Palestinian leader Yassir Arafat's standing in the world is rapidly collapsing. In the wake of suicide bombings on Dec. 1 and 2 that left 25 dead, Israeli helicopter gunships shot up Arafat's own prized helicopters and bombed his headquarters and other trappings of power.
Worse, the Bush Administration, which only two weeks ago was talking up the idea of a Palestinian state, seems close to buying into the Israeli argument that Arafat and his coterie are part of the global terrorist network that Washington wants to stamp out. White House spokesman Ari Fleischer all but signaled the Israelis to blast away on Dec. 3. A day later, the Administration followed up by freezing the assets of three financial groups said to be linked to the Islamic terrorist group Hamas, which claimed responsibility for the suicide attacks.
These events could well bring a turning point in the Middle East. Egypt and Jordan are unlikely to come to Arafat's rescue. But if Hezbollah, the Lebanese Shiite group, attacks Israel to support Palestinian militants, the Israelis might strike at Syrian military installations in Lebanon, risking wider war.
The shock waves from these outbursts will probably hit the Palestinians hardest, however. Arafat faces the choice of cracking down on the Islamic extremists or having the Israelis rain destruction on the dusty slivers of territory that he is expected to police. He could even become a target for an Israeli missile or, more likely, find himself bundled into exile.
IN A VISE. Prime Minister Ariel Sharon may not go that far because a serious escalation could prompt the resignation of Foreign Minister Shimon Peres of the Labor Party, whose presence strengthens his coalition. Still, Arafat's position is dire. It is not clear that he has the power or the will to satisfy Israeli demands to end the suicide bombings and jail key militants. And if Arafat succeeds in halting the violence, that may further blacken his image at home because the Islamists are increasingly popular. Arafat doesn't have much to persuade the public to turn against Hamas and its bombers. It seems unlikely Sharon will make an offer like the deal from his predecessor, Ehud Barak, that Arafat spurned at the end of the Clinton Administration.
With little to gain from moderation, the extremists rule the day. Ramallah pollster Khalil Shikaki notes that in recent student elections at al Najah University on the West Bank, the Islamists trounced candidates from Arafat's Fatah faction by 60% to 34%. Student ballots are a widely watched barometer. If this trend continues, says Shikaki, "the Islamic forces will become the mainstream in Palestinian society in two to three years." Hamas and Islamic Jihad want a fundamentalist Islamic state to replace Israel.
Arafat's only hope is that he passes the test by smashing the terror groups and that the U.S. resumes its efforts to broker peace. The Administration appointed two Middle East envoys, Assistant Secretary of State William J. Burns and retired General Anthony C. Zinni. The bombings sabotaged Zinni's first mission.
If serious negotiations could be restarted, pollster Shikaki thinks that Arafat might be saved. Otherwise, a younger, more militant group consisting of Islamists, perhaps allied with armed elements of Fatah, may come to dominate the West Bank and Gaza. Some Israeli officials, possibly including Sharon, think the militants might be preferable to Arafat because at least their intentions would be clear and the Israelis could deal with them as determined enemies. But a post-Arafat Palestine would probably be even more violent than it is now. Peace seems very far away. After weeks of resisting OPEC's demands, Russia decided on Dec. 5 to slash its crude-oil exports by 150,000 barrels per day, starting on Jan. 1, 2002. That 5% cut, together with reductions by non-OPEC members Norway, Mexico, and Oman, could trigger a 1.5 million-barrel-a-day drop in exports by OPEC. Analysts say the cutbacks should hold world prices steady at an average $19 per barrel next year--if not higher. The Russian move headed off a price war threatened by OPEC after Moscow offered to slash exports by just 50,000 barrels per day in the fourth quarter.
But Russia may not stay in OPEC's good books if its oil companies bend the rules. "Russian producers are going to continue to try to increase market share," says James Henderson of Renaissance Capital. "This is an ongoing battle between Russia and OPEC." A post-Taliban interim government will be installed in Afghanistan on Dec. 22, thanks to an agreement reached in Bonn after talks among Afghan opposition groups. Heading the government will be Pashtun tribal leader Hamid Karzai, who was backed by the U.S. and various Afghan factions. Now, attention will turn to rebuilding the country. Along with the U.N. and international lenders, a key player will be the State Dept.'s point man in Afghanistan, James F. Dobbins. The 59-year-old career diplomat, who has experience in Kosovo, Bosnia, Haiti, and Somalia, will work with Karzai to bring in aid and keep the government from unraveling.