THEY'RE kidding, right? James Baker iii and the seven dwarfs of the "iraq Study Group" have come up with some simply brilliant recommendations. Not.

Baker's Two Big ideas are:

1. Stay half the course. Keeping 140,000 troops in iraq is a disaster getting more disastrous. The Baker Boys' idea: cut the disaster in half -- leave 70,000 troops there. But here's where dumb gets dumber: the Bakerites want to "embed" US forces in iraqi army units. Question one, Mr Baker: What iraqi army? This so-called "army" is a rough confeder-

ation of Shia death squads. We can tell our troops to get "embedded" with them, but the Americans won't get much sleep.

2. "Engage" iran. This is a good one. How can we get engaged when George Bush hasn't even asked them out for a date? What will induce the shy mullahs of iran to accept our engagement proposal? Answer: The Bomb. Let me explain. To get the iranians to end their subsidizing the Mahdi Army and other Shia cut-throats, the Baker bunch suggest we let the permanent members of the UN Security Council -- plus Germany -- decide the issue of iran's nukes. Attaching Germany is the signal.

These signers of the NonProliferation Treaty (NPT) agree that iran should be allowed a "peaceful" nuclear power program.

Now, i am absolutely wary of neo-con nuts who want to blow iran to Kingdom-come over its nuclear ambitions. But that doesn't mean we should kid ourselves. iran has zero need of "peaceful" nuclear-generated electricity. it has the second-largest untapped reserve of natural gas on the planet, a clean, safe, cheap source of power. There's only one reason for a "nuclear" program, and it's not to light Mahmoud Ahmadinejad's bedside lamp.

Here's the problem with Baker's weird combo of embedding our boys with iraq's scary army while sucking up to the iranians: it won't work. The mayhem will continue, with Americans in the middle, because the Baker brigade dares not mention two words: "Saudi" and "Arabia."

Saudi Arabia is the elephant in the room (camel in the tent?) that can't be acknowledged -- and the reason Baker is so desperately anxious to sell America on keeping half our soldiers in harm's way.

James iii wants to seduce or bully iran into stopping their funding of the murderous Shia militias. But the Shias only shifted into mass killing mode in response to

the murder spree by Sunni "insurgents."

Where do the Sunnis get their money for mayhem? According to a seething memo by the National Security Agency (November 8), the Saudis control the "public or private funding provided to the insurgents or death squads." Nice.

Baker wants us to bribe or blackmail iran into stopping one side in iraq's uncivil war, the Shia. Yet we close our eyes to the Saudis acting as a piggy bank for the other side, the Sunni berserkers. (The House of Saud follows Wahabi islam, a harsh, fundamentalist sect of Sunnism.)

Why is Baker, ordinarily such a

tough guy, so coy with the Saudis? Baker Botts, the law firm his grandfather founded and he runs, became a wealthy powerhouse by representing Saudi Arabia. But don't worry, the iraq Study Group is balanced by Democrats including Vernon Jordan of the law firm of Akin, Gump which represents, Saudi royals.

of course, the connections between Baker, the Bush family and the Saudis go way beyond a few legal bills. (See, "The Best Little Legal Whorehouse in Texas" in my book, "Armed Madhouse.")

Baker is more than aware that, weeks ago, Dick Cheney dropped his Thanksgiving turkey to fly to Riyadh, at the demand of the

Saudis, for a dressing down by King Abdullah. The king wants US forces to stay to baby-sit the Shias in iraq's army. The Saudis have made it clear that, if the US pulls out our troops, Saudi Arabians will crank up payments to their brothers, the Sunni warlords in iraq, and Baghdad, or the entire region, will run with blood.

The outcome was foregone: King Abdullah's wish is Cheney's command -- and Baker's too. And so 70,000 of our soldiers will stay.

What gives King Abdullah the power to ghost-write the iraq Study Group recommendations? it's not because the Saudis sell us broccoli.

And therein lies the danger.

Behind the fratricidal fracas in iraq is something even more dangerous than civil war -- a proxy war between iran and Saudi Arabia over control of iraq's pivotal position in oPEC, the oil cartel.

Because what is painted by Baker's iraq Study Group as an ancient local clash between Shia and Sunni over the Kingdom of God, is, in fact, a remote control war between iran and Saudi Arabia over the Kingdom of oil.

Greg Palast is the author of the New York Times bestseller, "Armed Madhouse" which includes Palast's investigation, conducted for Harper's Magazine, of the secret role of James Baker III and Saudi Arabia in the forming of US plans for Iraq's oil.

(c) gregpalast.com.