War and Natural Gas: The Israeli Invasion and Gaza's Offshore Gas Fields

The military invasion of the Gaza Strip by Israeli Forces bears a direct relation to the control and ownership of strategic offshore gas reserves.

This is a war of conquest. Discovered in 2000, there are extensive gas reserves off the Gaza coastline.

British Gas (BG Group) and its partner, the Athens based Consolidated Contractors International Company (CCC) owned by Lebanon's Sabbagh and Koury families, were granted oil and gas exploration rights in a 25 year agreement signed in November 1999 with the Palestinian Authority.

The rights to the offshore gas field are respectively British Gas (60 percent); Consolidated Contractors (CCC) (30 percent); and the Investment Fund of the Palestinian Authority (10 percent). (Haaretz, October 21, 2007).

The PA-BG-CCC agreement includes field development and the construction of a gas pipeline.(Middle East Economic Digest, Jan 5, 2001).

The BG licence covers the entire Gazan offshore marine area, which is contiguous to several Israeli offshore gas facilities. (See Map below). It should be noted that 60 percent of the gas reserves along the Gaza-Israel coastline belong to Palestine.

The BG Group drilled two wells in 2000: Gaza Marine-1 and Gaza Marine-2. Reserves are estimated by British Gas to be of the order of 1.4 trillion cubic feet, valued at approximately 4 billion dollars. These are the figures made public by British Gas. The size of Palestine's gas reserves could be much larger.




Who Owns the Gas Fields

The issue of sovereignty over Gaza's gas fields is crucial. From a legal standpoint, the gas reserves belong to Palestine.

The death of Yasser Arafat, the election of the Hamas government and the ruin of the Palestinian Authority have enabled Israel to establish de facto control over Gaza's offshore gas reserves.

British Gas (BG Group) has been dealing with the Tel Aviv government. In turn, the Hamas government has been bypassed in regards to exploration and development rights over the gas fields.

The election of Prime Minister Ariel Sharon in 2001 was a major turning point. Palestine's sovereignty over the offshore gas fields was challenged in the Israeli Supreme Court. Sharon stated unequivocally that "Israel would never buy gas from Palestine" intimating that Gaza's offshore gas reserves belong to Israel.

In 2003, Ariel Sharon, vetoed an initial deal, which would allow British Gas to supply Israel with natural gas from Gaza's offshore wells. (The Independent, August 19, 2003)

The election victory of Hamas in 2006 was conducive to the demise of the Palestinian Authority, which became confined to the West Bank, under the proxy regime of Mahmoud Abbas.

In 2006, British Gas "was close to signing a deal to pump the gas to Egypt." (Times, May, 23, 2007). According to reports, British Prime Minister Tony Blair intervened on behalf of Israel with a view to shunting the agreement with Egypt.

The following year, in May 2007, the Israeli Cabinet approved a proposal by Prime Minister Ehud Olmert "to buy gas from the Palestinian Authority." The proposed contract was for $4 billion, with profits of the order of $2 billion of which one billion was to go the Palestinians.

Tel Aviv, however, had no intention on sharing the revenues with Palestine. An Israeli team of negotiators was set up by the Israeli Cabinet to thrash out a deal with the BG Group, bypassing both the Hamas government and the Palestinian Authority:

"Israeli defence authorities want the Palestinians to be paid in goods and services and insist that no money go to the Hamas-controlled Government." (Ibid, emphasis added)

The objective was essentially to nullify the contract signed in 1999 between the BG Group and the Palestinian Authority under Yasser Arafat.

Under the proposed 2007 agreement with BG, Palestinian gas from Gaza's offshore wells was to be channeled by an undersea pipeline to the Israeli seaport of Ashkelon, thereby transferring control over the sale of the natural gas to Israel.

The deal fell through. The negotiations were suspended:

"Mossad Chief Meir Dagan opposed the transaction on security grounds, that the proceeds would fund terror". (Member of Knesset Gilad Erdan, Address to the Knesset on "The Intention of Deputy Prime Minister Ehud Olmert to Purchase Gas from the Palestinians When Payment Will Serve Hamas," March 1, 2006, quoted in Lt. Gen. (ret.) Moshe Yaalon, Does the Prospective Purchase of British Gas from Gaza's Coastal Waters Threaten Israel's National Security? Jerusalem Center for Public Affairs, October 2007)

Israel's intent was to foreclose the possibility that royalties be paid to the Palestinians. In December 2007, The BG Group withdrew from the negotiations with Israel and in January 2008 they closed their office in Israel.(BG website).

Invasion Plan on The Drawing Board

The invasion plan of the Gaza Strip under "Operation Cast Lead" was set in motion in June 2008, according to Israeli military sources:

"Sources in the defense establishment said Defense Minister Ehud Barak instructed the Israel Defense Forces to prepare for the operation over six months ago [June or before June] , even as Israel was beginning to negotiate a ceasefire agreement with Hamas."(Barak Ravid, Operation "Cast Lead": Israeli Air Force strike followed months of planning, Haaretz, December 27, 2008)

That very same month, the Israeli authorities contacted British Gas, with a view to resuming crucial negotiations pertaining to the purchase of Gaza's natural gas:

"Both Ministry of Finance director general Yarom Ariav and Ministry of National Infrastructures director general Hezi Kugler agreed to inform BG of Israel's wish to renew the talks.

The sources added that BG has not yet officially responded to Israel's request, but that company executives would probably come to Israel in a few weeks to hold talks with government officials." (Globes online- Israel's Business Arena, June 23, 2008)

The decision to speed up negotiations with British Gas (BG Group) coincided, chronologically, with the planning of the invasion of Gaza initiated in June. It would appear that Israel was anxious to reach an agreement with the BG Group prior to the invasion, which was already in an advanced planning stage.

Moreover, these negotiations with British Gas were conducted by the Ehud Olmert government with the knowledge that a military invasion was on the drawing board. In all likelihood, a new "post war" political-territorial arrangement for the Gaza strip was also being contemplated by the Israeli government.

In fact, negotiations between British Gas and Israeli officials were ongoing in October 2008, 2-3 months prior to the commencement of the bombings on December 27th.

In November 2008, the Israeli Ministry of Finance and the Ministry of National Infrastructures instructed Israel Electric Corporation (IEC) to enter into negotiations with British Gas, on the purchase of natural gas from the BG's offshore concession in Gaza. (Globes, November 13, 2008)

"Ministry of Finance director general Yarom Ariav and Ministry of National Infrastructures director general Hezi Kugler wrote to IEC CEO Amos Lasker recently, informing him of the government's decision to allow negotiations to go forward, in line with the framework proposal it approved earlier this year.

The IEC board, headed by chairman Moti Friedman, approved the principles of the framework proposal a few weeks ago. The talks with BG Group will begin once the board approves the exemption from a tender." (Globes Nov. 13, 2008)

Gaza and Energy Geopolitics

The military occupation of Gaza is intent upon transferring the sovereignty of the gas fields to Israel in violation of international law.

What can we expect in the wake of the invasion?

What is the intent of Israel with regard to Palestine's Natural Gas reserves?

A new territorial arrangement, with the stationing of Israeli and/or "peacekeeping" troops?

The militarization of the entire Gaza coastline, which is strategic for Israel?

The outright confiscation of Palestinian gas fields and the unilateral declaration of Israeli sovereignty over Gaza's maritime areas?

If this were to occur, the Gaza gas fields would be integrated into Israel's offshore installations, which are contiguous to those of the Gaza Strip. (See Map 1 above).

These various offshore installations are also linked up to Israel's energy transport corridor, extending from the port of Eilat, which is an oil pipeline terminal, on the Red Sea to the seaport - pipeline terminal at Ashkelon, and northwards to Haifa, and eventually linking up through a proposed Israeli-Turkish pipeline with the Turkish port of Ceyhan.

Ceyhan is the terminal of the Baku, Tblisi Ceyhan Trans Caspian pipeline. "What is envisaged is to link the BTC pipeline to the Trans-Israel Eilat-Ashkelon pipeline, also known as Israel's Tipline." (See Michel Chossudovsky, The War on Lebanon and the Battle for Oil, Global Research, July 23, 2006)

Porn industry seeks own stimulus ... package

Adult industry titans say economy has made Americans ‘go limp’
Jane Wells CNBC
-- updated Jan. 7, 2009

Seems everyone is lining up for a government handout, but in the case of the porn industry, you may wonder where the hands have been.

TMZ is reporting that Hustler's Larry Flynt and "Girls Gone Wild" creator Joe Francis are asking for a $5 billion federal bailout of adult entertainment because "the economy has made America's appetite for sex go limp."

The Web site claims adult DVD sales are down 22 percent in a year, numbers which are sure to deflate expectations at this weekend's AVN Adult Entertainment Expo in Las Vegas.

Porn may not be as recession-proof as originally thought. Not only are people spending less, but there's a lot of free competition available.

TMZ says Joe Francis, hounded by legal troubles, plans to go to Congress to ask for his own ... stimulus package. "Francis sees his industry like the big three automakers, only BIGGER" says TMZ. "Sounds like someone has a bone to pick."

Gee. Where to put that $5 billion? Subsidize silicone? Provide consumer incentives ("buy one, get one free")? Zero-percent financing to shoot the next installment of "Lex the Impaler"?

Times have apparently gotten so tough that Larry Flynt is now suing his nephews. Today's Los Angeles Times reports that Flynt has filed a trademark infringement suit against Dustin Flynt and Jimmy Flynt II, brothers who formed Flynt Media to release such adult films as "Positive Exposure" and "Sex at Your Service." The elder Flynt is concerned that "knock-off goods" will dilute the power of his brand. "To come into the adult entertainment business and use my name not only confuses people who buy my products, but if they're not maintaining a certain quality, it could also hurt my name," he tells the LA Times.

The nephews say they have every right to use their own name, and Dustin Flynt tells the Times he believes his uncle is dealing with "inferiority issues." Apparently growing up in the porn biz isn't as invigorating as it sounds. "I spent a lot of blood, flesh and tears working directly for my family," says Dustin Flynt, "and it wasn't easy."

stop

As if Things Weren't Bad Enough, Russian Professor Predicts End of U.S.

Good thing I like the Chinese foods ....mmmm. Chinese Foodszzz

In Moscow, Igor Panarin's Forecasts Are All the Rage; America 'Disintegrates' in 2010
By ANDREW OSBORN

MOSCOW -- For a decade, Russian academic Igor Panarin has been predicting the U.S. will fall apart in 2010. For most of that time, he admits, few took his argument -- that an economic and moral collapse will trigger a civil war and the eventual breakup of the U.S. -- very seriously. Now he's found an eager audience: Russian state media.
[Prof. Panarin]

Igor Panarin

In recent weeks, he's been interviewed as much as twice a day about his predictions. "It's a record," says Prof. Panarin. "But I think the attention is going to grow even stronger."

Prof. Panarin, 50 years old, is not a fringe figure. A former KGB analyst, he is dean of the Russian Foreign Ministry's academy for future diplomats. He is invited to Kremlin receptions, lectures students, publishes books, and appears in the media as an expert on U.S.-Russia relations.

But it's his bleak forecast for the U.S. that is music to the ears of the Kremlin, which in recent years has blamed Washington for everything from instability in the Middle East to the global financial crisis. Mr. Panarin's views also fit neatly with the Kremlin's narrative that Russia is returning to its rightful place on the world stage after the weakness of the 1990s, when many feared that the country would go economically and politically bankrupt and break into separate territories.

A polite and cheerful man with a buzz cut, Mr. Panarin insists he does not dislike Americans. But he warns that the outlook for them is dire.

"There's a 55-45% chance right now that disintegration will occur," he says. "One could rejoice in that process," he adds, poker-faced. "But if we're talking reasonably, it's not the best scenario -- for Russia." Though Russia would become more powerful on the global stage, he says, its economy would suffer because it currently depends heavily on the dollar and on trade with the U.S.

Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar. Around the end of June 2010, or early July, he says, the U.S. will break into six pieces -- with Alaska reverting to Russian control.

In addition to increasing coverage in state media, which are tightly controlled by the Kremlin, Mr. Panarin's ideas are now being widely discussed among local experts. He presented his theory at a recent roundtable discussion at the Foreign Ministry. The country's top international relations school has hosted him as a keynote speaker. During an appearance on the state TV channel Rossiya, the station cut between his comments and TV footage of lines at soup kitchens and crowds of homeless people in the U.S. The professor has also been featured on the Kremlin's English-language propaganda channel, Russia Today.

Mr. Panarin's apocalyptic vision "reflects a very pronounced degree of anti-Americanism in Russia today," says Vladimir Pozner, a prominent TV journalist in Russia. "It's much stronger than it was in the Soviet Union."

Mr. Pozner and other Russian commentators and experts on the U.S. dismiss Mr. Panarin's predictions. "Crazy ideas are not usually discussed by serious people," says Sergei Rogov, director of the government-run Institute for U.S. and Canadian Studies, who thinks Mr. Panarin's theories don't hold water.

Mr. Panarin's résumé includes many years in the Soviet KGB, an experience shared by other top Russian officials. His office, in downtown Moscow, shows his national pride, with pennants on the wall bearing the emblem of the FSB, the KGB's successor agency. It is also full of statuettes of eagles; a double-headed eagle was the symbol of czarist Russia.

The professor says he began his career in the KGB in 1976. In post-Soviet Russia, he got a doctorate in political science, studied U.S. economics, and worked for FAPSI, then the Russian equivalent of the U.S. National Security Agency. He says he did strategy forecasts for then-President Boris Yeltsin, adding that the details are "classified."

In September 1998, he attended a conference in Linz, Austria, devoted to information warfare, the use of data to get an edge over a rival. It was there, in front of 400 fellow delegates, that he first presented his theory about the collapse of the U.S. in 2010.

"When I pushed the button on my computer and the map of the United States disintegrated, hundreds of people cried out in surprise," he remembers. He says most in the audience were skeptical. "They didn't believe me."

At the end of the presentation, he says many delegates asked him to autograph copies of the map showing a dismembered U.S.

He based the forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in.

California will form the nucleus of what he calls "The Californian Republic," and will be part of China or under Chinese influence. Texas will be the heart of "The Texas Republic," a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an "Atlantic America" that may join the European Union. Canada will grab a group of Northern states Prof. Panarin calls "The Central North American Republic." Hawaii, he suggests, will be a protectorate of Japan or China, and Alaska will be subsumed into Russia.

"It would be reasonable for Russia to lay claim to Alaska; it was part of the Russian Empire for a long time." A framed satellite image of the Bering Strait that separates Alaska from Russia like a thread hangs from his office wall. "It's not there for no reason," he says with a sly grin.

Interest in his forecast revived this fall when he published an article in Izvestia, one of Russia's biggest national dailies. In it, he reiterated his theory, called U.S. foreign debt "a pyramid scheme," and predicted China and Russia would usurp Washington's role as a global financial regulator.

Americans hope President-elect Barack Obama "can work miracles," he wrote. "But when spring comes, it will be clear that there are no miracles."

The article prompted a question about the White House's reaction to Prof. Panarin's forecast at a December news conference. "I'll have to decline to comment," spokeswoman Dana Perino said amid much laughter.

For Prof. Panarin, Ms. Perino's response was significant. "The way the answer was phrased was an indication that my views are being listened to very carefully," he says.

The professor says he's convinced that people are taking his theory more seriously. People like him have forecast similar cataclysms before, he says, and been right. He cites French political scientist Emmanuel Todd. Mr. Todd is famous for having rightly forecast the demise of the Soviet Union -- 15 years beforehand. "When he forecast the collapse of the Soviet Union in 1976, people laughed at him," says Prof. Panarin.
[Igor Panarin]

Write to Andrew Osborn at andrew.osborn@wsj.com

Bush pledges $17.4bn to prevent collapse of US car industry

Andrew Clark --
The White House has reluctantly decided to prop up America's motor industry by providing $17.4bn of emergency funding to avert a potentially disastrous collapse of Detroit's leading car manufacturers.

Throwing aside his usual free market orthodoxy, President Bush used taxpayers' money to provide a three-month financial reprieve for General Motors and Chrysler in return for swingeing wage cuts among factory workers which provoked immediate anguish among unions.

In a speech from the White House's Roosevelt room, Bush said: "In the midst of a financial crisis and a recession, allowing the US auto industry to collapse is not a responsible course of action."

From an initial fund of $13.4bn, GM will get $9.4bn and Chrysler will receive $4bn. The treasury will make a further $4bn available to GM in February. Detroit's third major firm, Ford, told the administration that it could get by without a handout.

Bush said without the money, manufacturers faced the prospect of disorderly bankruptcy and liquidation. Experts believe the loss of one of Detroit's "big three" would cause more than a million job losses among suppliers and contractors.

"Such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry," said Bush.

"It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession."

The decision ends a month of bitter political wrangling in which motor industry bosses shuttled between Detroit and Washington to plead for aid.

Congress failed to agree on a legislative rescue plan a week ago, leaving an executive order from the White House as the last hope.

The money will come from the US government's $700bn economic bail-out fund intended to support struggling banks. But the money comes with tight strings attached, which angered Detroit politicians and the UAW car workers' union.

Under the deal, GM and Chrysler must cut workers' wages and benefits to the level of counterparts at Japanese manufacturers by the end of next year, a timetable which employees view as unfair. In a direct challenge to Bush's authority, the UAW said it would appeal to president-elect Barack Obama to change the terms when he takes office next month. "While we appreciate that President Bush has taken the emergency action needed to help America's auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers," said the UAW president, Ron Gettelfinger.

His view was echoed by John Dingell, a congressman representing the car manufacturing city of Dearborn, who said: "It is irresponsible during a time of economic crisis for the White House to insist that workers take further wage cuts on top of the historic concession they have already made."

The White House's terms were put before carmakers late on Thursday and agreed in late-night discussions. They give the treasury significant involvement in day-to-day decisions at GM and Chrysler.

In return for the money, the firms must prove by the end of March that they are financially viable, with prospects for long-term profits.

They will have to sell their private jets, halt bonus payments to senior executives and seek government approval of transactions worth more than $100m. They must even tell the treasury of any deviations from expenses policy on minutiae such as travel, Christmas parties and conferences.

GM's chief executive, Rick Wagoner, said there had been little room for negotiation after a "stunning slowdown" in business.

"You wouldn't wish this kind of crisis on any industry, or company, or on our people," he said. "It's been very difficult."

The White House's intervention came on the day Chrysler shut its manufacturing operation of 30 factories for an extended Christmas break of a month, temporarily laying off 46,000 workers.

Obama to close Guantánamo bay prison, quit the Iraq war, and cut US taxes

Barack Obama has outlined what he believes will be the main challenges he will face in his first two years in the White House, including closing Guantánamo Bay, withdrawing US troops from Iraq and employing a multilateral approach to the Middle East.

In an interview with Time magazine, who named the president-elect as their Person of the Year 2008, he also promised tax cuts for 95% of working Americans and said the health and school systems would be domestic priorities.

"On foreign policy, have we closed down Guantánamo in a responsible way, put a clear end to torture and restored a balance between the demands of our security and our constitution? Have I drawn down US troops out of Iraq, and have we strengthened our approach in Afghanistan — not just militarily but also diplomatically and in terms of development? " he told the magazine, which named him their Person of the Year 2008.

Obama said managing the transition of military power in Iraq would be a top priority, as was taking a multilateral approach to foreign policy. "Managing a more effective strategy in Afghanistan will be a top priority. Recognising that it is not simply an Afghanistan problem but it's an Afghanistan-Pakistan-India-Kashmir-Iran problem is going to be a priority.

"Sorting through our policy with respect to Iran effectively — that will be a priority. Dealing with our transatlantic alliance in a more constructive way and trying to build a more effective relationship with the newly assertive and, I believe, inappropriately aggressive Russia."

The Obama interview coincides with the announcement that more than 11,000 US troops will provide support, air defence and medical assistance at his inauguration on January 20 next year. General Gene Renuart, head of the US northern command, said although a "big chunk" of military and national guard units would do ceremonial work, the troops would also contain a contingent on alert to respond to a potential chemical attack. There also will be some 8,000 police and security agents.

Renuart said planners are working under the assumption that a terrorist or rogue element might try to interrupt the inauguration. "Not because we see a specific threat, but because [for] an event this visible and this important and this historic, we ought to be prepared to respond if something does happen.".

Comparing the economic situation to that of Japan in the 1990s, Obama warned that an American recession could take as long as a decade to recover. "I don't have a crystal ball, and economists are all over the map on this. I think we should anticipate that 2009 is going to be a tough year. And if we make some good choices, I'm confident that we can limit some of the damage in 2009 and that in 2010 we can start seeing an upward trajectory on the economy.

"But this is a difficult hole that we've dug ourselves into. You know, Japan found itself in a somewhat similar situation in the 90s, made some poor decisions, didn't squarely face some of the problems in its banking system and, despite significant stimulus, still saw this thing drag on for almost a decade."

Americans earning over £750,000 would go back to 1990s tax rates, he said. "In part to pay for the tax cut for people who desperately need it, I've proposed that people who are making more than a quarter-million dollars a year lose the tax cuts they received from George Bush and that we go back to the rates they had in the 1990s. And that is a pledge I intend to keep."

Obama said tackling climate change and the nuclear question would still be a priority. "Now, I mention those things, but keep in mind that some of the long-term priorities I identified in the campaign remain just as urgent today. I already mentioned nuclear proliferation. I already mentioned climate change. I think dealing with development and poverty around the world is going to be a critical component of our foreign policy. It's good for our security and not just charity."

Cheney Admits Torture Guilt

Cheney (Accidentally?..??) Admits Torture Guilt

Environmentalists Fuming Over Salazar

by Jeff Brady

Barack Obama and Ken Salazar at an Obama campaign rally in September.

Then-Sen. Barack Obama and Sen. Ken Salazar (D-CO) appear at a September campaign rally for Obama at the Colorado State Fair Grounds in Pueblo.

President-elect Obama's apparent pick to head the Department of the Interior has angered environmentalists who supported him during the election.

Citing anonymous sources, media outlets are reporting that Obama is close to announcing that Colorado Sen. Ken Salazar will be his nominee for Interior secretary.

Salazar is a rancher and considered a moderate Democrat. He is rarely seen without his trademark cowboy boots and hat. In public settings a favorite topic is economic development for rural America. Environmentalists were hoping instead for a loyal ally of the movement such as Rep. Raul Grijalva (D-AZ) or Rep. Jay Inslee (D-WA).

Last week, more than 150 environmental groups signed a letter to Obama specifically backing Grijalva.

"We've seen his record — that's very strong in regard to public lands and endangered species," said Oregon Wild spokesman Sean Stevens. "And I don't think we have the same sort of confidence in Ken Salazar. Hopefully we can grow to have that confidence."

Adds Kieran Suckling of the Tucson-based Center for Biological Diversity: "Ken Salazar is very closely tied to ranching and mining and very traditional, old-time, Western, extraction industries. We were promised that an Obama presidency would bring change."

Among those cheering the apparent Salazar nomination are the mining and agriculture industries, which generally backed Republican John McCain for president.

"I first heard it Monday and was excited because I have worked with him when I used to live in Colorado," said Laura Skaer, executive director of the Northwest Mining Association. "I know that he's fair and balanced."

The secretary of the Interior, perhaps more than any other Cabinet post, affects the lives of rural Americans, many of whom depend on natural resource development for their living.

"So the people I represent in rural communities are going to want somebody as secretary of the Interior that understands rural issues," said Dan Keppen, executive director of the Family Farm Alliance.

"It looks like many of the folks that might be opposing or upset about Sen. Salazar's appointment are activist groups from urban areas," said Keppen.

In Illinois, a Virtual Expectation of Corruption

As much as politicians in Illinois have had a tradition of corruption, the people of Illinois have had a tradition of accepting it, even expecting it, long before Gov. Rod R. Blagojevich was accused of trying to put a United States Senate seat up to the highest bidder.

Otto Kerner, who served as governor in the 1960s, was found to have accepted bribes of racetrack stock but only after the track owner deducted it on her taxes as a cost of doing business.

After Paul Powell, an Illinois secretary of state, longtime state legislator and infamous dealmaker, died in 1970, associates discovered $800,000 in undocumented cash in shoeboxes, briefcases and strongboxes in his closet, a considerable cache for a man who had never earned a salary of more than $30,000.

Mr. Powell had emerged unscathed from a grand jury investigation into accusations that he bought stock in a harness racing company. As he said, “It wound up with the grand jurors wanting to know from me where they could buy racetrack stock.”

The state’s unusually lax laws have allowed corruption to flourish — in fact, prosecutors say, it was the threat of a new campaign finance law that takes effect in January that set Mr. Blagojevich on a last spree of pay-to-play. The tradition was established by the immigrants who settled the state in the 19th century and nurtured by a stubborn system of machine politics that other states eradicated long ago.

“There is this attitude among politicians, and frankly among citizens, that this is the way things are,” said Kent Redfield, a professor of political science at the University of Illinois at Springfield. “Politics is for professionals.”

The surprise for many Illinoisans last week was not that their governor was arrested, but that he could be brazen enough to try to sell a Senate seat when he was already under federal investigation.

Now the culture of his adopted home state threatens to dog President-elect Barack Obama, whose vacated seat in the Senate is the one that Mr. Blagojevich is accused of putting up for auction, much as swampy Arkansas politics dogged the last young Democratic politician elected on a platform of change, Bill Clinton.

Prosecutors say Mr. Obama is not a subject of the investigation. And he has been a champion of ethics reform in the Illinois Legislature and in the Senate. But some Republicans have seized the opportunity to try to tie him to the worst side of the state’s politics.

As he faced questions at a press conference in Chicago last week, Mr. Obama argued that there were two Illinoises — and that he came from the one not represented in the criminal complaint against Mr. Blagojevich.

Cindi Canary, director of the Illinois Campaign for Political Reform, said, “It’s as if we have a good angel on one shoulder and a bad angel on the other.”

“We have produced some real leaders,” Ms. Canary continued, mentioning former Senator Paul Simon, the former federal judge Abner J. Mikva and, of course, Abraham Lincoln. “At the same time, for historic and systemic reasons, we have real institutional corruption.”

Certainly, other states have their problems. The Corporate Crime Reporter ranked Illinois a mere sixth on a list of the most corrupt states last year, based on the federal public corruption convictions per 100,000 residents. (It was beaten by Louisiana, Mississippi, Kentucky, Alabama and Ohio; it was slightly ahead of New Jersey and New York.)

Still, as Mr. Mikva, who for many years was a member of Congress, said, “There’s a kind of Gresham’s law that operates: the bad drives out the good.”

If indicted, Mr. Blagojevich would be the fifth of the last eight elected Illinois governors to be charged with a crime, and if he is sent to jail, the fourth to serve time.

Since 1971, said Dick Simpson, head of the political science department at the University of Illinois at Chicago and a former Chicago alderman, 1,000 Illinois public servants have been convicted of corruption, and in Chicago, 30 aldermen have gone to jail.

Mr. Simpson said corruption went back at least to 1869, when three Chicago commissioners gave out a contract to paint City Hall and then used whitewash instead, pocketing the savings.

Now Illinois remains the rare place where one governor who served jail time (he used fraudulent loans to repair his yacht) writes an opinion article in a newspaper accusing the current governor of “ranking with Al Capone in establishing a disgraceful image of Illinois,” as Daniel Walker did on Thursday in The Chicago Tribune.

“Some people say it’s in the water,” said Mike Lawrence, who was a spokesman for former Gov. Jim Edgar (one of the unindicted ones) and executive director of the Paul Simon Public Policy Institute at Southern Illinois University. “But Paul Simon drank the same water that Paul Powell drank, and there couldn’t have been two more dramatically different politicians when it came to ethics.”

The deep-seated corruption, Mr. Lawrence and others said, has its roots in the settlement of the state in the 19th century.

Irish immigrants, and later Italians and Poles, faced discrimination in getting jobs and organized themselves politically as a way to assimilate and gain strength. New immigrants would come to local bosses for housing, work and food, and public office became the marketplace for jobs, contracts, rewarding friends and punishing enemies.

“It isn’t that the Irish are inherently corrupt,” Mr. Mikva said. “It’s that that’s the way you got power.”

Politicians mocked “goo-goo groups” like the “Plague of Women Voters” — good government being for girls and babies. “Politics was for people who had skin in the game,” Professor Redfield said.

After the convictions of George Ryan, whom Mr. Blagojevich replaced in the governor’s office, and Dan Rostenkowski, whose seat in the House of Representatives Mr. Blagojevich once held, their allies complained that prosecutors had criminalized politics. (Mr. Blagojevich’s lawyer, too, insisted that anything he had done was “just politics.”)

“I think for a while Illinois was sort of proud of their scoundrels,” said Mr. Mikva, who appeared on Friday with the Illinois attorney general in calling upon the State Supreme Court to declare Mr. Blagojevich unfit to govern.

“We bragged about Hinky Dink Mike Kenna and Bathhouse John Coughlin,” he said, referring to the bosses who ruled the First Ward in Chicago from the late 19th century until World War II with a mix of extortion, favors and ballot-box stuffing.

“We’ve gotten over that,” Mr. Mikva said, “but we’ve never put in the defense mechanisms in terms of ethics laws and limited contributions.”

There are no limits on political contributions in Illinois. The law that is to take effect in January bans contributions only from those with state contracts larger than $50,000, and it was passed only under pressure (including from Mr. Obama, who called his former mentor in the State Senate, Emil Jones Jr., to encourage its passage.) Unlike the federal system, corporations can give directly to politicians.

“There is a bottomless thirst for cash, for campaign contributions, for personal enrichment,” Ms. Canary said. “There is no speed limit.”

Professor Redfield said, “The laws reflect the culture, and the culture is shaped by the lack of laws.”

Long after machine politics died elsewhere — Prendergast in Kansas City, Tammany Hall in New York — Mayor Richard J. Daley’s machine ruled Chicago. Mr. Powell was a product of the downstate machine, Mr. Ryan of the Kankakee County machine.

Under Mr. Daley’s son, Richard M., the current mayor, Chicago’s machine has simply adapted, many say, so that the building blocks of the power structure are interest groups, corporations and unions rather than the neighborhoods.

In parts of downstate, the collapse of the coal industry has left the state as the biggest source of jobs, in prisons, mental institutions and universities. That has bred corruption in places like East St. Louis, where several officials and precinct workers were convicted of vote fraud in 2005.

“Most Illinoisans put a higher priority on getting their streets shoveled than they do on scandal-free public servants,” Mr. Lawrence said.

Instances of revolt are rare.

In the late 1970s, Mr. Lawrence said, after the Legislature and the governor slipped in a pay increase in a lame-duck session, outraged voters sent envelopes full of tea bags and even human feces. Then in 1980, they voted to reduce the size of the House by a third, to 118 from 177.

Mr. Mikva, who with Mr. Simon fought in vain to get the Legislature to pass limits on political contributions 50 years ago, recalled going to Mr. Blagojevich to suggest that he include such limits in a reform package. But while Mr. Blagojevich agreed to establish inspectors general and a new ethics board, Mr. Mikva said, he resisted ending pay-to-play.
by Kate Zernike

Bush: Duck and cover