Two years after the horror of 9/11, Osama bin Laden appears to be alive, well—and still a master of media manipulation.

In the Pakistani city of Peshawar, the Kissakhani bazaar is buzzing with talk of Osama bin Laden. When a new video aired by Al-Jazeera last week showed the terror chieftain walking casually down a boulder-strewn mountainside, it was almost as if he had risen from the dead. The market in bin Laden baubles—photos, tapes—took off in hours.

Muhammad Yaqoob, a 25-year-old hotel worker, quickly bought three new color posters of bin Laden from a sidewalk vendor. “I’m so happy he’s still in this world,” said Yaqoob. “I hope to hear one day that he has exploded the Bush White House.” In a nearby hotel lobby where locals usually gather over 10-cent cups of tea to watch Indian movies on TV, the price quickly doubled as a huge crowd jammed in for the constant replay. Many viewers proudly noted that bin Laden was wearing the rolled felt cap and loose-fitting shalwar kameez, shirt and pants that are the dress of this rough northwest region bordering Afghanistan. “Oh, America, look closely,” shouted one man. “Osama’s still strong and can walk over mountains.” Amid the boosterism, even adoration, one skeptical voice could be heard, a middle-aged teacher who feared the war will go on forever. “I still can’t understand why powerful America cannot catch him,” he said.

Why indeed? George W. Bush has already buried bin Laden—rhetorically. It’s been many months since the president, who once declared he wanted bin Laden “dead or alive,” even mentioned his name. But if last week’s video is to be believed, bin Laden appears to be not only alive, but thriving. And with America distracted in Iraq, and Pakistani President Pervez Musharraf leery of stirring up an Islamist backlash, there is no large-scale military force currently pursuing the chief culprit in the 9/11 attacks, U.S. officials concede.

New plots?

If the latest video is recent, which is by no means certain, bin Laden may have also recovered from whatever ailments he had. (He’s rumored to have been wounded, and to have kidney disease.) A former Afghan official points out that bin Laden is carrying full clips of ammunition in a bandoleer across his chest and has a Kalashnikov slung over his shoulder, a burden unlikely to be borne in the mountains by someone suffering from a debilitating illness. A senior source with the now reconstituted Taliban believes the video is a strong sign that Al Qaeda is actively planning new operations. Why? Because bin Laden and his top deputy, Ayman Al-Zawahiri, are both in it, and they appear together rarely.

U.S. intelligence sources say they are not even close to pinpointing bin Laden’s whereabouts. And one official involved in the search for him frets to NEWSWEEK that they may not be able to kill or capture him after all—ever. “We’re going to have to be very lucky to get him,” this Defense official said. It’s not just that recent reports place him in remote Afghan and Pakistani border provinces such as Kunar and Waziristan. Unable to infiltrate his network, U.S. officials also cannot monitor bin Laden’s communications, since he has long since dropped the use of satellite phones and land lines. He is surrounded by “people who are extremely loyal to him,” said one U.S. official. “Very, very few people know his whereabouts and those who do would not be inclined to discuss it.”

Still, intel officials say the latest video doesn’t really confirm that bin Laden is still alive and healthy. In audio portions, Al-Zawahiri makes explicit references to the recent war in Iraq. But the bin Laden part of the audio, and video shots showing both men wandering about a pastoral landscape, give no real-time references. (The CIA believes the voice on the tape is bin Laden’s, but has not been able to confirm that 100 percent.) Other knowledgeable sources say they doubt that bin Laden and Al-Zawahiri are really at ease in the mountains. U.S.-Pakistani operations to capture them have been too intense and intelligence reports suggest that the Qaeda chief has gone to elaborate lengths to stay on the move and not get caught. “He can’t afford to go for leisurely strolls,” says one former U.S. intelligence official who was recently involved in the hunt for bin Laden.

But bin Laden’s elusiveness and the Taliban’s resurgence—combined with the postwar morass in Iraq—have raised tough new questions about the administration’s overall strategy in the war on terror. It’s not just whether the Bush administration is getting Iraq right, say a rising chorus of skeptics among the military brass, along with some Democrats like Sen. Bob Graham. It’s whether Iraq should have been invaded at all when the task of destroying Al Qaeda in its Central Asian base was left so unfinished. “We’ve essentially declared war on Mussolini and allowed Hitler to run free,” said Graham, one of the few presidential candidates who voted no on the Iraq war resolution in fall 2002. With each passing day that ready-to-fire weapons of mass destruction are not found, it becomes harder to explain why Iraq was such an imminent threat that America had to wheel 180 degrees to suddenly take on Saddam Hussein—and sacrifice so much international support to do so.

‘The central front’

Military officials now openly worry about whether they’ll have enough troops for just the tasks they have. One problem: declining re-enlistments by frustrated Reservists and National Guardsmen. “The point is: why would we open that new front? It wasn’t related directly to the war on terror,” says retired Marine Gen. Anthony Zinni, the former CENTCOM commander who has long criticized the administration’s switch from bin Laden to Saddam. Iraq, which had a meager Qaeda presence before the March invasion, was supposed to be on its way to becoming a democratic model for the Arab world by now. Instead, Bush declared recently that Iraq has become “the central front” in the terror war, drawing legions of new foreign terrorists, including Al Qaeda.

The Bush administration has long insisted it could take on both Afghanistan and Iraq. And senior officials point to the signal fact that there has been no major attack against Americans by Al Qaeda since 9/11, and to the capture or killing of “nearly two thirds of Al Qaeda’s known leaders,” as Bush said in his speech to the nation on Sept. 7. That alone can be considered a huge success, and probably is by many Americans: a new NEWSWEEK Poll shows that a majority still supports Bush’s handling of Iraq and the war on terror.

But some like Zinni say the number of terrorists is not static; many more are being created. Meanwhile, the United States still has only about 9,000 troops in all of Central Asia, even as it struggles to fight off demands that it increase its presence in Iraq. And some U.S. military officials trace the Taliban’s gradual resurgence to the abrupt diversion of so many resources to Iraq, including Predator aerial vehicles, in a critical period beginning in 2002. One example: in February and March of 2002, the Arabic-speaking Fifth Special Forces Group—the teams that were mostly credited with winning the Afghan war—were largely pulled out to be soon redeployed in the Mideast. They were replaced by other teams such as the Seventh Group, whose focus is Latin America. The result: a loss of good intelligence. “From the very beginning we f—ked it up,” said a Fifth Group officer who fought in Afghanistan. “The conventional Army came in and new teams... didn’t have the same relations. Continuity is everything. The trust you develop with another guy by fighting alongside him is everything. We did it wrong.”

Stinting on intelligence?

Other intelligence resources were also badly strained. “It was widely reported after September 11 that we didn’t have enough intelligence officers who are familiar with [the Islamic] world,” notes one former staffer on the Senate Intelligence Committee. “If we didn’t have enough for Afghanistan, how did they make the argument they had enough for Afghanistan and Iraq?” Bush officials insist they did not stint in their intelligence gathering for bin Laden and Al Qaeda. “That’s a canard. There was a deliberate effort not to make that happen,” one administration official said. But privately, some U.S officials acknowledge that the search for weapons of mass destruction in Iraq may have seriously drained away resources from the hunt for bin Laden.

Washington has prodded Musharraf to send in troops to the tribal regions, and Pakistani officials claim they came very close to catching bin Laden in the past 20 months. In early September the military launched a fresh hunt after intelligence reports showed a large concentration of Al Qaeda and Taliban forces in the Waziristan tribal region. Helicopter-borne Pakistani troops were used for the first time, but the operation was abruptly halted after suspected Islamic militants fired three rockets at an air base being used by the Pakistani Special Forces.

Musharraf and other Pakistani senior officials concede that bin Laden and Qaeda fugitives enjoy tre-mendous public support in the North-West Frontier province and Baluchistan, which are now governed by pro-Taliban parties. More alarmingly, many Pakistanis suspect that elements in Pakistan’s military and its powerful intelligence agency, the Inter Services Intelligence (ISI), provide crucial support to Qaeda leaders and Taliban forces. Indeed, a number of Pakistani military officers have been arrested recently for links to Al Qaeda, including one soldier who gave shelter to Khalid Shaikh Mohammed, who was Qaeda’s No. 3. Even some in Musharraf’s administration express sympathy for Islamic guerrillas. “Taliban are fighting a just war against occupation of their country,” says a senior Pakistani official.

Perhaps the ultimate question, some U.S. military officers say, is whether the Bush administration has left America more vulnerable by pushing so forcefully for “regime change” in two countries at once, without planning properly for what would come next. Defense Secretary Donald Rumsfeld insists on keeping the U.S. military “footprint” small in both Afghanistan and Iraq. Yet meager nation-building efforts could turn both countries into a sea of sympathy for Islamist terrorists to swim in. Osama bin Laden has always proved depressingly capable in fighting for “hearts and minds.” The very fact that he is able to persist makes his message, among the radical faithful, only more potent.

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