By Franz Schurmann

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Basis of Prediction:

The above prediction is word for word identical with Prediction #46 that appeared last Tuesday, February 8, 2000.

In Prediction #46 I noted that Israel had already retaliated for the killing of pro-Israeli Southern Lebanon Army commander Akel Hashem and of three (subsequently two more) Israeli soldiers in the Israeli occupied Security Zone along the Lebanon-Israel border. On the basis of my own information about the situation along with the article by As-Sharq Al-Ausat (ASAA) writer Kareem Baqraduni which I translated and used as the basis for the prediction I predicted that Israel would still negotiate an agreement with Syria and then pull out from Lebanon.

In this Prediction #47 I make the same prediction but with a different argument. And I append another translated article by ASAA writer Waleed Ibn Murshid that directly relates to my new argument. Last week's argument was based on my conclusion that all parties to the strife wanted peace. This week's argument sees the global economy as a key force both in the strife and the peace process

During the week 2/8 to 2/15 Israel launched heavy raids against infrastructure targets deep inside Lebanon. Hizbollah forces fought back but without striking Israel proper. Peace accords seem more remote than the previous week.

An editorial in the ASAA of 2/12 gave three possible explanations for Prime Minister Barak's forceful actions in Lebanon. The first was that Barak looked for a way to divert attention from his failure to get agreements with both Syria and the Palestinians. The second was that he was not going to pull out of Lebanon in July as he promised and only do so after a separate accord with Lebanon had been signed. And the third was that Israel would seek a revision of the April 1996 agreement to restrict fighting in Lebanon to military targets. But if during the time the revisions were being discussed attacks should be launched beyond those permitted by the accords Israel would respond with an out-and-out attack on civilian targets all over Lebanon.

But the big news over these last seven days was the intervention of Saudi Arabia. That intervention ostensibly was on the oil front. But in fact was aimed at the Israeli-Arab peace process front.

Of all the OPEC nations only the Saudis have oil in such huge amounts that they can regulate prices by turning the oil flow tap higher or lower. If they allow a bigger flow the price goes down. If they reduce it the price goes up. On Thursday 2/14 they reduced the flow and oil prices jumped from around US$24-25 to almost US$30 in one day. As Yahoo News said on Friday February 15 "Prices took off on news that OPEC kingpin Saudi Arabia has allowed no let-up in price restraint to Western [oil] lifters."

Not only did this scare the global economic world but the Israelis as well. That same day a Saudi delegation flew to Gaza to talk with the Palestinian Authority. The Saudis said they would land only on condition that all Israeli personnel are removed from the airport. The Israelis complied.

What the second and third of Barak's imputed motivations for extensive military operations in Lebanon indicate is that the entire Israeli-Arab peace process could disintegrate. And this brings to my mind a similar event that happened in October 1973 during the "Yom Kippur War,"as Israelis call it or the "October War,"as the Egyptians call it. (I wrote extensively on that event in my book "The Foreign Politics of Richard Nixon,"Institute of International Affairs, UC Berkeley, 1987, pp. 301ff.).

Earlier in June 1967 during the "Six Days War,"Israel inflicted a massive defeat on the Arabs. The Palestinians lost the entire West Bank, the Egyptians lost the entire Sinai Peninsula and Syria lost the Golan Heights. In October 1973 Egypt invaded the Sinai, broke through the Bar Lev line on the East Bank of the Suez Canal and during fierce battles both sides suffered great human losses. Some three thousand tanks on both sides were destroyed. But the Israelis turned the tide and by mid-October Israeli forces had surrounded thousands of Egyptian troops. More menacing was that Israeli forces under the leadership of General Ariel Sharon crossed to the West Bank of the Canal and were moving north towards Cairo.

It was at this point that the usually stand offish Saudis intervened. They declared an oil embargo that soon led to oil prices rising 400 % (four hundred percent). By early 1974 a recession erupted in the industrialized countries that was the worst since the Great Depression of the 1930's. It did not end until the US presidential election year of 1976.

Furious diplomacy on all sides took place. Impenetrable walls of secrecy hid almost everything discussed by top officials. Suddenly on October 25 the White House declared a "red alert". A red alert means, "prepare for nuclear war."Yet hardly had people grasped the awesome announcement that a day later it was rescinded. And within another day or so Secretary of State Kissinger was on his way to Cairo to make peace.

Even now virtually nothing of what went on behind the curtains during the latter two weeks of October 1973 has been revealed. The reasons are obvious because the situation now is not that different from what it was then. Releasing old information could wreck the current diplomatic maneuvers. But the war in the Sinai did end, prisoners were exchanged and a road became visible that would lead to the Camp David Accords of 1979.

But the damage to the fledgling world economy had been done. So severe was that recession that many American cities began to die. The white middle classes accelerated their flight to the suburbs. The non-white poor remained in the cities. And Hollywood made a film called "Escape from New York"which showed a totally ravaged Manhattan completely sealed off from the rest of New York and the world. The curious stood on the waterfront of Brooklyn Heights to watch flames and smell stench rising from Manhattan.

Because I was then researching and writing my Nixon book it was obvious to me that war, peace and oil were closely connected in the October war. Now it's taboo in the mainstream media to suggest a link between oil and war. Oil is economic and war is military and the twain shall never meet, to paraphrase Rudyard Kipling. But in 1973 the post-Vietnam syndrome was still in force. And the media felt free to step on many toes. They did talk and write about the "oil weapon."But when things settled down the old taboo about keeping oil out of politics and politics out of oil returned.

The following article by Waleed Ibn Murshid also recognizes the taboo. But he did mention that during the riot-scarred WTO meeting in Seattle (11/30-12/2) some oil producers tried to get oil into the WTO agenda but were voted down. That initiative was voted down for the same reasons that in the fable the esteemed burghers of the city kept pretending that the naked king was dressed in all his regal finery.

There can be no doubt that on February 11, 2000 the Saudis made the price of oil jump in much the same way they did on October 19 (or October 20), 1973. And they did it for the same reason. Once again they used their "oil weapon"to tell the Americans they are willing to let the miraculous global bull market go kaput if Israel makes war on Lebanon and abandons the peace process. In October 1973 the Saudis scuttled a much shorter boom but one that gave Nixon a big victory in the November 1972 elections. Unfortunately he was already drowning politically because of the Watergate scandal.

The media have reported that President Clinton's popularity in California has soared to high new levels. That popularity will rub off on Vice-President Gore and certainly help him in the March primaries. It would do neither Clinton nor Gore any good to see a recession break out in the US and Europe as happened in late 1973 shortly after the October War was ended. Waleed Ibn Murshid explains how intimately oil and global capitalism are bound to each other.

But Waleed Ibn Murshid also inserts a political thrust into his op-ed piece. He urges the European Union (EU) to work with OPEC rather then attack it when oil prices soar or ignore it when they are low. Europe much more dependent on Middle Eastern oil than America. It also has been highly supportive of Israel. But signs are multiplying that the EU is rethinking its Middle Eastern policies. The most significant is its invitation, at long last, to the Turkish Republic to seek membership in the EU.

In the Yom Kippur war all European states, save Portugal, refused landing rights to American planes carrying emergency weaponry to Israel. If Europeans once again decide that oil is more vital to their interests than Israel then Israel only has one remaining major ally, the US. But it has long since been known that the Reagan, Bush and Clinton administrations all had to balance America's Israel and oil interests

It is for this reason that my Prediction #47 is identical with Prediction #48. But, as the French say "on verra ce qu'on verra,"we shall see what we shall see."

Globalization of the Oil Sector by Waleed Ibn Murshid, "As-Sharq Al-Ausat," Feb. 13, 2000

The industrialized nations complain when crude oil prices go up. But they are quiet when they go down. Towards the end of 1998 when the price of Brent crude fell to US$ 9.64 a barrel none of the industrialized nations shed any tears about the negative effect this was having on the oil producing countries and their growth rates. They knew that most of producers were dependent on oil as the main ----- if not the only ----- source of their income.

The European reaction to the current jump in crude oil prices to around US$30 a barrel has been nasty. This was evident in a statement released by the Organization of Economic Development and Cooperation (OECD) on February 10. They accused OPEC of sending a warning to the industrialized nations that it is ready to endanger global economic growth by putting a ceiling on oil production and keeping oil prices at their current high level.

Both conflict and cooperation have long marked economic relations between OPEC and OECD. Wouldn't those relations function better if they were anchored on a cooperation that benefits both their interests?

Since the "oil difficulties" of 1973 (the Saudi oil embargo imposed on October 19, 1973 - translator) it's been clear that Western economies are closely tied to the price of crude oil. The main reason Western industrialized nations have had such high growth rates during the last thirty years has been access to cheap oil. But cheap oil has put constraints on the growth of the oil producing countries that depend heavily on oil revenues to provide capital for their growth.

In recent weeks OPEC has been successful in raising ----- or as OPEC puts it, "rectifying" ----- crude oil prices. This is a clear signal to the Western industrialized countries that they need to work with OPEC to develop a more objective framework for the oil markets. Such a framework has to go beyond the current Western view that sees the oil markets as a game about an exhaustible strategic commodity vital to the world economy. This view holds that oil producers and oil consumers alike are hostage to the vagaries of supply and demand.

If something constructive comes out of the current crisis it could be that the industrialized Western nations finally realize there is an organic tie between oil prices and economic growth in all countries. When oil prices are high, economies slow down and unemployment rates go up. That shows how close the ties are between oil exporting and oil importing countries. The ties have not come because OPEC countries agreed to accept production quotas. Rather they have come from the relentless growth of the American economy [the core economy of the world system] that keeps on demanding more and more oil.

This being the case, a big question arises. The global economy is spreading all over the world. But why is oil being kept out of the globalist framework despite its huge role in worldwide production and consumption? [Editor's note: During the riot-scarred Nov. 30-Dec. 2 Seattle WTO meeting the delegates rejected a proposal by the oil producing countries to include oil as a WTO concern.]

Why doesn't the industrialized West stop talking about "shocks" due to oil price rises and instead develop some new confidence in OPEC? Such confidence requires that OPEC accept the growth requirements of the West but also that the West accepts OPEC's need for strong oil demand in the world markets. Such cooperation would assure stability in oil markets. It also would assure growth in both East and West.