© 2001 WorldNetDaily.com
MONDAY
FEBRUARY 12
2001

Since the end of World War II, the Middle East has been a hotbed of interstate conflict. The decade-long war between Iran and Iraq and the Gulf War were particularly significant events, yet the host of wars between Israel and its Arab neighbors are symptomatic of what has become one of the most complex and pressing matters in contemporary international affairs.

Israel's new prime minister:
a step toward peace?

On Tuesday, Feb. 6, Israel elected its new prime minister -- Ariel Sharon. Running on a platform of peace derived from security, the hardliner defeated Ehud Barak with 59.5 percent of the vote. While voter turnout in Israel is traditionally around 80 percent -- one of the highest in the democratic world -- it neared a record low of about 65 percent for Tuesday's election. Nevertheless, the majority of those that voted did so out of exhaustion from the preceding four months of violence -- a violence that came on the heels of the most sweeping concessions to the Palestinians offered by any Israeli leader. Most Israelis believe that Sharon will unite and arm Israel to form a more secure environment against the seemingly endless attacks by Palestinians and Islamic extremists.

In essence, Israelis had a choice similar to that of the English 70 years ago. Barak's continuing appeasement of the Palestinian Authority can be compared with Chamberlain's policy that threatened England in the late 1930s. Many Israelis believe Sharon to be, as Churchill was, a "hardliner" who will be offering far less than his predecessor in terms of peace negotiations. While historical analogies can help to derive some reason in contemporary events, there can be no historical comparison to the complexities of the present situation faced by Israel. The manner in which Sharon deals with the ongoing Palestinian violence is unknown and of the utmost significance, not only for Israel, but for the United States and the rest of the world.

Palestinians maintain that Prime Minister Sharon is a man to be feared. His early history with regards to Palestinians is one punctuated by accusations of extreme violence. His actions during Israel's war of independence in 1948, and against Palestinians in the Gaza Strip, coupled with his indirect responsibility for the deaths of nearly a thousand Palestinian refugees in 1982, have solidified a fear among Palestinians that future peace agreements, especially concessions at Israel's expense, are nearly impossible.

Palestinian information minister Yasser Abed Rabbo maintained, "There is no danger like the danger of Sharon, and all eyes have to be wide open to this; the peace front must be enlarged to confront this." Accordingly, Sharon's victory represents "the awakening of radical Israeli right-wing forces" who would "suppress the Palestinian people and turn their back on the peace process."

Not only must Sharon prove to the Arab world that he can be trusted, but also vice versa. There is a genuine desire among all Israelis that Palestinians, or an independent Palestinian state, should not threaten the security of Israel. While Sharon's history of violence plays its part in clouding prospects of peace, so does the Palestinians'. Indeed, after four months of violence, they have quite a way to go in order to convince Israelis that they seek peace and a genuine partnership rather than the destruction of Israel.

While key Arab players in the Middle East peace process -- namely Jordan and Egypt -- are viewing Tuesday's election results with dismay, rogue states such as Syria, Iraq and Iran are delighted at the thought of Sharon and Palestinian leader Yasser Arafat trying to do business. As long as Arafat refuses to renounce "terrorism" and recognize the "historic rights of the Jewish people on their own soil," Sharon refuses to even shake his hand. Considering the fact that Arafat probably has his own negative sentiments regarding Israel's new prime minister and the fact that Sharon will be offering much less negotiating room than his predecessor, the chances of the two developing a peaceful, trusting relationship are quite slim. Marwan Barghouthi, the head of the West Bank branch of Arafat's Fatah faction and a key organizer of the four-month uprising, confirmed the narrow chance of peace, adding that "continuing the intifada is the only way to deal with Sharon, and looking to negotiate with him would be worthless."

On the verge of war?

While the past four months have been marked by continual, violent, but limited clashes between Palestinians and Israeli soldiers, they have also been punctuated by numerous overt and covert threats of regional war. As the saga continues, Islamic fundamentalists from all regions of the Arab world continue to rally behind the Palestinian cause -- threatening the security of Israel.

Barely three months have passed since Iran's supreme leader Ayatollah Ali Khamenei rallied support for the Palestinian resistance movement, an effort that he said should continue to "frustrate ploys hatched by the U.S. and Israel." More importantly, he called for the elimination of Israel, which he said "is the main source of crisis in the Middle East." Indeed, peace is a distant prospect for the Islamic leader, who asserted that peace talks with Israel "will bring no positive and constructive results because the Israeli regime will not act fairly and reasonably." Tehran's 110,000-strong community of Basijis has already expressed its readiness to fight Israel along with Palestinians.

While Iran's resentment toward the U.S. and lack of cooperation are known variables, the rate at which other Arab countries have turned against the U.S. is alarming. Only Kuwait and Saudi Arabia see Iraq as a threat to Middle East security. Most remaining Arab countries have begun to form close ties to Saddam Hussein, and even Kuwait is calling for the expulsion of 5,000 U.S. troops that stand guard to protect the wealthy emirate. Of course, Kuwait is not the only U.S.-supported Arab country to turn against its benefactor.

Egypt, which has been building its military for more than 20 years -- mainly through the $1.3 billion in defense aid from the U.S. -- has been discussing scenarios for war in the region. Despite the benevolence of the U.S., Egypt, with its sizable Islamic population, will not be backing America's ally -- Israel -- if war develops. President Hosni Mubarak, after having withdrawn his ambassador from Tel Aviv, does not rule out a military campaign to save Arafat if full-scale war ensues within Israel. Egyptian pro-government experts pointed to a rising anti-Israel and anti-U.S. sentiment and the election of a new and apparently more militant parliament, which contains a sizeable Islamic opposition. Leading Egyptian analysts, including Dr. Ahmed Yusef Ahmed, director of the Arab Research Institute and a lecturer at Cairo University, have urged Egypt and other Arab countries to consider seriously the possibility of war with Israel.

Egypt has about 200 F-16s, more than 550 M1A1 tanks, the largest navy in the Middle East and a noteworthy defense industry. U.S. and NATO training exercises have given the Egyptian military valuable experience with its American-made weapons. A senior Israeli military source voiced concern that "they are building a monster and it is with U.S. help. … We have raised this with the United States and they don't want to hear this."

While the violent clashes between Israel and the Palestinians have been the focus of international attention, it could also be confrontations on Israel's northern border with Lebanon that propel the region into war. In an area known as Shaba Farms, Hezbollah has carried out repeated attacks, heightening tensions between Israel and the backers of the Islamic militia -- Syria and Lebanon. Martin Indyk, U.S. ambassador to Israel, asserts that "there's a real danger [of military confrontation] if Hezbollah is not restrained. … It would be a big mistake to underestimate Israel's willingness to defend its interests." U.N. special envoy to the Middle East, TerjeRoed Larsen, added that the Israeli-Palestinian clashes could easily have a "spillover effect in the region" and, in a worst-case scenario, incite a regional war.

Stepping up rhetoric against the U.S. and Israel, the Arab-run Al-Riyadh newspaper wrote that a regional war "will not be short and will not be limited to regular armies, because it will lead to an Arab resistance different from that known in previous wars." Indeed, a different situation exists today, with regards to Arab resistance, than in the past.

For the first time in years, Iran and Iraq have abandoned differences to cooperate against Israel. The two longtime foes are cooperating to ensure that Hezbollah gets Iranian missiles, weapons and other supplies. Iran, Iraq and Syria are continuing to encourage Hezbollah to initiate conflict along Israel's northern border. Amatzia Baram of Haifa University, a leading expert on Iraq and Syria, stated that "Iraq would very much want to help Hezbollah. … For Saddam, this would mean bolstering his standing in the Arab world. Besides, every Iranian mortar sent to Hezbollah would mean one less for use against Iraq." In response, Syria has lifted restrictions on travel of its nationals to Iraq -- ending a 20-year policy. A senior Israeli military source added that "the relations between Syria and Iraq have never been so good -- militarily, economically and politically."

As for the bolstering of Saddam's image, he has allocated more than $890 million to win Palestinian support. Saddam has reportedly sent $10,000 in consolation to each Palestinian family that has lost a member in the current mini-war against the Israelis. He told Palestinians, "If we had the opportunity, Iraq would have come to you with its armies."

The prospect of Iraqi armies coming to support Palestinians isn't an unlikely event. According to Israeli sources, it is likely that if Hezbollah were to continue to attack Israel's northern border, and if retaliation were to follow, Iraq and Iran would likely both throw themselves into the conflict. A senior Israeli military source indicated that Iraq is ready to launch missile attacks on Israel to help either Syria or the Palestinians. Iraqi Defense Minister Lt. Gen. Sultan Hashem Ahmed revealed that Iraq would be willing to defend any Arab country threatened by Israel, adding that "Iraq can destroy Israel because it possesses a large combat experience in dealing with all possibilities." Some of these possibilities include the use of chemical and biological weapons, as indicated by Deputy Prime Minister Tariq Aziz's statement that his country had biological weapons "to deal with the Zionist entity" -- a statement of particular genocidal character.

Oil at stake

With all of Saddam's vocal, financial and military support to Arab countries fighting Israel, there is more at stake than loyalties of the Arab masses. Not only is Saddam attempting to position himself as the champion of all Arabs in the region, but more importantly, as the one who controls vast Arabian oil reserves. The already collapsing international sanctions on Saddam's oil reserves would mean little in a time of regional war. As his influence grows, so does the prospect of him acquiring more and more oil -- a brokering chip that would enable him to gain ever more influence.

Not only does a menacing Saddam threaten American access to oil, but also the broad coalition of Arab states arrayed against Israel. If the Israeli-Palestinian conflict escalates or if war breaks out along Israel's northern border, the region may be propelled into a wider war -- one that will undoubtedly thrust the U.S., along with any moderate OPEC nations, in between a rock and a hard place. If the U.S. supports its long-time ally Israel, it risks an oil embargo similar to 1973 -- a response to the U.S. allying with Israel during the Yom Kippur war -- not to mention discontent from Russia, China and North Korea -- avid arms dealers to Mideast Arab nations. An oil embargo placed by Middle East Arab nations would do much more to cripple the U.S. economy today than it did 27 years ago.

At the outbreak of the Yom Kippur War (October 1973) that led to the energy crisis, gold stood at just $98 per ounce. By the time the war had ended, the price had more than doubled. By January of 1980, in the wake of more crises in the Middle East, gold was at $850 per ounce.

Today, the Persian Gulf produces over 27 percent of the world's oil and contains 65 percent of its oil reserves. This takes on particular significance because the United States in 1999 imported more oil from the Persian Gulf than at any time since 1977 -- a total of 25.1 percent of U.S. net oil imports.

The interconnection of tensions in the Middle East, oil prices and the U.S. economy is unmistakable. The connection between these factors and the financial markets is just as irrefutable. However, Wall Street never notices these things until after the fact. Now is the time for investors to diversify, before inattentive Wall Street stockbrokers, investment bankers and money managers get blindsided by world events, as they did in 1973. Should tensions in the Middle East escalate, last year's slide in the Nasdaq will look far less ominous. Now is the time to protect your wealth from the likely repercussions of the unpredictable and ever-deteriorating Middle East quagmire.

For more information on the Blanchard Economic Research Unit, visit economicresearch.net.