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THE SITUATION ROOM

Discovery's Final Liftoff; Gadhafi Loses More of Libya; Why Americans Are Stuck in Libya; Boeing Wins $35B Air Force Tanker Contract; Battles Over Public Unions Spreading; Gadhafi: Blame It On Bin Laden ; Careful Steps With Libya; Weapons of War for Sale; Foam Falls Off Shuttle Discovery

Aired February 24, 2011 - 17:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ANNOUNCER: This is CNN breaking news.

NASA LAUNCH ANNOUNCER: Two, one, booster ignition and the final liftoff of Discovery -- a tribute to the dedication, hard work and pride of America's Space Shuttle team. The shuttle has cleared the tower.

WOLF BLITZER, HOST: All right, there you saw it. Just a few moments ago, the Space Shuttle Discovery taking off on its final flight. Everything so far looks fine. It's only been a -- a few moments, but the dramatic pictures coming in set the scene for this final flight of this Space Shuttle Discovery.

A six-member crew will deliver what's called a storage module, a science rig, spare parts, to the International Space Station during this 11-day mission. It's supposed to take at least two days for the -- for the Discovery to get to the International Space Station. The flight was originally scheduled for November, but Discovery's launch was delayed because of repairs of the external tank support beams.

This is Discovery's 39th voyage, the last voyage. And it took off just a couple of minutes late, but it did take off. The Space Shuttle Endeavour is currently on for April 19th and the Space Shuttle Atlantis tentatively scheduled to launch later in the summer.

All of this very important, as these six crew members on the way to the International Space Station right now.

CNN's John Zarrella has been watching all of this unfold.

Briefly, set the stage -- unfortunately, we don't have John Zarrella yet, but we're going to get John Zarrella, hopefully soon, and he'll tell us what else is going on.

But you see these pictures happening right there. This is Space Shuttle Discovery that took off just a few moments ago.

We're watching all of this very, very closely and we'll certainly -- certainly have much more coming up on this story. But so far, so good for the Space Shuttle Discovery.

We'll check in with John Zarrella later.

But in the meantime, let's check what's happening in Libya right now. Breaking news happening there, as well.

Anti-government protesters appear to be gaining ground, moving closer and closer to the capital city of Tripoli and the power center of Moammar Gadhafi. We're getting reports right now into THE SITUATION ROOM that opposition forces have seized control of several -- several cities in the northwest, including one that's only about 30 miles west of Tripoli. Witness say Gadhafi still is cracking down hard in the capital. Today, he blamed the violence in his country on young people, claiming they're taking pills and being manipulated by none other than Osama bin Laden.

Amid all of this, Americans anxiously awaiting to evacuate Libya from Malta, in the Mediterranean. A ferry chartered by the United States remains stuck in the harbor because of bad weather. The State Department says 285 people are on board that ferry. One hundred and twenty-seven of them are American citizens.

Our correspondents are out in force covering this region, as only CNN can do that. We're going to be checking in with all of them.

Meantime, anti-Gaddafi forces are holding their ground in Eastern Libya.

Our senior international correspondent, Ben Wedeman, is one of the few Western reporters in Libya right now.

He's joining us on the phone from Benghazi, the second largest city in the country -- Ben, I understand you've been all around Benghazi today, including one of Gadhafi's military compounds.

Set the scene for us.

What did you see in Benghazi?

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT (via telephone): Well, we started by going to a hospital, the Jala Hospital. That was the hospital that took a lot of the casualties and fatalities during the clashes between the anti-Gadhafi protesters and government forces.

The place is still full of a lot of people in the intensive care unit, many of them with wounds to the chest, the head and the neck, according to doctors there, who say clearly that the government snipers were aiming to kill, not to -- not to just wound people.

The morgue is also full of bodies, many of them charred beyond recognition.

We also, as you mentioned, we went to the compound that holds not only the command -- the army command for the eastern part of Libya, but also several palaces that Moammar Gadhafi and his son would stay in when they visited Benghazi. Now, of course, the place is wide open. Hundreds of Benghazi residents are -- are streaming through there to look at a place which was really a forbidden city within the city of Benghazi. They're going through his palace, which all of these buildings have been ransacked and burned. Some of them, in fact, are still on fire.

We also watched as they brought in some earth moving equipment, trying to dig underneath the -- the surface there, because they believe that there may be underground prisons that they still haven't found, tunnels and possibly arms depots.

So it's a -- a scene of a lot of activity -- Wolf.

BLITZER: See yesterday, your dramatic report when you first entered Benghazi -- jubilation. And people were so, so happy.

What about today?

Has that mood changed somewhat?

What's going on?

WEDEMAN: Well, the -- the mood, I think, yesterday, was a real sort of climax for the people of Benghazi, because we were the first Western television crew to arrive. And as you saw, the reception was absolutely crazy. We were not -- they weren't throwing anything but candy and dates at us. Today it's a little different. Many of our colleagues in the press corps have joined us. So I think people are becoming a little more used to -- to the media being around.

But things seem to be, I wouldn't say going back to normal, but there is a sense that the ad hoc committee that's running the city is trying to bring things back in operation. Banks were open. The -- they are -- this committee is also trying to make sure that the hospitals have enough medicine, that stores are well stocked. They're even working very actively to evacuate a lot of foreign nationals who are in this part of Libya. Yesterday, they were able to evacuate several thousand Chinese workers; some Turkish workers, as well.

So they do seem to be running the place fairly well. In fact, many people say they run it far better than the Gadhafi regime ever did -- Wolf.

BLITZER: He called into a radio talk show, Gadhafi, today for about 30 minutes, issuing all sorts of warnings and making all sorts of declarations about young people on hallucinogenic drugs, that bin Laden was responsible for this.

Are people simply laughing at him or do they take all of his threats deadly serious?

WEDEMAN: They take his threats, Wolf, deadly serious, because this is a man, obviously, who they believe will stop at nothing to stay in power.

But at the same time, there is a lot of giggles and laughs when they listen to these addresses by Moammar Gadhafi. People were particularly moved -- amused by one thing he said. He warned the people of Libya to not consume any Nescafe that is produced in cities that are now under the control of anti-occupation forces. He said that because he believes that that Nescafe is laced with Ecstasy. So that sort of statement certainly set off a lot of chuckles among the people here in Benghazi.

BLITZER: Ben Wedeman, we're going to check back with you.

Thanks very much.

Ben is in Benghazi for us.

Take a look at this. Turkey has sent ferryboats, planes and buses to evacuate its citizens from Libya. Several thousand Turkish nationals already have gotten out. It's being calling the most comprehensive evacuation operation in Turkey's history. And yet the United States seems to be having a very hard time getting American citizens out of Libya.

We're told the U.S. chartered ferry is stuck because of bad weather.

Buy why has this been so difficult for the United States?

Let's turn to our foreign affairs correspondent, Jill Dougherty.

She's over at the State Department.

What's going on here -- Jill?

Why can't the U.S. get American citizens out of there?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, Wolf, boy, you look at this week, just going back Tuesday, the State Department failed to get permission from what it calls an overstressed Libyan government for a charter flight. Today, there was another charter flight that was scheduled, but they had to cancel that because of bad weather. And the Americans still sitting on that ferry, hoping to get out.

(BEGIN VIDEOTAPE)

DOUGHERTY (voice-over): The U.S. charted ferry is docked for the second day at Tripoli's Ashar port (ph), waiting for the storm to pass. On board, 285 people -- 40 U.S. Embassy staff and families, another 127 American citizens and 118 citizens from other countries.

The daughter of one woman aboard tells CNN it's been rough.

UNIDENTIFIED FEMALE: They're experiencing anxiety. But at this point, the -- I think in the last six days, they may have had six hours of sleep. So they're also getting a little bit giddy.

DOUGHERTY (on camera): What are the conditions like on it?

P.J. CROWLEY, STATE DEPARTMENT SPOKESMAN: I can only imagine.

DOUGHERTY (voice-over): State Department spokesman, P.J. Crowley, says, however, the passengers are not in imminent danger, that Libyans officials have been cooperating.

CROWLEY: The Libyans are securing their port at which the ship is docked. We have security officials on board the ship, as well.

DOUGHERTY: But U.S. officials warn violence could occur at any time.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: The security of these American citizens is an extremely high priority. And -- and I wouldn't want to say anything from this podium or publicly that would affect their security. So I'm not going to get into what specifically we're doing to -- to make sure they are safe. We are taking -- doing everything we can to -- to evacuate them, to -- to make sure they are safe.

DOUGHERTY: Fearful that Americans in Libya could be used as hostages, the State Department is urging Americans to get out.

Meanwhile, Great Britain was able to evacuate 64 people to Malta on a military plane. France flew 165 citizens to Paris on an air force plane from Central Libya and Russia evacuated some of its citizens to Moscow.

(END VIDEO TAPE)

DOUGHERTY: And the State Department insists that the problem really is bad weather. We've been unlucky, one senior official tells CNN.

And as soon as the weather clears, they say that they will have that ferry out of there. And then they also are hoping to get another charter plane in on Friday -- Wolf.

BLITZER: You know, I've been told -- and maybe you have the exact numbers -- there are thousands of American citizens in Libya right now, what, 150 or 180 that may be on this ferry. That's a relatively small number of all the Americans who are in Libya.

DOUGHERTY: It is. We are told there are about 6,000 Americans. Most of those are dual nationals. Those are people who have passports for the United States and passports for Libya.

But if you look at expats -- and a lot of them work for oil companies -- there are about 600 of them. Now, it's unclear exactly how many want to get out. And there's, as you know, a lot of chaos. But those are the numbers -- Wolf.

BLITZER: Yes, but it's -- it's also important to remember, if you're a dual citizen, a citizen of the United States and a citizen of Libya, you're still a citizen of the United States and you're just as much a citizen of the United States as those 600 who are just U.S. citizens. DOUGHERTY: Yes. However, Wolf, the State Department says that Libya does not recognize dual citizenship. So when people -- dual nationals are trying to get out, they have to use Libyan passports. And that's where the difficulty can come in (INAUDIBLE).

BLITZER: Yes, but from the American perspective, they're seen as American citizens. Whether or not they have dual citizenship with Canada or Libya or Britain or some other country, they're still United States citizens...

DOUGHERTY: That's correct.

BLITZER: And the U.S. government has a responsibility to help those 6,000 dual nationals. They're all U.S. citizens in addition in...

DOUGHERTY: Absolutely.

BLITZER: -- in addition to being Libyans. This notion of differentiating between American citizens -- strictly American citizens and dual citizens is, from the U.S. perspective -- forget about the Libyan perspective -- it's a difference that really shouldn't exist.

DOUGHERTY: However, it's -- it creates problems. They're not saying there's a difference legally, but what they're saying is it could create problems on the ground.

BLITZER: All right. Jill Dougherty is watching this.

Thousands of American citizens still stuck in Libya right now.

Let's talk a little bit more now of what it's going to mean to get those Americans out of Libya.

Tom Foreman is here.

And we've got the maps.

We've got the -- it's 1,000 miles, that whole Mediterranean coast of Libya. And the weather, as we see, in Tripoli, not so good right now.

TOM FOREMAN, CNN CORRESPONDENT: Yes, it really has -- listening to all of this from Jill and from Ben earlier, Wolf, it's really fascinating.

Benghazi over here. That's where Ben was talking about, all the trouble over here.

BLITZER: That's the second largest city.

FOREMAN: Exactly.

And let's move in here. And I wanted to talk about something that Ben mentioned on the way in. I'm going to stop this just about here.

When Ben said that there's reports of some towns falling within 30 miles, by the way, that's right around here. So if you look at the overall size of the country before, now you're talking about a really small part where this pressure is coming in.

So let's move into the port where all those Americans are right now. If we move into where the ferry actually is, what Jill was talking about, here's what we know about it. Some of the basic facts is, this is a very modern ferry. This is not like you're getting on some kind of clunker. This is a very modern sort of catamaran design, a comfortable ship, although, as you know, not that comfortable when you sit on it too long.

Basic facts -- 285 people in total, 40 non-essential embassy staff, 127 American citizens, 118 citizens from other countries.

The U.S. has the security on the ship, but the port overall is secured by the Libyan forces. Obviously, a lot of questions about security there, as Jill raised.

Let's look at the distance we're talking about here. If you look at the overall distance, 215 miles.

Why can't they do this?

Why can't they make this trip?

Well, this gives you an idea. This is what it looks like out on the Mediterranean when the seas are tough. Right now, what we're hearing is reports of 16-foot waves out there. So look at this. And this comes in, big crashing waves like that. This is the reason you don't want to start off with a ferry like that on a journey of this distance, with all these people on board, if you can avoid it. But it seems there's been a whole series of things that have gone wrong.

If it all works, however, Wolf, they'll ultimately head up here to Malta. Some people may wonder, actually, why Malta is the target that they're heading for here. There's a pretty good reason. Malta is the nearest of all the European ports where these folks could get to. It's six hours to make this overall trip.

And here's something interesting, the people who go on will be required to reimburse the U.S. government for the cost of this trip and they've got to get themselves out from here. It's not going to be a trip everywhere they want to go.

So that's generally the lay of the land there, Wolf, and a sense of what it's going to be like and the Americans are very much hoping they can wind up in this port just given a little bit of time.

BLITZER: Tom Foreman, thanks very much.

A major contract has just been awarded. Lisa Sylvester is working this story. Billions of dollars at stake right now, a lot of jobs. Tell our viewers what just happened.

LISA SYLVESTER, CNN CORRESPONDENT: Well, Wolf, really $35 billion at stake here with this contract. It is who will build the Air Force's next-generation refueling tanker? This has been an ongoing saga. It was America's Boeing offered up a version based on the 767 going up against the European Aeronautic Defense and Space Company, a European consortium. They were using a model after the Airbus 330.

And we now know Boeing has won this contract. This is huge for the folks who are in Washington state and Kansas. Eleven thousand jobs at stake in Washington, 7,500 jobs in Kansas. But if you total in and if you factor in all of the indirect jobs across the United States, we are talking about 50,000 jobs. And also, Wolf, the winner could get additional future contracts, a much, much bigger prize worth $100 billion.

This really is, in fact, the third time the Pentagon has attempted to award this contract for all of us who have been following this. The previous two times, the decision was overturned over allegations that the bidding process was rigged and that the rules were discriminatory.

So, Wolf, hopefully the third time will be a charm, and we won't see any more challenges. And you can bet that the congressional delegations from Washington and Kansas will be coming out soon with releases. Really happy with this decision, Wolf.

BLITZER: Great news for Boeing, no doubt about that. They always make these announcements after the stock markets close. We'll see how the Boeing stock does tomorrow. I'm sure it will do just fine.

Thanks very much, Lisa, for that. Big news for Boeing.

We're going to get back to the situation in Libya. The revolt there already pushing up oil prices, but that could be a drop in the bucket compared to what could happen if unrest takes hold in Saudi Arabia.

And here at home, more and more states getting caught up with the fights over budgets and union rights. Is this what voters wanted when they cast their ballots last fall?

(COMMERCIAL BREAK)

BLITZER: We'll get back to Moammar Gadhafi and Libya in a just few minutes. There are dramatic developments unfolding right now, stand by. But there's other important stores we're following right here at home, including the soaring deficit.

That's on Jack's mind. He's here with "The Cafferty File" -- Jack. JACK CAFFERTY, CNN CONTRIBUTOR: The House of Representatives has passed more than $60 billion in cuts to federal spending. It's the first sign that Republicans are trying to make good on the campaign promises to close the deficits and cut government spending.

But before they break their arms patting themselves on the back, it's worth pointing out $60 billion is less than 3 percent of this year's projected deficit of more than $1.6 trillion.

The House bill cuts federal funds to Planned Parenthood, the Environmental Protection Agency and education programs like Pell Grants and Head Starts. What it doesn't touch is Social Security, Medicare or Medicaid, and those three entitlement programs total about 57 percent of the federal budget deficit -- or the federal budget, excuse me. So far, not a single dime has been cut from any of those programs.

According to a recent CNN Opinion Research Corporation poll, more than half of Americans think the deficit is extremely important for the president and Congress to tackle. But when asked what was more important, reducing the deficit or preventing cuts in Medicare, 81 percent say preventing cuts in Medicare, just 18 percent said reducing the deficit.

When asked about Social Security, 78 percent said preventing cuts in that program more important than lowering the deficit by a wide margin.

And when asked about Medicaid, 70 percent said avoiding cuts to the public health insurance program for low-income families was more important compared to just 29 percent who said closing the deficit was more important.

So at the end of the day, it's not just the government's fault here, is it? As the line in "Pogo" went, we have met the enemy and it is us.

Politicians know senior citizens are among the most consistent, reliable voters in the country, and it's a real risk to propose cutting programs many of them depend on, especially with the 2012 presidential election looming on the horizon.

Oh, and that $60 billion number, word is now it will wind up being closer to $25 billion.

Here's the question -- Should the government cut Social Security, Medicare and Medicaid in order to attack the deficit? Go to CNN.com/CaffertyFile, post a comment on my blog.

BLITZER: Jack, thank you.

Battles over public worker unions are spreading to cash-strapped states across the country. In what may be the most high-profile fight, there are more protests in Wisconsin today over a plan to eliminate collective bargaining rights for state workers on everything but wages. Our senior political analyst Gloria Borger has been following all of this, she's been writing about it in depth on CNN.com and she's been looking at the specifics.

The governor of Wisconsin, Governor Walker, he's, like Governor Kasich in Ohio right now, they're obviously very deeply concerned about the public budget, the issues of the public budget, the mess that's being created.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Right, and they want to end the public employee unions' collective bargaining. But what they ended up with, they say this is important for deficit reduction, what they ended up with, Wolf, was a stalemate. And if you look at the numbers, it's very interesting because the stalemate is not what the public wants.

Take a look at this, 61 percent of the public nationally doesn't like what Governor Walker is trying to do in Wisconsin. When we asked whether you want to remove union collective bargaining rights, you see two to one there. Sixty-three percent of Independent voters, Wolf, don't want to removed it, either.

So in theory, the public wants budget cuts, they like people willing to challenge the establishment, but they didn't vote for stalemate, they didn't vote for overreach, and they certainly didn't vote for what some people believe is arrogance here.

BLITZER: You wrote this column on CNN.com, in which you said, you pointed one White House official as saying that some of these new Republicans, these newcomers, they could use a dose of humility.

BORGER: Yes.

BLITZER: Now some of the Republicans say, President Obama, in his first two years in office, could have used a dose of humility as well.

BORGER: That seemed a little ironic to me, because of course, Barack Obama came in with his Democratic majorities and didn't consult Republicans as much, as a lot of people thought he should have, and didn't do very well. And only -- and when the lame-duck session came, and he actually got things done with Republicans did his approval ratings go up.

What he did accomplish, he only accomplished with Democrats. Voters aren't interested in games. They voted for bipartisanship. And when you look at the budget battle that's coming up, and the question of whether you ought to shut down the government, the question -- Gallup asked the question, what should Congress do in the budget battle. And again, Wolf, by a two to one margin, people want compromise, they want to get something done.

BLITZER: Good column, CNN.com, I hope our viewers read it.

BORGER: Thanks for the plug, Wolf.

BLITZER: Well, they should. It's a good, smart column, as you always do, Gloria.

BORGER: Thanks.

BLITZER: Thank you.

Moammar Gadhafi says young protesters in Libya have been corrupted by al Qaeda. We're taking a closer look at his attempt to link the unrest in Libya to Osama bin Laden. Is there any truth to that at all?

And in the midst of Middle East turmoil, one country in the region brings some strange bedfellows together to buy weapons.

(COMMERCIAL BREAK)

BLITZER: Let's get back to our top story right now, the revolt in Libya.

Opposition forces getting closer and closer to the capital of Tripoli, where Moammar Gadhafi is still believed to be holding up. He did give a ranting and rambling 30-minute phone conversation to a local radio station, making all sorts of allegations.

Let's discuss with our national security contributor Fran Townsend. Back in 2010, she visited high-ranking Libyan officials at the invitation of the Libyan government. She's also a member of the CIA's External Advisory Committee.

One of the things that Gadhafi and his sons, the allegations they're making, is that Osama bin Laden is behind this revolt in Libya and a lot of the young people in Libya are taking hallucinogenic drugs.

To a lot of us, it sounds like Gadhafi's taking some hallucinogenic drugs, but you've met the guy, what do you think?

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: Yes, I think you're closer to right than he is. I mean, it is. It's complete nonsense, Wolf.

I've spoken to sources in the intelligence and national security communities, nobody believes that this is true. This is a desperate attempt, a last-ditch effort by a desperate dictator, frankly, to justify the violence that he uses against his own people. It is complete nonsense and it plays to the base fear of sort of law-abiding people in the region that somehow bin Laden is going to take advantage of the chaos. It's not true. I haven't found anybody who thinks it is.

BLITZER: You know, 24 hours ago, almost exactly 24 hours ago, President Obama broke his silence and he spoke out forcefully on what's going on in Libya, but he never mentioned Gadhafi by name, he never mentioned any specific options he was going to take. He was only saying that there were a wide range of options before the United States. This is in contrast to what we're hearing from Angela Merkel, the chancellor of Germany, or Nicolas Sarkozy, the president of France. They're being very specific and they're mentioning Gadhafi by name, something the president of the United States did not do yesterday.

Why the caution on the part of the U.S.?

TOWNSEND: You know, Wolf, I think it seems natural that we should want to criticize the president because he wasn't stronger, especially given his strong statements when Hosni Mubarak was being ousted from Egypt. But I must tell you, you know, having been on the inside of these crises, this is the most delicate time.

And my understanding from folks on the inside is the president actually himself wanted to be much stronger than he was, and was rightly counseled by the national security and intelligence communities to be careful because the Americans are still in Tripoli. And it's a very dangerous time until you can get them out.

And there will be plenty of time for us to criticize the administration, if that's appropriate. But right now I think we really need to give the president the benefit of the doubt until he can get the Americans out of there.

BLITZER: But there are a lot more European citizens, thousands and thousands more European citizens, in Libya right now than American citizens in Libya, and the European leadership is much more blunt in condemning Gadhafi.

TOWNSEND: Wolf, you're absolutely right, but I think it's a dangerous path that the European leaders have chosen to take. But I would also point out that most of those European leaders, by the way, have better diplomatic, longer-term diplomatic and commercial relationships in Libya and deeper ties.

I mean, this is -- remember, it's not so long ago that Libya was still on the state's sponsor list and had its own weapons program. So our relationship doesn't have the depth and breadth in Libya that our European allies do. And let's also be honest -- American targets are a much more inviting target in terms of the Libyan government than the Europeans. We don't want to see anybody harmed, but I must say I think the president is right to exercise caution right now until he can get the Americans out.

BLITZER: All right, Fran. Thanks very much.

Let's go to CNN's Fionnuala Sweeney. She's following all of this from Cairo right now.

Some tough talk, Fionnuala, from Gadhafi today. What's the latest from your vantage point?

Unfortunately, we just lost Fionnuala Sweeney. We're going to try to connect with her in a few moments.

We did learn today, by the way, that Switzerland is now freezing the assets of Moammar Gadhafi in Switzerland. They're putting the financial squeeze on Gadhafi and his sons, the entire family. They've stolen billions and billions of dollars.

We're watching that part of the story. We'll check in with Fionnuala.

Ben Wedeman is in Libya right now. We'll check in with him.

We're going to check in with all of our correspondents. Stand by for that.

Here's a question: Is Saudi Arabia the next domino to fall? It's one of the world's largest oil providers, so everyone is watching very, very closely. The king of Saudi Arabia is proposing dramatic some changes to avoid an uprising in his kingdom.

Plus, rescue operations continuing in that massive earthquake in New Zealand, but hope is fading fast.

(COMMERCIAL BREAK)

(JOINED IN PROGRESS)

BARBARA STARR, CNN PENTAGON CORRESPONDENT: -- mission in the United Arab Emirates, but top military commanders, security experts, and some famous faces from around the world.

(BEGIN VIDEOTAPE)

STARR (voice-over): Arms buyers and sellers from around the world are here. Some strange political and military bedfellows are shopping.

Walking around, Sudan's military chief. We notice his Chinese military escort officer tries to evade our camera. China is a close military ally of this often criticized African military force.

(on camera): What is Sudan's priority right now?

GEN. ABDOULRAHEEM MOHAMED HUSSAIN, SUDAN CHIEF OF STAFF: We are looking for defensive equipment.

STARR: And I notice you're being escorted by the Chinese military attache.

HUSSAIN: Because we have a very long history with the Chinese. And most of all, equipment in Sudan is from China.

STARR (voice-over): Lebanon's military chief is with the Ukrainians. There's a new anti-tank missile. The general says he needs weapons to defend against invaders.

UNIDENTIFIED MALE: We are trying to concentrate on the missiles, anti-aircraft, anti-tank missiles.

STARR: We stopped at the Russian sellers of the legendary Kalashnikov rifle, and are shown the latest models.

UNIDENTIFIED MALE: Yes. The original design is producers of Kalashnikov rifles.

STARR (on camera): What is the one you recommend the most?

UNIDENTIFIED MALE: It depends. I mean, there is no -- the most perfect weapon does not exist.

STARR (voice-over): Suddenly, Sheikh Mohammed bin Zyad al-Nyahan (ph) of Abu Dhabi is in front of me. This crown prince is deeply worried about the political crisis in the region. I tell him I'm a journalist for CNN.

The sheikh seems to be everywhere, meeting after meeting. I've been told he won't talk politics with a reporter.

Others here don't want to be so public. Erik Prince, walking by with his face covered, the controversial one-time head of the war zone private security firm Blackwater.

Outside, more secrecy. These men won't tell us exactly which Middle East military they train, but they're checking out a new naval commando boat. The company's rep tells me he'll make one for me minus the weapons. Only a licensed government can really make a purchase here.

UNIDENTIFIED MALE: You can still have a rough and tough boat that goes very fast on the water.

(END VIDEOTAPE)

STARR: So I finally found something I would be allowed to buy if I could only afford it. Rumor is you can get this boat from the Dutch manufacturer for just under $1 million. Floor mats and racing stripes included, but no .50-caliber machinegun on the front for me -- Wolf.

BLITZER: Let me go right to John Zarrella. He's over at the Discovery's final liftoff.

It took off about a half an hour or so ago, John. But we're looking closely at the videotape. What are we seeing?

JOHN ZARRELLA, CNN CORRESPONDENT: Yes, Wolf, it came at about 3.5 to 4 minutes into the flight. And it looks pretty dramatic when you look at that video. And I think we have it, and we can also slow it down and watch it as well.

But what you're seeing is, that's foam that is coming off, being shed from the giant external tank. So it's after booster separation, which comes in about two minutes. And again, it's just about 3.5 to 4 minutes in.

It looks real dramatic, but the reality is that when you get up that high in the altitude, the atmosphere is so thin, that these pieces of debris, which unfortunately do fall off on a fairly regular basis, they really don't do much damage. But you can see that it's hitting the underbelly of the space shuttle there. That's the shuttle on the top, the giant external tank on the bottom of the screen there, the shadows there.

You can see some of the tiles of the underbelly. And there it is, watching that material.

It kind of just floats away and off. I'm sure in the NASA news conference coming up in about 20 minutes they will address that. They certainly don't take anything lightly when it comes to debris coming off the vehicle.

That, of course, as we know, is what caused the Columbia disaster, when the leading edge of the wing was damaged by foam coming off of the external tank. So they will take a critical look at this.

And, you know, Wolf, they have the capabilities now since the Columbia accident to actually go outside, do a spacewalk. And if there were, say, a damaged tile under there, they can put an astronaut on the end of a robotic arm either from the station or the shuttle and they can literally repair those tiles.

But we'll be listening to that news conference at 6:00, the post- launch news conference. Other than that, Wolf, picture-perfect launch.

The astronauts are on their way to a rendezvous with the space station. And at this point, it does not appear at first blush to be anything too, too seriously. As one of the NASA people told me, if it had happened within the first minute of launch, that would be a little bit more of a concern -- Wolf.

BLITZER: Well, that's good news that it's probably not very serious. I want to just let our viewers know, we were looping -- or we were repeating that video showing the foam going off. It only happened once, but we kept repeating that video, as we say, in a loop, and it looks a lot more dramatic than it actually is.

The foam coming off, I take it, is not as bad as if tile would have come off. If an actual piece of tile would have come off, that would have been so much worse.

ZARRELLA: Oh, yes, there's no question about that. When you take off those pieces of tile, certainly in some of those critical areas, like in Columbia, which was on the leading edge of the wing, and then on reentry you had those hot gases getting inside the vehicle, that is a real concern if you lose a tile or a tile is penetrated and damaged.

The foam off the external tank is meaningless. It's gone, the tank is gone, don't need to worry about that.

The question would be, were any of the tiles damaged underneath there by this foam hitting it? But again, Wolf, at four minutes in, the atmosphere is so thin, it really doesn't do much damage.

BLITZER: Well, that's good news. You'll let us know after that briefing at 6:00, in about 15 minutes or so, what the headline is.

Appreciate it.

John Zarrella, our man watching this story.

We're going back to Libya in just a couple minutes, including an in-depth look at Moammar Gadhafi's sons and their luxury lives, parties with Mariah Carey, Usher. And that's not all.

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BLITZER: There are huge concerns right now about the world's oil supply as anti-government protests spread not only in Libya and North Africa, but throughout the Middle East. Oil prices have spiked, but they could skyrocket if the unrest were to spread to Saudi Arabia.

We asked CNN's Mary Snow to take a closer look into that possibility.

Mary, what did you find out?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, the possibility of unrest spreading to Saudi Arabia seen as unlikely, according to many analysts, but the worries still persist in the oil markets. And oil has been rising on the question of what if? What if the unrest leads to disruptions in oil even though there haven't been any disruptions yet?

(BEGIN VIDEOTAPE)

SNOW (voice-over): The scene in Saudi Arabia Wednesday. King Abdullah, now 86, was welcomed home after spending three months abroad for medical treatment. Beyond its borders, though, there is concern in the oil markets about unrest spreading to Saudi Arabia.

Fadel Gheit is an oil analyst.

FADEL GHEIT, OIL ANALYST: I don't want to a fearmonger here. I don't think it's likely. I think the probabilities are low. But the market is concerned, and rightfully so.

SNOW: Saudi Arabia is the world's largest oil exporter, producing more than 8.5 million barrels of oil a day, more than Iran, Iraq and Kuwait combined. And much more of Libya, where fears of oil disruption have rattled the markets.

GHEIT: Saudi Arabia produces six times as much as Libya, so you can see if Libya gives the market a $10 push in oil prices, Saudi Arabia will give us a $60 push in oil prices, maybe a $100 push. But obviously that's all speculation.

SNOW: But as that speculation pumps up prices, it's also giving oil-rich Saudi Arabia more cash.

On Wednesday, as the king returned, he announced billions of dollars to help ease economic hardship, money for things like housing, employment and education. Former undersecretary of state Nicholas Burns says he sees relative stability in Saudi Arabia and doesn't expect it to be threatened the way Egypt and Libya were. But Saudi Arabia is taking notice of unrest, especially in neighboring Bahrain and Yemen.

NICHOLAS BURNS, FMR. UNDER SECRETARY OF STATE: So the $10.7 billion package of proposals yesterday I think is a direct attempt by the Saudi leadership to, in essence, say to its own population, we can provide, we, the Saudi leadership, for the needs of the people in this kingdom, we will react and respond to this crisis that is taking place all around Saudi Arabia and the wider Middle East.

(END VIDEOTAPE)

SNOW: And Saudi Arabia may react to the crisis in another way. "The Financial Times" reports Saudi Arabia is in talks to boost supplies to calm oil markets, even though no oil has been disrupted yet. Saudi Arabia holds the bulk of OPEC's spare capacity -- Wolf.

BLITZER: All right, Mary. Thank you.

Mary Snow reporting.

CNN's Ben Wedeman takes us inside a combat hospital in eastern Libya. We're going there. Doctors say they're shocked and overwhelmed by the casualties.

And what would it take for the U.S. military to actually intervene in Libya right now?

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BLITZER: Jack's back with "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is: Should the government cut Social Security, Medicare and Medicaid in order to attack the deficit?

David in Virginia writes, "Sure, as long as you also cut defense, cut oil subsidies, cut farm subsidies, and raise taxes on the rich. Everybody has to bail out the boat or we're all sunk. You can't have two percent of the passengers drinking margaritas and watching everybody else doing the work. Otherwise, the other 98 percent are going to throw them overboard at some point."

Jim writes, "Yes, those programs should be on the operating table, and it can be done without hurting anyone by simple means testing. The wealthy should have these entitlements cut. It won't hurt them. It's right and good for the government to provide safety nets for those who need them. It's ridiculous to provide them for those who don't."

Tom in Georgia writes, "It depends on how you ask the question. Cutting Social Security Medicare and Medicaid is an ugly way of saying it. And the polls clearly say people are not in favor. But if you substitute reform for cutting, you would get broad agreement. I think people are beginning to understand that the level of our nation's entitlements is not sustainable."

Joe in Houston agrees. "Your question presumes there's an option. There is not."

Timothy writes, "No, there's only one solution to fix the deficit. Raise taxes on all of us. That's the only way to get rich people to pay their fair share. My family makes well below Obama's magic $250,000 a year, but we're willing to tighten our belts, pay an addition 3 to 5 percent in taxes, if it will get us out of this crushing deficit and stifling debt."

Arlene in Illinois: "Isn't it ironic the people who are shaping our future are not covered by Social Security but know what's best for the rest of us? I get $500 a month. My husband gets $1,150. Boy, do we live high in on the hog."

"Come on over tonight, Jack, for supper. We're having beans and weenies."

If you want to read more on this, you'll find it on my blog, CNN.com/CaffertyFile.

BLITZER: Jack Cafferty, thank you. We'll see you in a few moments.

Evacuating Libya. Why have British citizens gotten out while American citizens wait and wait and wait?

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