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THE SITUATION ROOM

Should President Obama Do More in Libya?; US-Libya Hot and Cold Relations; Oil Supply at Risk in Middle East; Americans Murdered by Pirates; Libya's Strange Strongman

Aired February 26, 2011 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: Anti-government protesters now in control of some major Libyan cities. CNN is inside the country following this historic revolt and Moammar Gadhafi's brutal crackdown. The Libyan leader is vowing to fight to the death to hold on to power. This hour, his threats, his rants and his strange behavior now and in the past.

And the world's oil supply at risk. What if the unrest spreading through the Middle East explodes in Saudi Arabia?

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We strongly condemn the use of violence in Libya. The American people extend our deepest condolences to the families and loved ones of all who have been killed and injured. The suffering and bloodshed is outrageous and it is unacceptable. So are threats and orders to shoot peaceful protesters and further punish the people of Libya. These actions violate international norms and every standard of common decency. This violence must stop.

(END VIDEO CLIP)

BLITZER: President Obama condemning Moammar Gadhafi 's attacks on protesters and his vow to execute his enemies. The unrest, the violence and the threats exploding in Libya this week; Gadhafi acting and sounding as defiant and as dangerous as ever. The Libyan leader appeared yesterday before seemingly supportive crowds in Tripoli where his opponents have been largely scared off the streets.

But outside the capitol opposition forces have been gaining ground moving closer and closer to Gadhafi's power center. CNN's Senior International Correspondent Ben Wedeman is one of the few reporters inside Libya. He's been in the midst of the protests in Libya's second largest city Benghazi.

(BEGIN VIDEOTAPE)

(CROWDS CHANTING)

UNIDENTIFIED MALE: (words on screen over crowds chanting): I'm rolling.

BEN WEDEMAN, CNN SR. INT'L. CORRESPONDENT): All right. We're coming to the hub, where we've driven right through this demonstration. They put flowers on our car. (INAUDIBLE) they gave me an olive branch. Now we're trying to get through this crowd. These people of course have not see any media, so they are thinking of us as some sort of saviors. The fact of the matter is we're trying to get we're just trying to get to an interview with some prisoners, Libyan soldiers, and mercenaries. So, who knows when we're going to get out of this mess. Because these people, they see the camera, they see the foreigners, and they

UNIDENTIFIED MALE: Ben, I should really have you wired up.

Ben, how does this? Hang on.

WEDEMAN: How does this-what?

UNIDENTIFIED MALE: I mean, have you ever, in all your-have you ever.

WEDEMAN: OK, no.

UNIDENTIFIED MALE: Had this happen?

WEDEMAN: It's been 42 years since these people have been living under this old regime and obviously they've got so much inside of them what they need to get out. Where ever you go, people will talk endlessly, endlessly to you, telling you their problems, their experience, their hopes, their dreams.

UNIDENTIFIED MALE: You gotta look at me when you talk.

WEDEMAN: My hope is just to get out of this crowd, so we can do what we need to do and get some work done.

(CROWDS SINGING, WHISTLING, CHEERING)

WEDEMAN: This demonstration in Benghazi gives you an idea of the passion of the people of this city, the passion of so many Libyans who have been thirsting for 42 years for this sort of opportunity, the chance to express themselves freely.

(CROWD CHANTING)

WEDEMAN: We arrived in this city. And from the beginning, everywhere we went, I felt like I was an American soldier going into Paris during World War II. Everybody clapping and cheering. We are the first television crew to get to this city. And we were just overwhelmed by the welcome here. People were throwing candy inside the car, clapping, shaking our hands, telling us, you're welcome, thank you for coming here. An incredible experience.

(CROWDS CHANTING, SINGING)

WEDEMAN: And I'm almost -- I feel like I'm just not up to the task of conveying the significance of what we're seeing here. (CROWDS CHEERING)

It's noisy. It's chaotic. But the people are ecstatic. Pictures just say it all. Ben Wedeman, CNN, Benghazi, Libya.

(END VIDEOTAPE)

BLITZER: Many people are desperately trying to get out of Libya any way they can. Some have been able to drive to neighboring Tunisia. Our Senior International Correspondent Nic Robertson has been talking to refugees as they cross the border.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN SR. INT'L. CORRESPONDENT: That's the border post right up there. That's where people have been streaming through all day, several thousand, as many as 5,000 according to some eyewitnesses. It's slowed to a trickle now but when people get across, there are medical tents here, aid tents to help them. And over here they get marshaled through this point here. You can just see if you look over here -- you can see the man handing out refreshments. This is what happens when people get across the border. The first thing they're given here when they come across, they're given some refreshments.

This gentleman here handing out biscuits. Can we take a look, sir? These people just having crossed the border, here. This gentleman handing out biscuits. This is the welcome by Tunisians when they cross over. If you come down here a little further, you can see the border where people are driving through. Obviously carefully controlled; soldiers, additional troops, put on duty here. And over there the main processing, a place people can get a car to get transported out of here.

Once people get through that border point, they get a chance to stop, put their bags down, figure out how they're going to move beyond here. In here there's sort of a soup kitchen set up. We can just go inside and take a look. But again, this is all being run by Tunisian volunteers. They're providing free transport away from the border, kind of fix people up with accommodation. And here, putting it rough and ready as you see but sandwiches being made up, handed out to people. Thousands of these French baguettes, and sort of tomato, tuna mix being put in there. But food handed out for everyone who turns up.

And around here you can see a lady carrying a baby through here. And it's where people here have been telling us their stories, their stories of what life has been like in Tripoli, and how the journey out has been.

OSAMA SAID, HOTEL MANAGER: I can say that I heard lots of explosion, bombs and guns and lots of -- I'm working in a hotel, so second day, the hotel asked us to leave the hotel this day. We couldn't sleep that day. It seems like a war on this night.

But the situation from the morning, till 4:00, the town is quiet and you can go on by and -- but after 4:00, after noon, you cannot go here or there. You cannot get down from your home.

ROBERTSON: How dangerous was it to leave the city and to leave your home and come here?

SAID: We saw in the road lots of car crashed and burned, and objects, and things. So I don't think that we would be able yesterday or the day before, or before the last four days, to come.

ROBERTSON: This was the first time it was safe?

SAID: Yeah. I think today was safe. Just a couple of people searching and investigating the bags and your cell phone. They are cracking the SIM card of the mobiles, and the memory cards.

ROBERTSON: So you can't take your phone card out with you?

SAID: No, no, you cannot. Because there's about 20 points to investigate you and the first thing they are asking you about, where your SIM card, show me your phone, where is your memory card? And they crack it and break it.

ROBERTSON: What he's doing is gathering people up, offering them a ride to Bengardin (ph), this is the next town just along from the border. It's about 40 kilometers away. When we were there the streets were already filling up. But if you look over here -- excuse me -- if you look over here, you can see a bus starting to fill up. This is a ride -- a free ride people are getting, dragging their bags here through the mud.

This is a free ride that the Tunisians are giving them to get away from the border to get to somewhere a little warmer and a little drier. It's quite cold out here. It's been tipping down with rain, heavy rain all day. This is a chance for these people to get a ride away from the border. Nic Robertson, CNN, at the Libyan/Tunisian border.

(END VIDEOTAPE)

BLITZER: We also heard some scary stories from people who took another route out of Libya landing in Malta in the Mediterranean. Listen to this.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The airport-oh, organized anarchy. There's one term I could come up with. Basically, it was just a complete mess. The whole place is just a rubbish dump. It doesn't matter. People are abandoning every last piece of luggage they've got. I'm one of the lucky few who actually managed to get through because there's so many stampedes, the police get fed up with people, with the overcrowding. They charge with batons and cattle prods, and occasionally small arms fire just to basically frighten people off.

UNIDENTIFIED FEMALE: It's very scary.

UNIDENTIFIED MALE: Yes, scary in the night there's some gun fighting in the city at night.

UNIDENTIFIED FEMALE: There were a lot of tears and people were leaving very quickly. People were running to the airport without a ticket, with just a backpack, leaving all of their belongings behind, their pets behind.

UNIDENTIFIED MALE: There's probably seven guys with machine guns around and we had to give them our passport.

(END VIDEOTAPE)

BLITZER: Is president Obama doing enough to end the crisis in Libya? Nick Kristof of "The New York Times" is weighing in. We'll speak with him.

Plus, he's ruled Libya with an iron fist for more than 40 years, but he's apparently afraid to fly over water or stay on the upper floors of hotels. Just ahead, the colorful past of Moammar Gadhafi. Stay with us, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's dig deeper right now, the crisis in Libya. Joining us from Cairo, Egypt, "The New York Times" columnist Nicholas Kristof.

Nick, thanks very much.

I was intrigued by this Tweet that you put out, saying, the courage of pro-democracy protesters in Libya is matched only by the fecklessness of the international community. Fecklessness, weak, worthless, explain what you mean by that.

NICHOLAS KRISTOF, COLUMNIST, "THE NEW YORK TIMES": Well, at the same time that you have these unbelievable protesters marching unarmed, for example into Tripoli, into -- right into these people with machine guns, you have an international community that's essentially wringing its hands. And there are things that we can do.

Nobody is proposing that we invade Libya. That would be a mistake for a million reasons. But it's imperative right now that we send signals to try to peel off the Libyan military from Gadhafi himself. And there are ways we can signal that. And we're basically talking about talking, we're not doing anything more.

BLITZER: Give us some examples, specific examples, of what the international community should do.

KRISTOF: Well, I think there are -- one basic thing we can do is work a no-fly zone. If it was done elaborately then it would be take a lot of resources, but one can simply announce that any aircraft, any military aircraft that are used to attack civilians will lead to a reprisal. That we're not going to have planes above Libya at all times, but that when (AUDIO GAP) but when those aircraft are used against civilians, then later Libya is going to lose aircraft on the ground, same with ships. And that can be imposed immediately and be under conjunction with NATO, for example. A second thing we can do, I was talking to somebody in Tripoli today. He was saying that military units there, one base in particular, that they want some kind of signal from the United States, and other countries, so that they can be reassured that if they stay on their base and don't get involved that they will be protected, that they won't be attacked. And we should send those kind of signals to the Libyan military, and ask them not to get involved in this.

BLITZER: It looks, though, like the statements out of European leadership are stronger than the statements coming out of the Obama administration. They're much more specific. They're much more pointed. And they're naming Gadhafi specifically. Is that your sense as well?

KRISTOF: The Obama administration was worried that if we led the way there might be reprisal attacks on Americans in Tripoli. But at this point, that ferry carrying so many of those Americans has now left. And at the end of the day, when you have these Libyans leading the way, when you have Libya -- when you have the pro-Gadhafi forces and machine gunning these protesters then I think it is incumbent on us to do more. I think it's sad that Europe is leading the way, and we're kind of hiding in the wings.

BLITZER: I'm really concerned, though, that Gadhafi in maybe his final hours, maybe final days, he'll really unleash the mercenaries, the non-Libyan troops, some of his own thugs and randomly start killing not just hundreds but thousands of people. He does have weapons over there that are fully capable of doing that. How concerned should the world be about that?

KRISTOF: It's really hard to know. But his interior minister, who presumably knows him better than you or I, has warned about the possibility he might use biological weapons. Just let them loose on civilian populations. Now, in this situation, I mean, there's not a lot we can do at the end of the day. But one of the things we can do is make sure he doesn't have use of his air assets and of his ships. Those are the ways that he would be able to attack Benghazi, for example.

And I spoke to somebody who was involved in three ships that were ordered to leave Tripoli and attack Benghazi. And those naval commanders did not openly disobey but in practice are stalling. They don't want to do that. We need to send signals to those people to encourage them, to give them safe passages to Malta, for example, so they know how to get away and those attacks won't take place. We can at least mitigate the degree of killing even if we can't forestall it completely.

BLITZER: One final question, Nick, before I let you go and it's a tough one. If the U.S. were to find out where Gadhafi is hiding out right now, would it be appropriate to kill him, to drop a hell fire missile from a drone, let's say, and just kill him once and for all?

KRISTOF: That is a pretty tough question. Boy, you know, I'm really tempted to say yes. I am a little bit nervous that if you had unilateral action by the U.S., that that would resonate in Libya, among nationalists as an foreign imperialist power intervening. I would have to think about that. I would be worried about other casualties and want too know how sure we are that we would actually be able to take out Gadhafi . It would work an awful lot better if it were a joint American/Tunisia and Egyptian operation in some form.

BLITZER: Nick Kristof, we'll check back with you. Nick, he Tweets on Twitter @NickKristof if you want to read his stuff. It's really good.

We're not leaving the crisis in Libya. Just ahead, the million-dollar lobbying campaign that helped bring a terrorist country closer to the United States.

Plus, he travels with a team of female bodyguards and some say he's afraid to fly over water. We're digging deeper into the colorful past of the Libyan leader Moammar Gadhafi.

(COMMERCIAL BREAK)

BLITZER: Libyan TV aired footage of the country's embattled leader making an unexpected public appearance. Moammar Gadhafi said yesterday he was one with his people and vowed to defend Libya against outside influences.

(BEGIN VIDEO CLIP)

MOAMMAR GADHAFI, LEADER OF LIBYA (through translator): The revolution is reviving. The revolution is standing in the faces of everybody. They wanted to bury our glory. I am among the people. We will fight. We will repel them. They have to get out of Libyan lands. We will defeat any campaign, any foreign campaign as we have done before, as we have done against the American raids.

(END VIDEO CLIP)

BLITZER: Days into anti-government demonstrations and violent retaliations, Libya is clearly in turmoil. Oil prices are rising. The Arab League suspended Libya. High-level diplomats have defected, yet the Libyan strongman vows to stay in power, and to execute those who would defy him. CNN's Brian Todd is here in THE SITUATION ROOM for us.

His tenacity -- Gadhafi 's tenacity, is it surprising?

BRIAN TODD, CNN CORRESPONDENT: Not surprising at all, Wolf. We have talked to analysts who have discussed the Gadhafi regime for years, who have analyzed the regime, talked to one former official who met with Gadhafi. Not one of them is shocked by his public remarks this week, including a lengthy speech he gave to the nation earlier this week, which they say all fit Gadhafi's pattern of defiance and delusion.

(BEGIN VIDEOTAPE)

GADHAFI (through translator): I am supported by millions and by God.

TODD (voice over): From his house bombed by the Americans in the '80s next to a monument of a golden fist crushing a U.S. warplane. He waxed paranoiac for more than hour. Said Libya's young protestors have been poisoned by enemies who gave them hallucination pills and alcohol. Said he'd become a martyr before he ever left power. It was vintage Moammar Gadhafi.

GADHAFI (through translator): This march cannot be stopped, stopped by those agents, those rats, those cats who move in the dark.

TODD: U.S. security officials say the speech came as Gadhafi had effectively lost control of the city of Benghazi and other areas of eastern Libya.

(On camera): Gadhafi's apparent disconnect doesn't surprise Noureddine Jebnoun, professor at Georgetown University's Center for Contemporary Arab Studies. He's with me right now.

Professor, does this man comprehend at all what's going on in his country?

PROF. NOUREDDINE JEBNOUN, GEORGETOWN UNIVERSITY: No, not at all. He's out of touch. He's off base. And for the simple reason he didn't understand like people are rejecting his regime completely.

TODD: Why do you think they're rejecting him at this point?

JEBNOUN: They are rejecting his regime because he didn't offer to them anything. He offered to them nepotism, corruption, terror and a kind of tribalism.

TODD (voice over): This is a man who has ruled over Libya with a culture of fear since taking power in 1969 at the age of 27. Diplomats say he's afraid to fly over water, afraid to stay on upper floors of hotels, and doesn't look people in the eye. He travels with a team of female bodyguards. Prefers to bring with him a ceremonial Bedouin tent and voluptuous blond Ukrainian nurse, all according to U.S. diplomatic cables posted on Wikileaks. During the height of his conflicts with the U.S., in the 1980s, President Ronald Reagan made it personal.

RONALD REAGAN, FMR. PRESIDENT OF THE UNITED STATES: This mad dog of the Middle East.

TODD: That was the period when Gadhafi was linked to the bombing a Berlin disco that killed two U.S. servicemen and later the Pan Am 103 bombing over Lockerbie, Scotland.

(On camera): Why did he sponsor so much terrorism in the '80s?

JEBNOUN: Yes, it is by opportunism and ideology, you know? He was behind like the Irish Republican Army. He hasn't any common ground with the Irish Republican Army.

TODD: By 2003, Gadhafi had given up his weapons of mass destruction, started helping the U.S. in the war on terror, and began paying reparations to Lockerbie victims' relatives. Now his sons are in the spotlight. He has at least five. One as his national security adviser has met with Hillary Clinton. Mideast experts say another son, Hannibal, has had a string of violent incidents. In Switzerland he was once arrested for assaulting his staff and his mug shot ended up in the papers. The Libyan government responded by briefly holding Swiss businessmen hostage.

His most trusted son is Saif Al-Islam Gadhafi , Western educated, charming but who has also come out and shamelessly defended this crackdown.

SAIF AL-ISLAM GADHAFI, COLONEL GADHAFI'S SON (through translator): We're not Egypt. We're not Tunisia.

TODD: CNN contributor Fran Townsend has met Saif Gadhafi.

(On camera): Do you think he has the backing of some of the tribes and some of the other security apparatus that his father did, though? That's really where the rubber hit the road, right?

FRANCES FRAGO TOWNSEND, FMR. BUSH DIR. OF HOMELAND SECURITY: That's exactly right. That's the real question. It's not-you know, Colonel Gadhafi, the leader there, has very much controlled that himself, the relationships with the tribes and the security services. And the question is, is Saif strong enough? Are his relationships in those areas strong enough to transfer from his Father? I think we don't know the answer to that yet.

(END VIDEOTAPE)

TODD: The answer may hinge on his son's abilities to curry favor with some tribes and drive wedges between others. Analysts say Moammar Gadhafi was a master at that, and at keeping the security and business elite on his side despite coming from one of the smaller tribes in Libya, Wolf.

BLITZER: When he goes down, and I think everybody senses he's eventually going down. Might be a few hours, might be a few days, or a few weeks. Is there a structure there that can take charge?

TODD: The short answer is really, no. There's no Constitution, there is no legislature. He set up these popular committees, but they really kind of rule on his behalf. This is really a nation run on one man's whim and one analyst told me, unfortunately, that man is a guy who acts like Tony Soprano, the old character on the HBO series. He is just very unpredictable and violent.

BLITZER: And he's very, very dangerous right now. Brian, thanks very, very much.

There's a lot of options out there. What can the United States do about all of this? Has the Obama administration been tough enough in speaking out against the violence in Libya? These are questions that need some answers right now. Joining us our senior political analyst Gloria Borger.

Gloria, I assume now that some Americans have gotten out of Libya there's going to be a much more vociferous U.S. response. The rhetoric will ratchet up.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, as you know, Wolf, the tone has been very restrained, although we've said that he's got to stop what he's doing, et cetera, et cetera. We haven't said Gadhafi must go.

And I've been told that this restraint is because they are really worried about the fate of American citizens, don't you think? That's what kept Obama from even making a public statement early on.

BLITZER: There a lot more European citizens in Libya and the Europeans have been much more vocal --

BORGER: They have.

BLITZER: -- in their public statements. The European leadership whether in France or in the U.K. or in Italy, they've got a much more important relationship with Libya as well.

BORGER: There's also a question here about what kind of leverage do we have anyway? What kind of leverage does the U.N. Security Council have anyway? I mean, if you want to do a no-fly zone you have to get it approved by the U.N. and that's quite difficult. So what other options are there that they can really use that could have effect?

BLITZER: But if the evidence is there that they're slaughtering people on the streets, I think the United Nations Security Council including Russia, including China, would authorize an international coalition to go ahead and impose a no-fly zone.

Look, the NATO has a base in Aviano, which is not far away in Italy and they've got a lot of fighter jets. The U.S. has F-16s. F-15s. They could easily declare a no-fly zone over Libya right now.

Any helicopter goes up, shot down. Any plane goes up, shot down. Just as the U.S. and its partners -- mostly the U.S. did over Iraq in the '90s when Saddam Hussein was in power.

BORGER: And don't forget financial sanctions. They could clearly freeze the assets of Gadhafi and his family and an arms embargo possibly.

BLITZER: Yes, but, you know, all of that is going to take some time to get going, the financial -- there are immediate steps that the U.S., if it were willing to put together a coalition could do. Going now to Geneva and meeting with the United Nations Human Rights Council of which Libya not that long ago was the chair of the U.N. --

BORGER: What was it doing there in the first place.

BLITZER: -- honored member of the United Nations Human Rights Council.

BORGER: Toothless -- toothless human rights council.

BLITZER: What they got to do is they got to tell the Libyans, the military leadership, all the mercenaries, the thugs there, Gadhafi, his sons. You know what, unless you give up, you will be not only arrested, tried, war crimes, tribunals, or whatever but you might even be killed in the process because they're going to want to save lives.

BORGER: To the larger point, Wolf, isn't this the result of the United States dependence on oil that essentially we're willing to make friends, get in bed with, use whatever cliche you want with, people we would not ordinarily standing next to on a foreign stage.

BLITZER: A lot of people are embarrassed right now including high officials in the Bush administration and in the Obama administration about the way the United States warmed up to Gadhafi over the past -- since 2004 when he renounced his nuclear program.

Said he was giving up his weapons of mass destruction. Everybody knew what he was doing inside Libya. They knew what he was doing to the people of Libya, but even Condoleezza Rice went there when she was secretary of state. Hillary Clinton received the son at the State Department.

BORGER: George W. Bush credited him --

BLITZER: A lot of people are embarrassed by their behavior right now. And I'm hoping that the top leadership here in the United States and in Europe, elsewhere around the world, including in the middle east, they learn the lessons -- once you start coddling up to these thugs and dictators you're going to pay a price.

BORGER: You know, domestically, Wolf, I was thinking this does give the Obama administration opportunity to talk about offshore drilling again. I know we've been through the whole BP crisis --

BLITZER: This energy independence thing for 30 years and you know, it really hasn't happened, it's only gotten worse. I'm sure we'll hear it for another 30 years.

BORGER: Hope springs eternal.

BLITZER: Yes, Gloria, thank you. We have a lot more on this crisis in Libya including the multimillion dollar lobbying campaign here in Washington that helped ease Gadhafi's icy relationship with the United States. Stand by for details.

And as the violence spreads across the region, there are new fears about the already soaring price of oil.

(COMMERCIAL BREAK)

BLITZER: As Libya's Moammar Gadhafi vows to crush the uprising against him, the Obama administration has been looking into all possible options including sanctions and a no-fly zone.

Just the latest swing in the tumultuous relationship between Washington and Tripoli, we asked Lisa Sylvester to give us some background. It is a tumultuous relationship. LISA SYLVESTER, CNN CORRESPONDENT: Now, Wolf, you know, Moammar Gadhafi has gone full circle from being shunned by the international community, Libya labeled a state sponsor of terror then embraced by world leaders within recent years, now to being condemned again.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): A series of high profile meetings in 2008 and 2009. Moammar Gadhafi meeting with Secretary Of State Condoleezza Rice, embraced by Prime Minister Tony Blair, a warm greeting by Italian Prime Minister Silvio Berlusconi and then a meeting between Secretary Of State Hillary Clinton and the Libyan leader's son, Mutassim Gadhafi.

HILLARY CLINTON, U.S. SECRETARY OF STATE: We deeply value the relationship between the United States and Libya.

SYLVERSTER: Suddenly the same Libya blamed for the bombing of Pan Am 103 over Lockerbie was being welcomed in international circles, all the result of a public relations campaign by Libya to shake off its image as an international pariah and state sponsor of terror and to be accepted by the international community. Moammar Gadhafi began in 2003 agreeing to give up his weapons of mass destruction program.

DAVID SCHENKER, WASHINGTON INSTITUTE FOR NEAR EAST POLICY: Libya was reeling from decades of multilateral sanctions that had really held the country back. They were looking forward to investment in the oil industry in the country and really needed an opening to the west to do this.

SYLVESTER: Libya hired some of the best and brightest U.S. lawyers and lobbyists, the Livingstone Group, Blankrome and Whiting case spending more than $2 million in 2008 and 2009, according to records filed under the Foreign Agents Registration Act.

Libya's hired representatives pressed the State Department and members of Congress to lift economic sanctions and to exempt Libya from an anti-terrorism law that would have allowed victims of terror to seize government assets. Paul Blumenthal has written extensively on Libya's lobbying efforts.

(on camera): It seems like they went from 0 to 60 where they had absolutely no lobbying to ramping up lobbying efforts here.

PAUL BLUMENTHAL, SUNLIGHT FOUNDATION: They absolutely did ramp up lobbying efforts really fast and a lot of that is because the economic sanctions came down. They were removed as a state sponsor of terrorism by the international community and all of a sudden you had the African nation with the largest oil reserves in the world available for business. And you had tons of companies -- Chevron, Bp, Exxonmobil looking to gain entrance into this country.

SYLVESTER (voice-over): Oil companies like Shell and Marathon Oil also jumped in and lobbied the U.S. government on behalf of Libya. The result was a major turnaround. Not only did Washington elite welcome Gadhafi and his family so did Hollywood. Superstars from Lionel Richie to Beyonce were paid big money to perform at lush parties in the Caribbean and the Middle East.

(END VIDEOTAPE)

SYLVESTER: And now there are calls to re-impose those economic sanctions on Libya coming from among others Senator John Kerry, head of the Senate Foreign Relations Committee. He has called the crackdown on protesters beyond despicable, Wolf.

BLITZER: Yes, certainly is. A lot of people are dead right now and we're fearing many, many more will be killed. Lisa, thanks very much.

We're going to stay on top of the Libya story. We're also following other news including those four Americans who were killed aboard their pirated yacht off the coast of Africa. Even as the U.S. military attempted to negotiate their release. We're piecing together the final moments.

And oil prices surge on concerns about the world supply, but could it be just the beginning? We're looking closer at the worst-case scenario and what it could mean for you. Stay with us here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: There are deep concerns right now about the world's oil supply as anti-government protests spread in the Middle East and North Africa. Oil prices have spiked, but could they skyrocket if the unrest were to spread to Saudi Arabia? Mary Snow is looking into that possibility for us. Mary, what are you finding out?

MARY SNOW, CNN CORRESPONDENT: Wolf, analysts say that that possibility of unrest spreading to Saudi Arabia is unlikely, but the worries still persist and the oil markets prices have been rising since mid-February on the question of what if unrest leads to disruption in supply.

(BEGIN VIDEOTAPE)

SNOW (voice-over): This 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, SENIOR ENERGY ANALYST FOR OPPENHEIMER AND COMPANY: I don't want to be a fear monger here. I don't think it's likely. I think the probabilities are low, but the market is concerned and rightly so.

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

GHEIT: Saudi Arabia produces six times as much oil as Libya, so you can see if Libya gives the market $10 push in oil prices Saudi Arabia will give us $60 or maybe $100, 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 to help ease economic hardship, money for things like housing, unemployment 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 Libya and Egypt were, but Saudi Arabia is taking notice of unrest especially in neighboring Bahrain and Yemen.

NICHOLAS BURNS, FORMER UNDER SECRETARY OF STATE: 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 this kingdom. We will react and respond to this crisis taking place around Saudi Arabia in the wider Middle East.

(END VIDEOTAPE)

SNOW: And Saudi officials are responding to the crisis in another way. On Friday the "Financial Times" quoted the international energy agency saying that Saudi Arabia began producing more oil to make up any short falls in supply from Libya, Wolf.

BLITZER: All right, Mary, thank you. Mary Snow in New York.

Piecing together the final moments for four Americans murdered by pirates off the coast of Africa. We're looking at what happened aboard their yacht that led to the tragedy.

And Jeanne Moos on the most unusual behavior of the Libyan strong man Moammar Gadhafi. Is he crazy or crazy like a fox? Stay with us here on THE SITUATION ROOM.

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BLITZER: And around the world, boating tour ended in bloodshed this week. Four Americans on a hijacked yacht were killed by pirates even as a powerful U.S. Navy ship stood poised for action.

Details are still emerging about the incident, lots of questions. CNN's Pentagon correspondent Chris Lawrence has been piecing all of this together for us as best he can. What are you learning, Chris?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: You know, Wolf, we're getting new information about what may have gone wrong with that rescue. We know that two of the pirates, the leaders actually, voluntarily came on board one of the U.S. Navy ships.

But the official says instead of negotiating in good faith, the U.S. detained and imprisoned these two pirates. And the official says the pirates had left word with the other pirates still on that hijacked ship, if we don't come back, kill the hostages.

(BEGIN VIDEOTAPE) LAWRENCE (voice-over): U.S. military might was right there. Hundreds of miles southeast of Oman, four Navy warships, drones overhead, special operations forces ready to move.

For three days they had been trailed the pirated yacht "Quest" trying to negotiate the release of the four American hostages. An officer who has commanded other anti-piracy missions says pirates can be young, poor and difficult to talk to.

Two pirates spent the night on board the "U.S. Sterett" but the pirates and their prize kept moving.

Without warning, Tuesday morning, a rocket-propelled grenade fired toward the "Sterett" 600 yards away, immediately the sound of gunfire from inside the cabin. Small boats carrying U.S. naval reaction forces raced out boarding without firing a shot. But U.S. sailors discovered the four American hostages shot.

Mysteriously, two pirates were already dead. Moments later, U.S. forces killed two more pirates below, shooting one, knifing another, 15 pirates in custody.

(END VIDEOTAPE)

LAWRENCE: This was the deadliest pirate attack on Americans in modern history. It really gives fresh warning to the fact that pirates may now be roaming up to 1,500 miles offshore. To put that in somewhat of a perspective, that is an area as large as the United States east of the Mississippi, in patrolling that area probably at any one time no more than 34 international ships at one time, Wolf.

BLITZER: Chris, what I hear you saying is that the decision to go ahead and arrest, to detain those two pirate negotiators may have then panicked the other pirates and as a result, they killed those four Americans. Is that what is under investigation right now?

LAWRENCE: Exactly. That's what they're looking at, Wolf. Not only did they imprison these two pirates, but apparently these were the two pirates who were sort of leading this group and were in command, so to speak, of this group of pirates. And by imprisoning them, it may have endangered the hostages with those instructions that is they left behind.

BLITZER: Chris Lawrence reporting for us. Thanks, Chris very much.

When we come back, Jeanne Moos and a most unusual look at Moammar Gadhafi.

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BLITZER: Even in the midst of an uprising, Libya's strong man, Moammar Gadhafi, is no stranger to strange behavior. CNN's Jeanne Moos takes a most unusual look at this most unusual dictator.

(BEGIN VIDEOTAPE) JEANNE MOOS, CNN CORRESPONDENT (voice-over): You could kiss him but you couldn't kiss him good-bye, not yet. Moammar Gadhafi gave one of his trademark fist-pumping, finger-pointing speeches, adjusting his hat, tossing around his robes. He spoke for an hour and 15 minutes and blamed much of the rioting on youths.

MOAMMAR GADHAFI, LIBYAN LEADER: Offer them those hallucination pills --

MOOS: Less you think you're hallucination. He kept repeating the hallucinogenic part -

GADHAFI: Treat them from the pills they are taking -- MOOS: As he rambled on, waiters came along not once but twice bringing refreshments. He finished with a final fist pump.

GADHAFI: -- revolution --

MOOS: And a supporter rushed forward to bestow a kiss on the Libyan leader. It was a speech as long as his odd appearance Monday was short.

UNIDENTIFIED MALE: Don't believe those dogs in the media.

UNIDENTIFIED MALE: What a nut.

MOOS: Gadhafi is a magnet for ridicule. For his look, for his traveling tent, for the female bodyguards who always accompany him, Steven Colbert imagined them protecting Gadhafi from protesters --

UNIDENTIFIED MALE: Choreographed waves of six-foot tall Libyan amazons spin kicking protesters in the jaw. It will be like a Janet Jackson video.

MOOS: After his 2009 speech at the U.N. when he ripped up the charter and tossed it, Conan O'Brien did a little translation re-visitation.

MOOS: We can't even agree how to spell the guy's name. Does it begin with a "g" or a "k" or a "q"? Does it end with a "y" or an "I"? The three cable news networks each spelled it differently. It's a vintage "Saturday Night Live" joke --

UNIDENTIFIED MALE: No two people spell it alike. Send us your spelling of Gadhafi and, remember, it can't be the same of any of these spellings.

MOOS: Many call him a madman.

UNIDENTIFIED FEMALE: We read that you are mad.

MOOS: Weird, yes, says Barbara Walters but -

UNIDENTIFIED FEMALE: Did I think he was crazy? No.

MOOS (on camera): The oddest moment of Gadhafi's latest speech came before it even began, when the cameras caught Libya's leader primping. (voice-over): That's the real Gadhafi pondering shall I button my collar or leave it undone as his country comes undone. Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: That's it for me. I'm Wolf Blitzer in THE SITUATION ROOM. The news continues next on CNN.