In The Mideast, The Pillars Of U.S. Policy Are Wobbling

As the Clinton Administration engages in a high-stakes game with Iraqi strongman Saddam Hussein, its Mideast strategy seems to be failing. The two pillars of its policy--pushing an Israeli-Palestinian peace to defuse regional tensions, and holding together the Gulf War alliance to isolate Iraq and Iran--are wobbling. And even the Administration's least controversial initiative, that of nudging Arabs and Israelis to do business with each other, is running into trouble.

The Middle East/North Africa Economic Conference in Doha, Qatar, starting on Nov. 16, was planned as a major opportunity to deepen business and political ties. Secretary of State Madeleine K. Albright had hoped to work high-level crowds. The three-day event has attracted just 50 top Israeli executives, along with 800 Arab, Asian, and American counterparts--fewer than attended last year's meeting in Cairo.

Far from being a U.S. success, the meeting is turning into an embarrassment. Key U.S. allies such as Egypt, Saudi Arabia, and Morocco are boycotting it. That dashes American hopes of rallying regional support against Saddam. Worse, Arab leaders snubbing the U.S.-backed Qatar get-together will go instead to a Dec. 9 Islamic Summit in Tehran.

RUNNING INTO THE SAND. The message to Washington is clear: As long as the five-year-old Oslo peace process remains stalled, the U.S. won't get much support from the region's moderates. Also, it will be hard to normalize business and economic contacts between Israel and its neighbors.

Most U.S.-backed schemes have run into the sand already. One showcase project, an Israeli-Jordanian airport to serve the cities of Aqaba and Eilat, might still happen, thanks to U.S. seed money. But the U.S.-backed Middle East Development Bank is a nonstarter, while a $300 million project to pipe Egyptian natural gas to energy-hungry Israel--the so-called Peace Pipeline--hasn't left the drawing board because of the faltering peace process. Instead, with Egyptian-Israeli relations at a 20-year low, Israel Electric Corp. is seeking alternative gas supplies in Russia, Norway, and Nigeria--even though Egyptian gas would be cheaper.

Meanwhile, rather than promoting intraregional trade, the economic conferences mainly are aiding U.S. companies. Americans are winning an increasing share of the region's $200 billion in imports. Dearborn (Mich.)-based CMS Energy Corp., for example, won a $1.6 billion power contract in Morocco, while Hughes Space & Communications Group snared a $1 billion satellite project in the United Arab Emirates.

Back home, the Administration can sell events like the Qatar conference as good for U.S. business, even if they don't further peace. "Yes, getting Arabs and Israelis to do business has been one of the purposes," says Under Secretary of State Stuart E. Eizenstat, "but there are other reasons."

Setbacks to the peace process haven't had a huge economic impact. Indeed, the region is generally thriving for the first time in years. Large-scale privatization programs, deregulation, and fiscal restraint are revving up economic growth in countries such as Morocco, Tunisia, and Egypt. Foreign investors are pumping cash into local stock markets. The region is expected to grow more than 6% this year.

The argument used to be made that Arab-Israeli economic cooperation would guarantee future prosperity as well as bring peace. Qatar may reinforce the idea that Israel and the Arabs don't need each other. That bodes ill for the future--and for U.S. clout in the region.