A last chance for quiet diplomacy How did the U.S. get to this point? Money is the answer

January 13, 1991|By THOMAS FERGUSON

LAST NOVEMBER, THE day after the election, President Bush abruptly raised the stakes in the Persian Gulf by sharply increasing the number of U.S. troops committed. Two days later, he canceled scheduled rotations for the forces already in Saudi Arabia. Thus, Desert Shield became Desert Sword.

A thousand points of light now seem fated to burst macabrely in the sky east of Suez sometime soon, if not necessarily on January 15, setting in motion a series of scarcely imaginable upheavals. Yet the logic of Desert Shield, and especially of President Bush's bold "double or nothing" gamble still remains something of a puzzle.

Inevitably, a slight tincture of irrationality seems to cling to it. Why did the United States commit itself to Kuwait and Saudi Arabia? Why did it send in such a large force? And what was the rush? With the steady accumulation of evidence that sanctions were working, why wouldn't the administration slow down?

The answers are as straightforward as they are stark: The United States was protecting not the flow of oil itself, but the flow of oil dollars. It made a large commitment because a small one would -- by hanging the albatross of foreign intervention around the neck of King Fahd -- create more problems without providing the means to solve them. And buying time costs real money -- which the administration knew it didn't have.

To understand why Desert Shield has unfolded the way it has, and why a peaceful resolution of the crisis is unlikely, it is necessary to get a firm grip on just what the stakes are.

We begin with what seems like a truism, that, to paraphrase Sen. Robert Dole and others, what U.S. involvement in the region is all about is oil -- a claim that is just close enough to the truth to be seriously misleading. Of course, there is oil in the Middle East and plenty of it, and this makes the area valuable. But more than one analyst has realized that as a source of supply, Middle Eastern oil is far more important to Europe and Japan than it is to the U.S. This has led some critics, particularly conservative Republicans, to say that U.S. intervention is an act of utter folly, amounting to a subsidy to competitors.

This view is simple-minded. First of all, precisely because the area's oil is so vital to the allies, the United States' unique ability to project power within the region confers enormous leverage in negotiations with the allies over, for example, commercial access to Western Europe and Japan.

Most tellingly, however, oil sales to Europe and Japan generate financial surpluses. These surpluses, in turn, have to flow somewhere to be saved and then, for a price, to be invested. The legendary petrodollar surpluses of the leading Middle East states no longer represent the Amazon of world capital (that designation belongs to the now equally-famous Japanese trade surplus with the United States). They probably do not even qualify as its Nile (as, perhaps, do the bulging funds amassed by Germany, Inc.). But the gulf region certainly continues to qualify as the world economy's Mississippi, a father of financial waters that still flows majestically into New York and London (where the largest U.S. banks -- now mostly in serious trouble -- have branches).

Although Arab investors have carefully diversified their assets, the bulk of their oil money is still recycled through American and British institutions. In addition, the Arab states continue to price their oil in dollars -- a fact which is fundamental to the international role of the dollar as the law of gravity is to the solar system.

It should now be apparent why the United States rejected the option of sending in a true multinational force in the wake of Iraq's invasion of Kuwait. In the real world of the 1990s, those who man the fort will have de facto control of an Arabian treasure beyond the dreams of Aladdin. Pressed ever more sharply by Japan and a resurgent continental Europe, the United States and Britain (the one large country to go down the line with the Bush administration) have no intention of internationalizing the surplus.

Nor is it difficult to see why once the administration established the nature of its intervention -- unilateral in fact although *T multilateral in appearance -- it also rejected another favorite suggestion of the critics: to dispatch a small force to serve as a "trip wire" to warn of further advances by the Iraqis.

First of all, in the frenzied first days after Saddam Hussein swallowed Kuwait, no one could completely rule out a move against Saudi Arabia. If only a "trip wire" force were on hand, the United States would have been left with no choice but the nuclear option.

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