. As evidence of how badly the embargo has degraded vehicle safety, the way to Pyongyang was littered with road accidents, some quite serious.)

The scene also offered a rare look at the national physiology. I was a member of a six-man humanitarian aid project that last month re-supplied hospitals and sanatoriums throughout the country’s North Pyongan province. With the obvious exception of the patients we met in wards and care units, we saw no signs of malnutrition in a country racked by frequent food shortages. Nor was there evidence of the flood that had reportedly deluged much of the country only a few weeks earlier.

On the contrary, as our convoy weaved its way back to Pyongyang, we were struck by the vigor of the roadside toilers. Though North Koreans are on average several inches shorter than their brethren in the south, their complexion was ruddy, their eyes bright and their hair full and dark. Also noteworthy was the quality of their clothes – brightly colored parkas and scarves, and worn but well-made trousers, sweaters, hats and footwear. And while transportation along the highway was dominated by pedestrians, ox-carts, and large trucks filled with travelers clutching their belongings in haversacks, we were frequently passed by oncoming vehicles of Japanese and European make, apparently privately owned and operated, as well as new bicycles and motor-scooters.

In an exhausted economy like North Korea, these could only have come from China, the wellspring of a smuggling trade that is infiltrating the country with everything from new auto parts to DVD copies of South Korean soap operas. At a terminal on the Chinese side of the border, bus drivers pay a nominal “tax” to enter North Korea’s expanding black market with the eager complicity of customs’ police. Chinese cigarettes, liquor and soda appear for sale throughout urban and even rural parts of North Korea on simple wooden tables at street corners. Hotels like the Abrokgang in Sinuiju and the Koryo In Pyongyang have been made over with imported light fixtures, door locks, and sound systems. Electricity and hot running water are no longer rationed and new Karaoke players have been installed in dining rooms. Rack rates are no longer calculated in feeble dollars, but in muscular Euros.

Achirongee, or “Shimmer” in Korean, is a popular eatery in Pyongyang. It accepts dollars, Euros and Chinese yuan, offering food and a standard of service that rivals the top diners in Seoul. Its waitresses sport contemporary hairstyles – gone is the wholesome pony-tail-and-bangs look that was once de rigueur for all good, apple-cheeked revolutionaries – and wear sparkles with their makeup.

None of this, of course, would be possible without the tacit endorsement of North Korean leader Kim Jong Il. As a tactical maneuver, it’s the smart move. What better way to salvage a nation that was nearly extinguished in the 1990s by famine and disease than by opening a black-market lifeline with a sympathetic neighbor? Certainly it has bought the regime some good-will. A petty-merchant class appears to have congealed around the new China trade and its wares are raising living standards slightly for a population that has beaten the worst of natural and man-made plagues. The easing of relations between Pyongyang and its neighbors has led to new investment from South Korean industrialists and, if the number of Chinese patrons at Achirongee is any indication, from China as well.

Most importantly, Washington is poised to remove Pyongyang from its list of terrorist sponsors once the regime bins its suspected nuclear weapons program, so desperate is the Bush administration for a foreign policy success. Thus rehabilitated, North Korea would be targeted for all manner of funds, from South Korea mostly but also from China, Russia, and Japan’s large ethnic-Korean community. It will be as much a political marketplace as a commercial one, from non-governmental organizations anxious to expand their donor-financed empires, to state-run and quasi-public companies eager to entrench the Kim dynasty and forestall the one affair no one in the region wants consummated: Korean unification. While Seoul is intimidated by the costs of absorbing a population equal to half its own, the rest of East Asia is keen on keeping the peninsula divided and comparatively weak.

But throwing money at Pyongyang’s existing problems may create a host of new ones. Absent wholesale economic reform, the amount of cash that will be channeled into North Korea is likely to be far beyond its capacity to absorb it. The result will be massive corruption – witness the Palestinian Authority after its 1993 peace deal with Israel – and an unprecedented and destabilizing rate of income disparity.

Despite many takers, no one has made money betting against Kim Jong Il since he assumed power after his father’s death in 1994. He has distinguished himself for playing a single hand – his nuclear ambitions – with a workmanlike facility. Still, what appears now to be his safest bet might turn out to be his riskiest gamble. Dictators thrive in darkness, after all. They leverage international isolation to manipulate, coerce and cajole at home. By widening the aperture, even to simple consumer goods, the Dear Leader courts the hazards of rising expectations so that one day, after the work units are deployed to clear the trunk roads of yet another bed of freshly fallen snow, someone may remark with annoyance at the lack of motorized plows.

China's Secret Growth Engine

Like a growing number of Chinese manufacturers hit by rising wages, Wang Jianping recently packed up his plant and machinery on China's east coast and headed west, where cheaper labor helps offset rising inflation and withering competition. Unlike most of his rivals, though, Wang didn't stop at China's borders. He pushed as far west as Nigeria, where the shoemaker from Zhejiang—a bustling province of 44 million people—has been doing a robust trade since 2004. "We have a very successful operation," says Wang, whose Hassan Shoe Manufacture Co. exports shoes to more than a hundred countries. "Business has never been better."

Leave it to a Zhejiang native to pioneer outsourcing in a country still known for its limitless supply of peasant labor. When it comes to trailblazing more efficient ways to make money, Zhejiang province has always been ahead of the rest of Chinese business. By the time China was getting comfortable with economic reform in the late 1980s, Zhejiang was investing overseas and trading equity stakes in private companies—albeit underground—unfettered by central government meddling.

Once neglected by the state, Zhejiang is now hailed by economists for its bottom-up model of development and fearless regard for the global economy. It's also being watched as a bellwether for the Chinese economy: in recent months, Zhejiang investors have cashed out of frothy Chinese markets, bought into a record number of Western businesses and moved up the business food chain from making simple goods to providing sophisticated Internet services. In October, one of Zhejiang's former provincial governors, Xi Jingping, was named heir apparent to the national party leadership at the Communist Party Congress. He's encouraging the rest of the country to follow the Zhejiang model.

In fact, Zhejiang is less a preplanned model than an organic byproduct of necessity. Sealed off by an enveloping mountain range to the west and by the East China Sea to the east, the province was written off during the cold war as the front line of an American attack, and thus starved of resources by Beijing. "We had no choice but to turn to private business both here and abroad," says Ma Jinlong, director of the People's Government Economic Research Center in Wenzhou, Zhejiang's commercial capital. "As late as the 1970s, few of the provinces had any good business sense but we've always had it."

While much of the rest of China is still run by state bureaucracies, nearly three quarters of the economic output and more than half of the tax revenue in Zhejiang comes from private enterprise. Small to midsize enterprises dominate, funded by an elaborate underground banking network, with a default rate near zero (borrowers tend not to back out on neighbors). Ironically, the underground banking system has made corporate financing far more open than in other provinces, where loans are typically arranged through opaque state banks.

Zhejiang is still home to the world manufacturing capitals for buttons, socks, dyes and textiles, but now it is also going high tech. While Zhejiang is no Silicon Valley, R&D investment in private industry last year grew by 47 percent over 2005, and the value of high-tech companies as a percentage of total industry increased by 26 percent. Alibaba, the e-commerce company that recently launched a $1.5 billion IPO, was founded in 1999 in Zhejiang.

Zhejiang's lack of centralized meddling has sucked in a fat share of China's wealth. Zhejiang ranks 11th in population among China's 33 provinces, municipalities and autonomous regions, but fourth in total trade. Since 1978 its economy has grown at an annual rate of more than 13 percent, three points higher than the nation as a whole, and it is expected to expand by 14.7 percent this year. According to a recent analysis by the Organization for Economic Co-Operation and Development, bank deposits in Wenzhou have recently swollen with heavy remittances, apparently from locals pulling money out of overheated stock markets in Beijing and Shanghai.

They're also pulling out of Zhejiang, however. Wang Ji, a clothingmaker in Wenzhou, says his profit margin has fallen from 10 percent to zero in the last year, and worries that "if there's no profit soon we'll have to retool our whole line or move it abroad." Faced with rising wage inflation, Zhejiang industrialists are already moving factories to more remote areas like southern Jiangxi and central Sichuan, or overseas to Indonesia, Vietnam, Bangladesh, Africa or Central Asia. Foreign direct investment from Zheijiang has doubled since 2005 to $1 billion, making it the most aggressive investor of any Chinese province. "We've taken the lead in relocating overseas," says Wang. "And wherever Zhejiang goes, the rest of China follows."

Zhejiang entrepreneurs have also been cutting mergers-and-acquisitions deals in the West. While Asia accounts for nearly 40 percent of Zhejiang's outbound investment, Europe and North America follow closely behind with 37 percent and 27 percent, respectively. Last year Hangzhou Machine Tool Group Co. bought a 60 percent share in Germany's aba z&b Schleifmaschinen GmbH, a leading producer of high-tech grinding machines, for an undisclosed sum; like many Zhejiang entrepreneurs, the group hopes to leverage the Western company's R&D back home and abroad. In September last year, a company called Zhejiang Huaye Logistics Co. set up an office in Dubai specifically to identify investment opportunities in the burgeoning Gulf entrepôt.

Zhejiang's success as an outsourcing and M&A center has made it an asset for aspiring politicians. Xi assumed the pole position to succeed party boss Hu Jintao in no small part because of his record as a former Zhejiang governor and his association with the region's grass-roots free-marketeering. A province that once prospered from the state's neglect has now become an officially approved model for how to prosper. And with Xi cheering it on, the signs in Zhejiang point to aggressive westward and foreign expansion.

Ha'aretz, Israel's Liberal Beacon

The daily editorial meeting at the Israeli newspaper Ha'aretz is a sacred, if sometimes rancorous, noontime ritual. It takes place in the editor's office, which like the rest of the newsroom is embellished with avant-garde paintings from the art collection owned by the Schocken family, the paper's publisher and owner. Debates are freewheeling and nonhierarchical, the way early kibbutzniks might have argued over crop rotations. With the meeting convened by editor David Landau, the dozen or so deputy editors and senior writers haggle over what should be the lead editorial for the next day's edition and on which side of the issues Ha'aretz should array itself.

Occasionally, the debates end in a draw. One day last February, for example, participants argued for two hours over whether Israel's head of prisons should be appointed police commissioner despite a history of disciplinary offenses and a criminal trial that ended in his acquittal. The meeting concluded with a hung verdict, and the next day's editorial was unusually cautious and equivocal. More recent debates have focused on whether Israel should break ranks with the Bush Administration and pursue peace negotiations with Syria. Ha'aretz favors such a dialogue, though not as robustly as some staff members would like and despite opposition from others. "

The noontime meeting is where senior people ventilate," says Landau, who came to the paper fourteen years ago not long after leaving the Jerusalem Post when it was bought by conservative media mogul Conrad Black. "The rank and file may view it with sarcasm and cynicism, but beneath that is a grudging prestige of membership in such a vibrant spectrum of opinion."

In Israel, spirited debate was once a cultural imperative. Now it is a rare, if precious, resource, as is Ha'aretz and its emphatic liberal consciousness. Though Palestinian suicide bombers and Hezbollah rocket attacks have all but muted Israel's high-decibel, hydra-headed politics, there is Ha'aretz, arousing and provoking with its pro-peace apostasy. Not only does the paper challenge its readers; it makes money doing it. The depth, passion and wit of its reporting recalls the best of the long-extinguished Washington Star or Britain's once-sassy Independent. The paper routinely scoops its larger rivals, the tabloids Yediot Ahronot and Ma'ariv, particularly when it comes to US-Israeli relations, and it is the closest thing the Middle East has to an indispensable read. (It is also the only major Israeli daily with an editorial page; in June Yediot Ahronot dropped its editorial section and, like Ma'ariv, now restricts itself to signed opinion pieces.)

Ha'aretz's opposition to Israel's most controversial policies--the occupation of the West Bank and the incarceration of Gaza behind a fortified wall, the systematic discrimination against Israel's Arab citizenry, last year's war in Lebanon--makes it a life raft for anyone who despairs of the Jewish state's rightward lurch but who is too afraid to criticize it openly for fear of being tarred as an anti-Semite, an appeaser of terrorists or a self-hating Jew.

"Israel is in a coma," says Ha'aretz senior writer Gideon Levy, bête noire of Ha'aretz critics and patron saint to its most loyal readers for his relentless campaign against the occupation. "There was a time when you'd ask two Israelis a question and you'd get three opinions. Now you get only one."

Like museum curators who deny a national treasure to a marauding foe, Landau and his staff preserve Israel's tradition of dissent from the demagogues of our Age of Fear. When Ha'aretz's coverage of seismic events has triggered a wave of subscription cancellations--most notably for its empathetic reports of Palestinian suffering in the early days of the second intifada and its condemnation of Israel's invasion of Lebanon last year--publisher Amos Schocken has struck back with defiant editorials. When American academics John Mearsheimer and Stephen Walt were slandered last year for their article in The London Review of Books, which alleged a pernicious influence over US Middle East policy by the so-called Israel lobby, Ha'aretz ran an editorial that condemned the "McCarthyite policing of academia" as "deeply un-Jewish." Last September, when violent clashes erupted between Hamas and Fatah in Gaza, auguring the climactic split that would come in June, Ha'aretz correspondent Amira Hass ruled them the inevitable result of "the extended experiment called 'what happens when you imprison 1.3 million human beings in an enclosed space like battery hens.'"

Reportage like that regularly places Ha'aretz and its correspondents--several of whom have their own columns on the opinion page--in the cross-hairs of conservative pro-Israel groups as well as ordinary Israelis and members of the Jewish Diaspora. "Talkback," the reader-response feature in Ha'aretz's online edition, boils with largely negative and often hostile commentary. Aluf Benn, the paper's diplomatic correspondent, says he is routinely characterized by readers as a "Nazi Jew-hater" (he is also treated to "Nazi Occupier" from the pro-Palestinian side, he says). Senior Ha'aretz correspondent Tom Segev, author of the books 1967 and One Palestine, Complete, says the most extreme messages he gets often come from American Jews. In response to a story he wrote during the Israeli invasion of Lebanon, one US reader remarked: "I don't know if your mother slept with Hitler knowingly or if he raped her but I can tell you are a Nazi."

"It's bizarre," says Segev. "You think you're writing for some intelligent people, but there are some real weirdos out there." Nevertheless, Talkback is closely followed by Knesset members as an invaluable measure of the Israeli viscera.
No subject, it seems, is too sensitive for Ha'aretz to take on--including the "blood libel." The publication in Italy early this year of Bloody Passovers: The Jews of Europe and Ritual Murders, by academic Ariel Toaff, provoked a furor over the book's suggestion that there could be some truth to at least one blood libel--an alleged murder of a child in 1475 by the Jews of Trent, who may have then used the victim's blood to bake matzo for Passover. While most of the Israeli media shied away from the controversy, Ha'aretz weighed in with a lengthy piece about the book and the state of academic freedom in Israel, a tongue-in-cheek history of the blood libel and its modern iterations, a scholarly but sobering essay on how the blood libel has been used as a trigger for anti-Jewish pogroms and a profile of Toaff's father, the former chief rabbi of Rome, who condemned the book and chastised his son for writing it. (The book was eventually pulled from the shelves by the publisher.)

The letters came pouring in, says editor Landau, who along with Schocken and the paper's section editors spends much of his time answering heated written responses to Ha'aretz coverage or engaging angry readers over the phone. "I can't say in all honesty whether we would have broken that story if we had it exclusively," Landau says. "But once the Italian press broke it and it was in the public domain we just applied regular journalistic principles. It's very rare that we sit on a story." (Landau admits he withheld news in late 2004 of the drug-related arrest in Peru of the daughter of the Israeli ambassador to Britain. Entreated by the ambassador to exercise restraint, Landau and his editors agreed to delay publication while embassy officials negotiated for his daughter's release. The understanding was overtaken by events, however, when the young woman won a beauty contest held by her fellow inmates, and the story was carried by the Associated Press.)

Ha'aretz correspondents praise Landau, a former reporter himself and an English-born Orthodox Jew, for giving them the freedom to define and interpret their beats. He recruits from Israel's best feeder papers and Army Radio, which is respected for its tough reporting, and puts them to work in the paper's boiler rooms, like the night desk. "You need a year of indoctrination," says Benn. "And during that time you always hear the senior editors saying, 'That's not the way it's done here.' There is a lot of pride in the culture."

Levy, who says that somewhere in the Ha'aretz newsroom is a thick file of subscription-cancellation notices inspired by his coverage, says he is less constrained in his punditry than most columnists are in the United States and Europe. While working in Gaza early this year with a French film crew that was making a documentary about him, Levy declared on camera that the Gazans' plight made him ashamed to be an Israeli. "A few days later," he says, "I got a call from the producer, who said he couldn't use the quote for fear it would upset the Jewish lobby in France. That would never happen at Ha'aretz, particularly under David Landau."

Ha'aretz's core readership--the 65,000 Israelis who take the paper in Hebrew and the 15,000 or so who read the English edition--are among the country's elite. Surveys reveal Ha'aretz subscribers to be predominantly Ashkenazi and in their 40s, with above-average levels of income, education and wealth. "Never trust Ha'aretz as a true reflection of the average Israeli newspaper reader," says Shmuel Rosner, the paper's right-of-center chief US correspondent. "For many Israelis, Ha'aretz is like The Nation. People who read it are better educated and more sophisticated than most, but the rest of the country doesn't know it exists."

Landau insists, however, that Ha'aretz's readership is no more monolithically liberal than is the paper itself. Its opinion pages make room for conservative thinkers, politicians and policymakers, including such rightist luminaries as Israel Harel, the former chairman of a prominent settlers' group, and Moshe Arens, a former Likud Party minister and Israeli ambassador to Washington. In a February opinion piece, Ha'aretz's military correspondent, Ze'ev Schiff, sternly rebuked Jibril Rajoub, a former Palestinian Authority intelligence chief under Yasir Arafat, for remarking that the Arabs will one day regain all of historic Palestine. Such a "Hamas-style declaration" from a senior Fatah member like Rajoub, Schiff concluded, was proof that the Palestinians must eradicate extremists in their ranks as a condition for peace talks. (The legendary Schiff, who had covered his beat "since the Boer War," jokes Landau, died in June at 74.)

Then there is Rosner's blog, a landfall for hardliners inside Ha'aretz's liberal archipelago. In the wake of Hamas's Gaza takeover in June, Rosner suggested (in a piece written with Aluf Benn) that the idea of a two-state solution to the Israeli-Palestinian conflict might be ditched in favor of a Palestinian confederation or autonomous region comprising Gaza, the West Bank and Jordan. Such an alternative, Rosner wrote, "can be viewed as part of the search for a solution, but also as a whip being held over the head of the hesitant [Palestinian Authority President] Abbas." It was a brazen proposition even within the Washington Beltway, where the goal of Palestinian statehood is embraced across much of the political spectrum.

Rosner, who worked as an editor at Ha'aretz before moving to Washington, acknowledges his minority status at the paper but says he is no outcast. "As an editor," he says, "I've had to justify my decisions to colleagues, but the dialogue was always professional. I don't agree with most of the paper's editorials and neither do a lot of readers, but they subscribe anyway because it is so good."

Ha'aretz is privately owned and is not obliged to declare its finances, though it is thought to be at least modestly profitable. Its English-language website attracts more readers than both the Hebrew-language print and online editions. Its business section, The Marker, is hugely popular and has helped to boost growth of fully paid subscriptions by some 15 percent over the past few years. At a time when most papers are shutting overseas bureaus, Ha'aretz is expanding its presence in New York and California.

As a newspaper that succeeds with smart reporting and good writing, Ha'aretz is a model worthy of emulation for a troubled news industry worldwide. But to evaluate it only as a good business plan misses the point. Unique among national newspapers, Ha'aretz is both public forum and chronicle of a religious and political movement that has, for good or ill, transformed a region and consumed the world. If the paper has a bias, it is less its liberal sensibility than its appeal to the possible--like Yitzhak Rabin's "calculated risk" for a negotiated peace--over the reflexively negative of our post-9/11 world. By creating a home for opinions and values that are at odds with its own, Ha'aretz radiates security in its identity and convictions. And by supporting dialogue with Israel's enemies, it projects confidence in the Jewish state's ability to coexist with its neighbors as just one rational actor among many. At a time when the Zionist movement appears to be content with exchanging one ghetto for another, Ha'aretz insists on an Israel that is of the world as well as in it.

"We have an obligation be a factor in Israeli democracy, to play a role in the Zionist enterprise," says Landau. "We can't trim our sails. This is the reason we exist."

Waiting Game

Iraq's exiled investors and business owners are watching for the sign to return and rebuild their country.

IRAQ HAS LONG HAD A PROFOUND IMPACT ON THE POLITICAL and economic landscape of the Middle East. In the 1970s, when the country's oil boom helped transform the nation, turning the immense, desiccated sandlot into a modern, diversified economy, Iraq was a beacon for intellectuals as well as investors and oil men. After its 1990 invasion of Kuwait and the embargo that followed, Iraq's cash-rich guest workers, many of them Jordanians, returned home to fuel a property bubble that burst a few years later. The embargo also fed a regionwide black-market economy and a corrupt bourgeoisie, which in turn provoked a cultural backlash from indignant Islamists.

Now the violence in the country following the U.S.-led invasion of 2003 has made exiles of close to 3 million Iraqis, more than 10 percent of the prewar population of 26 million, largely split between Syria and Jordan. According to the latest research by the United Nations High Commissioner for Refugees, there are nearly 2 million Iraqis in Syria and 1 million in Jordan; the office estimates that 50,000 people leave Iraq every month.

Amman, with its solid banking system and openness to the West, attracted the initial and most prosperous wave of refugees. If Iraq is ever to be rebuilt, it will need the help, and money, of skilled exiles like those who have settled in Jordan's capital. But now, as the war in Iraq continues, there are signs that Iraqi expatriates are growing increasingly frustrated in Jordan, where they face red tape and a nativist suspicion of foreigners.

Unlike other countries in the region, Jordan is doing little to attract or retain Iraqis or other foreign investors. Egypt and Saudi Arabia are selling state-owned assets, liberalizing their financial sectors and dismantling obstacles to direct investment from abroad. Foreign companies that were once intimidated by nontariff barriers throughout much of the Middle East are now increasingly prominent in Cairo, Alexandria, Riyadh and Jeddah. Even Syria is opening up: Fromageries Bel, the French owner of the Laughing Cow cheese franchise, operates a wholly owned subsidiary there; agricultural giant Cargill is part of a consortium developing a sugar refinery; and France's Lafarge has been awarded a license to build a $100 million cement plant in a joint venture with local investors.

Tiny Jordan, however, has failed to establish itself as either a manufacturing hub or a services center. "Here you either have money or you don't," says Labib Kamhawi, a businessman and human rights activist in Amman. "We need investment in information technology, retail and high-rise buildings for more office space. But we don't have vocational training, so people would not be able to adapt even if we had these things."

Jordan's needs include the basics, says Joost Hiltermann, who heads the Amman office of the International Crisis Group, a Brussels-based organization that monitors conflicts worldwide. "You have a million additional people in a country with 6 million, so there are severe constraints on water, electricity, health and education," he says. "Iraqi money is being invested in real estate, which is good for the upper and middle classes, but it's bad for everyone else."

Indeed, the riches of many Iraqi exiles have created a liquidity-driven boom in Amman, fueling resentment among ordinary Jordanians. The cost of housing in Jordan has risen by as much as two thirds since 2003, according to local estimates, and the price of basic commodities, from food to fuel, has soared -- along with crime rates and prostitution. High-level corruption, always a blemish on the monarchy, is flourishing.

Unable to make inroads, Iraq's business-class diaspora is radiating outward, moving further away from where the money and resources could one day do the most to restore Baghdad. Iraqi mogul Asad al-Khudhairy, for example, who left Iraq for Amman in 2004, abandoned Jordan earlier this year to settle in London. Al-Khudhairy is the head of the Iraqi Federation of Contractors, chairman of Dar Es Salaam Investment Bank and patriarch of the al-Khudhairy family -- one of the oldest and most venerable of the dozen or so oligarchies that once dominated the Iraqi economy. He is looking at investment opportunities in Oman and Egypt these days. "It's hard to talk to the people in power, and when you do, it's tough getting the right answers," says al-Khudhairy, 69, of his experience in Jordan. "Plus, we're afraid of the high fees" for everything from utilities to building permits.

The departure of such investors "is the most frightening thing," says Jalal al-Gaaod, 45, a Sunni Muslim living in Amman who is an architect with degrees from two presitigious U.S. universities. "Iraq can only be rebuilt by people like me, who have spent so much of our lives outside the country and who don't have this baggage of complicated and complex hatred and vengeance."

Al-Gaaod -- who, demographically, represents the last gasp of Iraq's once-prolific educated professional class -- is one of the few Iraqis in Jordan who has not given up on the country. Al-Gaaod and his brother Talal, who passed away last year, labored mightily with mixed results to nudge Jordan, through a series of massive development projects, toward a world-class economy. In 2002 and 2003 they designed and built their own headquarters and paid for it with $3.6 million in cash. They also pushed for a $2.2 billion oil-refining and -distribution project that would link Iraq and Jordan and enrich both countries (see sidebar). And they unveiled extravagant plans to develop Amman into a regional entrepôt for trade and culture -- and an incubator for Iraqi wealth.

Jalal, who is running a major development project and planning to open a new shopping center in Amman this month, says he intends to stay put in Jordan. But that too may change, he warns, leaving one less talented Iraqi in the region to rebuild the country once its sectarian holocaust is finally extinguished.

JALAL AL-GAAOD'S OFFICE IN DOWNTOWN AMMAN IS that of a designer as much as a businessman-investor. The shelves behind him are stocked with thick tomes on architecture -- his favorite book is The Fountainhead, Ayn Rand's 1943 novel about an iconoclastic builder -- as well as recent books on foreign affairs, including America's troubled Iraq enterprise. He wears a windbreaker with the Harvard Business School logo on the left breast, a souvenir of a two-week executive program he took in 2004 that brought him back to the U.S. for the first time since he arrived in Jordan in 1991.

Education is a hallmark of the al-Gaaod family tradition. Jalal's father, Bazee Mejeal al-Gaaod Jalal, learned French and English at a secondary school in the town of H¯it, in al-Anbar province, and taught himself to be a general contractor. His sons were the first from his clan of some 2,000 members to attend university in America. Both Talal and Jalal graduated with bachelor's degrees from the University of Southern California, where Jalal studied architecture. Jalal later earned an MBA at the Massachusetts Institute of Technology.

"It was a tough transition," Jalal says, "to move from California, where we would vacation in Tahoe, to 18-hour days studying through cold winters in Boston."

Exile has been tougher still.

Jalal was working at a design firm in Los Angeles when Saddam Hussein invaded Kuwait on August 2, 1990. A few months later he was in Jordan, where he set up a representative office for the family business, Tabouk Group Holding Co. "I wanted to be closer to my family," he says. "I didn't think I'd be gone for more than a year or two."

With Talal piloting things from Baghdad, Jalal struggled in Amman to keep the family's subsidiaries running throughout the 1990s despite the international embargo that crippled the Iraqi economy.

The two brothers were protecting the family's empire, a conglomerate that grew out of the construction firm their father had been operating while Jalal and his brother were studying in the U.S. Tabouk Group was one of the largest such companies in al-Anbar -- it built some of the province's first roads and highways. After the government nationalized Iraq's oil industry in the early 1970s, in time for the 1973 Arab-Israeli war that sent fuel prices spiraling, the government invested its petrol riches in lavish subsidies for aspiring industrialists. The senior al-Gaaod expanded into textiles and made a small fortune producing bath towels. But state incentives evaporated with the Iran-Iraq war of the 1980s. By the time Talal returned to al-Anbar with an engineering degree from the University of Southern California, the Iraqi economy was stagnant.

Made the head of the family business, Talal sold the bath towel plant and developed a small portfolio of companies that produced fertilizers, phosphates and dates -- an unlikely combination of modern materials and one of Iraq's oldest and most iconic commodities. On the eve of Iraq's invasion of Kuwait in 1990, Tabouk Group was doing a modest but stable import-export trade.

Jordan was a natural draw for Jalal, who knew the Amman-Baghdad nexus. The al-Gaaods had links that predated the Saddam era. Sanctions were not the only menace that prompted the brothers to move part of their capital out of Iraq; Hussein and his family enriched themselves by shaking down Iraqi businessmen and investors. Talal was forced to give some of the family's land to Uday Hussein, Saddam's notoriously corrupt and sadistic son. When the brothers were "asked" by the regime to invest in a sports club operated by Hussein cronies, they did as they were told.

Later the al-Gaaods were somewhat shielded from Hussein. As sanctions weakened the dictator's coercive might, he had to rely on tribal sheikhs to keep order and control restive elements -- just as the Ottoman Turks and British occupation forces in Mesopotamia had before him, and as American forces in al-Anbar province are doing today. The al-Gaaods are prominent members of the al-Dulaim, a Sunni tribe in western Iraq whose members became well represented in senior positions of Hussein's government and to whom the leader was especially beholden. The al-Gaaods therefore enjoyed protection as well as some privileges.

While the government continued to subsidize Iraq's agricultural sector, the al-Gaaods used their contacts to broker deals for imported farming equipment. Later they leveraged tribal contacts to emerge as skilled brokers in the lucrative oil-for-food program, in which Baghdad was allowed to sell petroleum for humanitarian items.

The notoriously corrupt program was populated by shady dealers close to the regime. The al-Gaaods naturally attracted attention. A September 2004 report by the Iraq Survey Group, a U.S.-led task force that investigated Iraq's suspected weapons of mass destruction program, focuses heavily on the dealings of Sattam Hamid Farhan al-Gaaod, one of Jalal's cousins. It identifies Sattam as "one of Saddam's most trusted confidants in conducting clandestine business transactions" and says he ran a network of front companies from which he and his associates worked the oil-for-food program on behalf of the regime.

Jalal, who appears in the report as the owner of an al-Gaaod family subsidiary, dismisses the report's findings. Following the collapse of Saddam's regime, he says, U.S. agents thoroughly investigated the family business and found nothing. "They pored over every line of credit," he says. "They were going on rumors and false information."

Still, Jalal acknowledges that the family owes much of its wealth to the oil-for-food program. When U.S.-led coalition forces invaded Iraq in March 2003 and toppled the regime, the al-Gaaods more than doubled their payroll to 120 hires. Most of the new staff were recruited in Baghdad, flown to Amman for training and then returned to Iraq. Hopeful that Iraq would stabilize, Talal began shopping for a six-seat corporate jet and a Boeing 727 cargo carrier.

But by 2005, with the insurgency in Iraq building steam, the al-Gaaods and their staff were spending far more time in Amman than in Baghdad. Soon they were joined by a legion of other Iraqi businessmen -- and their riches. Unlike most of their compatriots, who were content to take equity stakes in real estate projects or investment firms, the brothers had blue-sky dreams for Jordan. The romantic Talal even spoke of a revived Arab Federation, the short-lived union between Iraq and Jordan that collapsed after a 1958 coup. "We feel an obligation to the people of Jordan," he said in an interview in March 2005. "We want to change the vision of Jordanian business."

Since his death last year, Talal's vision has been undercut both by the sectarian war in Iraq and by petty politics in Jordan. The brothers' bold and politically controversial plan to refine and transport oil from Iraq's al-Anbar province to the western Levant has stalled. So has their scheme to redevelop the 1,200-acre King Hussein Sports Complex in downtown Amman.

The brothers wanted to replace the complex -- a vast but neglected compound of athletic facilities and conference halls -- with a massive $3 billion city-within-a-city, including parks, residential and commercial real estate, hotels, a trade exposition center, a museum and an opera house. This was serious business to the al-Gaaods; Talal brought in Japan's Mitsui & Co. and China Petroleum & Chemical Corp., or Sinopec, as principal backers of the project, which the brothers estimated would take ten years to develop. In 2003 they unveiled their blueprints and project proposal for King Abdullah II and his brother, Prince Faisal, at the royal palace. Their meeting was a success; the al-Gaaods were encouraged to proceed.

But politics intervened. Not long after getting the green light, the al-Gaaods were told they could develop only half the site. Then articles critical of unnamed rapacious developers began to appear in the local press, and parliamentarians started objecting to the project on environmental grounds. Jalal suspected pressure from Jordan's increasingly influential Islamist political groups. "They cannot coexist with modernity and development," he says.

The al-Gaaods put the project on hold and turned instead to a smaller-scale scheme to build a $75 million, 30-story luxury hotel. They purchased land a year ago in Amman's Shmeisani financial district for 10 million Jordanian dinars ($14.2 million), and the project was approved by the city planning commission. But when Jalal and his team gave a formal presentation to the mayor, they were told all new development would be suspended while the city drafted a new zoning law.

To be sure, Amman badly needs such a law. The city is a dreary conurbation of low-lying cinder-block homes and office buildings interrupted by the odd, and frequently garish, five-star hotel.

Muunther Saket, deputy general manager of Allied Planning & Engineering Corp., one of Amman's top construction management firms, agrees the city council's zoning reform efforts could use more input from the investment and construction community. And he says that uncertainty over how the law will shake out has cast a pall on new development.

"There has been no proper consultation with the stakeholders, the people who will be affected," Saket says. "Largely as a result, there is a growing fear among investors that their projects will become invalid once the new laws are issued."

But continued delays in the formation of the law has frustrated al-Gaaod as well as other investors. He has been told by his contacts on the planning commission to have an exit plan ready if his Shmeisani property is not zoned for hotels. He estimates that would mean a $25 million write-off.

BUT AL-GAAOD'S TABOUK HAS NOT BEEN WITHOUT success in Jordan. Subsidiary al-Baraka Investment & General Trade Co. is due this month to open the al-Baraka Mall, a Jd50 million complex in the Swaifieh shopping district with more than 25,000 square meters of space that can accommodate 70 shops. (Some 140 businesses applied for tenancy, according to Jalal.) But, says al-Gaaod, "The Jordanian government has lost a very critical year. If things continue as they are, we'll have to reconsider our options" for future investment.

Giving a tour of the nearly completed al-Baraka Mall, al-Gaaod leans against the steel frame of the glass dome that will flood the arcade below with sunlight and reflects on his experiences in Jordan. He is proud of the development, which is several grades above similar retail facilities in the kingdom in both size and quality of design and construction. It may be the closest he gets to fulfilling Talal's dream.

If anything, the tumultuous aftermath of Saddam Hussein's removal has estranged Iraq and Jordan from each other. The Iraqis brought their wealth to the kingdom but also crime and inflation. There is growing tension between the Shiite-led government in Baghdad and Jordan's Sunni monarch, who last year warned of a "Shiite crescent" raking across the Middle East. As al-Gaaod boasted of the mall's anchor tenant, the upscale Lebanese retailer ABC, there was ominous talk in Washington and the Middle East of a wider war that would pit Sunni Saudi Arabia, Jordan and Egypt against Shiite Iran and its co-religionists among Gulf emirates and Lebanon's Hezbollah. At the epicenter of this sectarian earthquake, of course, would be Iraq, the country that has lost two generations to war, tyranny and isolation.

Iraq will need investors unsullied by years of tribal and sectarian violence, al-Gaaod says. "I am not ethnically or religiously defined. I am defined by my profession. How many Iraqis like me are left in this world?"

For now he is still hopeful there is a future in property development in Amman, which he expects to finance largely through bank loans. As for al-Baraka Investments, al-Gaaod anticipates growth of some 15 percent over the next five years -- or 25 percent, if the situation in Iraq reverses and the country finally readies itself for development. Property development is "closer to what I know, which is architecture," Jalal says. "Hopefully, we can make some important changes here."

At the mall al-Gaaod solicitously helps his visitors down several flights of unlit and unfinished floors to street level. There in upscale Swaifieh he says goodbye and disappears among so many other rich Iraqis who, unlike him, are just passing through on their way to someplace else.

WHEN ASAD AL-KHUDHAIRY LEFT BAGHDAD in December 2004, his final act was to enter negotiations with HSBC Holdings for the sale of a controlling stake in Dar Es Salaam Investment Bank, a Baghdad-based lender that was established by the family in 1992. The bank, with 14 branches throughout Iraq, was the first in the country to offer ATM services and the first private lender to issue a Visa Gold credit card.

Al-Khudhairy arrived at Dar Es Salaam with 30 security guards armed with machine guns; after hours of discussions he headed straight for the airport. (In October 2005, HSBC announced it would buy 70 percent of Dar Es Salaam; it didn't disclose the price, but a source close to the transaction put it at $50 million.)

Only 45-year-old son Faisal, the eldest of al-Khudhairy's three children, is still in Iraq, where he tends to the family's remaining businesses, which include a $300 million construction operation, Baghdad's Summerland Hotel and a citrus farm in the southern city of al-K¯ut. Annual turnover from these assets is about $100 million.

Al-Khudhairy is concerned about his son. "I worry about him very much," he says in a telephone interview. "Last night I couldn't sleep because I was told by someone that there was some kind of accident, and I was relieved to hear from him this morning." (Faisal travels under the protection of the family's own security company, according to Asad.)

From Baghdad, al-Khudhairy moved to Amman. He had been dividing his time between the two capitals since the 2003 invasion of Iraq. But aside from a $2 million equity stake in a commercial office center, his investments in Jordan don't amount to much.

Now al-Khudhairy is planning to move the family's Baghdad-based pharmaceuticals company to Oman. He expects to spend $30 million to $40 million to replace equipment it was forced to leave behind in Iraq and another $10 million to relocate staff. His firm is also building a steel mill in Bahrain, which offered the company generous tax concessions and free land; the company is investing about $8 million in Indian machinery for the mill. Egypt is also courting Iraqi industrialists, and al-Khudhairy says he is examining opportunities there.

Unlike the nouveau riche al-Gaaods, the al-Khudhairys belong to the nobility of Iraq's merchant and industrial classes. The family runs subsidiaries engaged in finance, agriculture, trade, hotels and banking. Its bloodline dates back to the early 17th century, when the Ottoman emperor Murad IV recruited members of the al-Khudhairy clan to help liberate Baghdad from the Safavids of Persia. The family settled in Baghdad, according to Asad, and in 1758 its patriarchs began a long reign as leaders of the city's chamber of commerce. In 1917, Abdul Kader al-Khudhairy, Asad's uncle, intervened on behalf of hundreds of British soldiers who had surrendered to Turkish forces and were about to be massacred. "He bought them from the Turks and held them on his farm under his flag until the British came for them," says Asad. "For that he received a knighthood after the war. All the documents are at Somerset House in London."

Al-Khudhairy is a refugee not only from war, but from the debris of Iraq's modern golden age. He obtained a graduate degree in civil engineering from London University in 1961 that was paid for, as was the case with many Iraqi professionals from his generation, on a full state-sponsored scholarship. He promptly returned to Iraq and introduced construction and engineering to the family's primary business lines of trading and agriculture. He also helped, alongside crews from U.S. company Kellogg, Brown & Root, to develop Iraq's bountiful oil fields. "The best years for Iraq were under the socialist regime," says al-Khudhairy, referring to the decade after the Ba'ath Party seized power in a bloodless coup in 1968. "Everyone was rich, everyone was happy, everything was owned by the government."

After Hussein usurped the presidency in 1979 and grew increasingly repressive, the al-Khudhairys, like the al-Gaaods, accommodated the regime when they had to but otherwise kept their distance. Despite their social standing, they weren't completely insulated from Hussein's reach. Like other industrialists, they never reported the revenues of their subsidiary companies and often registered them under the names of their grandchildren to avoid shakedowns by Hussein and his cronies. Saddam seized the al-Khudhairy ancestral villa, a sweeping estate on 3 hectares (7.4 acres) along the banks of the Tigris.

When the regime fell, looters stripped al-Khudhairy factories down to their foundations. Before the insurgency gained momentum, al-Khudhairy opened offices and an apartment in Amman to support his empire in Iraq but also as a hedge against the unexpected. Like the al-Gaaods, the al-Khudhairys had long-standing connections in Jordan; under the embargo, says Asad, they smuggled pharmaceuticals plant equipment from the country into Iraq by bribing United Nations inspectors. They covered letters of credit via bank accounts in Jordan and Lebanon, a clear but common violation of the sanctions regime.

Now the al-Khudhairys and Jordan are parting ways. "I'm sure I'll come back to Amman from time to time," al-Khudhairy says. "But over the long run, I don't think Jordan can handle so many people. I hope it doesn't destabilize, but we're playing it safe."

He is taking a similarly realistic stance toward his homeland. "Should things get better in Iraq, of course we'll return," he says. "But we believe that won't happen for ten years."

Pipeline to Nowhere: The Mirage of Iraq's Reconstruction

Since the U.S.-led invasion of Iraq in 2003, hopes for the country's economic and political revival have been repeatedly dashed by religious and ethnic rivalries and terrorism. Few know the painful journey from optimism to disillusion better than Jalal al-Gaaod.

After coalition forces toppled Saddam Hussein, Jalal's brother, Talal, was running the family's Baghdad-based construction and industrial business, Tabouk Group Holding Co., and looking for ways to capitalize on regime change. Talal, with the support of the Jordanian government, hatched a plan to build an oil pipeline and refinery complex that would pump crude from al-Anbar province in western Iraq to a refinery in the Jordanian town of Zarka and then deliver refined oil to the Red Sea port of Aqaba.

For Talal, an influential member of the powerful al-Dulaimi tribe that dominates the province, the plan was designed to serve several purposes. It was to boost Iraq's production capacity by 1.2 million barrels of oil a day -- more than a third of its prewar level -- giving a sharp boost to the war- and sanctions-ravaged economy. It also aimed to give the province's disenfranchised Sunni population a significant share of the country's oil revenues. (Existing pipelines travel through Shiite-dominated southern Iraq, where the country's biggest oil fields are located, to terminals in the Gulf or through the Kurdish north to Turkey.) The project also promised to spur economic development in Jordan, which suffered badly from the war and the preceding period of sanctions imposed on the Hussein regime.

Talal, a Sunni tribal leader with close ties to the region's sheikhs, lined up a guarantee of roughly $2 billion in funding from Mitsui & Co., the giant Japanese trading company, which intended to take exports from Aqaba to Japan. Then he tried to win crucial U.S. backing for his ambitious plan, a confidential summary of which had already been circulating at the highest levels of the Pentagon.

In July 2004, Talal and a delegation of leaders from the al-Dulaimi tribe gathered at the Sheraton Amman Hotel to pitch the plan to Evan Galbraith, who was the adviser to the U.S. mission to the North Atlantic Treaty Organization for then­Defense secretary Donald Rumsfeld. The American response was noncommittal.

Paul Hughes, a retired U.S. Army colonel who served in Iraq immediately after the fall of the Hussein regime, says he was briefed by Galbraith on the project shortly after the envoy had returned from Amman. "Galbraith thought it was a great idea," Hughes tells Institutional Investor, "particularly as something that could have been unveiled before the U.S. midterm elections. But wiser heads prevailed." Galbraith and the Pentagon declined to comment.

The problem, says Hughes and other security experts, was that the project could easily have become a target for insurgent activity and would have required vital U.S. military resources for its defense. The surge in sectarian violence in 2004 underscored that risk.

Efforts to keep the project alive continued nonetheless. The Jordanian government sent a formal proposal to Iraq's then­interim prime minister, Ayad al-Allawi. The proposal got bogged down, however, by infighting between Sunni and Shia elements within the government. Those tensions stymied efforts to agree on a national petroleum law to share the country's oil wealth among its Shiite, Sunni and Kurdish populations, a vital precondition to the pipeline project. A draft law, which was to have been agreed upon this year, remains stalled in parliament.

For Talal al-Gaaod, the refinery and pipeline project would have been a step toward a stable and prosperous Iraq. But he never saw his vision fulfilled. He died of heart failure in Paris last year. His surviving brother, Jalal, who continues to run the family business from exile in Jordan, harbors few hopes that the plan -- and Iraq's economic and political fortunes -- will be revived anytime soon.

"The pipeline offered so much opportunity," he says. "But since Talal's death and the security problems, it's gone nowhere."

Twilight of a Golden Age

Summer 2007

I attacked my assignment as a Middle East correspondent with the alacrity of a baying hound running down a wanted man.  I loaded up on historical accounts by A-list experts: Hitti, Hourani, Nutting, Glubb, Fromkin, Shlaim, Lewis.  I consumed their separate narratives, cross-referencing one against the other and triangulating each for bias.  I was a machine in perpetual motion; the more I read, the more I needed to know.  By the end of my three-year stint, I had accumulated a working library of Levantine history from the caliphates to the Second Intifada.  In 2001 I took leave to write my own book.

 Before my departure, I paid a final visit to the American University’s bookshop in Cairo where I came across Lawrence Durrell’s Alexandria Quartet.  Many of my Egyptian friends had recommended it (while simultaneously dismissing it as E. M. Forster on Viagra), but I had been too disciplined to be distracted by a short story, let alone a novel sequence that weighs in at 884 pages.  But now I was seduced by the image on the book’s front cover, a water-colour of a neo-Palladian villa so common to Alexandria’s cornice and narrow byways.  I plucked a copy from the shelf and added it to my basket, which was filled with non-fiction books. I immediately felt guilty.  This is what it must be like to commit adultery, I thought.

Lawrence Durrell

Consummation would take several years, however, and even then the affair began awkwardly.  Accustomed as I was to the linear progression of history and current events, I was unprepared for the Quartet, which is as elliptical in approach as it is epic in scope.  The tale unfolds as a tetralogy of novels, set in the late 1930s, about expatriate and native habitués of what was one the world’s most cosmopolitan and romantic cities.  Like louvered shutters that open and close to unveil different images, Durrell weaves first-person accounts with omniscient narrative, projecting varying interpretations of the same events.  An illicit affair as recounted by one narrator, for example, is revealed later on to be a smokescreen that conceals another.

 Durrell called his work ‘a four-dimensional dance’ and claimed that he had applied the theory of relativity to a work of fiction.  At the very least, he succeeded in animating Einstein’s principle that time and distance change matter, in this case the stuff of myth and imagination.  The author introduces his characters fully formed and in mid-stride, demanding that the reader follow along by intuition and extrapolation until he is well in the work.  At first I was intimidated by this, and at times I felt like discarding the book in the next departure lounge.  But as I soldiered on, I developed an uneasy bond with the principal storyteller, who we learn midway through the Quartet’s second book is named Darley.  So intimate and uninhibited is Darley’s narrative that the reader feels vaguely complicit in the relentless violence, intrigue, betrayals, cabals and carnal desires that linger in the ‘cobwebs of Alexandrian society’. 

Durrell wrote the book at lightning speed, much of it in his cottage in Provence.  He had known Alexandria only as an expatriate.  Evacuated in 1940 from Kalamata in southern Greece just ahead of the German invasion, he had fled to British-controlled Alexandria, where he worked in the Foreign Press Department.  His insights into the city’s diplomatic circles leaven the Quartet with barbed reportage that rivals Graham Greene for irreverence.  An English consular group ‘has the disconsolate air of a family of moulting turkeys’.  Darley’s French comrade, Pompal, is ‘a rare figure within the diplomatic community who appears to possess a vertebral column’.  A particularly oafish senior official should have engraved on his headstone: ‘His mediocrity was his salvation.’

The Quartet dazzles with the kind of histrionic, inscrutable and exhibitionist creatures that seasoned expatriates – particularly those from the Mysterious East – will comfortably recognize.  There is Justine, the Mediterranean sea nymph, a self-described ‘tiresome, pretentious, hysterical Jewess’ and Nessim, her husband, a Coptic financier who plots to empower his minority sect by conspiring with the Nazis.  Balthazar, a homosexual mystic, is the conscience of the group, and his narrative is a helpful corrective to Darley’s self-absorbed one. The urbane Purswarden is a successful but self-loathing writer.  Then there is Mountolive, a dashing if deluded diplomat, living symbol of Western imperial conceit; and finally Clara, the saintly portraitist, maternal confessor and den mother to all the little monsters who tear through the whole torrid mess.  (Clara also does a turn as Justine’s lover.)

 Durrell was a product of his time, and the Quartet is peppered with references that today would be considered anti-Semitic, misogynistic and racist.  He publicly described Arabs as ‘apes in nightshirts’, and his view that Islam is intolerant and backward permeates the work.  The book also traffics in the worst kind of last-century Orientalism, with Nessim marveling at ‘the Oriental woman’s true obsessions – power, politics and possessions’.  Jews are depicted as predatory – sexually, in the case of Justine – and atavistic; her first husband remarks that ‘it takes a Jew to sniff out a Jew’.

 However unsavoury such language is, it gives the Quartet a coarse credibility that thrusts the reader into the multi-layered and anxious world that was Egypt on the eve of Europe’s collapse.  Alexandria is cast in all its pre-war magnificence as a brassy conurbation of commerce and culture.  In Alexandria, Darley tells us, ‘fidelity is an unheard-of state of affairs’.  The city is ‘a hybrid, a joint’, both princess and prostitute, sacred and profane.  Only here, in a city that predates Ptolemy, could a novelist knead together characters of such varied ethnicity, race and religion.  Greeks, Italians, French, Britons, Jews and Arabs fraternize intimately in every pocket and pore of the Quartet, as they did in real-life Alexandria until only a few generations ago.  ‘Alexandria is still Europe,’ Mountolive remarks to himself, ‘not the Egypt of rags and sores.’

 As war clouds converge, Alexandria’s foreign community and exiles are engulfed by ‘the Arab-Muslim tide’ – a portent of the Islamic revival to come – and the story transforms itself from a chronicle of expatriate voluptuaries into a thriller that entwines Nessim’s doomed cabal, Justine’s self-destruction and Purswarden’s martyrdom amid revelation of his love affair with his blind sister.  In a masterly display of literary gymnastics, The Alexandria Quartet lands feet-first as a love story.

 Like most great novels, the Quartet endures not so much for what it tells us about a particular time and place, but for the familiarity of its characters.  In the reckless Justine, the vulnerable Darley, the worldly Balthazar and the proud Nessim, we see composite portraits from our own lives, particularly those of us who live abroad.  Characters in the Quartet frequently stop to view their reflection in mirrors, a brief interlude for measuring the gap between their self-image and reality.  With his world in free fall, for example, Nessim ‘caught sight of his own face in the great pier-glass and was surprised to notice that it wore an expression of feeble petulance’.  As Durrell’s creations submit to introspection, they also dare us to consider ourselves through the same glass, however darkly.

Durrell, a jazz pianist and painter, was also a master scene-setter.  God-like, he summons a heavy downpour that scrubs clean Alexandria’s soiled streets, only to extinguish it so lovers may stroll across a slick but sparkling corniche.  Justine, startled by Nessim’s invitation to treason wrapped up as a marriage proposal, retreats to the nearest coffee shop, where she orders a cup of hot chocolate; ‘She drank it with trembling hands.  Then she combed her hair and made up her face.  She knew her beauty was only an advertisement and kept it fresh with disdain.’  All that’s missing is a packet of Lucky Strikes and a three-day old copy of the International Herald Tribune.

In Alexandria not long ago, I met Dr. Galal Araf, a professor of paediatrics at the University of Alexandria.  He was summering with his family in their bungalow at Montazah, formerly the royal compound of the Egyptian monarchy before it was nationalized in 1954 by Gamal Abdel Nasser.  Montazah was recently privatized and is now run by a developer as a gated beach resort. While his grandchildren played in the sand and his sons and daughters talked to their spouses and friends, Dr. Araf sat upright in a lounge chair.  He wore pleated gabardine trousers and a pressed short-sleeved shirt – common dress, I have found, among well-educated Mediterranean men of his generation.

Dr. Araf was old enough to remember the twilight of Alexandria’s golden age and had lived through the mayhem and degeneration that followed it.  ‘Alex was a city of the world,’ he said.  ‘It was filled with Greeks and Maltese, Italians and Jews.  There was a quarter of the city where residents spoke only Greek.  People from all over came to Alexandria to see the latest fashions from Europe.’

I asked if he had read The Alexandria Quartet.  Like so many Alexandrians, he seemed to regard the book as more a burden that a blessing.  His late wife, it turned out, had been a professor of English literature at the University of Alexandria, and her Ph.D dissertation was on Durrell and his masterpiece.  It was titled ‘Lawrence Durrell: the Fabulist’, and she used it as a basis for a lecture she gave in 1997 to the Lawrence Durrell Society when it convened in Alexandria.

‘Her thesis’, said Dr. Araf, ‘was that Durrell chose Alexandria simply because it appealed to the romance of Western readers.  The story could have taken place anywhere, because it doesn’t follow the facts of the city literally.’

The literalist in me agreed.  The Quartet is not the place to go for a primer on Alexandrian history.  But I silently disagreed with Dr. Araf on one point: if Alexandria resonates among romantic Occidentals, it is precisely because it is truly one of the Cities of the World.  No other place has blended different cultures and mores so successfully, and no writer has interpreted their trace elements – passion, envy, grace and intrigue – like Lawrence Durrell.  Let the historians and pundits work their side of the Arab street, and let the novelist work his.

Exodus

In Damascus one recent evening, Ahlam Al Jaburi entered the foyer of her apartment in tears. She had risen at 5:30 am that day to be first in line at the office of the United Nations High Commissioner for Refugees (UNHCR) in what she hoped would be her second interview since she first requested asylum in December. Even by the grisly standards of postinvasion Iraq, Jaburi has a strong case. In July 2005, while working with US military officers investigating the claims of war victims in the Baghdad suburb of Khadimiya, the 41-year-old computer specialist was kidnapped by three men while hailing a cab to get to work. "They called me a spy for the Americans and wanted information on their base," Jaburi says between long silences, interrupted only by the mechanical hum of a glowing fluorescent tube. "They threatened to kill me, but I had nothing to tell them." Her only concession to her tormentors was a plea that they not toss her body into the Tigris River.

Jaburi, a Sunni Muslim, was kept blindfolded and regularly beaten for eight days before her elder brother negotiated her release through a third party. The family paid a ransom of $50,000, which it drew from the sanduk ashira, a "tribal box" managed by local sheiks. As she was released, Jaburi, whose given name means "dream" in Arabic, was ordered to leave Iraq with her family.

Despite her service with US authorities in Baghdad, Jaburi was turned away from the US Embassy in Damascus when she requested asylum in America. After ten hours of waiting for her interview, enduring sporadic fits of pushing and shoving from other asylum seekers, she was forced to return home after the office closed for the day.

The latest malignant outgrowth of Bush's war in Iraq is, according to Refugees International president Ken Bacon, "the fastest-growing refugee crisis in the world." Like debris from a maritime disaster, the remains of Iraq's shattered lives are washing up at border crossings, accumulating at immigration centers and settling into tenement housing. The exodus, particularly in its first stages, has included members of Iraq's once-legendary class of skilled white-collar elites--doctors, engineers, scientists and educators. Without Iraq's professionals, it will take a generation to rebuild the country into a self-reliant state with a functioning economy.

"All of the doctors I know have decided to not go back," says a Sunni Iraqi pathologist and hospital administrator in Amman who, fearing for his family's security back home, would not give his name. "It will take a decade just to train new physicians. The insurgency has turned the country into an empty vessel, drained of talent."

What began as a thin stream of Iraqi merchants and investors seeking a safe place to do business has become a flood of some 2 million refugees--though it could be twice that amount--concentrated largely in Jordan and Syria. Many are destitute, and they place enormous strain on a region that is already highly combustible, both politically and economically. Once welcomed as fellow Arabs in distress, they are increasingly blamed for a scorching rise in inflation, crime and prostitution. Heads of state and politicians warn that they will import Iraq-style sectarian strife--political fearmongering, many believe, that could become self-fulfilling at a time when the Bush Administration appears to be lining up its Sunni allies for a confrontation with Iran.

"We have thousands and thousands of Iraqis spilling in from Iraq, and the government is worried that they may bring their conflict to Jordan," says Taher Masri, a respected former prime minister. "In Parliament a few weeks ago, members were condemning Iran for trying to convert Jordanians to Shiism. My driver just asked me if Shiites were a greater danger than Israelis."

Dispossession accounts for much of the Middle East's colonial inheritance, from the Ottoman Turks' genocidal eviction of Armenians to the Palestinian exodus that followed the creation of Israel with British complicity. If history is any guide--and it usually is in the Middle East--where refugees go, trouble follows. The Iraqi exodus could do more to reshape the geography and geopolitics of the region than anything gamed out in neoconservative think tanks, which tend to see the matter as an abstraction. For Jordan and Syria, themselves the bastard progeny of imperial coupling, the problem is very real--and deadly serious.

"Jordan is scared to death of the spillover from Iraq," says Rhanda Habibe, Amman bureau chief for Agence France-Presse and the doyenne of the Jordanian press corps. "The Arab world is dividing into two groups, with Egypt, Saudi Arabia, the US and Jordan on one side and Iran, Hamas and Hezbollah on the other. If there is civil war in Iraq or a civil war in the West Bank, it could all spin out of control and suck us into it."

Though there are an estimated 1.2 million Iraqi refugees in Syria, compared with some 750,000 in Jordan, the strain is felt deepest in the Hashemite Kingdom. Tiny and resource poor, Jordan is a culture dish for the Middle East's myriad schisms, scored as it is by rich and poor, Muslim and Christian, secular and fundamentalist. Jordan lumbers under the weight of a large ethnic Palestinian population--40 to 60 percent of the total--much of which is still living in camps. The Palestinians in Jordan have coexisted uneasily with indigenous "East Bankers" since the two sides went to war in 1970. The regime is burdened by its alliance with the deeply unpopular US government and its peace accord with Israel. It is also a mendicant state, unable to survive without generous aid from the United States and its Arab neighbors. In February, for example, Jordan avoided a budget crisis only after Saudi Arabia, under stiff pressure from Washington, pledged $500 million in aid.

Aside from strong-arming the Saudis, however, the White House has taken a back seat in the refugee crisis. Ellen Sauerbrey, the Assistant Secretary of State for Population, Refugees and Migration, has pushed Amman and Damascus to accommodate Iraqi exiles while doing little to open America's own borders to them. Testifying before Congress four months ago, Sauerbrey--who has no experience with refugees and who was appointed by Bush during a Congressional recess last year to avoid a floor fight over her strong opposition to abortion rights--confined US resettlement efforts to a single paragraph of her opening remarks. It took a measure led by Senator Edward Kennedy to shame the government into granting asylum to 7,000 Iraqi war refugees (among them, Ahlam Al Jaburi, whose persistence finally paid off this past April when she was awarded a promise of asylum).

With the US playing only a passive role in the crisis, Arab leaders are dealing with the problem as they see fit. Both Amman and Baghdad--the former worried about its capacity to absorb so many Iraqis, the latter covetous of its professional elites--are determined to reverse the migration. For a while, according to recent arrivals, Shiite men were being turned away at the Iraqi-Jordanian border, some with stamps in their passports that prohibited them from returning for five years. Now, they say, any adult male between the age of 18 and 36 stands a good chance of being refused entry. Amman recently announced it would admit only Iraqis bearing a special passport, soon to be issued by the Baghdad government on highly restricted terms.

Rafed, a refugee and aid worker, says UN officials are being pressured by Amman and Baghdad to stop registering Iraqi exiles, which gives them some measure of protection against forcible return. "There is an agreement to send us back, especially the intellectuals and professionals," says Rafed, who would not give his full name because he works closely with the UN. "This crisis is an embarrassment to both regimes."

Rafed is a linguist with a degree from the University of Baghdad. Before fleeing Iraq he translated for US forces and worked with internally displaced persons throughout the country. (The IDPs, totaling close to 2 million, are a widely overlooked byproduct of the war. More than one in ten Iraqis is now unmoored.) By May 2006 Rafed was getting death threats for "working with the unbelievers." He varied his route to work each day and carried a handgun for protection, but having lost four of his cousins to the insurgency, one by decapitation, he decided to flee.

A Shiite, Rafed acknowledges some discrimination under Saddam Hussein, but he is nostalgic for the stability of the late dictator's rule. Before the US invasion, Rafed was engaged to a Sunni girl, but the relationship crumbled under pressure from both families. Stress has made him a diabetic, he says.

Like many of his fellow exiles, Rafed blames foreign elements for the conflict: Salafists (Sunni extremists) from Saudi Arabia and Afghanistan, agents from Iran and, of course, the United States. It was the Americans under viceroy Paul Bremer, the refugees say, who established a confessional style of government, with political parties defined by sect and ethnicity. "The Salafists started executing Shiites," says Rafed, "and then the Mahdi Army began to retaliate. Then, after the 2005 elections, the Sunnis felt threatened and abandoned politics and entered the insurgency. It was 90 percent political."

Some also blame Jordan's king, Abdullah II. In December 2004 the king warned of a "Shiite crescent" raking across the Arab world from its Persian pivot. Coming from a monarchy with a reputation as America's handmaiden--Abdullah's father, King Hussein, was on the CIA's payroll--Abdullah's remark was widely received as a proxy war whoop aimed at Iran and was quickly repeated by Egyptian President Hosni Mubarak.

Not long afterward, reports circulated that Iranian agents were proselytizing in Jordan's impoverished south, provoking a démarche from Amman. Earlier this year, a Jordanian cleric during Friday prayers condemned Shiites as apostates, and parents reported that teachers were lecturing students about the evils of Shiism. In an apparent move to cool things down, Abdullah invited a Shiite imam to preach at the King Hussein Mosque, a first for Jordan.

Having dutifully channeled for Washington, America's man in Amman was clearly in over his head. "When you have teachers condemning Shiites in class, that's bad," says Joost Hiltermann, Middle East project director for the Brussels-based International Crisis Group. "When immigration officials are asking if visitors are Shiite or Sunni at the airport, that's bad. And when clerics are calling for violence against Shiites, that's bad too, particularly when you consider that clerics are controlled by the government."

In contrast with Jordan, Syria continues to welcome Iraq's dispossessed. In part, that's because Damascus has the resources to accommodate them. Unlike Jordan, the country is endowed with water and oil and a population more than three times that of its smaller neighbor to the south. Damascus also still prides itself on being the fountainhead of Arab nationalism and as a haven for refugees and dissident groups.

Such conceit is not cost-free. Syria too is stalked by ethnic and sectarian tensions, with a restive Kurdish minority and a majority Sunni population ruled by the Assad family dictatorship. President Bashar al-Assad is clearly betting that his authority is sound enough for him to play the role of beneficent sheik. For now, at least, it appears to be a safe wager. The Americans are pinned down in Iraq, and Syria is riding the crest of an economic boom with the unwitting help of Washington. In December 2003 the United States imposed economic sanctions on Damascus for assisting militant groups like Hamas and Hezbollah, but as US Treasury officials cracked down on Syrian accounts held overseas, depositors simply repatriated their funds. The result was a liquidity glut that irrigated an economy long parched for capital.

"All the dirty funds are coming back to Syria," says Jihad Yazigi, editor in chief of The Syria Report, an online economic bulletin. "And you can thank these US sanctions."
In the current standoff, however, there is little margin for error, and the 41-year-old Assad is still relatively new at the game. It was the Palestinian refugee crisis, after all, that led to civil wars in Jordan and Lebanon, the latter of which was quelled by a Syrian intervention that paved the way for Syria's long and painful occupation of the country. Assad has to keep a wary eye on Aleppo, Damascus's rival city to the north, which has a growing Salafist movement. When the Grand Mufti of Syria died in 2004, Assad waited two years before replacing him with Sheik Ahmed Hassoun, who as the mufti in Aleppo had skillfully kept a lid on sectarian tensions. As Syria's exile population swells--in Aleppo as well as in Damascus--so does the prospect of confrontation.

If anything, says Laith Kubba, a former spokesman for the Iraqi government, the United States should thank the Syrian government for not turning its back on the Iraqis. "I would be happier to see Iraqi professionals staying in Jordan and Syria, preserving their skills," says Kubba, who is now a senior director at the National Endowment for Democracy. "Sending them back only consumes or wastes them in the civil war."

No one knows that better than Khulood Alzaidi, an aid worker who was forced to flee Iraq for Jordan in 2005 after receiving death threats slipped under the door of her home in the southern city of Kut. Poised and soft-spoken, the dark-skinned Alzaidi has kept the threatening letters as proof of her vulnerability. But her quest for asylum in the West is ensnared in a bramble of politics and red tape. She has no residency permit and has been picked up by security services and ordered to leave the country. Like her fellow émigrés, she dreads the prospect of being forcibly returned to the sectarian holocaust that is Iraq.
"I have nowhere to go," she says. "The Jordanians want us out, and the Americans won't take us in."
Unlike the vast majority of her fellow exiles, Alzaidi has met the man most closely associated with her plight. On November 17, 2003, the 27-year-old Shiite was one of a dozen or so Iraqi women who were guests of President George W. Bush at the White House. The event was held to honor the group's work on behalf of women in postwar Iraq, and was organized by Fern Holland, the feminist activist who less than a year later would be murdered by insurgents there.
On the day of Alzaidi's meeting with the President, she was ushered into the Oval Office along with the rest of the group, where they stood before a phalanx of reporters and a galaxy of flashing strobe lights. According to Alzaidi, Bush centered himself directly to her left. He assured the delegation that the United States would not abandon Iraq and that his decision to invade the country would be vindicated despite the chaos and rising death toll (by then, Iraq's sectarian violence had been escalating for several months).

"I saw the blood of Iraqis in his face," Alzaidi says from a friend's apartment. "This was the man who turned our lives upside down." Alzaidi says she nearly cried from rage, but restrained herself out of respect for the President.

Welcome at Rawda

It's 8 p.m. on a Friday night at Rawda, a coffee house in the Al Sahin district of Damascus, Syria, and the regulars are filing in. They occupy chairs and tables under languid ceiling fans and a haphazardly joined ceiling of corrugated plastic sheets. Water pipes are summoned, primed and ignited, and soon the din of conversation is dueling with the clatter of dice skittering across backgammon boards.

Once a movie theater, Rawda is an enclave for artists and intellectuals in a country where dissent is regularly smothered in its crib. Lately, it has become a bosom for the dispossessed. The war in Iraq has triggered a mass exodus of refugees to neighboring Syria, and Rawda plays hosts to a growing number of them. Most are artists, orphaned by a conflict that has outlawed art.

"We can no longer work in Iraq," says Haidar Hilou, an award-winning screenwriter. "It is a nation of people with guns drawn against each other. I can't even take my son to the movies."
Some two million Iraqis have fled the sectarian violence in Iraq. They are Sunnis driven out by Shiite militias and Shias threatened by the Sunni insurgency. They include some of the country's most accomplished professionals—doctors, engineers and educators—targets in the militants' assault on the Iraqi economy.

But there is another war in Iraq, one on artistic expression and critical thought. Among the exiles slumping their way to Damascus are writers, painters, sculptors, musicians and filmmakers, who are as important to Iraq's national fiber as its white-collar elites. Rawda, which means "garden" in Arabic and was itself founded by Russian émigrés before World War II, has become their smoke-filled sanctuary.

"People from all walks of life come here," says dissident Abu Halou, who left Baghdad in the 1970s and is now the unofficial "mayor" of Syria's Iraqi diaspora. He says the owners were once offered several million U.S. dollars in Syrian pounds by a developer who wanted to turn Rawda into a shopping mall. "They turned him down," Abu Halou says, seated as always at the main entrance, where he appraises all new comers. "The family understands how important this place is to the community."

For the Iraqis, Rawda is a refuge of secularism and modernity against pathological intolerance back home. They swap tales, like the one about the Baghdadi ice merchant who was attacked for selling something that did not exist during the time of the Prophet, or the one about the motorist who was shot by a militant for carrying a spare tire—a precaution that, for the killer, betrayed an unacceptable lack of faith. In Syria, at least, the art colonists of Rawda can hone their skills while the sectarian holocaust rages next door.

"The militants believe art is taboo," says Bassam Hammad, a 34-year-old sculptor. "At least here, we can preserve the spirit of Iraq, the smells of the place. Then maybe a new school can emerge."

After the fall of Saddam Hussein, Hammad says he was cautiously optimistic about the future. But as the insurgency grew in intensity, so did proscriptions against secular expression. Liquor stores were torched, women were drenched with acid for not wearing the veil and art of any kind was declared blasphemous. In July 2005, Hammad was commissioned by a Baghdad municipal council to create a statue that would honor 35 children who were killed in a car bombing. It was destroyed by militants within two months, he says.

Though Hammad turned down two more such commissions, he began receiving death threats taped to the door of his home. He remained locked indoors for five months before he abandoned Iraq for Syria. "They made me a prisoner in my home," he says. "So I came here."
Iraq was once legendary for its pampered bourgeoisie, and its artists were no exception. Just as Saddam Hussein, a frustrated painter who fancied himself an adept playwright, subsidized Iraq's professional classes, he also gave its painters, musicians and sculptors generous stipends. They were allowed to keep whatever money they could make selling their work, tax-free, and the state would often buy what was left over from gallery exhibitions. Like athletes from the old Soviet Union, young students were tested for artistic aptitude and the brightest ones were given scholarships to study art and design, including at the Saddam Center for the Arts, Mesopotamia's own Sorbonne. Iraqi art festivals would attract artists from all over the Middle East.

In a surreal counterpoint worthy of a Dali landscape, Baghdad under Saddam was a hothouse for aestheticism and culture. "It was so easy to be an artist then," says Shakr Al Alousi, a painter who left Baghdad after his house was destroyed during an American bombing raid. "It was a golden age for us, providing you staid away from politics."

Filmmaker Ziad Turki and some friends enter Rawda and take their positions in one of the naves that abut the main courtyard. At 43, Turki was born too late to experience modern Iraq's artistic apex. A veteran of several battles during the Iraq-Iran war, he remembers only the deprivation of the embargo that was imposed on Iraq following its 1990 invasion of Kuwait. Turki studied cinematography at the Art Academy of Baghdad and after graduating made a series of short films with friends, including Haider Hilou.

In July 2003, they began producing a movie about the U.S. invasion and the insurgency that followed. They used rolls of 35-millimeter Kodak film that was 22 years older than its expiration date and shot it with a borrowed camera. Whenever firefights erupted and car bombs exploded, says Turki, the crew would grab their gear and compete with news teams for footage. Everyone on the project was a volunteer, and only two of the players had any acting experience. Post-production work took place in Germany with the help of an Iraqi friend who was studying there.

Turki called his movie Underexposed. "It's about what is going on inside all Iraqis," he says, "the pain and anguish no one ever sees." The film cost $32,000 to make and it won the 2005 award for best Asian feature film at the Singapore International Film Festival. (Critics hailed the production's realistic, granular feel, says Turki, which he attributes to that outdated Kodak film.)

Syria once had a thriving movie industry, but it was claimed decades ago by cycles of war and autocracy. There is little for a filmmaker to do in Damascus, even celebrated ones like Turki and Hilou. They are currently producing short documentaries about refugees, if nothing else, to lubricate their skills. Turki draws inspiration from Francis Ford Coppola but models himself on the great Italian directors like Federico Felinni and Luigi Comencini, who could finesse powerful emotions from small, austere films. "As a third-world country, we will never make high-tech blockbusters," Turki says between tokes from a water pipe. "Our movies will be simple, spare. The point is that they be powerful and truthful."

Turki fled Iraq in November 2006 after militant set fire to his home. Like his fellow émigrés, he is grateful to Syria for allowing him in. (Neighboring Jordan, also home to about a million Iraqi exiles, is turning many away at the border.) But he's not sure where he'll end up. "Frankly, I don't know where I'll be tomorrow," he says.

Tonight at least, there is Rawda, proudly anachronistic, an old-world coffee house in one of the planet's final Starbucks-free frontiers. It may seem strange that refugee artists would find asylum in an authoritarian state like Syria, but perversity is one of the Arab world's most abundant resource these days. A war that was waged, retroactively at least, in the name of liberty and peace has made a neighboring autocracy look like an oasis.
"Art requires freedom of expression," says Hammad, the sculptor. "If we can't have it in Iraq, then at least we can create art in exile."

Truffles in the Sand

Everyone knows Saudi Arabia is rich in oil. But who had any idea the desert kingdom harbored another prized commodity?

Read the article here.