Iran's nuclear stand-off with the West limped back to the U.N. Security Council, North Korea stormed out of talks with South Korea, and falling crude stocks in the world's top oil consumer, the United States, continued to bolster prices.

"Oil is being hit from all fronts by geopolitical problems," said Mark Pervan, a resources analyst at Daiwa Securities. "A raft of problems could keep prices at record levels for some time."

Iranian President Mahmoud Ahmadinejad on Thursday warned that any Israeli strike on Syria would be considered an attack on the whole Islamic world that would provoke "a fierce response."

Israeli jets struck Hizbollah's southern Beirut stronghold on Friday, a day after blockading Lebanese ports and bombing Beirut's airport in reprisals against the Lebanese guerrilla group's capture of two Israeli soldiers.

Neither Israel nor Lebanon are oil producers but both lie at the heart of the Middle East, which collectively pumps nearly a third of global output, leaving oil traders very nervous.

"Israel has flared up badly this week, but it's tension which has been brewing for years," said Daiwa's Pervan. "Then there's Nigeria, where instability is endemic, politics is in turmoil and it's unlikely to change before elections next year."

In Nigeria, two suspected explosions at a crude pipeline operated by Agip, a unit of Italy's Eni, caused oil spills, Nigerian officials said. Eni denied reports of sabotage and extensive oil spills and said the damage would be repaired soon.

It spells fresh uncertainty in Nigeria after Royal Dutch Shell has already shut down 473,000 barrels per day of supply, almost a quarter of output in Africa's top oil supplier, due to attacks by rebel militants.

LOWER STOCK CUSHION

Oil in New York is up around 28 percent in 2006, rallying from below $20 in January 2002 amid rising demand led by the United States and the second-largest oil consumer China, together with a series of real or potential supply disruptions.

Iranian President Mahmoud Ahmadinejad said the world's fourth-largest oil exporter would not abandon its right to nuclear technology as Tehran's case was referred back to the U.N. Security Council after it delayed accepting a package of incentives designed to prevent it developing nuclear weapons.

"With Israel and Nigeria, Iran completes the triumvirate of key tensions supporting prices," said Daiwa's Pervan.

Elsewhere, in Asia, North Korea blamed the South for the collapse of their first high-level talks since Pyongyang's missile tests sparked a regional crisis last week, saying Seoul would "pay a price" for the failure.

Robust U.S. demand in the face of high prices and falling inventories also supported oil's gain.

"Today's records are a supply-side story not a demand story," said Pervan. "But the draw on U.S. stocks was really severe and you can't underestimate the effect on prices."

U.S. crude inventories slid 6 million barrels last week as imports fell, a government report said Wednesday, five times the decline forecast in a Reuters poll.

Only a month ago, BP's chief executive, Lord Browne of Madingley, predicted that long-term oil prices would eventually fall to below $30 per barrel, a prediction that now looks less credible. Increased use of technology and exploration success may drive prices down eventually, but with increasing political and military tension in the world's oil-producing nations and unquenchable demand from developed and developing economies, the oil price is showing few signs of any meaningful decline.

Georgina Taylor, a UK equity strategist at the investment bank Goldman Sachs, says that stock markets have been slow to price in higher oil prices. She said: "The oil price has been ignored to a certain extent, and while forecasts for cost increases are rising the market is still behind the oil price. Should the price of oil rise to, say, $100 per barrel, there would be a hugely negative impact on global equity markets, real incomes and growth. That said, the London market should be best positioned of the major markets to benefit from a higher oil price and fundamentally UK equities remain good value."

Despite concerns over the oil price and yesterday's record prices, in real terms the per-barrel value was higher during the oil shock of the 1970s. According to BP, oil hit an inflation-adjusted average of $87.65 per barrel during 1980, a period also marked by high inflation, slow economic growth and higher interest rates. Even so, oil is more expensive in real terms now than it has been since 1983.

One oil trader said: "Last year, global geopolitical tensions were exacerbated by the extremely active hurricane season in the United States. All the predictions are that this year will be every bit as active, and the situation in Israel looks like it is spiralling out of control."

He added: "In these circumstances, oil prices are only going to head in one direction. Unless Opec bows to political pressure from consumers and opens the floodgates, oil is going to stay expensive for the foreseeable future."

"The Japanese economy has been in a difficult period for over 10 years but thanks to efforts by the private and public sectors it is beginning to return to a normal state," said BoJ governor Toshihiko Fukui.

"We think prices will remain on a steady upward trend. The risk of a return to deflation has dissolved," he told a press conference.

The Bank of Japan sought to assuage worries that the rate rise might stifle economic growth, saying further increases would be made only gradually and that rates would be kept "very low" for some time.

Fukui said the BoJ had no plans for a series of consecutive interest rate rises at future meetings.

Even so, many analysts were pencilling in another interest rate rise before the end of the year.

"Recent history suggests we should be very sceptical of verbal assurances that policy will only tighten gradually," warned Richard Jerram, chief economist for Japan at Macquarie Securities.

But he added: "We think the very slow acceleration in inflation is likely to be an impediment to a rapid string of rate hikes."

The policy board also increased the official discount rate, or the rate at which it lends directly to commercial banks, to 0.4 percent from 0.1 percent.

The central bank first adopted the zero-rate policy in February 1999 to try to stop Asia's largest economy from falling into a deflationary spiral.

With the economy seemingly on the mend, the BoJ increased its overnight call rate to 0.25 percent from zero percent in August 2000.

But the economy quickly reversed course and it was forced to drop the rate back to zero again in March 2001, when it also introduced its unprecedented quantitative easing policy -- flooding the system with cash -- which it ditched in March.

Fukui said he was confident that the central bank had not made a similar blunder this time.

"If you compare the situation in 2000 with the current situation, the foundations of the economy's growth have grown more robust and its vulnerability to shocks has declined."

Asia's largest economy now finally seems to be out of deflation, with core consumer prices up for a seventh straight month in May and the overall economy on track to its longest post-war expansion.

But it has left a hangover -- public debt now stands at over 150 percent of Japan's annual economic output after the government spent trillions of yen trying to revive the economy when the economic bubble burst in the early 1990s.

The end to zero interest rates was made in spite of calls from several government ministers, including Finance Minister Sadakazu Tanigaki who said just this week that there was no need yet for an interest rate rise.

However, Japanese Economic and Fiscal Policy Minister Kaoru Yosano on Friday gave his approval for an rate rise, saying it was the "right thing" to do as zero rates were an exceptional policy.

The BoJ's historic decision has also been overshadowed somewhat by controversy over the BoJ governor's links to a scandal-tainted investment fund, with polls showing a large majority of Japanese wanting Fukui to resign.

The BoJ chief indicated Friday he still has no plans to stand down, saying he wanted to fulfill his responsibility as central bank governor.

Financial markets took the rate rise news in their stride, focusing instead on high oil prices and violence in the Middle East as they fell sharply.

DEMAND DOWN. While the day's losses were pegged to company-specific issues, some analysts say growth for the entire year will be slower than previously thought. Among the concerns: delays in key computer-related technologies including the latest Microsoft operating system and next-generation DVD players.

Some are concerned price wars are imminent and that economic slowdown could crimp overall demand. "There's a softness in the market that's building," says Richard Shim, a senior research analyst at IDC. In the past two weeks, IDC cut its 2006 forecast for U.S. PC growth to 5.7%, from 6.8%. "In '04 and '05 there was tremendous growth. In a market that's as mature as this industry is, there's no way you can maintain those levels."

Dell fed worries on July 12 by announcing that the following day it would unveil a "major pricing initiative" for U.S. consumers and small businesses. The same day, UBS Investment Research (UBS) said it was cutting earnings estimates for Dell on the belief the company "continues to be impacted by competition and adverse mix shifts within the PC market." Dell's performance in recent quarters (it lost U.S. share to rivals in the first three months of the year) has given investors little reason for confidence-though the company has embarked on a turnaround campaign that includes beefing up customer service (see BW, 6/19/06, "Dell: Facing Up To Past Mistakes").

Credit Suisse (CSR) issued a report the same day that did a number on Apple's stock. The computer maker, which reports fiscal third-quarter results July 19, will probably issue sales and earnings forecasts for the current period that falls short of analysts' expectations, Credit Suisse analyst Robert Semple wrote.

Apple is likely to tell analysts that fourth-quarter sales will be $4.6 billion to $4.8 billion, compared with analysts' estimates for sales of $5 billion, the report says. "We expect Apple will once again use the September quarter to reduce iPod inventories as the company prepares for a refresh of its product lineup."

NEW PRODUCT DELAYS. Apple has been dogged by reports from analysts at other firms that the next version of the popular iPod music player will be delayed. If that's the case, Apple won't be alone in experiencing tech delays. Microsoft has already owned up to delays in Vista, the next version of its operating system, and Office, its package of business-productivity applications. That in turn could affect the timing of PC purchases, say analysts including Wendy Abramowitz, a senior analyst at Argus Research.

Backers of the competing next-generation DVD technologies weren't ready with their wares as early as planned either, notes Shim at IDC.

So how long will the bearish sentiment linger? Shim sees the market "bouncing back in '07." NPD analyst Stephen Baker is even more upbeat. "We continue to be very bullish about the third quarter," he says. Not only will consumers be buying machines for students, but many are upgrading to notebooks and adding second computers for the home, he says.

Intel spokesman Chuck Mulloy confirmed the layoffs Thursday, saying they would "both reduce costs and improve decision-making and communications." He didn't disclose the financial costs or benefits of the cuts, but said Intel plans to share more details Wednesday when it discusses financial results for the last quarter.

The restructuring and regrouping effort comes after two years of sluggish performance at Intel. In 2004, the company had to delay or cancel a number of products. In 2005, Intel steadily lost market share to rival Advance Micro Devices.

"Intel has been besieged by slowing PC market demand and uncharacteristically fierce competition from rival AMD. The primary concerns facing Intel's operations are declining revenues and profitability," said Martin Kariithi, an analyst at Technology Business Review.

The move, along with the sale of some communications processor assets to Marvell Technology Group in June, is part of an efficiency review Intel launched in April to become more competitive. More cuts are likely as a result of the review, Otellini said.

"You should expect that we will continue to take actions, including selective reductions, as we complete analyses and decisions about investments, expense levels and organizational structures," Otellini said in the memo. "Over the last five years at Intel, the number of managers has grown faster than our overall employee population. Our efficiency analysis and industry benchmarking have shown that we have too many management layers, top to bottom, to be effective."

Kariithi estimated that the revenue per Intel employee dropped from $408,175 in the fourth quarter of 2005 to $371,075 in the first quarter of 2006, but he expects another layoff to be announced during the financial results announcement.

To return revenue per employee to where it was a year ago, Kariithi said, Intel will have to lay off 10 percent of its staff--about 10,000 people.

Although AMD has been gaining share against its rival, it has had its own difficulties as well. Last week, the company announced revenue of $1.21 billion, significantly less than the $1.3 billion average expected by analysts and a 9 percent decrease over the first quarter.

Most managers losing their jobs will be notified Thursday and Friday, Otellini said, and will get a minimum of three months' separation pay.

Henri Richard, executive vice president of sales and marketing at AMD, earlier this year said that AMD made some of its gains in part because of Intel's complacency. Characterizing Intel as fat and sluggish has become a recurring theme with AMD.

Institutional intertia

In an interview Wednesday, Thomas Sonderman, director of automated precision manufacturing at AMD, said that the chipmaker realized in the 1990s that it never would be able to have as large a factory footprint as Intel. As a result, it optimized what it could do in a single factory.

"We didn't have the luxury to be fat, dumb and happy," he said.

Otellini rebuffed the notion that Intel had become self-satisfied earlier this year. Still, Intel has had trouble overcoming institutional inertia. In early 2004, CNET News.com asked then-CEO Craig Barrett and Otellini if the company's emerging problems were the result of overconfidence. The two said no, arguing that the problems that had emerged had fairly specific causes. A few months and a few more product problems later, Barrett issued an internal memo warning employees that the company had become somewhat complacent and needed to refocus.

Despite the warning, Intel didn't rebound. And employee head count went from about 85,000 at the end of 2004 to 100,000 at the end of 2005.

Otellini called for a thorough examination during the first-quarter earnings call in April. The project was then reiterated at a meeting with analysts.

The 90-day efficiency review began in late April and therefore should be complete in coming weeks. Mulloy declined to say when actions resulting from the review would be done because the company doesn't yet know, he said.

That review has already resulted in the sale of Intel's XScale communications and applications chip technology to Marvell. There have been some smaller actions from the review, Mulloy said, including the closure of a 19-person lab in Glasgow, Scotland.

Intel periodically conducts purges. After a mini downturn in 1998, the company reduced head count through voluntary departures and layoffs. After bulking up with several acquisitions in the dot-com era, the company subsequently whacked divisions and sold off other groups.

In Thursday's memo, Otellini sought to fan Intel employees' competitive fires.

"We have done extremely well over the past 25 years of the PC era. But we need to adjust now for where our industry is going. Competition will intensify across our product lines. Pricing will be aggressive," he said. "Our objective, and our destiny, is to refashion Intel now while we have the means and the time to do so, and ensure we continue to remain No. 1."

South Korea's Samsung expected the lawsuit to be "resolved smoothly," and had provisioned for such lawsuits, according to Chu Woo-sik, the senior vice president of Samsung's IR team.

The suits come at a time when dynamic random access memory (DRAM) chip makers enjoy relatively steady prices and look for firmer demand toward the year-end shopping season and the consumer launch early next year of Microsoft Corp.'s Vista operating system.

Lockyer said on Thursday that he, joined by 33 other state attorneys general, would file the complaint alleging the chip makers violated state and federal antitrust laws during a conspiracy to fix prices for DRAM chips, from 1998 through June 2002, when there was a glut in the market.

The lawsuits follows a U.S. Justice Department probe launched in 2002 that resulted in hundreds of millions of dollars in fines levied against Samsung, Hynix, Infineon, Elpida Memory Inc. and other chip makers.

The federal investigation followed a sharp plunge in the prices for memory chips used in computers and other electronics, which forced a wave of industry consolidation and pushed several chip makers near bankruptcy.

"If these suits are completed by the end of the year and the scale of fines are fixed, that would be a substantial blow to each company," said a Tokyo-based analyst at a European brokerage.

"But that is rather unlikely. The more likely scenario is that they would set aside reserves gradually as the suits progress, harming their profit margins."

The multi-state complaint accuses the companies of fixing DRAM chip prices, artificially restraining supply and rigging bids for contracts.

Those actions caused computer makers such as Dell Inc. and Hewlett-Packard Co. to pay more for chips and then pass those costs on to consumers, said Florida Attorney General Charlie Crist, another lead plaintiff in the case.

Micron spokesman Dan Francisco said he could not comment specifically on the lawsuit because the company had not yet seen it. But he noted that the Boise, Idaho-based chip maker has been in talks to resolve the issue.

"We have been involved in discussions with state attorneys general for a long period of time," Francisco said. "As I understand it they wanted to get these cases on file while we discuss the potential for resolution."

Germany's Infineon could not immediately be reached for comment.

The multi-state lawsuit names many of the world's top-ranked memory chip makers including Hynix; Taiwan's Mosel Vitelic and Nanya Technology Corp.; Japan's Elpida and NEC Electronics Corp.'s NEC Electronics America.

Samsung shares fell 2.67 percent to close at 584,000 won after it reported an 11 percent drop in its quarterly profit, and Hynix lost 3.13 percent to 30,900 won. The benchmark Korea Composite Stock Price Index ended down 2.33 percent.

Shares in NEC Electronics closed down 2.03 percent at 3,380, and Elpida lost 1.99 percent to 4,430 yen, roughly in line with the Tokyo stock market's electrical machinery index.

An Elpida spokeswoman said she could not comment since it was still in the process of looking into the matter. An NEC Electronics spokesman said it was too early to make any comment.

Of course, what businessmen really mean by getting government off our backs is preventing government from regulating commerce, as if there were some connection between capital and democracy, democracy and freedom. In corporate speak democracy and free trade has nothing to do with human beings and their freedoms. What Bush and his kind are really talking about is absolute corporate rule and continued Plutocracy.

According to author Antonia Juhasz, "Prior to the first Gulf War in 1991 and even after eight years of war with Iran, Iraq was ranked 15 out of 130 countries on the 1990 United Nations Human Development Index. Before the first Bush invasion, Iraq had the highest percentage of college-educated citizens in the Middle East and above average overall literacy rates. According to the World Health Organization, prior to 1991 health care reached approximately 97 percent of the urban population and 78 percent of rural residents, while the infant mortality rate was well below average for developing countries. "

Constitutional government was established in Iraq in 1922. Prior to the 1991 U.S. invasion, Iraq was in essence a socialist government, since most of its political and economic infrastructure, including its burgeoning oil industry was nationalized. Despite Saddam Hussein's abuse of the constitution (the U.S. is suffering similar abuses under Bush), the Iraqi people enjoyed a high standard of living and many freedoms. This allowed them benefits such as socialized health care and access to free higher education that Americans have never known.

All of those freedoms and the high standard of living were demolished with the U.S. invasion and permanent occupation of Iraq. A huge corporate fire sale was under way.

Under the imposed dictatorship of Paul Bremmer granted under the Coalition Provisional Authority during the first months of the occupation, all of Iraq's 192 state-owned enterprises were privatized and divided among 150 U.S. corporations that have so far realized more than $50 billion in profits. Every aspect of the Iraqi economy was dismantled, privatized, and divided up among corporate America with no benefit to the Iraqi people.

With the U.S. occupation the Iraqi Constitution was torn asunder and replaced with a new charter that places Iraq under virtual corporate rule. Under the U.S. imposed Corporate Constitution, the Iraqis no longer have access to clean water, reliable electricity, medicine, healthcare, or higher education. Ownership of Iraq's once prosperous economy, including her extensive oil fields, was transferred from the Iraqi people to U.S. corporations.

This is the democracy we have brought to Iraq, punctuated by suffering, misery, and death. When innocent blood flows so too does the money. See how the stocks of Halliburton and Bechtel rose with the invasion and occupation of Iraq.

The blueprint for the economic plunder of Iraq was orchestrated by Bearing Point, Inc. of Mclean, Virginia. The Bearing Point plan turns Iraq from a socialist state to a full bore capitalist entity over three years. For their services Bearing Point made the tidy sum of $250 million.

Not surprisingly, Bremmer has strong ties with corporate America and such luminaries of dementia as Donald Rumsfeld, Henry Kissinger and George Schultz that extend more than a quarter of a century. All of these men have economic ties with the same businesses that stole Iraq's wealth. Each of them has realized great personal fortune by profiteering on the spoils of war and occupation: policies they helped to forge.

The government is studded with men like Paul Bremmer and Henry Kissinger, who migrate back and forth from corporate America into the halls of government, create policy that is favorable to their own business interests, then return to business to realize the wealth they have created for themselves and their shareholders. It is men like them who are responsible for America's aggressive war posture, among them the quagmire in Iraq.

Consider the ties regarding officials in the Bush regime and the Halliburton- military-war profiteering connection, as documented by Antonia Juhasz in The Bush Agenda:

- Joe Lopez, a retired four star general and former aide to Cheney joined Halliburton in 1999.
- Dave Gribbon, Cheney's former assistant in Congress was Halliburton's Vice President and returned to the Whitehouse with Cheney when Bush stole the 2000 election.
- Ray Hunt, who provided money to both of the Bush presidencies joined Halliburton in 1998 and serves to this day.
- Lawrence Eagleberger, former president of Kissinger Associates and Bush, senior's Secretary of State also served on Halliburton's board of directors
- Charles Dominy, a retired three star general and former Halliburton executive currently serves as Halliburton's chief lobbyist.

Halliburton is only one of many corporations profiting from the invasion and the permanent occupation of Iraq. Other corporations have people as favorably placed in the Bush regime as Halliburton. Bechtel, Lockheed Martin, Boeing, General Electric-all the usual suspects-are well represented in the government; and all of them lobbied extensively for war and occupation. They have no intentions of stopping in Iraq either. The world is their oyster and the military can procure it for them.

It is worth noting that crony appointments are not peculiar to the Bush regime or to the Republican Party. They have a long and sordid history. That is how business is conducted and fortunes are made-through outright theft and conquest. None of this would be possible without the military. Our soldiers are the pawns of the rich but they think they are making the world safe for democracy. All they are doing in fact is opening the world up to capitalism and private ownership.

Since the occupation began in 2003 the Iraqi people have been forced to exist under conditions of extreme brutality and abject poverty. After the deliberate bombing of water sanitation facilities, hospitals, and electric generating sites there have been outbreaks of disease such as tuberculosis and dysentery, causing suffering and death. There has been no peace and no security for the innocent victims of unbridled greed.

There is also the matter of depleted uranium munitions used by U.S. forces that litters the country in aerosolized form that is easily taken up by the wind and remains radioactive forever. Depleted uranium is an indiscriminate killer whose effects linger for generations in the bodies of the occupiers and the occupied. Can you say Agent Orange? That is the great free market democracy that we have brought to the Middle East.

The war machine keeps turning like a sausage grinder, spewing its product into the coffers of the rich. Into the hopper go our sons and daughters and dark-skinned nations-out comes sausage and huge bank rolls for Bush, Cheney, and Rumsfeld and corporate America. Corporations, government, and militarism comprise the unholy trinity of capitalism. Together they form a corporate welfare state that boggles the mind.

The American military is not abroad defending freedom and sowing the seeds of democracy, as they seem to believe. One need only examine the history of this nation to recognize the familiar patterns of conquest and oppression. The occupation of Iraq is the continuation of the policies that created the institution of slavery, following the genocide of the Indians. The military, far from being a defender of peace and freedom, has evolved into an extension of the corporate welfare state.

The world will know no peace until enough citizens are sufficiently aroused to dismantle the military apparatus. Furthermore, we must recognize the link between militarism, war, and capital and build a better system-a form of government that serves the people rather than capital. Code Pink and other groups that maintain a constant presence in Washington are on the right track. They deserve our full support.

Charles Sullivan is a photographer, social activist and free lance writer residing in the hinterland of West Virgina. He welcomes your comments at earthdog@highstream.net