MIDDLE EAST: Crisis in the Middle East

Analysis

align=justify> The continuation of suicide bombing campaigns, the growing international isolation of Israel and the US' s acknowledgement of Yasser Arafat as leader of the Palestinian people have put the Israeli Prime Minister Ariel Sharon's policy of military occupation of the West Bank and isolation of Arafat under intense public scrutiny.

The Bush administration's policy to the conflict continues to be characterised by caution. The need to balance a largely pro-Israeli domestic public opinion and temper anti-US popular sentiment amongst its Arab allies have shaped the US's limited objective of achieving a cease-fire.

The immediate impact of the crisis for the 'War against Terrorism' has been to push back any likely action that would be taken against Saddam Hussain's Iraqi regime. This seems more likely as the Arab world has recently sought to accept the Iraqi regime back into the regional fold and as the Iraqi regime itself, faced with a potential US military attack, seeks to adopt a more conciliatory tone towards the US.

align=justify> II. Participants

For Oxford Analytica:

David Taylor, Deputy Editor, Oxford Analytica

Also Middle East Editor at Oxford Analytica . Spent 17 years with the Foreign and Commonwealth Office. Postings in Aden, Damascus and Hong Kong. Graduated from King's College, University of Cambridge with a first class degree in law.

Dr Eugene Rogan, Lecturer in Modern History, St Antony's College, University of Oxford and Oxford Analytica Region Head

Specialises in modern Middle East history. Previous posts at Boston College and Sarah Lawrence College. Member of the Middle East team at the Oxford Analytica International Conference . Regular contributor to the Oxford Analytica Daily Brief.

Dr Philip Robins, Lecturer in Politics, St Antony's College, University of Oxford and Oxford Analytica Region Head

Specialises in the domestic politics and international relations of the modern Middle East, in particular Iraq and the Gulf states. Former Head of the Middle East Programme at the Royal Institute of International Affairs, Chatham House. Also worked as a journalist for the BBC and The Guardian in the Middle East. Regular contributor to the Oxford Analytica Daily Brief

Dr Tim Hames, Oxford Analytica Region Head

Currently a London based senior journalist and commentator. Former American Research Studies Officer at Nuffield College, University of Oxford and Lecturer at Christ Church College, University of Oxford. Co-editor of 'A Conservative Revolution?' and co-author of 'Governing America'. Interests include American domestic, economic, electoral and foreign policy. Member of the North American Team at the Oxford Analytica International Conference and a regular contributor to the Oxford Analytica Daily Brief.

align=justify> III. Presentations

David Taylor : Welcome to Oxford Analytica's open conference call on the 'Crisis in the Middle East.' I am the Deputy Editor at Oxford Analytica. With the US Secretary of State, Colin Powell, arriving in Israel today, and the Israeli offensive in the West Bank still in full swing, the issues on our agenda today are of the greatest importance.

As far as the format is concerned, the hour-long conference will start with brief presentations by the three panel members who will highlight key issues. We will then go into a question and answer session.

Let me briefly introduce you to our panel of experts. We have Dr Tim Hames, who is a London-based journalist and commentator and formerly a lecturer at Oxford whose principal interests are American domestic, economic, electoral and foreign policy. Dr Philip Robins is a lecturer in politics at St Anthony's College in Oxford who specialises in modern domestic politics and international relations of the modern Middle East. Dr Eugene Rogan is a lecturer in Modern History at St Anthony's College, also here in Oxford.

I am going to call first of all on Dr Eugene Rogan to talk about the current state of the Israeli-Palestinian conflict.

Eugene Rogan : Thank you, David. As Operation Desert Shield comes to the end of its second week, the one lesson that all observers have learned is that military solutions are providing no solutions to the Palestinian-Israeli conflict. From the Israeli perspective, the government of Ariel Sharon has come under a degree of international isolation which is unprecedented in recent times. The EU, the United Nations and even the United States have begun to apply pressure for an immediate Israeli withdrawal. A request which the Israeli government is patently unwilling to entertain. This has left the Israelis feeling more vulnerable and more exposed to international opprobrium than they have in many years.

Despite the efforts to achieve a military solution to the ongoing Palestinian-Israeli conflict, the Israelis do not enjoy any greater security now that the operation is two weeks on than they had beforehand. The recent bus bombing yesterday in Haifa has only underlined to Israelis that, as hard as they may strike the Palestinian civilian centres, they will continue to face the threat of terrorist attacks. So, the pressure remains, both domestically and internationally, on the Israeli Prime Minister, Ariel Sharon.

This is not to say that the Palestinians are having an easy ride of it. Obviously, they are on the receiving end of a very harsh military campaign which has been closed off to the international press and diplomatic observers. From all inside evidence, this campaign is resulting in very high casualties and certainly a major sweep up of those who are involved in Hamas, Islamic Jihad or in the Fatah Tanzim organisation. Yet, through all of this, the Palestinian Authority President, Yasser Arafat, is managing to survive and indeed to consolidate his position.

We have read time and again Arafat's political obituary. It looked as if his obituary was going to go beyond politics and become a reality as his compound came under sustained attack. Until recently, Arafat was growing unpopular amongst his own constituents and among Palestinians. Now, Palestinians have rallied around Arafat stronger than before. The Arab world, which had maligned Arafat on many occasions, has once again rallied behind him because of the way in which the Israelis have tried to isolate him. The EU has rallied behind him, and now with the visit of Colin Powell and his demand to see Arafat, even the United States is beginning to recognise that the President of the Palestinian Authority is indeed going to be the man to represent the Palestinians.

We are, therefore, coming to a situation where it is inevitable that the diplomatic pressure is brought to bear to end the military action and re-start negotiations. All parties are somewhat distressed to realise that it will be Ariel Sharon and Yasser Arafat who are most likely going to be facing each other opposite the negotiating table.

David Taylor : Thank you for that, Eugene. I would now like to turn to Tim Hames. Tim, what do we know about this apparent US change of stance, or change of discourse which has taken place over the last week?

Tim Hames : I want to make three main points:

1) A caution about over-estimating the significance of the US shift;

2) To look at what the short term objectives of the Bush Administration are; and

3) To examine some wider questions about American public opinion.

1) It is easy, particularly given the extravagant media coverage to exaggerate the significance, duration and coherence of the apparent shift in policy and rhetoric last week.

The process of policy re-evaluation of this comes through three separate strands. First, Vice President Cheney returns from his tour of the region, persuaded that the temperature needed to be lowered in terms of the Israeli-Palestinian conflict. This would allow for the pursuit of other goals in the region, most notably the isolation of Iraq. But that phrase 'lowering political temperatures' is not the same as committing the United States to the sort of engagement we saw in the late Clinton era.

Secondly, it seems to have been the results of an appreciation that President Bush's comments in Crawford at the beginning of last week. The president appeared to say that the only condition he placed upon Israel's military activity was that it did not completely repudiate any former peace process --'it did not close the door' to use his phrase-- was perceived as a shift in US policy in Sharon's direction, and therefore requires some compensation.

Thirdly, the State Department was extremely alarmed by the concerns of Arab allies about popular reactions on their streets to that sense of the US being indistinguishable from Sharon, and being reluctant to engage in active diplomacy.

2) In the short term, the American objectives are quite limited. They are focused upon a cease-fire. Assuming that Israel will offer Powell some sort of bait by which their forces will withdraw from the West Bank, which is the most likely outcome although it certainly will not be now, then the focus will return to the Americans seeking Yasser Arafat's condemnation and marginalisation of suicide bombing. That will be extremely difficult for him to consider and may well re-ratchet US policy to the position it was in ten days ago.

The Administration's chief operatives in the region, General Anthony Zinni the special Middle East envoy-- and George Tenet --director of the CIA--, are more persuaded by restarting a low-level political process between the two sides. This would focus on more practical issues rather than gambling on more explosive questions that are at the centre of the conflict.

The president retains a deep caution about committing himself to a grander approach owing to the lack of a blueprint that both Arafat and Sharon could endorse. The president remains deeply reluctant to commit political capital in such an uncertain area.

3) Finally, US public opinion. There are deep cultural reasons why Americans tend to empathise with Israel in this region. They are not going to be seriously diminished by events. The continuance of suicide bombing and the linkage there with September 11, clearly plays well from the point of view of the Israeli Government in its efforts to mobilise public opinion. There is also ready evidence that Republicans in the House of Representatives and Senate are nervous about the perception that the president might have shifted policy more forcefully than perhaps he has.

It seems to me that all these factors are quite important areas for caution for the president. If Colin Powell cannot demonstrate that there is the space for a serious push at the macro level of politics, then the White House will be reluctant to commit itself to it.

David Taylor : Thank you very much, Tim. Lastly, I would like to call on Philip Robins to present the wider implications on the war on terrorism and on other issues of regional stability in the Middle East.

Philip Robins : As far as Iraq is concerned, it was always unlikely that a move against Iraq --a second stage of the 'War against Terrorism' as it has been labelled-- was going to happen sooner rather than later. This situation became more and more marked with the increasing signs that the war against terrorism against Afghanistan had not been won in the comprehensive way that many had thought it would at the end of last year.

Clearly the emergence of this very intense period between Israel and the Palestinians has further served to push back any thought that a war against Iraq would loom sooner rather than later. If we were looking at autumn of this year as a best-case scenario, from an American point of view, for action against Iraq, we are now pushing it back into the next calendar year, but without any real sense of how this will happen.

We should bear in mind, for instance, that at the Arab summit in Beirut, the de facto leader of Saudi Arabia, Crown Prince Abdullah, made a very marked and public acknowledgement of the senior Iraqi representative, Izzat Ibrahim, and made a point of embracing him in public in front of the television cameras. There is less of an inclination on the part of even moderate Arab states to become drawn into or embroiled in any Iraqi adventure.

The Iraqis understand this, and it is no surprise that the Iraqis have gone for their 30 day cessation of UN-administered exports of oil at this particular time. Baghdad has been rather disconcerted by being labelled as a second priority for the 'War against Terrorism.' Iraq has made a number of conciliatory noises in the direction of the United States, in particular from last October or so onwards. This very bold and assertive move on oil exports reflects a perception in Iraq that the country has more leeway than it appeared to have up until just a few weeks ago.

Nevertheless, even though any action against Iraq has probably been pushed back, we should still remember that Iraq is still very much a priority: a priority as far as Washington is concerned, and also a priority as far as the British Administration is concerned. Over the last couple of days, we have seen Prime Minister Blair --as he was trying to manage criticism from his own back-benchers over Iraq policy-- assert that Iraq remains a priority and remains a dangerous and threatening state with weapons of mass destruction an important element in all of this. Overall, Iraq will remain a priority, though a particular date for action against Iraq has been pushed back.

One or two observations on wider issues: Even though the Israel-Palestinian conflict is the issue of the moment, other factors will continue to be important even though action towards them may be delayed. A very important area is the whole question of economic and political reform in Saudi Arabia, the most important state for the West certainly in the Gulf region. The Saudis have indicated that they want to press ahead with reform. Crown Prince Abdullah is very much associated with reform. We have seen the introduction of formal positions on foreign direct investment in such areas as gas initiatives. However, as a result of the distraction of the Palestine issue, movement is not going ahead on these very crucial areas.

In many ways, this may be regarded in the long term as a wasted opportunity. These reforms are very much associated with Crown Prince Abdullah as the only person in Saudi Arabia who is able and capable of delivering on such reforms.

A second broader issue as far as the region is concerned is the whole question of the radicalisation of regional public opinion. Up until two or three years ago, there was a view that the Arab-Israeli issue had been replaced by ordinary inter-state politics as the central issue in the region. If that perception was ever true, this has been superseded by the polarisation and radicalisation of public opinion in the region on the issue of the Palestinians.

Of course, against the backdrop of September 11, and of a rising, youthful population, whose views and values are very difficult to gauge, the way in which the Palestinian issue could play with some of those values and some of those ideas could be very disconcerting for the future.

David Taylor : Thank you very much, Philip. There are plenty of issues there and I hope we will get plenty of questions based on them. We will now take questions.

I will start the ball rolling by putting a question to Tim about Colin Powell's visit. Tim, you have painted a fairly downbeat picture of likely US aims and objectives. There has been some comment in the press this week suggesting that Powell has heard and taken on board some of the arguments from people he has met this week concerning a broader strategy, a final deal involving international observers and perhaps participation in some kind of version of the Madrid conference involving Arab states and the EU. Is this pure wishful thinking, or does this suggest that there are different views within the US administration between the State Department and other parts of the US government?

Tim Hames : I think the latter is the most important aspect. The State Department has never been as hostile institutionally to the Clinton approach as the Bush operatives in the White House. Whilst it is often claimed in journalistic terms that the divisions in US foreign policy are between Powell and the US Secretary for Defence, Donald Rumsfeld, or Powell and Vice President Cheney, it seems to me that the much more significant, if low key actor is the National Security Advisor (NSA), Condoleezza Rice. Rice is a very unusual form of NSA, in that:

She has had a long personal association with the President, well before he took office which is not customarily the case for people who hold this position;

Secondly, she has quite a strong awareness of domestic policy consequences of foreign policy action, and a desire to protect the President's popularity and minimise his exposure to foreign policy risks; and

Thirdly, she has no particular background or passion in this particular region. She is more comfortable with questions involving the high politics of Russia in particular than other areas.

All these points combine to reinforce an institutional caution by which the Bush administration is quite happy for Powell to go and see what the prospects for a deal are, but will look at what he brings back with a great deal of caution.

David Taylor : Thank you for that, Tim.

Client : My question concerns the issue of the Jenin refugee camp and whether there has been a massacre there. Apparently the Israelis are not letting any media into the camp. If such a massacre has taken place, what will be the reaction of the US government and the international community?

Eugene Rogan : You have framed the question correctly. We cannot say until international observers have gone in. It is a very ominous sign that the press corps has not been allowed into the camp as we rely on the press to be the eyes of the world. What we do know is that no Palestinians have been admitted to hospitals in or around the Jenin camp which suggests that anyone who has been wounded or killed in the fighting remains unaccounted for until such time as people are allowed in to take out the wounded.

The last figures I saw published by the Israeli government two days ago acknowledged that 200 people had been killed and 1500 had been wounded. These are official figures. The Palestinians have maintained a figure, I saw yesterday, of 500, in which case we are talking about a higher order of magnitude. Until international observers have gone in and given us an independent assessment, we cannot tell, but I would think that such a high level of civilian casualties in a refugee camp would only serve to bring greater international criticism and isolation for Israel, and increase pressure for it to take immediate action to withdraw its military.

David Taylor : Tim, this is speculation at this stage, but if our worst fears are confirmed and let us say many civilians have died in Jenin, do you see this as having some sort of impact on US public opinion?

Tim Hames : The absolute crucial distinction is whether or not the Israeli government can persuade American opinion that the people shot were themselves armed or were credibly military actors themselves. In which case, to put it bluntly, the private views of both American officials and many Americans will be, 'well, if you're still engaged in that sort of conflict, that sort of thing may well happen to you', versus whether or not it is something which is closer to the indiscriminate slaughter of women and children. Obviously, if it is the latter, then in presentational terms, the Israelis are in a very difficult position indeed. If, on the other hand, they can present it more as the former, then it is unlikely that the Pentagon or the National Security Council (NSC), particularly given the way the US operates against terrorism, will be particularly appalled.

Client: My question is directed towards Professor Rogan, and it concerns the effect on domestic politics in Israel of the current campaign. If it becomes gradually more apparent that the military strategy is not working out and that it is not stopping the suicide bombings, is this likely to result in greater tension within the coalition and in a shift in public opinion of Sharon?

Eugene Rogan : My take on this is that the presence of Labour in the coalition has in essence neutralised the standard checks and balances of Israeli politics. There is not a party out of government to claim the critical role of opposition, to challenge government actions and to put forward an alternate vision. Everyone recognises in Israel that if you were to go to the polls today, a Likud government would be returned and it might be led by Binyamin Netanyahu, though arguably, Ariel Sharon would still have a good chance.

Sharon has hedged his bets well by drawing in right wing parties into his coalition. This week he drew in the Gesher party as well as the National Religious Party, and in this sense is making sure that his government is, if anything, stronger in support of a tough military line. However, there is no doubt that this puts real pressure on Labour to consider its position, but Labour itself has been so beleaguered and unable to resolve its own leadership battles, that it is difficult to be persuaded that Labour could pose a credible political alternative to Likud. We see a situation where everyone is disillusioned with the failure of the military options, but there is no political vision being put forward, and frankly no demand seems to have been made for an alternative political position.

David Taylor : Thanks for that, Eugene. Philip, would you like to add anything?

Philip Robins : It is important to draw attention to the rather volatile nature of Israeli public opinion. We are now very much used to seeing a decisive majority of the Israeli public backing Sharon. We saw that in his election about a year ago, and of course in terms of the methods and tactics which he has used and has been using over the last couple of weeks.

However, one only has to go back a year or so before that to see that there was an equally strong majority of the Israeli public in favour of peace-making with the Palestinians, engaging with the Palestine authority led by Yasser Arafat, a negotiation based on the principle of 'Land for Peace' and the trading of territory occupied in 1967 in return for the end of the Palestinian-Israeli conflict.

If public opinion has been volatile in one direction, then we should not necessarily assume that it is going to be solid in this current direction indefinitely.

The other issue which is also worth mentioning is the question of the economy. Clearly, the whole political atmosphere in Israel at the moment has been dominated by the security situation, dominated by terrorism, dominated by the killings that have been sustained, particularly inside the green line over the last few weeks. We also need to be mindful of the fact that there has been a tremendous economic deterioration in Israel during this time as well. Unemployment is up near 10%, a stringent budget has been introduced, new projections are being revised to suggest that the budget deficit will be bigger this year than it was assumed to be four or six weeks ago. There is talk now of an introduction of a war tax to pay for the military actions on the ground.

This will be important in terms of the way in which Israelis perceive their position in the longer term. The current short term is very much preoccupied with the security situation. Nevertheless, as an eventual withdrawal from this initial action takes place and as there is perhaps a move back to negotiations, Israelis will then start to refocus on the economy and then even start to critique this government's handling of the economy.

David Taylor : Thank you for that. One other possible consequence that has been mentioned in the media is that public opinion might shift more towards the idea of a separation from the Palestinians if neither military action nor negotiations are viable. Philip, would you like to comment on that?

Philip Robins : I am sure people would be very happy to have separation. This has always been discussed as one possible way forward in terms of the relationship. The big problem here is the practicalities of achieving a separation, especially when the Israeli economy is still dependent on significant numbers of unskilled and semi-skilled Palestinian labour coming from territories where the green line boundary is a very long one. We have seen how difficult it has been for the Israeli military to prevent the suicide bombers coming across in the last weeks, even when they have been in a heightened state of alert. One must also consider the question of a significant Palestinian population that lives within Israel that itself has Israeli citizenship, some 18% of the country being made up of Palestinians. We do not know at what point there may be further radicalisation of parts of this population against the backdrop of what is happening more broadly in the region.

Eugene Rogan : I agree with Philip. If separation were to take place in terms of an Israeli withdrawal from the territories occupied in 1967, this could be a way to diminish tensions between communities. But many of the plans being put forward by the current government in Israel for separation involve creating buffer zones and security zones, more reminiscent of South Lebanon. This would involve laying down miles and miles of barbed wire and annexing territory or taking control of territory in the West Bank as a buffer against Palestinians. It would also leave in place a network of settlements and roads that connect them. I cannot see how the continued presence of settlements and the holding of Palestinian territory would provide a way for the two sides to overcome their differences.

Client : We appreciate your comments and the light that they shed on this murky situation. Would the panel in general comment on the consequences for the economic and political stability in the broader region. In particular, for example, the issues that now confront the Jordanian and the Egyptian economies which are reliant to a certain extent on tourism and so forth. The economic consequences for Israel have been touched on, but we would like you to comment on the political and economic implications in the broader region in terms of stability in the area.

Philip Robins : It is a very important point to be aware of, particularly in terms of the situation in Jordan where both political and economic stability issues are important, and in Egypt, perhaps more from the point of view of economic stability rather than political stability.

In Egypt there have been some demonstrations over the last week or more, these have been more intensive, perhaps with larger numbers taking part than is usually the case. Nevertheless, the political demonstrations in Egypt have been contained reasonably effectively. The protests have been very much directed against Israel and directed against the United States rather than directed against the Egyptian regime itself. Therefore, there has been a containment of the domestic and political dimensions of these protests in the Egyptian case.

At the economic level, the situation is much more serious. The Egyptian economy seemed as if it was moving in the right direction with some belated reformist measures taken, particularly last summer. That situation, coupled with the devaluation of the Egyptian pound and September 11 plunged the Egyptian economy back into uncertainty. Tourist numbers during the important winter season were particularly affected. Levels of tourism are still low now, with an uncertain prognosis.

There has been a rallying around as far as the foreign exchange position has been concerned. Over the last few weeks, we have seen various international actors, the IMF and others, coming to Egypt's assistance, being supportive of Egypt's need to get itself through the next 12 months in particular as far as its foreign currency position is concerned.

Eugene Rogan : Jordan is suffering directly from the consequences of the instability in Israel and Palestine. Obviously, it has a population which is largely Palestinian we don't know exactly the proportion but it is widely assumed to be as much as 50%-60% people of Palestinian origin, or people who have been refugees from the Palestine wars of 1948 and 1967. The political instability in the Palestinian territories has a direct consequence within Jordan itself.

This comes on the back of the failure of the Jordanian government to foster the kind of investment which would create jobs for Jordanians. A very high level of unemployment in the country, officially set at 15%, is widely held to be as much as 35%. The prospect for attracting foreign direct investment diminishes with regional instability. Clearly Egypt and Jordan share the feature of full peace with Israel, which is unpopular at home and brings them under pressure from abroad, but it also makes them special partners with the United States. I would not be the least bit surprised to see Egypt and Jordan bargaining with the United States, and in an indirect way with the United States taxpayers, to help them make up any economic shortfall with enhanced aid packages. This bargaining would also help retain their critical roles as partners in peace. Certainly, for the moment, it is enormously destabilising for the politics and economies of the neighbours of Israel.

David Taylor : Tim, do you want to come in on that point which Eugene made about the possible role for the United States in bolstering those frontline states?

Tim Hames : Yes. There is certainly more room to manoeuvre for Bush and Congress, partly because of the number of different ways money is allocated for the 'War on Terrorism,' and partly because the US's role in the world has changed since September 11. He probably has more room to manoeuvre, ironically, than Clinton had to assign various forms of funding which could be used, particularly in the Jordanian case, for stabilisation.

David Taylor : Thank you very much for that.

Client : What is your view on the oil price going forward, and the possible scenarios?

Philip Robins : I suppose the one general point to make is that the situation is different today compared with the end of last year. At the end of last year, there was a very real concern that there might be a significant downward pressure on oil prices, and even a collapse in oil prices, similar to those we saw back in 1998. If oil prices were around 18 US dollars per barrel, there was a concern that they could go down as low as 14 USD or even lower, which of course would potentially have put tremendous fiscal pressure on a whole series of countries, not least, the very important states of Iran and Saudi Arabia in the Gulf region.

Today, of course, oil prices have strengthened for a variety of different reasons, not least because of the tensions in the region. Now they are up to 26-27 US dollars per barrel. People are asking whether there will be any further room for the rising of prices or whether they would die back, and if they do die back, how far will they die back to? But, nobody is talking about a rout as far as oil prices are concerned, along the lines of those that were being discussed publicly two or three months ago.

In terms of the oil price movements themselves, these have been affected by:

The tensions on the ground as a result of the Israeli military strategy of the last couple of weeks;

The Iraqi announcement of ending oil exports for 30 days, to be reviewed again after that period; and

The difficulties and problems which Venezuela is going through at the moment which, from another part of the world, is creating nervousness as far as oil prices are concerned.

Taken together, all three of these factors help to explain the tightness in the market at the moment. I estimate that most people are tending to assume that once the Israeli forces are withdrawn, once the strike in Venezuela is resolved and once people have got over Saddam's latest peace suggested politics, perhaps a slightly calmer sense will prevail over oil prices.

David Taylor : Thank you, Philip. One of the points we have made in our articles over the last few months, and particularly recently, is that oil prices seem to be extraordinarily volatile in the market as it is constituted at the moment. As you say, there are various factors, including a diminution of regional tensions and seasonal aspects in the northern hemisphere which presumably could cause prices to slip away again as quickly as they have risen.

One further point that would be worth making is that once this particular piece of manoeuvring by Saddam is out of the way, I suppose the oil market will be facing the next possible piece of Saddam manoeuvring concerning the renewal of the 'Oil for Food' programme which is likely to be even more controversial than last time around, is it not?

Philip Robins : That is very true. We also have to remember that making up any shortfall will not be as easy as it has tended to be in the recent past. There is a tendency for a number of commentators to say that if Iraq cuts its production this will cause problems in terms of the market, sending the oil price up and then the Saudis will simply increase their production to take into account that gap in the market. That certainly was a reasonable assumption to hold in the recent past, but this time we are talking about a ceasing of oil exports by Iraq in solidarity with the Palestinian people. It will be much more difficult for the Saudis, and indeed, for others in the region to make good that shortfall because, by implication, they will be saying that they do not care about the Palestinians, and of course, that is very definitely not the case as far as these states are concerned. It is certainly not the case as far as Crown Prince Abdullah is concerned, who is somebody who has, on a number of critical occasions, shown himself to be extremely influenced by the Palestinian issue regardless of the pragmatic politics at a particular time.

David Taylor : Philip, we have identified in previous articles in the Daily Brief that the Palestinian issue might be the one on which the general assumption about Saudi Arabia making up the gap would founder. Obviously, nobody has joined Iraq in the oil boycott so far. What do you think might happen to make the pressure on Saudi Arabia intolerable and cause them to make statements of a rather different variety, perhaps about what they would do?

Philip Robins : We will have to see what the level of casualties has been as a result of the Israeli military push, and we have to see what the profile of those casualties is, along the lines of the answer that we had to the first question. If the news is very stark and very shocking, then that could immediately increase the pressure on states to be seen to be taking action as far as this is concerned, with oil inevitably being on the list of actions that could be taken. We have to remember that the important issue over the last week is not that we are particularly close to a general oil price embargo. There are very strong reasons why most of the producer states would not want that, not least their own fiscal positions, and Saudi Arabia and Iran are very near the top of that list.

What the last week has done is to bring the issue of oil as an instrument of leverage back on to the agenda. Against that backdrop, any particular shocking developments in the future will be difficult to manage as far as pressures for use of this instrument are concerned.

David Taylor : Thank you, Philip. Tim, is this an issue that is exercising US policy-makers at the moment?

Tim Hames : It is clearly a factor in the mix. There are two plausible scenarios to put forward in the three weeks up to 1 May:

The first scenario is that the Israeli operations at least lead to a reduction in Hamas' capacity to carry out suicide bombings in Israel, and that a very low form of political dialogue occurs. That is a rather unheroic outcome from the point of view of idealism, but it would be enough to meet the criteria of lowering the political temperature, to a degree that would take it off the television screens, and to that extent would not feed into the general level of debate on oil prices.

The second scenario is that the Israelis pull back as either there is no evidence of any diminution in Hamas' activities, and/or Arafat shows little sign from their point of view of even a form of words that would indicate some distaste for Hamas. In which case there would be a lot of internal pressure on the Israeli government to re-occupy. The crisis would be re-ignited and in political terms, would be worse the second time round than the first.

Client : Thank you for those excellent comments. If the Israelis pull back to the 1967 lines or to some other internationally recognised line with the support of the international community, they will have to feel confident in that. I would like you to tell me what effect you think recent experiences they had will play on their thoughts, that namely in May 2000, the Israelis withdrew to the UN recognised demarcation border between Lebanon and Israel. Since then, there have been problems on that border, especially recently, where the international community has basically said very little. How would that affect Israeli decision-making?

Eugene Rogan : I think the experience of the withdrawal from south Lebanon was a bit of a shock for the Israelis. The Israeli army was not used to withdrawing under force of arms, and it was the first time they had found themselves with an Arab state so triumphant in driving the Israelis off their territory. This was hard for them to swallow, and it made people feel that they had handled things badly by making an unconditional withdrawal. Although, initially, the experience was one of security on their northern frontier, certainly more security than they had seen in all the years, that northern frontier was mentally serving as a security zone.

The experience of that withdrawal suggests one point. Although the Shebaa Farms only take up a very small bit of territory, it has continued to serve as a legitimate basis for nationalists supported by the Syrians and Lebanese government to continue to attack the Israelis. The Israelis should perhaps take a lesson that withdrawal is going to be most successful when there is no one left on occupied territory to be the target of attack. That is probably not a lesson that the Israeli public is going to buy right now. All I can say is that the experience of occupation no longer seems one which is compatible with a political settlement. It does not seem to be a position that can be defended by military means while providing for the security of Israeli civilians in Israeli cities.

Client: The UN says that the Shebaa Farms are not occupied territory, and when the Israelis withdrew to the border, they did it in entire compliance with the UN. I am not sure what the Shebaa Farms example you are bringing up is meant to give. Was it that they did not completely withdraw, or that even though they did completely withdraw in accordance with the UN, if the other side does not think they did, then it does not matter what the UN says? I was not sure where you were going with that example.

Eugene Rogan : The Shebaa Farms issue is one that has been passed round between the Syrians and the Lebanese. Officially it was Syrian land occupied by the Israelis, but the Syrians then changed their sovereignty and recognised it as Lebanese land. This is where the UN recognised the Israeli withdrawal, but not to the satisfaction of the Lebanese and the Syrians. I suppose it suggests that it is going to be essential to make sure that the final borders that are agreed do not lead to the tension of occupied territory --the Israelis recognise that the Shebaa Farms were occupied land-- and that it be done through negotiation with the Arab partners. Certainly, the frontier itself with Lebanon, aside from the Shebaa Farms, has been one which has held.

Client: My question is for Philip Robins. I want to ask about Turkey's current position on the conflict, if you could comment on how domestic political opinion in Turkey is responding, and also how this escalation will impact on Turkey's relationship with Israel?

Before you respond to that, you also said, if I heard you correctly, that you did not expect economic and political reform to go ahead in Saudi Arabia. Does that mean that you think there will be no agreement on the gas initiatives?

Philip Robins : Thank you for giving me the opportunity to clarify the point about Saudi domestic economic reform. In 1998 the Saudis implemented a series of important reforms which they did in good time, but certainly since last September the political will to push ahead with these reforms has very much been dissipated by the need to focus on the war against terrorism, the management of a now difficult relationship with the United States, and now, of course, the Palestinian issue. These reforms are still on the agenda. My view is that it is of crucial importance that they go ahead, and therefore, it is of concern that they are not being pushed ahead in as rapid time as they had been initiated. Of course, there are other more pressing political issues.

As far as the Turkish-Israeli issue is concerned, this has been a fascinating and very interesting development which has happened over the last few days, exacerbated by Prime Minister Ecevit's somewhat intemperate remarks about Israelis actions against the Palestinians.

The way that various key actors in Turkey have sought to clarify their position tends to suggest that as far as the levers of power are concerned --certainly as far as the military, the political establishment and the foreign ministry are concerned-- the relationship with Israel is one that continues to be valued. After all, it is only just a few weeks ago that the latest military commercial agreements were signed between Turkey and Israel. But the Turks have always been concerned to balance, or at least be seen to balance, their delight at having closer relations with Israel with a concern to get the presentational politics of the Palestinian issue right. They have always been concerned about the importance of going ahead with the peace process, of having dialogue rather than conflict between the Israelis and the Palestinians, and not seeing the peace process spin out of control into a direction of greater conflict.

Members of the political establishment in Turkey will be somewhat dismayed by the developments which have accelerated in pace over the last couple of weeks. It makes their strong relationship with Israel much more difficult to manage in domestic terms. In domestic terms, there is an important section of public opinion that has been animated on the issue of Israel and the Palestinians in recent times. This has the potential to translate into party politics where the Islamicist parties might benefit from any sustained criticism of the political establishment for an overly conciliatory position towards the Israelis. It is a very fascinating issue, and one to continue to watch.

Client: On which Middle Eastern countries would an invasion on Iraq and a regime change have the biggest impact, and what kind of effect would you expect?

Eugene Rogan : My personal concern would be for Jordan. I think Jordan would come under a lot of pressure to serve as a base for a land troop movement, and that would be extremely destabilising to the country. I would be very concerned about how Iran might try and take advantage of such a situation. Those would be the two countries I would look at most carefully.

Philip Robins : Certainly Jordan, very definitely. It is a place where regional pressures often well up. Clearly Saudi Arabia would be important as well for the latent anti-Americanism which exists in that country, and of course, Kuwait. If there was to be regime change in Iraq, or if there was to be a concerted attempt at regime change which failed, then Kuwait would be very much the beneficiary, or in the case of the second scenario, very vulnerable indeed to future developments in Iraq.

David Taylor : I would like to thank all of you who participated in this conference, and also to our panel of experts. I should like to remind you that tape recordings or written transcripts of the call are available from your normal point of contact in our Business Development Team. If you are interested in further discussion of the impact of any of these events, then please speak to your normal point of contact in our Consultancy Team.

Before we go, we will be running a piece in the Oxford Analytica Daily Brief next week on US-Middle East policy which will carry forward the arguments from where we have got to today. I hope you will join us for our next conference call. Please let us know if you have any ideas for the subject matter of this call which might interest you. In the meantime, goodbye and thank you for joining us today.