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France: This Scandal Could Hand the Presidency to Jospin

Along with fireworks and a military parade down the Champs Elys?es, the French expect a nationally televised speech by their President as part of the annual Bastille Day celebration on July 14. Usually, it's a stress-free assignment. But this year, it's a safe bet that President Jacques Chirac would rather skip the festivities.

That's because he is facing the worst political crisis of his scandal-plagued six years in office. In early July, reports surfaced that Chirac used more than $300,000 in cash to pay for luxury vacations that he took with his family and close aides in the mid-1990s when he was mayor of Paris. Chirac has not commented, although his aides have said the money came from family savings and "secret funds" the government made available for his use while he was Prime Minister from 1986-88.

Most French aren't satisfied with that explanation. It has long been known that the government annually gives the President and Prime Minister about $60 million in cash to use at their discretion. But most people assumed the money was spent largely on official activities. Many are shocked by the idea that Chirac might have salted away funds to support a lavish lifestyle on leaving office. A recent poll shows 48% of respondents would support impeachment proceedings against Chirac.

NECK-AND-NECK. That's why he is under intense pressure to address the scandal in his Bastille Day speech. If he stonewalls, his popularity rating could plummet, analysts say. It has already fallen to 48% from 60% a year ago. Leading rightists now say openly that Chirac may be too weakened to fend off a challenge by Socialist Prime Minister Lionel Jospin in presidential elections next May. Until recently, Chirac and Jospin were neck-and-neck in the polls. But a new survey by the BVA group shows Jospin ahead by four points.

"L'affaire des voyages" is politically more treacherous for Chirac than other scandals that have dogged him in office. He's also under investigation for alleged illegal financing of his RPR party while he was Paris mayor from 1977-85. But he had never been accused of benefitting personally--until now. "This could damage Chirac's ability to be a candidate," worries Herv? Morin, a parliamentarian from the rightist UDF party.

But the Right faces a dilemma. Although Chirac looks like damaged goods, no other conservative has the stature to make a serious run for the presidency. France has no presidential primaries, and the top two vote-getters in the first round of balloting will face each other in a runoff. Two other rightists--Fran?ois Bayrou of the UDF and Alain Madelin of the Liberal Democracy party--plan to run. But neither scores much above 5% in the polls. "Chirac is the only strong personality they have," says Michel Gurfinkel, editor of the right-leaning magazine Valeurs Actuelles.

On the Left, Jospin seems to be gearing up for an ugly election fight. He has ordered government auditors to conduct a study on the use of secret funds and report findings by yearend. This could provide him with ammunition against Chirac just as the campaign revs up. "It's going to be a gutter battle," says Franz-Olivier Giesbert, director of Le Point magazine.

Apart from wanting to govern France for five more years, Chirac has another reason for aiming to stay in power: He is immune from prosecution as long as he is in office. Prosecutors may not even be able to compel him to testify. But Chirac's wife, daughter, and associates are already being subpoenaed. That could produce still more damaging revelations. The coming months are shaping up to be an obstacle course that could defeat even the famously skillful Chirac. Saddam Hussein's anger over a U.S. and British-led push to revamp the decade-old U.N. sanctions regime against Iraq could give a boost to Russian companies eager to develop Iraqi oilfields. Iraq's Trade Ministry announced on July 9 that it would stop giving preferential treatment to France, after the French backed so-called "smart sanctions," which would tighten import controls on equipment that could be used for military purposes. Instead, Iraq will give greater priority to trade with Russia, which threatened to veto the plan.

Although Russian oil majors have long wanted to produce oil in Iraq, they so far have honored U.N. sanctions against such activities. But companies such as Lukoil, which has obtained licenses for Iraq's rich West Qurmah oilfield, are positioning themselves to cash in, figuring sanctions eventually will be loosened. Russian oil companies "are flush with cash" and see Iraq as "a natural expansion platform," says a Moscow oil analyst.

The French shouldn't be counted out yet, though. Russian oil companies alone won't be able to provide the investment needed to revive Iraq's decrepit oil industry. And Iraqis are more likely to welcome investment from the French than from companies in the U.S. and Britain. That could still benefit France's TotalFinaElf, which has long had its eye on developing big fields in southern Iraq. Meanwhile, Iraq is expected to channel a large chunk of the trade allowed under the U.N.'s just-renewed oil-for-food program to neighboring Turkey, Syria, and Jordan--as well as Russia.

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