WITH the Iraqi invasion of Kuwait, a fundamental political change is under way in the Middle East that may fatally undermine the peace process and Egypt's recently recovered position at the head of Arab diplomacy, according to diplomats and Egyptian observers in Cairo. ``The Arab world is going through a sea change that threatens to engulf everyone, leaving President Saddam Hussein master of the high ground,'' a senior Western diplomat said Saturday.
President Hosni Mubarak - deceived by his Iraqi counterpart and erstwhile ally practically on the eve of the invasion - may have been the first victim of the attack, these observers say.
Iraq's action humiliated Mr. Mubarak, coming on the heels of his public statements that Mr. Hussein had assured him there would be no attack.
As Iraq attempts to lead the region into a more radical period - characterized by confrontation with the West over oil and the Palestine issue - the historical opportunity offered by Mubarak's moderate leadership could be lost. Depending upon Arab nations' reactions to sweeping sanctions imposed by the United Nations on Monday, the era of moderation begun 13 years ago with the December 1977 visit of President Anwar Sadat to Jerusalem could be coming to an end.
Even as the Kuwaiti crisis was unfolding, there were already signs that alliances, forged only recently with Egypt's restored position at the head of Arab diplomacy, were beginning to unravel.
With the United States having suspended the dialogue with the PLO and the coming to power of a right-wing government in Israel, the peace process had been taken off even the back burner.
At an Arab League meeting in Tunis last month, Palestinian leaders were sharply critical of Egypt's position in the peace process, and criticized Cairo for acting on behalf of Washington, saying that this reflected Egypt's economic and financial dependence upon the US.
Since then, the Palestinian leadership, anxious to resist Egyptian pressure for further concessions to Israel, had moved to identify more strongly with Iraqi leader Saddam Hussein; indeed, Palestinians were among the few Arab peoples to cheer the invasion.
Three days after the invasion, Egypt denounced it and demanded Iraq's withdrawal.
But fully one third of Arab League member-states refused to endorse a resolution similar to the one already announced by Egypt, condemning the invasion and calling for Iraq's withdrawal. These included the Palestine Liberation Organization (PLO), Jordan, Sudan, and Yemen. The same countries also refused to back a similar resolution of the Organization of the Islamic Conference, which was also meeting in Cairo over the weekend.
There are signs that these allies have drifted away from Egypt, at least on this crisis.
``It is clear,'' says an Egyptian analyst, ``that Mubarak has been eclipsed - both in terms of the overall event and the diplomacy to resolve it. For the meantime, at least, Mubarak's traditional role of shuttling among the various parties has been taken over by King Hussein of Jordan.''
Jordan - stuck between two military giants - has also hedged its bets. King Hussein criticized the Arab League's resolution - as well as those by other bodies - which, he said, preempted his efforts to resolve the crisis by bilateral negotiation.
Yemen - looking for a strong ally against its big neighbor, Saudi Arabia - opposed resolutions condemning Iraq. Sudan - dependent upon Baghdad for military supplies, and currently in a mood of Islamic militancy - moved away from its traditional position of following Egypt and also opposed condemning Iraq.
For Egyptians, what is now at stake is not only Egypt's role in the Arab world, but also the peace process and prospects for solving the region's problems. The quasi-official press has spoken boldly and raised alarms about the possible consequences of the Iraqi attack.
Egypt's normally noncontroversial English-language daily, The Egyptian Gazette, was outraged at the mildness of Mubarak's response: ``The maximum step adopted by this nation,'' it cried, ``was a toothless condemnation of the Iraqi incursion.''
Ibrahim Nafei, editor of Al-Ahram newspaper - widely understood to reflect Mubarak's views - said the attack was worse than the Arab-Israeli war of 1967. It had opened up the ``doors of hell to the Arab nation'' and had brought about one of the blackest days in Arab history, he said.
``The attack,'' Mr. Nafei said, ``gives Israel leave to act as it wants - right and left, north or south, as well as internally. It has put a box of matches in Israel's hands and told it to go ahead and do what it likes in the region.''
He continued: ``The Arab League and other Arab alliances, such as the Arab Cooperation Council and the Gulf Cooperation Council, have been left cold and exposed by the attack, while it is being left to foreigners to point the way out of the crisis.''
Nafei's fears go to the heart of Egypt's concerns about the Iraqi attack and what it says for the underlying rivalry that has developed in recent months between Egypt and Iraq for leadership of the Arab world.
There appears to be wide agreement in Egypt that Mubarak has been humiliated and sidelined by the Iraqi invasion, despite reports of his maintaining contacts with Arab and world leaders on the issue.
The question is whether this eclipse will be long-lasting and what changes it might bring for Egypt's long-established position as the principal Arab link to the peace process.
If Arab and Western pressure are unable to force Saddam Hussein to disgorge Kuwait and allow a free Kuwaiti government, Cairo-based diplomats say Egypt's position will suffer not only in the Arab world, but also in its relations with the West.
In that event - and at a time when there are already pressures in Washington to reduce the foreign aid budget - Egypt simply will no longer be able to serve the interests of the peace process.
A reduction of US military and economic aid tied to the peace process - currently worth about $2.1 billion annually - would leave Egypt's moderate and pragmatic leadership vulnerable to the political pressures that have been building up because of the worsening economic crisis.
``Egypt may already be wishing that it had signed its agreement with the International Monetary Fund,'' a Western diplomat said over the weekend. This was a reference to the long, drawn-out negotiations that have been going on between Egypt and the IMF.