Clinton's presidency faces the roughest waters yet on the foreign policy front. But the sudden spurt in oil prices could lead to equally serious problems on the economic front. Without a major initiative on his part, we could see a repeat of the 1980 scenario that did in President Jimmy Carter. PNS editor Franz Schurmann, author of "The Logic of World Power" (Pantheon) and a book on the Nixon presidency, is professor emeritus of history and sociology at the University of California, Berkeley.

Never in his presidency has Clinton faced rougher waters on the foreign policy front than now. Yet as oil prices spurt upward, the outlook on the economic front is also growing bleaker. Unless he can show some strong and credible leadership in both areas, he could face a scenario similar to the fiasco that did in Jimmy Carter in 1980.

On the foreign front Clinton appears to have lost control of the Arab-Israeli peace process, the centerpiece of his administration's foreign policy. That process works if and only if the U.S. alone runs it and assumes a relatively even hand in its support for Israel and its need for Arab support. Now both conditions are rapidly disappearing.

As is evident from the rush of governments to Damascus to curry favor with Syrian president Hafiz al-Asad, Washington is no longer calling all the shots in the peace process -- nor is it likely to be between now and the Israeli elections on May 28. Meanwhile, Arabs, Muslims and Europeans are all fuming over the perception that the U.S. either encouraged Israel to attack Lebanon or was unable to restrain Peres and the war-minded Israeli military.

The loss of control is evident elsewhere in the world. Earlier this year, Clinton seemed to have the Europeans eating out of his hand when he moved decisively to end the Bosnian war. Now, however, European leaders are bitterly denouncing Israel. France's president Chirac, whose political career was shaped by the anti-American General De Gaulle, is undermining American policy everywhere, especially in the Middle East.

With much fanfare Clinton announced a major new "alliance" with Japan. Yet not only are the terms of the agreement vague. The big winner appears to be Japan, which has finally assumed the dominant role in the U.S.-Japan economic relationship. In return for Japan's support against "the China threat," Clinton has agreed to end his earlier crusade to force open the Japanese market to American goods. For example, while Ford took over the ailing Japanese Mazda auto manufacturer, it is the giant Japanese Sumitomo bank that has become the chief guarantor of the merger.

The situation looks even worse in Russia. Veteran political observers are increasingly worried that Yeltsin may cancel the June elections or allege fraud if the vote goes against him. Meanwhile he is seeking to shore up his falling ratings through diplomacy. Not only are Russia and Belarus merging but he has concluded a pact with the strongmen of four Central Asian republics that could mark the decisive step towards reconstituting the old union between them. In late April when Yeltsin meets Chinese president Jiang Zemin in Shanghai, all five will sign a Russia-China-Central Asia non-aggression pact that has more force to it than the U.S.-Japan alliance.

Finally, even as Clinton played tourist in St. Petersburg, tension in U.S.-Russian relations was undermining the Bosnian accords in ex-Yugoslavia. The Bosnian Serbs -- if not ready to opt out of the Dayton accords -- are so far unwilling to hand over the two top alleged war criminals, Karadzic and Mladic, as the price for remaining in.

What makes the foreign situation most worrisome is its economic dimension. As the glow of the ever-booming American stock market begins to fade, the chief worry in Europe -- reflected in European media far more than in the American -- is of inflation, triggered by rising oil prices. Inflation, in turn, could raise interest rates, wreck recovery in the U.S. economy and cut off any promise of ending Europe's stubborn recession. The Clinton administration is still pleased with America's 5.5 unemployment rate, but a spurt in inflation, paralleled by rapid increase in gas prices at the pump, could quickly turn the economic scene in the U.S. dismal.

In 1980 Jimmy Carter was defeated by the combination of an underestimated inflationary threat and the Iranian hostage crisis. Not only are the economic issues now beginning to parallel those of 1980 but Iran -- as the chief backer of the Lebanese Hizbollah -- is once again emerging as a key player in the foreign crisis.

One way Clinton could act to reverse the deteriorating political situation is to make a radical shift in his Middle Eastern policy from lop-sided support of Israel towards greater even-handedness vis-a-vis the Arabs. Even more important, Clinton could launch a dialogue with Iran -- similar to Nixon's initiative towards China -- that soon enough would include Israel.

Such a dialogue could also trigger a reversal in rapidly rising oil prices. Just recently, when an OPEC delegation visited Teheran, President Rafsanjani said that Iran wanted stable oil prices. Given Iran's clout in OPEC, this was clearly meant as an olive branch for Clinton. Were he to take it, the payoff could be significant in November.