Associated Press reported Tuesday that the Pentagon is “considering a buildup of Navy forces in the Persian Gulf as a show of force against Iran.”[1]  --  Navy Newstand reported last week that the aircraft carrier USS Dwight D. Eisenhower had arrived in the Persian Gulf on Dec. 11.[2]  --  The Guardian (UK) reported that the notion of sending another carrier — perhaps the USS Stennis — was seen by CENTCOM commander Gen. John Abizaid as a way of reassuring Saudi Arabia.[3]  --  Both the USS Dwight D. Eisenhower (launched in 1975 and based in Norfolk) and the USS Stennis (launched in 1993 and based in Bremerton) are Nimitz-class carriers, the largest warships ever built.  --  Bloomberg News reported Wednesday that “Iran's rhetoric and ambitions ‘are clearly causing a lot of anxiety among our friends in the Gulf, and they want help,’ John Hillen, State Department assistant secretary for political military affairs, said in an Dec. 13 interview.”[4]  --  “If assigned to the Persian Gulf region, the Stennis may arrive as early as February,” according to an unnamed U.S. official.  --  The plan for the U.S. naval build-up in the Persian Gulf was first reported by CBS News.[5]  --  Meanwhile, in a move that was curiously underreported in U.S. media, “Iran announced on Monday it would replace the dollar with the euro in foreign transactions and state-held foreign assets, in an apparent response to mounting U.S. pressure on its banking system,” the News of Pakistan reported.[6]  --  BBC News reported the move as a Iranian decision to “shift its foreign currency reserves from dollars to euros and use the euro for oil deals in response to U.S.-led pressure on its economy.”[7]  --  “The dollar slipped slightly against the euro in New York trading although analysts said they did not expect the reaction to be too severe.” ...

1.

PENTAGON MULLING SHOW OF FORCE TO IRAN
By Pauline Jelinek

Associated Press
December 19, 2006

http://news.yahoo.com/s/ap/20061219/ap_on_go_ca_st_pe/us_iran

WASHINGTON -- The Pentagon is considering a buildup of Navy forces in the Persian Gulf as a show of force against Iran, a senior defense official said Tuesday.

Speaking on condition of anonymity because the idea has not been approved, the official said one proposal is to send a second aircraft carrier to the region amid increasing tensions with Iran, blamed for encouraging sectarian violence in neighboring Iraq as well as allegedly pursuing a nuclear weapons program.

The United States and its European allies are seeking sanctions against Iran because of its refusal to stop uranium enrichment, a technology that can be used to produce nuclear fuel for civilian purposes or fuel for a nuclear bomb.

In Tehran, President Mahmoud Ahmadinejad said Tuesday that U.N. sanctions would not stop Iran from pursuing its uranium enrichment program, which he has said is for peaceful development of energy.

Bush administration officials have repeatedly declined to rule out the use of force against Iran, though they have also said their first choice is to rely on diplomacy.

In New York, U.N. Secretary-General Kofi Annan said military action against Iran would be "rather unwise and disastrous." Annan, who is leaving his job Dec. 31, made the comment to reporters at a news conference as the Security Council debated a resolution that would impose sanctions on Tehran.

The idea of building up U.S. Navy forces has been discussed over some time and it's unclear when a decision will be made, the defense official said.

The aircraft carrier USS Dwight D. Eisenhower is already in the region. It left the United States in late September with four other Norfolk-based ships and submarines carrying 6,500 sailors.

The flotilla headed to the Mediterranean Sea and eventually went to relieve the Norfolk-based aircraft carrier USS Enterprise strike group, which was in the region supporting operations in Iraq and Afghanistan.

Also, the U.S. in late October led a naval training exercise aimed at blocking smuggling of nuclear weapons in the Persian Gulf.

The six-nation maneuvers off the coast of Iran were the first of their kind since North Korea's Oct. 9 nuclear test and U.N. sanctions that called on the international community to conduct searches at sea to ensure the reclusive Communist nation is not secretly expanding its nuclear program.

2.

Top story

USS DWIGHT D. EISENHOWER ARRIVES IN PERSIAN GULF
By Eisenhower Strike Group Public Affairs

Navy Newstand
December 12, 2006

http://www.news.navy.mil/search/display.asp?story_id=27005

[PHOTO CAPTION: An F/A-18F Super Hornet from the “Jolly Rogers” of Strike Fighter Squadron One Zero Three (VFA-103) launches from the flight deck of the Nimitz-class aircraft carrier USS Dwight D. Eisenhower (CVN 69). Eisenhower and embarked Carrier Air Wing Seven (CVW-7) are on a regularly scheduled deployment in support of Maritime Security Operations (MSO).]

USS DWIGHT D. EISENHOWER, At Sea -- The Nimitz-class aircraft carrier USS Dwight D. Eisenhower (CVN 69), flagship of the Eisenhower Carrier Strike Group (IKE CSG), entered the Persian Gulf Dec. 11, accompanied by the guided-missile cruiser USS Anzio (CG 68).

While operating in the Persian Gulf, Dwight D. Eisenhower and embarked Carrier Air Wing (CVW) 7 will conduct missions in direct support of troops participating in Operation Iraqi Freedom (OIF) and maritime security operations (MSO).

CVW-7 began flying missions into Afghanistan Nov. 6 in support of coalition troops on the ground participating in Operation Enduring Freedom. During 33 days of operations, the air wing flew more than 4,000 hours and more than 680 sorties, providing close air support and reconnaissance to International Security Assistance Force (ISAF) troops.

“Our men and women are proud to be serving alongside coalition partners and regional nations in this very important area of the world,” said Rear Adm. Al Myers, commander, Eisenhower Strike Group and Combined Task Force 152. “We are committed to supporting coalition ground forces in OIF to set the conditions for security and stability within Iraq and providing the Iraqi people with the best opportunity for self-determination. We’re grateful for the opportunity to serve and make a difference, whether it’s flying in support of multinational troops operating in Iraq or training alongside coalition and regional navies, or conducting maritime security operations in the Persian Gulf.”

IKE CSG departed Naval Station Norfolk Oct. 3 for deployment and began operating alongside coalition maritime forces in the region Oct. 30 conducting MSO as well as complement the counter-terrorism and security efforts of regional nations. The focus of these operations is to prevent international terrorist organizations from using the maritime environment as a venue from which to launch attacks, move people, weapons, or other material.

CVW-7 includes Carrier Airborne Early Warning Squadron (VAW) 125 “Tigertails,” Strike Fighter Squadron (VFA) 103 “Jolly Rogers,” VFA 131 “Wildcats,” VFA 143 “Pukin’ Dogs,” VFA 83 “Rampagers,” Electronic Attack (VAQ) Squadron 140 “Patriots,” and Helicopter Anti-submarine (HS) 5 “Nightdippers.”

IKE CSG includes Dwight D. Eisenhower, with its embarked air wing, CVW-7, and embarked Destroyer Squadron (DESRON) 28; the guided-missile cruiser Anzio; guided-missile destroyers USS Ramage (DDG 61) and USS Mason (DDG 87); and the fast attack submarine USS Newport News (SSN 750). All are homeported in Norfolk, Va.

For related news, visit the Commander, U.S. Naval Forces Central Command/Commander, U.S. 5th Fleet Navy NewsStand page at www.news.navy.mil/local/cusnc/.

3.

Special report

United States of America

U.S. CONSIDERS NAVAL BUILD-UP AS WARNING TO IRAN
By Suzanne Goldenberg

** Administration concern at nuclear program -- Security situation in Iraq 'tragic' as attacks grow*nbsp;** Guardian (UK)
December 20, 2006

http://www.guardian.co.uk/usa/story/0,,1975675,00.html

The Bush administration is weighing options for a naval build-up in the Gulf as a show of force and a warning to Iran on its nuclear program and its support for Shia militias in Iraq, it emerged yesterday.

Under the proposed build-up, first reported by CBS television, the Pentagon would send an aircraft carrier to join one already in the region. The proposed deployment was described as a message to Tehran not to take provocative steps, and was not preparation for an attack.

The idea of sending a second aircraft carrier was raised this month by the commander of U.S. forces in Iraq, General John Abizaid. But it also comes amid mounting pressure from Saudi Arabia against a withdrawal of U.S. forces from Iraq.

Pentagon officials were considering Gen Abizaid's request, but few other details were immediately available. A Pentagon spokesman said there would be no comment on military movements.

"The administration has been pretty clear about Iran's role in the region, which is that Iran has to stop being provocative," the White House spokesman, Tony Snow, told reporters.

The aircraft carrier USS Dwight D Eisenhower has been in the region since September, along with four other ships and submarines carrying 6,500 sailors. The navy could move other carriers into the region within six weeks. The USS Stennis, a cruiser which was scheduled to deploy in early 2007 in any event, would be the most likely ship to be deployed.

However, if the U.S. were to contemplate a military strike, it would need far more than two carriers, said Reva Bhalla, an analyst at Strategic Forecasting Inc. The US deployed five carriers ahead of the invasion of Iraq in 2003.

Outgoing U.N. secretary general Kofi Annan said yesterday that military intervention in Iran would be "unwise and disastrous," as the Security Council debated a resolution that would impose sanctions on Tehran over its nuclear program. "I believe that the council, which is discussing the issue, will proceed cautiously and try and do whatever it can to get a negotiated settlement," he said.

The latest draft resolution would order all countries to ban the supply of specified materials and technology that could contribute to Iran's nuclear programs.

Reports that the U.S. is leaning towards an even stronger posture against Iran reflects indications that Washington wants to deepen its military presence in the region. It follows warnings from Saudi Arabia that it would fund Sunni militias in Iraq in the event of a U.S. troop withdrawal. "The aircraft carrier is a way of assuring the Saudis that the inclination is to do more rather than less, and that we are not going to leave them in the lurch," said John Pike, a military analyst.

The tougher posture on Iran and a temporary troop surge in Iraq would both run counter to the findings of the Iraq Study Group earlier this month which recommended a withdrawal of U.S. combat forces from Iraq by early 2008, and the opening of diplomatic talks with Iran and Syria.

George Bush has yet to unveil his new strategy for Iraq, postponing a planned policy address until the new year. However, a series of leaks suggest that the White House is in favor of sending an extra 20,000 to 30,000 more troops to Iraq for the next six or eight months. Bush told Washington Post on Tuesday he plans to expand the size of the U.S. military to deal with the long-term fight against terrorism.

The Pentagon believes the U.S. can only bolster its forces in Iraq by extending deployments, a course that would eventually wear down the army.

Meanwhile, the administration is concerned at evidence that Shia militias are receiving support and training from Iran.

A Pentagon report on Monday said that the Mahdi Army, the armed militia loyal to the radical Shia cleric Moqtada al-Sadr, had eclipsed al-Qaida as the most dangerous agent of sectarian violence.

The quarterly assessment from the Pentagon was the bleakest to date, describing the security situation in Iraq as "tragic." Violence rose by 22% over the past three months to a new high of 959 attacks a week against U.S. and Iraqi forces, and the Pentagon warned that the continued bloodshed was eroding the legitimacy of the prime minister, Nouri al-Maliki.

The growing power of Shia militias has come to occupy a greater share of U.S. attention, and fuelled frustration with Mr. Maliki. The Iraqi prime minister is dependent on both militia, and so far has resisted U.S. pressure to confront them.

ESCALATING VIOLENCE

The Pentagon report said attacks on U.S. and Iraqi troops and Iraqi civilians jumped in recent months to the highest level since Iraq regained its sovereignty in June 2004.

· From mid-August to mid-November, the weekly average number of attacks increased 22% from the previous three months.

· There were an average of 959 attacks a week on U.S. and Iraqi forces during the three months ending in November.

· Ninety-three Iraqi civilians are killed or injured every day. Attacks against Iraqi security forces reached a new high at 33 a day.

· Injuries and deaths among U.S. forces stood at 25 a day.

4.

News

U.S.

ABIZAID WANTS ADDITIONAL NAVY CARRIER IN PERSIAN GULF
By Tony Capaccio

Bloomberg News
December 20, 2006

http://www.bloomberg.com/apps/news?pid=20601103&sid=aB9F0Hlr.fLA&refer=us

Pentagon officials are reviewing a request by the top U.S. commander for the Middle East for an additional aircraft carrier and escort vessels in the Persian Gulf area, three defense officials said.

The request by U.S. Central Command commander General John Abizaid is in the early review stages by the Joint Staff and Joint Forces Command that oversees the deployment and readiness of U.S. forces, the officials said. The request would then be forwarded to Defense Secretary Robert Gates, the officials said.

Abizaid's request wasn't aimed at any one country, said the three officials familiar with the request, who asked not to be identified. Instead, they said, Abizaid wants to boost U.S. presence in a region that's seen increased rhetoric and war exercises by Iran, heightened tensions between Somalia and Ethiopia and increased violence in Afghanistan.

Abizaid said in an interview last month that Iran had just completed a 10-day war game “designed to intimidate the smaller nations in the region in a way that I haven't quite seen before.”

OIL PRODUCER

Iran, while maintaining its position as the second-largest oil producer in the Organization of Petroleum Exporting Countries, has defied United Nations demands to suspend its nuclear program, saying it's needed to generate electricity. President Mahmoud Ahmadinejad has promoted the nuclear project as an important national goal.

Iran's rhetoric and ambitions “are clearly causing a lot of anxiety among our friends in the Gulf, and they want help," John Hillen, State Department assistant secretary for political military affairs, said in an Dec. 13 interview.

The U.N. Security Council will vote on whether to impose sanctions over Iran's nuclear program “in the next several days,” Nicholas Burns, the undersecretary of state for political affairs, told Cable News Network on Dec. 18.

If Gates approves Abizaid's request, the USS John C. Stennis carrier strike group based in Bremerton, Washington, would probably be sent because it's scheduled to deploy in January as part of the Navy's normal rotation of carriers to an as yet undisclosed location, said one of the officials.

STENNIS

The Stennis in November completed an exercise for joint air, surface, and anti-submarine operations, vehicle boarding, and oil platform defense, according to the Navy's Web site. It was the final exercise needed to declare the Stennis ready for its January deployment.

If assigned to the Persian Gulf region, the Stennis may arrive as early as February, the official said. It would join the USS Eisenhower carrier strike group, which entered the Persian Gulf this month.

Incoming House Armed Services Committee Chairman Ike Skelton, a Missouri Democrat, said that sending a carrier to a region is “always a signal that we're here and we're watching.”

Pentagon spokesman Bryan Whitman declined during a session with reporters to discuss carrier moves.

CONTINGENCIES

“We move ships where we believe we need to have ships,” he said. “We don't talk about those movements, we don't talk about those plans and we don't talk about those contingencies.”

Although the officials said the carrier request isn't directly aimed at Iran, the U.S. accuses Iran of trying to interfere in the politics of neighboring Iraq by supporting Shiite Muslim militias, of financing and arming Hezbollah fighters in Lebanon, and seeking to develop nuclear weapons.

The Pentagon in its latest quarterly report to Congress on Iraq wrote that “Iran and Syria are undermining the government of Iraq's political process by providing both active and passive support” to anti-government forces.

--To contact the reporter on this story: Tony Capaccio in Washington at This email address is being protected from spambots. You need JavaScript enabled to view it.

5.

World

U.S. PLANS MILITARY BUILDUP TO WARN IRAN

** CBS News: Pentagon Officials Consider Sending Message To Defiant Tehran **

CBS News
December 19, 2006

http://www.cbsnews.com/stories/2006/12/19/world/main2280067.shtml

The Pentagon is planning to bolster its presence in the Persian Gulf as a warning to Iran's continuously defiant government, CBS News reports.

CBS News national security correspondent David Martin says the U.S. military build-up, which would include adding a second aircraft carrier to the one already in the Gulf, is being proposed as a response to what U.S. officials view as an increasingly provocative Iranian leadership.

Recent Iranian naval exercises, support for Shiite militias in Iraq, and Tehran's allegedly peaceful nuclear enrichment program -- which U.S. intelligence believes is designed to produce a bomb -- have all lead to the planned changes, Martin reports.

Military officers say the build-up would take place after the first of the year, not with the aim of actually attacking Iran, but strictly as a deterent.

Meanwhile, Iranian President Mahmoud Ahmadinejad said Tuesday that U.N. sanctions would not stop the Islamic republic from enriching uranium.

The United States and its European allies are seeking sanctions against Iran because of its refusal to stop uranium enrichment, a technology that can be used to produce nuclear fuel for civilian purposes or fuel for a nuclear bomb.

A draft U.N. resolution would order all countries to ban the supply of specified materials and technology to Iran that could contribute to Iran's nuclear and missile programs. It also would impose a travel ban and asset freeze on key companies and individuals in the country's nuclear and missile programs who are named on a U.N. list.

"A nation whose youth have been able to achieve the nuclear fuel cycle with empty hands -- rest assured that it will be able to capture other peaks of (progress)," Ahmadinejad told a large crowd in the western city of Kermanshah.

The hardline president spoke a day after election results indicated his allies suffered an embarrassing defeat in last week's local council elections, an apparent sign of voter discontent with his policies.

Ahmadinejad, however, has had success in gaining support among Iranian citizens by emphasizing the struggle with the West over the country's nuclear program, a source of Iranian pride.

6.

IRAN TO REPLACE DOLLAR WITH EURO

News (Pakistan)
December 20, 2006

http://www.thenews.com.pk/daily_detail.asp?id=36064

TEHRAN -- Iran announced on Monday it would replace the dollar with the euro in foreign transactions and state-held foreign assets, in an apparent response to mounting U.S. pressure on its banking system.

“The government has ordered the central bank to replace the dollar with the euro to limit the problems of the executive organs in commercial transactions,” government spokesman Gholam Hossein Elham told reporters.

“We will also employ this change for Iranian assets (in dollars) held abroad.” Amid U.S. allegations that Tehran funds militant groups and is seeking a nuclear weapon, reports have suggested the U.S. Treasury has put major pressure on European banking giants to halt transactions involving Iranian clients.

Bankers in Iran have complained in recent weeks that it was becoming increasingly difficult to receive Iranian-held money denominated in dollars from European bank accounts. They said that this was because of U.S. pressure on European banking giants not to allow dollar-denominated funds to be sent into, or out of, the Islamic republic.

Elham implied the move would apply to oil revenues from the world’s number four crude producer, although it would be difficult for Iran to force oil buyers to pay for all of its crude oil in euros.

“Foreign income sources and oil revenues will be calculated in euros and we will receive them in euros in order to put an end to our dependence on the dollar,” Elham said. In reality, Iran could still receive payment for oil in dollars and then convert it into euros for the state budget.

The move comes amid mounting pressure from the United States for the U.N. Security Council to agree sanctions against Iran over its controversial nuclear program. Elham added that Iran’s budget would in future be calculated in euros.

“Until now the budget has been calculated according to revenues in dollars, but this calculation will now change,” he said. Economy Minister Davoud Danesh Jafari had already said in November that Iran would carry out transactions with currencies other than the dollar and its use of the greenback would drop to a minimum level.

Morteza Tamadon, a member of the government’s budget and planning commission, said the government was looking to reduce its dependence on the dollar due to the greenback’s recent slump as well as because of U.S. pressure.

“Iran wants to reduce this vulnerability,” he said, adding that the most reasonable option for the government would be to use a basket mixing both currencies. “This is a political manoeuvre as a reaction to the U.S. ban on dollar transactions with Iran,” said leading economist Mohammad Reza Behzadian.

However he cast doubt on whether Iran would ever be able to demand that all foreign exchange payments for its oil be made in euros. “Iran has said that 60 per cent of oil sales are already being carried out in dollars. I suppose the government would keep the remaining amount in dollars because it has to.

7.

DOLLAR DROPPED IN IRAN ASSET MOVE

BBC News
December 18, 2006

http://news.bbc.co.uk/1/hi/business/6190865.stm

Iran is to shift its foreign currency reserves from dollars to euros and use the euro for oil deals in response to U.S.-led pressure on its economy.

In a widely expected move, Tehran said it would use the euro for all future commercial transactions overseas.

The U.S., which accuses Tehran of supporting terrorism and trying to obtain nuclear weapons, has sought to limit the flow of dollars into Iran.

It wants the United Nations Security Council to impose sanctions on Iran.

DOLLAR SQUEEZE

Analysts said Tehran had been steadily shifting its foreign-held assets out of dollars since 2003 and that Monday's announcement was unlikely to affect the value of the dollar, which has weakened significantly in recent months.

An Iranian spokesman said all its foreign exchange transactions would be conducted in euros and its national budget would also be calculated in euros as well as its own currency.

"There will be no reliance on dollars," said Gholam-Hussein Elham.

"This change is already being made in the currency reserves abroad."

The currency move will apply to oil sales although it is expected that Iran, the world's fourth largest oil producer, will still accept oil payments in dollars.

NUCLEAR TRIGGER

Washington has sought to exert financial pressure on Iran, which it accuses of flouting international law by trying to acquire nuclear weapons.

Tehran denies this, saying its nuclear research is for purely geared towards civilian uses.

Most international banks have stopped dollar transactions with Iran and some firms have ceased trading with Iran altogether in anticipation of possible future sanctions.

The dollar slipped slightly against the euro in New York trading although analysts said they did not expect the reaction to be too severe.

"It is something they have been saying they are going to do for quite a long time now, so I wouldn't expect any market reaction," said Ian Stannard, an economist with BNP Paribas.

The BBC's Tehran correspondent Frances Harrison said Iranian businessmen were complaining about delays in securing letters of credit and saw current conditions as a prelude to the imposition of sanctions.

Tehran has urged Iranian businesses to open letters of credit in euros in the future.