US and Mideast: Will Priorities At Home Suffer?

Britain sent soldiers into Egypt in 1882 and they stayed there until after World War II

THE Iraqi invasion of Kuwait has thrown the world geopolitical scene into turmoil. Economists and historians are trying to assess the impact of this event on the global power structure.

Wall Street economist and international economic adviser Sam Nakagama, for instance, says the Organization of Petroleum Exporting Countries (OPEC) will become ``a kind of regulated public utility.''

Yale University historian Paul Kennedy describes the United States movement of its armed forces to the Middle East as an ``impressive demonstration'' of its ability to ``project its power'' thousands of miles from home. But, he notes, previous great powers (Spain and Britain) made similar moves in their declining years. He wonders if the operation will divert US attention from goals he regards as essential to the ability of the US to survive as a great power - the strengthening of its economic, technological, and educational base.

The US remains the world's No. 1 economic and military power. It has almost 30 percent of free-world output compared with 12.6 percent for No. 2 Japan.

Professor Kennedy says he suspects that the US may find itself stuck in Saudi Arabia: ``It may be more difficult for the United States to get out than to get in.''

Author of a much-discussed book, ``The Rise and Fall of Great Powers,'' Kennedy notes that the British Prime Minister William Gladstone sent troops into Egypt in 1882 in similar circumstances, with the goal of stabilizing an essentially feudal state. Between then and World War I, London made 50 public announcements of its planned departure from Egypt. It didn't leave until after World War II.

Michael Cosgrove, principal of the Econoclast, an advisory service, figures the crisis in the Middle East will drive the Europeans and the Russians closer together.

``What the Europeans need is energy and what the Russians have is oil and natural gas,'' he says. Mr. Cosgrove expects Western Europe to provide the Soviet Union with more technology and capital needed to step up its output of oil and gas that can be shipped westward to replace riskier Middle East sources.

In the background of such speculation, the oil ministers from most OPEC nations gathered in Vienna Sunday for informal talks on how to maintain the group's influence on the world oil market.

All OPEC members - except blockaded Iraq and Kuwait - are suddenly wealthier, for the moment. Crude oil has about doubled in price to above $30 a barrel since a low point in early summer.

But what will happen to OPEC, even if the US emerges with a clean victory and Kuwait is restored, is unclear.

``OPEC will never be the same,'' Mr. Nakagama says. ``It will become a kind of regulated public utility, in which the United States will have a large voice. Having saved the Saudi royal family as well as the emirates of Kuwait, Dubai, Abu Dhabi, and Qatar, the US will emerge with considerable influence over their political and economic policies.''

Prior to the 1970s, the Texas Railroad Commission in effect controlled US oil prices by managing the well production in that state. Washington went along by imposing quotas on oil imports.

In effect, the US could manage the price of oil again somewhat by suggesting production levels for the Saudis and the Gulf states. US influence will remain especially strong if its troops remain in the region. ``It doesn't seem like the US will be out of there anytime soon,'' says Nakagama.

At the moment, the economic interests of the US and Saudi Arabia coincide. The Saudis believe they can maximize the financial return on their massive oil reserves by keeping the price low enough to discourage the production of crude elsewhere and encourage consumption.

However, Mr. Cosgrove figures the US protection of oil properties in the Gulf makes them now more valuable in the ground. Some oil-rich Gulf nations may feel less compelled to turn oil into quick cash as a way to a more financially secure future.

Cosgrove speculates on the possibility of a United Nations-type of international force keeping the peace in the Gulf: ``In that situation, we could end up with more of a tie between producing and importing countries.''

Kennedy's book was brought repeatedly to the attention of Soviet President Mikhail Gorbachev and Foreign Minister Eduard Shevardnadze, the author was told recently. The book finds that in history such empires as those of Austria and the Ottoman Turks overstretched their grasp while neglecting their economies at home. The advisers likened the situation in the Soviet Union to those former empires.

Kennedy sees the end of the cold war as giving the US a chance to reduce its budget deficit, strengthen its industrial competitiveness, and improve education. He is concerned that President Bush will become enmeshed in strategic affairs and not use the ``breathing space'' to improve the long-term US competitiveness.

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