The gulf war has reached a stalemate: The parties in conflict can neither advance nor retreat. And patience is wearing thin.

The only way to defuse the tension and let the steam out of the crisis now is to radically turn the focus of conflict from the military to the economic facet of the problem.The main lesson we have learned from the evolution of the East-West conflict is that failure to address the economic imbalances and gaps besetting our world will lead the underdeveloped countries to assert themselves militarily. Since that is now the case with Iraq, it might be useful to try to understand Saddam Hussein's perspective and interests.

The underdog should not be expected to behave like a gentleman. Saddam's aggressiveness, brutality and irrational behavior actually reflect the despair of a Third World nation that has seen its only national resource, crude oil, systematically losing ground on the world market. In his view, America has succeeded in cutting oil prices by dividing and manipulating OPEC with the help of its client-states - Saudi Arabia and Kuwait - which have been co-opted into the advanced industrial system of the capitalist West.

Let us recall that the pretext invoked by Saddam for the invasion was Kuwait's decision to sell oil at $18 a barrel, thus undercutting Iraq's demand for $25 a barrel. Despite the general view in the West that this was just a ploy, there are historical grounds for Saddam's attitude, if not his action.

Especially in the post-war era, cheap oil fueled rapid development and enriched the industrial nations. The 1973 Arab oil embargo (and, later, the new oil prices set by OPEC) was the first serious attempt to restrict that basic source of Western prosperity. After the industrial nations recovered from the stagflation initially caused by the higher prices, they set into motion economic mechanisms that worked in their favor.

In only three or four years they absorbed, through Western banks, most of the oil dollars the richer OPEC nations had accumulated. Having to pay the high price of industrial equipment and know-how, financed with increasingly high interest rates set by American banks, the poorer oil-exporting nations such as Mexico and Nigeria became debtors bent under the heavy burden of annual service payments.

The rich oil-producing nations like Saudi Arabia and Kuwait, on the other hand, invested heavily in the West. The Saudi oil minister candidly admitted last year: "We have become an integral part of the American oil market, and the return of our investment depends on the health of that market."

Equally tantalizing are Kuwait's enormous investments in the West, which had reached $100 billion before the invasion.

It can be seen, therefore, that the origin of the Iraq-Kuwait conflict is in the oil market, and it is there that a peaceful solution of the conflict should be found.

That is why a negotiated agreement with Iraq and other oil-exporting countries ensuring stability of oil production at a fair price should be the main objective of a settlement. The fate of Kuwait is a subordinate issue that can be settled more easily once the true cause of the conflict has been eliminated.

In practical terms, the agreement should provide that the new and stable price of oil should come into effect the moment Iraq has completely withdrawn from Kuwait and when American and other foreign troops have left Saudi Arabia and the gulf region. Signatories of the agreement should pledge to respect the independence and sovereignty of all the gulf states. And the agreement should be confirmed and strengthened by the Security Council.

What are the merits and advantages of such an approach?

First, it would avoid a disastrously bloody and staggeringly expensive military conflict.

Second, by shifting the focus of conflict from the military to the economic facet of the problem, the negotiations would provide a face-saving posture to all parties involved.

Third, the establishment of a definite and firm price of oil would remove the single greatest destabilizing factor of the world economy in recent times.

Let us deal with the cause of the conflict, not with its effects. This should be the guiding principle in dealing with all such future conflicts if we want peace and stability in a world beset by disparity in power and wealth.

1990, New Perspectives Quarterly

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