Oil Rivers Run Deep

The world's oil market was hit again last week when Saddam Hussein drew another arrow from his quiver, announcing a 30-day halt of Iraqi oil exports in protest of Israeli military action against the Palestinians. Saddam's gambit came only three days after Iran's supreme leader had called on all OPEC nations to take the same action. Oil prices, which have already risen 25 percent since mid-February, shot up by 5 percent. For even the most optimistic, it looked like Saddam had hit a bull's-eye, and that the U.S. economy--and the global market that it drives--would plummet back into a recession.

In the end Saddam's arrow fell short. Saudi Arabia and OPEC announced that they would not follow his squeeze on oil, and prices stabilized. But economists remained anxious about the volatile oil market, worrying that the price spikes caused by Mideast turmoil (chart) could hurt the world's economic recovery. Morgan Stanley analysts warned that every $1 rise in oil costs the Asian economy 0.1 percent in GDP growth. European market analysts were also unnerved. And most worryingly, the White House expressed its concern about the U.S. economic rebound. Higher gas prices, said Energy Secretary Spencer Abraham, could "strain the budgets of America's working families, raise the cost of goods and services and ultimately create a drag on the [U.S.] economy." This was hardly the news the world wanted to hear.

But maybe some of the fears are overblown. While oil prices may remain unstable, we're unlikely to plummet back into a recession just yet. For one thing, the world economy is less dependent on oil than it has been in the past. Energy expenditures account for only 7 percent of U.S. GDP, compared with roughly 14 percent in 1980. And Federal Reserve chairman Alan Greenspan remains confident of U.S. economic expansion (in the 3 to 4 percent range) despite the mixed signals the economy is sending. Investment may remain momentarily dead, but consumer spending is rising almost as strongly as before the Twin Towers disaster. In addition, the Bush administration tax cuts passed last year will add $50 billion to incomes in 2002, just about offsetting the drain on spending power imposed by the recent 50 cent gas-price increase. Certainly, the current U.S. rebound will be slowed--but only a little.

Which is good news for the rest of the world. With U.S. economic growth likely, global markets can expect stronger exports, despite ongoing Mideast violence and any oily tricks Saddam may still have up his sleeve. OPEC and Saudi Arabia have oil supplies large enough to compensate for any further moves by Iraq. And Venezuela, where production slowed dramatically last week amid a coup d'etat, won't drag the world economy down either. Regardless of who is in power, the Venezuelan government (the world's No. 4 oil exporter) will almost entirely depend on revenue from the 2 million barrels of oil the country exports to the United States each day, and will have to maintain consistent production levels. The same goes for the other exporters--and Russian exports are rising daily. The wild card, of course, is Saudi Arabia. With their smaller gulf allies, the Saudis could still, at some point in the Mideast crisis, announce an embargo against the United States, as they did in 1973. This could trim production enough to force world prices temporarily higher. So, while it looks like the world markets aren't headed back into the well just yet, it's still too early to claim that the global economy is completely in the clear.


On the Right Side of Sharon

Can Israel deal with Arafat?
I don't see any leader who will trust this man even if for a short time he pretends to control the fire... This man embodies terror, its way of life.

But Israel is coming under heavy pressure from the United States to withdraw. Can you afford to rebuff your most important ally?
You [the United States] took your B-52s and you bombed everything under the clouds in Afghanistan. You didn't care about civilians; you didn't care about infrastructure. You could allow yourself to do that because you felt safe from international criticism. For weeks you didn't allow the media to come in. And you needed time, seven months. We need another eight weeks. I will tell Colin Powell not to have a moral double standard.

How do you solve the problem in the long run?
I would offer the Palestinians a very broad and progressive autonomy... They could enjoy everything that Israeli citizens enjoy except three things: they will not be able to control their external borders, they will not have any armed organizations and they will not be allowed to vote.

Some people would call that apartheid.
People can use all kinds of slogans and all kinds of equations but they're irrelevant. You have to remember that there's not one single Arab among a hundred million Arabs in the world who has the right for a free vote. We know that in all those Arab countries where elections are taking place it's a fiction.


A Commanding View Of The Economy

We've asked the question before. The first great era of globalization, in the late 19th century, says Yergin, was a time of optimism similar to this past decade. But it all ended with an act of terrorism. The death of Archduke Ferdinand in 1914 propelled the world into war, the Great Depression and the fracturing of the world economy. September 11--as well as the 1997 Asian economic crisis--sent similar shockwaves throughout the markets.

But the film argues that the free-market system will survive, if not prosper, in spite of terrorism. The key problem for globalization is not terror, but that other more consistent dilemma: how to close the gap between the rich and the poor. Gandhi debated it with Prime Minister Jawaharlal Nehru, it infuriates anti-globalism protesters and it continues to weigh down the majority of the world. "Global poverty is the great test of globalization," says Yergin. "The markets will be judged by this."

POST 9-11

Suing the Saudis--and Saddam


Abdullah Gul, an Afghan residing in Pakistan, says he was recently paid to distribute 30,000 such leaflets. His employer? Haji Khano Gul, a former mujahedin commander and now an alleged opium smuggler. Khano Gul told NEWSWEEK that it is the duty of all Afghans to fight Americans and their Afghan allies "by destabilizing the country with the opium and hashish trade."

The war against opium has already proven tough for President Karzai. Just days after Interior Minister Mohammed Younis Qanooni announced the interim administration's plans to carry out its declared poppy ban, a bomb nearly killed the Defense minister in Jalalabad, a notorious center of poppy cultivation. But Karzai has little alternative: if he wants to keep good relations with his international supporters, he has to crack down on drugs.


Shower to the Nth Power


Kicked Out


By Joe Cochrane

The steak sandwich sat seductively before my eyes. Seven hours removed from a 61-day assignment in Afghanistan and sitting down to my first Western meal in weeks at the U.N. Club in Islamabad, it was as if I had died and woken up in gourmet heaven. With glass raised I began my re-introduction to the world.

Was Afghanistan that bad? Yes and no. It certainly is a stressful place. But in Kabul I was able to watch television, buy most things I could get in other countries, and even a few I couldn't, such as genuine Persian carpets. And every day brought a full spectrum of emotions. I interviewed a former senior Taliban official who had defected to the Northern Alliance shortly before Kabul fell, in order to save his own skin. He said I shouldn't be worried about how many Afghans were executed by the Taliban because more than 1.5 million people had died during the entire two-decade war. I felt like vomiting as I left his office. Then there were the many times when the humanity of the Afghan people had me wondering how they could have ever gone to war in the first place. One impoverished family who saw me doing an interview on a nearby street invited me in for tea. They insisted that I stay the night at their dilapidated apartment, offering to slaughter a sheep for dinner. I had to muster all my courage to politely decline. I just couldn't justify this poor family's killing a prized piece of property just to feed me, although doing so would have been a great honor for them. I went home that night and felt like crying. Afghanistan stirred in me the kind of emotions that I did not get in other strife-torn countries, such as Cambodia and East Timor. It is its own intriguing universe housed inside an invisible bubble that ends at the border with Pakistan.

The reality is that, as happy as I am to be safe and sound outside Afghanistan, I find myself desperately longing to be back there. The incredible stories, camaraderie with fellow journalists and my Afghan assistants, and (I admit) the adrenaline rush of conflict journalism proved overpowering. It was almost like being back in college, but the bonding was far more intense given the dangerous circumstances. I would spend hours asking questions of my Afghan driver, Moukhim, about his experiences during the war: How had he survived? How did he maintain such a positive outlook? I would also spend hours alone pondering what I would do if I was about to be kidnapped or killed while working in the field. Would there even be enough time to react? This was a disturbing question probably best left unanswered.

My longing to return to Afghanistan didn't subside when I returned to Thailand, where I am based. I was apathetic to the usual excitement of Bangkok life, and stories from friends about what had happened while I was gone. The Thai prime minister was attempting to crack down again on the media, one person told me. A Canadian friend confided that he had met a wonderful woman while I was gone. It meant nothing to me. So I took desperate action--a beach holiday on Bali. As peaceful and relaxing as it is here, though, my postcard still reads: WISH I WAS THERE.

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