#61 A Beleaguered Ethiopia

Ethiopia has had a busy year so far and it's starting to shape up to be a rough one. After invading Somalia back in July 2006 in order to crush the Islamic insurgency, the Ethiopian troops swiftly proceeded to defeat the enemy and reach Mogadishu by the end of December. Victory was clear and it was time to leave and let the African Union (AU) or the United Nations send the necessary peace keepers. But this did not happen. Instead, the AU did not make good on its pledge to send 8,000 troops (only 1,200 have been deployed), leaving the much reviled Ethiopians to face an increasingly resurgent enemy that can bank on local support when it comes to opposing what many Somalis see as invading Ethiopian forces.

While contending with the troubles in Somalia, tension with another neighbor is starting to flare up. Ethiopia has consistently accused the Eritrean government of supporting and sponsoring various terrorist groups and elements such as Al-Qaeda backed Al-Shabat, operating in Somalia. Ethiopian Prime Minister Meles Zenawi said recently that one of the main goals was to defeat Eritrean-backed groups in order to "make it difficult for Eritrea to take the option it has taken thusfar - destabilizing through sending elements to Ethiopia and the horn." He said putting Eritrea's accomplices "out of the game" will leave Eritrea with one option: aggressing Ethiopia on its border - a step deemed unlikely, given the result of the 2000 border war with Ethiopia and the likely backlash from the international community (perhaps most importantly from China).

Eritrea, on it's part, released eight Ethiopian citizens who were kidnapped in the northern Afar region in March. Five Europeans had also been kidnapped, but were released 12 days after their capture. Despite this gesture of apparent goodwill, it appears most east African states support Ethiopia and the transitional government of Somalia, while Eritrea openly supports the Islamists. This, in part, has led to Eritrea leaving the Intergovernmental Authority for Development (IGAD), signaling increased instability in the region. Eritrea released a document explaining their decision to suspend their membership of IGAD, accusing Ethiopia and the U.S. of intentionally causing havoc in the Horn of Africa in order to restore U.S. dominance in the region.

Besides the escalating conflict in Somalia that is starting to entrap the Ethiopians and has caused a massive refugee problem, Ethiopia was rudely awakened by a massive shooting rampage in Abole, a small town about 120km (75 miles) from the regional capital, Jijiga, in the Somali (not to be confused with the country, Somalia) region. Gunmen from the Ogaden National Liberation Front (ONLF) killed at least 74 people in an attack on an exploratory drilling site run by a subsidiary of the Chinese government-owned giant oil company, Sinopec. Sixty-five of the dead were Ethiopians and nine were Chinese oil workers. Seven Chinese were also taken captive. Ethiopia has launched a rescue operation to try and secure the release of the Chinese, accusing Eritrea of backing the ONLF in the process. The safety of Chinese interests in Ethiopia is crucial for the African nation, since China is Ethiopia's largest trading partner, with trade worth $450 million in 2006.

China is sure to learn lessons from this attack as well, as the killing of 9 Chinese and the abduction of 7 others comes on the backdrop of 16 Chinese oil workers being kidnapped in Nigeria and a Chinese engineer being killed and another injured in Kenya this year alone. This poses a major dilemma for China, that swears on her policy of non-interference. Until the recent murders and kidnappings of Chinese civilians, this policy has worked very much in China's favor, allowing it to gain access to resources in far flung regions where unsavory types run the show. But once the Chinese themselves become targets, the feasibility of such a policy is brought into question. Perhaps the recent stunning discovery of 2.2 billion barrels of oil in Bohai Bay (northeastern China) will temporarily quench China's thirst for foreign oil and gas, though this is highly unlikely.

#60 A Warrior Pur Sang

Do you remember the Watergate scandal? Or the Missile Crisis pitting US President John F. Kennedy and Soviet leader Nikita Khrushchev? What about the Vietnam War or the recent Iraq invasion? I'm sure all our readers know Venezuelan President Hugo Chavez, U.S. President George Bush Sr., Jr. and Iranian President Mahmood Ahmadinejad. Do they also know the leaders of a time long passed, such as Chile's Salvador Allende, China's Mao Zedong and America's Dwight D. Eisenhower? Most probably you do. So what is it that all these events and people have in common?

The answer is: Cuban President Fidel Castro has been in power to witness and deal with each and every one of these episodes and leaders, as well as scores of others. And despite the vast reports claiming his time has now finally come, it seems he might be around for a while longer.

It is unclear which illness (he suffered from intestinal bleeding and is believed to suffer from diverticular disease) the Cuban President is battling exactly, but there is little disputing his resolve and ability to deal with whatever challenge is thrown at his entity. Castro has survived numerous attempts on his life, prompting the British newspaper The Guardian to write an article about the matter and Channel 4 to make a documentary. They came to the conclusion that 638 ways have been devised by various parties - most notably the CIA - to assassinate him (for an interesting read on the 638 ways attempted to kill Fidel Castro, have a look at the Guardian's article on the subject). These include an exploding cigar, a poisonous ballpoint pen and a jar of cold cream containing poison pills. Castro fittingly responded to these numerous attempts by making what has become a legendary comment; "If surviving assassination attempts were an Olympic event, I would win the gold medal."

Attempts on his life haven't managed to kill him, old age doesn't seem to damage him too much and now it appears disease has failed as well. After what was considered to be a series of life threatening operations, rumours of Castro's death spread like wildfire. But little by little, pictures and videos emerged of a recovering Castro at the side of his main ally, Venezuelan President Hugo Chavez. Last week Castro even published an article denouncing U.S. plans to turn corn into ethanol as a means to create an alternative energy supply to oil. The most recent and puissant proof that Castro is on his way back to leading his country is the meeting he held with Wu Guanzheng, a member of the Chinese Communist Party's Politiburo.

The meeting with Wu is all the more substantial given that Castro received a letter from Chinese President Hu Jintao that delved, amongst other things, into economic issues. According to Chinese officials in Cuba, trade between the two countries has blossomed in recent years, growing to $1.8 billion last year, double that of 2005. Most of this trade is accounted for by Cuban imports of Chinese buses, locomotives and farm equipment and supplies. Cuba would very much like to capitalize on China's booming economy and overall growth, providing it with a golden opportunity to get the Cuban revolutionary engine back on steam.

Castro's Cuban revolutionary movement has survived many catastrophes - the most notable being the collapse of the Soviet Union - but survived them all. This is very much due to the unique leadership abilities of El Commandante. When it comes to Fidel Castro, never say die.

#59 Divisive Ethanol

Ethanol has become the new "it" thing in terms of energy fashion. Whether you are a proponent of expanding ethanol production for energy use, believe it would be a disaster to do so, or if you could not care less about the topic, one thing is for sure: you have something to say about it. The scope of discussion on the topic extends far beyond merely energy, encompassing a wide array of sectors such as food, agriculture, energy, trade and the environment. No matter in what context ethanol is debated, it has become a particularly divisive topic.

The environmental field is one such area. High profile politicians, scientists and lobby groups such as the Renewable Fuels Association - the largest Washington ethanol lobby group - are touting it as a 'green' alternative to the heavy pollutant, gasoline. Others, such as Stanford University civil and environmental engineering professor Mark Jacobson, loudly dispute this claim. Jacobson conducted a study analyzing the environmental effects of switching to ethanol and concluded "It's not green in terms of air pollution...If you want to use ethanol, fine, but don't do it based on health grounds. It's no better than gasoline, apparently slightly worse." Green or not, ethanol has set the stage for a tough debate worthy of competing with the ever contentious notion of Global Warming.

At the top of the world's political echelons, ethanol has garnered a prominent and cosy space for itself as well. Venezuelan President Hugo Chavez, following the words of Cuban President Fidel Castro, has issued a stark warning against the use of ethanol as a main source of energy, warning there is a lack of arable land and arguing it will lead to food prices skyrocketing, subsequently causing mass starvation among the world's poor. Bush, on the other hand, has hailed ethanol as a fitting alternative to the American addiction to foreign oil, sealing a bilateral deal with the world's largest ethanol producer, Brazil. The fact that these two leaders disagree on something is far from surprising, of course. What is noteworthy, however, is the effect that ethanol is having on Chavez's relationship with Brazilian President Luiz Inacio Lula da Silva (Lula), who Chavez considers to be a close ally.

At a Venezuelan hosted energy summit involving eight Latin American nations, Lula responded to Chavez's comments regarding massive production of ethanol in an unprecedentedly stark manner, saying “The truth is that biofuel is a way out for the poor countries of the world...Obviously there is no possibility of competition between food production and biofuel production...No one is going to stop planting rice to plant biofuels. The problem of food in the world now is not lack of production of food. It's a lack of income for people to buy food.” Chavez was seemingly taken aback by these statements, softening his position afterwards by insisting that his real objection is to the U.S. corn-based variety of the biofuel – not Brazilian ethanol produced with sugar cane. Nevertheless, ethanol has managed to become the first topic to create public disagreement between the two leaders.

Let's just hope that either the proponents of ethanol as a substitute or additive for oil are correct, or that other, cheaper, cleaner and less divisive methods will be found in the meanwhile. Divisive ethanol must not become a distraction for the real reasons - which are a plenty - that we are seeking alternatives to oil.

#58 The North African Breeding Ground for Radical Islam

The daily suicide bombings in Iraq have become so frequent that they barely generate more than a blink of the news watcher's eye. That is, if it actually makes the news, for a mere 15 people dead has become too common to report on. Perhaps if about 100 people die at the account of a suicide bombing (or any other form, for that matter), some hearts will skip a beat, causing short-term grief and a quick thought for the victims.

This phenomenon might simply be explained by the fact that such bloodshed is no longer shocking, simply because it occurs on a daily basis. It made me wonder, however, how come such little attention has been paid to the recent bombings by and clashes with Islamic terrorists in North Africa? There seems to be an eerie silence when it comes to the risks posed by radical Islamists in countries like Morocco, Algeria, Tunisia and, to a lesser extent, Egypt (the bombings in Cairo, the resort towns of Dahab, Sharm el-Sheikh and Taba in the last 3 years that killed scores of Westerners generated great media interest). Perhaps the fact that Westerners are directly effected by the occasional bombings in Egyptian resorts might explain for the relatively large attention given to these bombings when compared to those in neighbouring countries.

Few people know that in January this year, 12 militants were killed in Tunisia after a fierce gun battle with security forces. The Tunisian authorities said they were militants who had crossed the border from Algeria. Equally few people know that just last March 11, a man entered a cafe in the Moroccan city of Casablanca in order to use the Internet, but when the cafe's owner refused him permission to log on to radical websites, he detonated the explosives that he had hidden under his clothes, killing 1 person and wounding 3 others. Or even more recently, on April 10, Casablanca was the site of a major security operation against suspected Islamic militants, resulting in three suspected militants detonating their suicide belts in order to prevent arrest. A fourth was shot dead by police as he tried to detonate his device. The police claim to have foiled a plot to target foreign and strategic interests by these suicide bombers.

The most deadly of bombings in the region this year occurred in Algeria's capital Algiers, where two bombs killed at least 33 people and injured a couple hundred, just a few days ago, on April 11. I barely recall the bombings getting any mention in the press headlines. The bombings were the work of the Salafist Group for Preaching and Combat (GSPC), which changed its name to the al-Qaeda Organisation in the Islamic Maghreb in January. The group's aim is to establish an Islamic state in Algeria and was a major player in the Civil War of the 1990s (and part of the 21st Century as well) in which some 150,000 people died. Finally, last Saturday, April 14, Casablanca was once again the scene of a suicide bombing. Two brothers blew themselves up near the US consulate and its cultural center, injuring one passer-by.

Not only were the two brothers wanted in connection with the March Internet cafe bombing, but the police also found another explosives belt that linked the brothers with the men who blew themselves up on April 15. What's more, officials stated that one of the three suspected militants who blew themselves up during the police raid is the brother of the Internet cafe bomber. All men are thought to have played key roles in the 2003 terror attack in Casablanca, where suicide bombers killed more than 40 people and are believed to belong to the Algerian group mentioned before - the al-Qaeda Organisation in the Islamic Maghreb, formerly known as GSPC. The group has also been said to be active in Tunisia and Mauritania, thus uncovering an interconnected and well-organised Islamic terror group/cell in North Africa.

With Westerners seemingly only able to understand an immediate threat or one that is too late to act against, it is worth putting all this into a socio-geographical perspective. For one, there are no non-European nations closer to Europe than Morocco, Tunisia and Algeria. Furthermore, of the estimated nearly 20 million Muslims in Europe, only Turkey has more emigrants in Europe than Algeria and Morocco. Ignoring the increasingly visible threat posed by Islamic terrorists is tantamount to Europe begging for problems. The Tunisian, Moroccan and Algerian authorities must be helped by strengthening political and economic ties. This does not mean pandering to the whim of Dictators against the will of ordinary people, but it does mean standing up for what you believe is right and aiding those who seek the same results.

#57 REPLY to Article #50 Is Afghanistan the Right War?

As the Iraq War’s broad unpopularity causes a number of governments—including at least one branch in the United States—to consider the political consequences of continued participation, it's important to keep some perspective about the relative importance of the conflicts in which the West is now engaged. While a principled case must be made for continued American involvement in Iraq, it need not be done at the expense of the vital mission being carried out by NATO forces in Afghanistan.

In his March 14 piece for the Weekend Economist (#50 Is Afghanistan the Right War?), Westbrook Sullivan argues that the focus of the international community on the war in Afghanistan is disproportionate to that nascent democracy's impact on world affairs. Sullivan tells us that Afghanistan is “impoverished and isolated,” largely irrelevant to America's strategic interests, essentially no more than an inconvenient central Asian backwater. A failed state at the heart of Central Asia, Sullivan contends, “would be an annoyance to America and its allies, [but] would have little more effect than that on the international community.” This assessment could scarcely be more flawed.

There is little doubt that Iraq is the most significant conflict zone in which the U.S. is presently involved, if only as a consequence of the sheer numbers of American troops involved. A successful—or at least not-disastrous—resolution to the sectarian strife and anti-coalition insurgency there is absolutely vital to the maintenance of American security. While arguments abound about the legitimacy or necessity of the initial intervention in Iraq, the fact remains that the total collapse of the American-led enterprise there would have disastrous consequences for regional and global security.

Just the same, those reservations have helped to ensure that the war in Iraq is an American operation. One would be remiss not to mention the contribution of both combat forces and service-support troops from a number of coalition forces, but the fact remains that the invasion and occupation of Iraq would not have taken place without the specifically American rationale presented by the Bush Administration. The time to make he case for multilateral involvement and burden-sharing in Iraq was four years ago, not the spring of 2007. Most governments have long since reached the decision that further contributions to Multi-National Forces Iraq (MNFI) will needlessly erode their popularity without many of the attendant benefits associated with participation in the initial war effort. Americans should not be surprised that the Blair government would draw similar conclusions.

Sullivan dismisses this sort of calculation as nothing more than a form of political self-preservation, dismissing the redeployment of assets from Iraq to Afghanistan is merely a “relatively safe alternative” for politicians “not wanting to look weak on security issues.” How can we criticize the political leadership of another state when a politically expedient course of action also happens to help secure that nation's vital interests? Iraq is a sinking ship, and the UK is one of the last on the lifeboats. Few should be shocked that the Blair government is unwilling to go to the bottom of the sea.

Leaving aside the politically-charged question of whether or not preemptive war in Iraq was justified, one must concede that a great deal of international goodwill and moral force was squandered through the unnecessary and inaccurate conflation of the war in Iraq with the so-called Global War on Terror (GWOT). Few nations opposed the bombardment and subsequent occupation of Afghanistan, as such action was viewed as a necessary and natural response to the atrocities visited upon the U.S. on September 11, 2001. Operation Iraqi Freedom (OIF) was considerably less well-received. Even those allies who were convinced to make contributions to the war effort had little reason to suspect that they’d be involved in a multi-year occupation. So why now should those faithful members of the coalition be slandered for re-assessing their priorities? Have the preceding four years not convinced Mr. Sullivan that the U.S. should accept and encourage what contributions other nations choose to make to missions deemed important to American interests?

British patience for the mission in Iraq has waned, but the UK’s contributions in Afghanistan can still be vital. The International Security and Assistance Force (ISAF) in that country, composed of troops from 37 nations, not only makes an important contribution to mission accomplishment but also to the prospects of future security burden-sharing. As NATO allies and other states are compelled to develop broader capacity in support of ISAF’s mission, U.S. policymakers can be more confident in the capabilities of partner states when called upon in future conflicts. With a territorial defense mission seemingly obsolescent in the 21st century, NATO’s future utility to its member states will be defined by the ability of multinational, mission-focused task forces to conduct out-of-area operations. Further expansion of the alliance (and the attendant effect on U.S.-Russia relations) is an open question at present. As such, the future of NATO is in the balance; if ISAF fails in Afghanistan, so too does the institution that has formed the bedrock of European security and transatlantic cooperation for the last six decades.

All this considered, the critical question addressed by Sullivan is whether or not a stable and well-governed Afghanistan is vital to international security. We shouldn’t be surprised to find that those who answer the question in the negative do so in the face of a staggeringly broad consensus to the contrary. Documentary filmmaker Sam Kiley, who recently spent time with NATO forces in Afghanistan, puts their mission in stark terms: “NATO and the Afghan government want to win this war to prevent Afghanistan returning to Taliban rule and becoming a base once again used by international terrorists.” There seems very little doubt that ISAF’s failure would result in exactly such a scenario.

American—and global—security is increasingly wedded to the maintenance of state control over territory; the future must be one of less failed states, not more. Sullivan’s dismissive reference to Afghanistan as “almost entirely impoverished and rural” is puzzling; do these two factors somehow render instability in the country less threatening? The geopolitical significance of Afghanistan is very real. Porous borders with Pakistan and the former Soviet republics of Central Asia destabilize important allies in the region, as well as making the task of tracking terrorists’ movement exponentially more difficult. Kidnapping raids launched into Iran by Baloch separatists (like Jundullah, which American intelligence community sources have recently alleged is financially and materially supported by the U.S. government) complicate the already-delicate relationship between Washington and Tehran. Ungoverned territory in Afghanistan provides further opportunity for these groups to take dangerous and destabilizing actions against Iranian targets, increasing tensions and the likelihood of a destructive and unintended war.

Abandoning Afghanistan to the Taliban and al-Qaeda, however attractive it may seem in light of the attention and effort commanded by the steady dissolution of the nascent free Iraq, would be a perfect public diplomacy storm of military failure, sacrificed international goodwill, and eroded American credibility. It seems absurd to suggest that the most appropriate way to secure the most robust future contribution of allied support for American interests is to abandon the war widely viewed as just and necessary in favor of the one most reject as an illegitimate flight of neoconservative fancy. The loss of moral force associated with such an abdication of a just and necessary mission is one from which the United States would not soon recover.

- This article was written in response to Westbrook Sullivan's #50 Is Afghanistan the Right War?. It was first published on CJMEWETT and provided to the Weekend Economist by the author, Christopher Mewett.

#56 Peer to Peer Finance: Threat or Opportunity?

Micro finance - associated with financial empowerment in developing countries - is making a commercial comeback in the developed world. This time in the form of peer to beer banking, albeit without banks as intermediaries. Peer to peer banking uses the Internet as a virtual marketplace where lenders meet borrowers. Taking out the bank as the middle man creates both a more personal and a more competitive business model.

Taking out large, powerful and influential institutions such as a banks may seem an unconventional move at first. There is a valuable logic behind the idea, however. Proof of its success lies in the growing popularity of peer to peer financing enterprises such as Prosper.com, the British Zopa and the Dutch Boober. With relative success, they have proven that their "bankless" model has merits capable of attracting a growing community of borrowers and would-be debt speculators.

Peer to Peer financing groups attain their strength by working together with credit rating and credit collection agencies, much in the same way that traditional banks do. Would-be borrowers are registered and receive a credit score, based upon which they get a rating. This is similar to the world of corporate and institutional borrowing and lending, where the credit scores of firms and institutions are rated by agencies such as Moodies and Standard & Poor. This rating, in the same way as in the corporate world rating, gives insight to the level of risk that a loan bears.

It is important to note that, even though peer to peer financing at first glance appears rather informal, the lending contracts are in fact legally binding contracts. This means that borrowers pay by direct debit and, when borrowers miss payments, the same recovery/collection process that banks rely on are used to recover the face value of the loan.

From the perspective of a lender, the most attractive and interesting aspect of peer to peer financing is that it allows lenders to take small positions in a large number of different loans. This allows lenders to diversify risk by spreading a lending position among a large group of borrowers, while at the same time earning competitive returns.

There is a dark side to peer to peer financing, however. For the most part peer to peer financing is a by product of the consumer debt era in which we live. Credit card debt is one of the largest contributors to the disease that American consumer debt has become. Nearly 2.5 million Americans are currently in debt counseling, creating a large demand for consumer credit. Much of this demand is fueled by out of control credit card debt. Americans often own multiple credit cards and in many cases use one credit card to pay off another, creating a downward spiral of debt.

Credit card companies take advantage of the situation and earn considerable returns on high interest rate credit card debt. It is no surprise therefore that most loan or consolidation requests are instrumental in paying off expensive and out of control credit card debt. The sheer amount of refinancing actually underscores the true scope of of the cancer that has become credit card debt in America.

When investigating some of the Peer to Peer financing companies, one also sees that the level of riskiness is by no means uniform either. When correcting for U.S. and European interests rates, the American Prosper.com has much higher interest rates than the Dutch Boober.nl, suggesting that Peer to Peer financing does come with considerable risk, comparatively speaking.

For EU or other non U.S. citizens this means that the personal debt market is out of bounds, both in terms of the supply and demand of credit. This is a pity, as it is quite lucrative for European suppliers of credit to invest in American investment grade loans. For similar levels of risk, Europeans earn much lower returns.

In any case Peer to Peer finance is still very much in its infancy. The American Prosper.com, one of the largest Peer to Peer finance groups, claims to have more than 240.000 members and 49 million in loans. This would result in about 204 dollars worth of loans per member. Based on the 240.000 member base, that still amounts to a relatively low amount of loans spread among members. Nonetheless, the promise off Peer to Peer finance is one to be followed with close attention. Traditional banks would be wise to analyze what the development of Peer to Peer finance products means for their business models: is it a threat or an opportunity.

#55 The Weekend Economist Dot Com

Dear Readers,

We would like to bring your attention to the recent launching of our new dot com site: www.weekendeconomist.com!

This blog will continue to operate as usual and remains the flagship of the Weekend Economist Group. The World Beyond the Weekend Economist will also continue to serve its current purpose.

The principle function of the dot com site is to serve as an umbrella site for all the other elements of the Weekend Economist. Except for the blogs, for instance, the dot com site offers a WE Contribute section, where you can find out more about the Guest Authors and Editors that make up the Weekend Economist Group. The site also provides the latest news about what is going on at the Weekend Economist (WE News) and offers you a fun place to express your thoughts on world affairs in our global forum, sign our guestbook, or take part in a number of entertaining polls (WE Interact). In fact, there is a poll running right now about which global leader is most worthy of reverence, so please come and vote here! Additionally, WE Friends provides a number of links to sites that are well worth your time, while WE Sources is where we provide links to some of the world's top resources on financial, economic and political reporting. Finally, We Contact allows you to get in touch with us if you have any questions, requests, or would like to join the Weekend Economist Publishing Team.

So please have a look at our new site and explore, engage and interact! WE look forward to seeing you regularly,

The Weekend Economist Group

#54 A Near Eastern Conundrum

There are few problems that appear as intractable as the Arab-Israeli predicament and fewer still which are liable to produce a pessimism as intense as that which reigns among those individuals involved in attempts to bring about its end. Consequently, even the mere mention of a final peace deal is of sufficient gravity to attract a great deal of media attention and stoke the fires of hope in the hearts of well-meaning people everywhere. This is precisely what has happened in the wake of the decision at the March 27-28 Arab Summit in Riyadh, Saudi Arabia, to re-endorse the Arab Peace Initiative first launched at the Beirut Arab Summit of 2002.

Amid much fanfare, leading representatives of twenty-one of the twenty-two Arab states (Libya having boycotted the event) gathered in the Saudi capital and proceeded unanimously to revive the 2002 Peace Plan. Within moments of this decision, news services throughout the world were leading with stories of a potential breakthrough in the peace process. The Arab half of the Arab-Israeli conflict had come together in support of peace, and the onus was now on Israel to reciprocate. Or was it? Few people seemed to be asking why a peace offer that led nowhere in 2002 should prove more successful in 2007.

Superficially, the Arab Peace Plan is attractive. It demands of Israel that she withdraw in full from all territories occupied in June of 1967, that a just solution be found to the Palestinian Refugee problem, and that a Palestinian state with Jerusalem as its capital be created in the West Bank and Gaza Strip. In return, Arab states are to normalize relations with Israel and establish a comprehensive peace. This rough outline broadly parallels the Clinton Parameters which formed the basis of Israeli-Palestinian negotiations at Camp David in 2000 and reflects what any eventual settlement of the Arab-Israeli conflict is expected to resemble. Upon closer inspection, however, major problems with the Arab Peace Initiative become apparent.

For one, no scope is provided by which Palestinians and Israelis can agree upon alterations to the border that take into consideration changes on the ground, either in Israel’s favor or in that of the Palestinians. There is no room for what was Israel before 1967 to become part of Palestine or for any of what was the Jordanian West Bank before 1967 to become part of Israel. Similarly, the call for a full return to the 1967 borders deprives Israel of control, shared or otherwise, of Jewish holy sites in Jerusalem, leaving them under the complete control of a Palestinian Authority with a very poor record when it comes to respecting Jewish holy places.

Far more seriously, the envisaged “just solution to the Palestinian Refugee problem” is linked to two provisos. First, it must be in accordance with UN General Assembly Resolution 194 which demands that every refugee who wishes to should be able to return to Israel without delay and that those who do not should be given financial compensation. Uniquely, the UN defines a Palestinian refugee as any direct descendant of one who fled what became Israel in the course of Arab-Israeli conflict between 1946 and 1948. According to this exceptionally broad definition which includes those with no more than one Palestinian great-grandparent, there are today over four million registered refugees and many more still who are eligible for the status. The second condition stipulated by the Arab Peace Initiative is that every form of Palestinian patriation which is not agreeable to the Arab states be rejected out of hand. That is, no Palestinian refugee can be settled permanently in any Arab country unless that country allows him to do so. Given the Arab record in dealing with Palestinian refugees, this is not very auspicious to say the least.

The rigidity of the Arab Peace plan is a cause for serious concern, especially as there has been no real indication that the Arab states are willing to countenance compromise on any of their demands for peace. For Israel, this is a real problem. Whether one likes it or not, roughly a quarter of a million Israelis live in the West Bank and some 200,000 more live in East Jerusalem. They cannot all be removed with ease from their homes, and evicting them will produce a refugee problem over half the size of the original Palestinian Refugee problem. Fortunately, a majority of these people live in large settlement blocs and minor adjustments to the border can prevent hundreds of thousands of people from being rendered homeless overnight. In return for such border adjustments, Israel might surrender equivalent territories in Israel proper to the Palestinian state or offer financial compensation in some form. Alternatively, Jews living in what might become the Palestinian state could be offered a choice between Palestinian citizenship and relocation, but it does not appear as though any of the Palestinian factions would be well disposed to such suggestions. Either way, unless it becomes possible to discuss such issues and reach perhaps more practical conclusions than those demanded by the Arab Peace Initiative there is little basis for optimism.

Likewise, no real progress can be expected as long as the Arab League continues to insist on a settlement to the Palestinian Refugee problem which includes a full return to Israel proper of those Palestinian refugees wishing to do so. It is striking that the Arab Peace Initiative entirely ignores the fate of upwards of three quarters of a million Jews who were expelled from Arab countries in the last sixty years or so while adopting a maximalist position with regard to Palestinian refugees, all of whom should be in their view repatriated or compensated. Whether as a result of the Arab peace plan four million, two million, or only half a million Palestinian refugees immigrate to Israel is irrelevant, as the consequence will inevitably be to make of Israel a binational state in one fell swoop. One fifth of Israel’s population is already Arab, and the addition of a million or more would paralyze the democratic political system and polarize the country between Jew and Arab.

Surely it is not in the interests of peace to create a new binational state on the model of Cyprus, Bosnia-Herzegovina, or even Kosovo? Still more, it seems counterintuitive to bring together two antagonistic peoples in one state when historical precedents like Yugoslavia, Lebanon, Turkey/Greece, and India/Pakistan all dictate otherwise. Indeed, Belgium too has in recent decades been home to violent clashes between its Flemish and Wallonian citizens, and one can hardly point to a history of hatred between these two populations akin to that which plagues the Near East. What cause is there then to assume that Jews and Arabs will be able to share power peaceably in one state? Be that as it may, it does not seem entirely correct for a resolution of the Arab-Israeli conflict to entail the establishment of a Palestinian Arab state with no significant Jewish population alongside a binational Israel with a possible Arab majority. Such a scenario would effectively dismantle the Jewish State of Israel.

Irrespective of these many stumbling blocks, the Arab Peace Initiative remains positive in that it does promise a comprehensive resolution to the Arab-Israeli conflict. If only for this reason Israel should have embraced the Arab peace plan in theory, even if with reservations. Israel’s official response to the Arab summit was slow to materialize, but Prime Minister Ehud Olmert did announce within a week of the Arab Summit’s re-endorsement of the 2002 peace initiative that Israel was prepared to enter into negotiations immediately and that he was personally prepared to travel to Riyadh to meet with his Arab counterparts; in case they preferred a different setting, he also extended to them an invitation to come to Jerusalem. Unfortunately, the Arab response has not been conducive to confidence in a renewed peace process.

Even before Israel reacted to the Arab Peace Initiative, both Saudi Foreign Minister Prince Saud al-Faisal and Palestinian President Mahmoud Abbas threatened that should Israel reject their peace proposals it might trigger a new round of Arab-Israeli war. It is difficult to determine if this threat was simply rhetorical or indicative of a coming confrontation. After all, Hizb-Allah has been rearming diligently, Hamas is militarizing Gaza at an alarming rate, Syria seems to strengthening its military presence near the Golan Heights, and all of this is being directed in some degree by an increasingly outrageous Iranian regime. Even so, Prime Minister Olmert’s positive response to the Arab Peace Initiative has met with little more than skepticism and derision.

As is logical for any representative of the Jewish State, Olmert agreed to commence negotiations in the direction of a final peace settlement but did not endorse without objection the dubious stipulations of the Arab Peace Initiative. Accordingly, his offer to begin peace talks has so far been either ignored or decried, and not one Arab state has welcomed it. Essentially, the Arab message has been that Israel must first accept their peace offer and that only then can talks begin. This is a peculiar way of making peace. Not only that, but it is strange that Palestinian Foreign Minister Ziad Abu Amr has thought it helpful to respond to Olmert’s overtures by announcing in Vienna that, “I also believe, I can say here, that at this time we don't have an Israeli partner anymore.”

Without compromise there will be no progress in the struggle to resolve the Arab-Israeli conflict. If it is impossible in the view of the framers of the Arab Peace Initiative to conclude a settlement with Israel which allows her to continue to exist as a Jewish state alongside a Palestinian Arab state, which divides Jerusalem equitably, and which finds a practical and humanistic solution for both the Jews of the West Bank and the Palestinian refugees, then the Arab Peace Initiative is in every respect a false dawn.

- This article was written for and provided to the Weekend Economist by Jonathan Valk

#53 Ahmadinejad: An Adroit Twerp

Rarely in modern history have there been figures who, like Mahmood Ahmadinejad, have managed to fabricate countless fairy tales, insult millions of people, defy the so-called most powerful international body in the world, laugh in the face of America, pose a serious threat to peace and stability, and get away with it all. It seems no matter how low or how provocative the man becomes, the world refuses to do a thing about it. Mahmood even manages to win a few friends in the process.

Perhaps his most notable feat was accomplished just recently, culminating in the release of the British sailors. Ahmadinejad knew full well that the British would do little more than talk big. I seriously wonder whether the 15 men (including 1 woman) would have been arrested/captured had they been American troops. Then again, given his unpredictability, he might as well have. Either way, it was a serious plus point for Iran that they were British.

The way Ahmadinejad and the rest of the Iranian leadership dealt with the situation was incredibly belligerent, offensive and menacing. And yet, the Iranians scored a major political victory, making the British lose face and appear weak. Not only were "confessions" and "apologies" aired, but Ahmadinejad managed to make it seem as though it was the British who were being arrogant in maintaing they did nothing wrong, while Iran was essentially doing the exact same thing in saying they had every right to arrest the crew. Furthermore, upon releasing the soldiers, Mahmood made it seem as though it was a personal gift to the British. "We have every right to put these people on trial," Mr Ahmadinejad asserted. "But I want to give them as a present to the British people to say they are all free." The occasion? Prophet Muhammad's birthday, the Easter holiday and perhaps even Persian New Year.

Naturally Ahmadinejad was clever enough to give the sailors the absolute best treatment possible in captivity. He can now show the 'stark contrast' between how poor the West treats her Muslim captives versus how benevolently the Iranians treat their Christian prisoners. Of course the apparently wonderful treatment bestowed upon the British is the complete opposite of how the regime treats any Iranian dissidents. But that is not for the outside world to see, as it would hurt the propaganda machine (yes you skeptical reader you; not only the USA has a smoothly flowing propaganda engine). Iran comes out as the more saintly party, which will only further boost her image, particularly in the Muslim world.

After having the heat of the world turned on Iran for the nuclear issue, the arrest of the sailors and the Iranian insistence that they face trail seemed to be enough material to isolate Iran completely. But just two weeks later, nobody is talking about the nuclear standoff and Ahmadinejad is seen smiling and chatting with 15 highly apologetic British servicemen. Could it have gone any better for the Iranians?