Regional Outlook : The Gulf: An Uncertain Peace : * Iraq invaded Kuwait a year ago. The war is over, but the instability is not.

Few times in history does the face of destiny pass over a landscape as it did that sultry August night when a fuming, rumbling line of Iraqi tanks hurtled across the moonlit desert and took up positions in a tiny seaside sheikdom called Kuwait.

By the time the sun rose, the magic kingdom of petroleum and parched sand, of flowing white robes and long, black limousines, of hidden harems and glittering office towers, was in many ways a memory, the first and bloodiest casualty of the Arabs’ petrodollar paradise, but not the last.

The Iraqi invasion of Kuwait, in the end, did more than shatter the illusion that the protected emirates of the Persian Gulf could live in comfortable isolation forever, shielded from the poverty, turmoil and misery of their neighbors by the armor of their bank accounts.

The sudden occupation and the swift, violent war that ended it has, in a single year, exploded many of the old notions that held the Middle East together and left it grappling for a new way of understanding the future. It has laid to rest the old myth of Arab unity and left in its wake a patchwork of restless neighbors suspicious of each other and of America’s now overwhelming influence in what remains, even after the emasculation of the Iraqi war-making machine, the most heavily militarized region on Earth.

A year after the onset of a crisis in which well over 100,000 people died, Iraqi President Saddam Hussein is still in power, though his country is in ruins. Kuwait is a haunted land of oil fires and violent retribution that appears disinclined to democratic reform. The window of opportunity for peace that it was hoped would open between Arabs and Israelis stayed shut for months until recent days. Islamic fundamentalism is on the rise, fueled by growing anti-Western sentiment from the Mediterranean to the Persian Gulf, and the explosive income gap between rich and poor Arabs is wider than ever before.

“The cost of the war was making the Arab homeland a battleground,” said Tahseen Bashir, a former Egyptian ambassador and confidant of the late President Anwar Sadat.

“The volcano only lasted with a few days of war, and it ended in less than 100 hours. But now the whole landscape is changing. The stability of the Arab world today is being kept not from month to month but almost from day to day. What will happen to Jordan? What will happen to Kuwait? We ended a world system in the Middle East, but we have not yet established a new system, and what is being done is being done ad hoc, piece by piece. It is not now as dramatic or explosive as the war, but its impact on the human beings who live here will be graver. Each country in the Middle East is trying to save its own skin. The Arabs have not yet managed to recoup or regroup. We are living in a fractured Arab world, and in every fracture there are new problems.”

In the months since the conclusion of the war, the region has veered uncertainly toward a new brink. On the one hand looms the possibility of renewed U.S. air strikes to counter Iraq’s alleged refusal to fully disclose its remaining nuclear facilities; on the other stands the hope of a final resolution to the region’s most intractable dispute, the Arab-Israeli conflict.

More fighting? Or finally, after decades of turmoil, the prospect of peace?

Turning back the tide of years of enmity, Syria in the wake of the Gulf conflict has for the first time agreed to face-to-face talks with Israel; Jordan followed suit, the Gulf states agreed to send an observer, the Palestine Liberation Organization assented to a joint Jordanian-Palestinian delegation, Israel sounded some positive notes, and by Monday, the Soviets were calling for a Mideast peace conference by year end. But U.S. Secretary of State James A. Baker III’s latest initiative is by no means assured of smooth sailing. It remains uncertain what expectations were attached to Syria’s endorsement--and if they were in fact conditions, what will Israel have to say about them?

Israel continues to insist that it won’t talk to the PLO or to any Palestinian representative from East Jerusalem, annexed by Israel in 1967. PLO Chairman Yasser Arafat just as quickly insisted that such a ban would be a deal-killer--but, in the new post-Gulf War political order, how closely was anyone listening to Arafat?

An even bigger question is how far the United States will be willing to go to urge the parties into a settlement.

The Arab Gulf states indicated that they were prepared to drop their nearly 25-year-old economic boycott of Israel in exchange for a halt to new Jewish settlements in the Israeli-occupied West Bank and Gaza Strip. But Israeli officials failed to embrace the offer, and attention focused on the U.S. Congress, where Israel’s request for $10 billion in loan guarantees to house new immigrants remains an open question.

As a new showdown with Iraq looms over the issue of nuclear disclosures, several nations, led by President Bush, have launched disarmament initiatives aimed at eliminating chemical and biological weapons from the region and stopping the expansion of nuclear capability and ballistic missiles--even as the United States, Europe, the Soviet Union and China open the door to major new arms sales in the Persian Gulf, Syria, Egypt and Israel.

Lebanon, the tiny nation that has become almost a metaphor for conflict in the Middle East, has been unified under the Syrian-backed government of President Elias Hrawi, and most of its militias--including the last guerrilla strongholds of the PLO--finally disarmed. But Israel, wary of Syria’s new influence in Lebanon, launched a wave of new air strikes on guerrilla bases in the south and has raised the specter of an eventual showdown with Syria over Israel’s self-declared security zone in the south.

The Arab League has reconvened in Cairo, and a suspicious, tentatively hopeful, occasionally surly band of delegates from its member states have met twice, opening the way for repairing the wounds that split the Arab world bitterly in half. But the meetings have been largely ceremonial, and diplomats say the new Arab order is likely to be run not on consensus but on the say-so of the new power brokers of the region, Egypt, Saudi Arabia and Syria.

Even that axis of influence has shown cracks in recent months, with Egypt’s miffed decision to pull most of its troops out of the Gulf in the face of questions about whether future protection of the region will be entrusted to the Arabs themselves or, again, to the West. Gulf officials dumped earlier plans for a full-scale Egyptian-Syrian security force, and the two Arab allies left only about 6,000 troops in Kuwait, far less than the 40,000-strong force envisioned immediately after the war.

The disturbing reality of the new Middle East is that no one is in a position to call the shots.

Saudi Arabia, Washington’s strongest Arab ally in the crisis, is facing a conservative religious backlash against a long-term Western presence in the region and, U.S. diplomats say, is showing indications of simply wanting to be left alone to sort out the aftermath.

Syria remains inscrutable, substantially improving its ties to the West when it dispatched troops to the allied coalition and then endorsed Baker’s peace initiative. Yet even as President Hafez Assad has made moves to appear conciliatory, he has also moved quietly to expand his influence over the rest of the Arab world and to restock Syria’s already substantial army and ballistic missile arsenal.

Egypt, generously rewarded financially from the Gulf and the West for its contributions to the anti-Iraq coalition, nonetheless faces devastating unemployment as a result of workers returned from Iraq and Kuwait even as it is forced to swallow strict and unpleasant economic reforms imposed by the International Monetary Fund.

While Israel appears to be going along tentatively with some of the Arabs’ procedural demands for reconvening a peace conference, it is holding out against any withdrawal from the occupied West Bank and Gaza Strip. Meanwhile, Jewish settlement in the territories expands on a daily basis, with each new enclave diminishing any real prospects for peace in the region.

“The area is at a crossroads. It is ready to go in the direction of stability, or in the direction of violence and upheavals, depending on the direction the international community takes,” said Ahmed Abdul-Rahman, a member of the PLO’s executive committee and director of the Amman, Jordan-based Shoman Foundation.

“If they are going to keep the double standard and totally hypocritical approach to the area, then that would be in my opinion a perfect recipe for the politics of despair, and that includes assassination, terrorism, turmoil,” he said.

“We are not asking you to break the Israeli arm,” he said of the United States. “We are simply asking you to twist the wrist, or if not twist the wrist, pull the finger. We are saying simply that when you refuse to implement United Nations resolutions against Israel and instead kill 150,000 Iraqis, what else are (the Arabs) left with, except deepening their hatred?”

A growing number of Arabs, even many of those who sided with the coalition against Iraq, are wondering now if the war was worth the cost. Hussein is still in power, they say, and indeed they see indications that the United States may prefer some functionary of Hussein’s Baathist regime in Iraq to the alternative of a nation hopelessly divided among Kurds, Shiites and Arab nationalists. If this is the case, they wonder, why did so many die? And why are so many tens of thousands of Iraqis homeless, hungry and ill?

“Saddam Hussein in a weaker but controlling position seems to serve the American interests,” one Egyptian diplomat said. “Which means that in this ‘new world order,’ democracy is not part of the system. We have already seen very little democracy in Kuwait, which raises a long-term question as to the viability of the ruling regimes in these countries.

“The fact is that the Americans don’t want Arab security, they want American security,” he said. “And that raises the question, security from whom and for whom? Is it security of the sheik? What would the new American position be if the new threat comes not from Iraq, not from Iran, but from within? Who will draw the line?”

Democracy, heralded as one of the hallmarks of the new world order, has taken a beating in many parts of the Middle East.

Jordan has made substantial progress, instituting a national charter that implements new press freedoms and legitimizes political parties in exchange for recognition of King Hussein’s monarchy. Yet the reforms seem intended to diminish the influence of the popular Muslim Brotherhood, and countries throughout North Africa have taken strong authoritarian measures to clamp down on the Islamic movements that were nurtured under earlier democratic reforms.

Saudi Arabia has hedged on the timing of a promised national advisory council in the face of demands from religious conservatives to control any new reforms, and Kuwait has tried to control its political opposition and delayed a national election until October, 1992.

The region also has been slow to deal with the bitter divisions between the haves and have-nots of the Arab world.

Notions of Arab brotherhood disappear when a Saudi is asked about his responsibility for sharing oil wealth with his poorer neighbors, or when someone raises the fact that Qatar’s per capita income is $15,770 and Egypt’s is $660.

“When we had nothing, before the oil, what did they do for us?” a young Saudi oil executive said. “We were Bedouin. We were stupid. They could be happy to leave us to die in the desert. Don’t talk to me now about brothers.”

The six Gulf states have endorsed the idea of a $15-billion aid program to the poorer Arab countries, but many Arabs feel only long-term economic development will assure future tranquillity.

“Saddam Hussein opened legitimate accounts. But he himself was not a legitimate accountant. So the accounts are still standing, they’re overdue, they ought to be settled,” said Saad Eddin Ibrahim, a political science and sociology professor at American University of Cairo.

“One of the accounts is Palestine, but there is also the socioeconomic account, the distribution among those who have and those who have not, and the civilizational conflict between the Arab-Muslim world and the West.

“Both the West and the Gulf need to invest heavily in less well-to-do countries, paying human resource elements, putting money in education, health. Not handouts, not outright grants as much as real development that creates opportunities for a growing number of youngsters entering the labor force. If you resolve the question of equity and the question of disparity in the Arab world, then you would have taken the explosive elements out of the issues.”

The Israelis saw the hail of Iraqi Scud missile attacks do serious damage to their notion that the West Bank provides an effective security buffer against Arab enemies to the east, yet many Israeli officials say the Gulf crisis and its aftermath have served to prove many of the assertions of which they’ve long been trying to convince the world.

“As often happens, we thought the Gulf War and so many surprising events that occurred would have a traumatic effect on the Middle East, including the Arab-Israeli issue, and by now, a few months after the war, we are not surprised to discover that” the more things change the more they stay the same, said Yossef Ben-Aharon, director of Shamir’s office, shortly after Baker’s initial, unsuccessful, visits to the region.

“These characteristics that are rooted in this part of the world don’t change. They are flowing, like the sand in the desert, but at the same time they are rooted very deeply in the desert soil. . . .

As is often the case, the end of the war did not bring peace, at least not a quick peace or an easy peace. A year after the tanks moved into Kuwait, the road back from the Gulf looks as long as ever.

WINNERS & LOSERS: The Kuwaitis

Kuwait has been liberated, but at what cost? The oil production network that lured Iraq into a covetous invasion is a shambles: Fires burning in hundreds of wells won’t be extinguished for well over a year or more, and refineries are badly damaged. Authorities were hoping to be pumping up to 120,000 barrels of crude oil a day by the anniversary of the invasion, but that is a mere fraction of the 1.5 million barrels a day Kuwait was exporting before the crisis.

Just as badly hit was the country’s financial empire, which has been limping along since the recovery began. Hoping to restore faith in the economy, the Kuwaiti government has had to pump $100 million a month into the financial system to keep the dinar at its fixed rate of $3.50. And the country that financed Iraq’s military buildup is preparing to borrow money to pay the estimated $20 billion to $30 billion for rebuilding after the war.

Just as serious has been Kuwait’s growing isolation in the wake of the crisis, as mounting human rights abuses against Palestinians, Jordanians and others accused of collaborating with the Iraqis and a stubborn failure to implement speedy democratic reforms has left many Americans--and Arab coalition partners--wondering what they were fighting for.

WINNERS & LOSERS: The Iraqis

Just like Kuwait, the new Iraq looks very much like the old, starting with its president: Saddam Hussein, who looks to be as firmly entrenched as ever.

Hussein held enough of his army together to put down insurgencies among the Kurds in the north and the Shiites in the south, and he has followed the stick approach with the semblance of a carrot--pledges for democratic reforms, autonomy talks with the Kurds, legalization of some political parties, abolishing his ruling Revolutionary Command Council.

Few believe that the pledged reforms are anything more than a way of consolidating Hussein’s grip on power, and options for unseating him appear minimal at this point.

The United States assented to the U.N. Security Council’s inclination to assess Iraq 30% of its future oil revenues for reparations to Kuwait and other damaged neighbors, down from the crippling 50% it had earlier demanded.

Even that, diplomats say, won’t protect the Iraqis from a crippling wave of death and disease brought on by the country’s devastated infrastructure, much of which is being held together with dwindling spare parts and prayers--not the stuff of which great nations are rebuilt. But that is precisely where the international community appears to want Iraq for the moment.

WINNERS & LOSERS: The Israelis

Prime Minister Yitzhak Shamir emerged from the nerve-racking era of the Scud attacks with unprecedented popularity, and the Palestinians’ controversial support for Saddam Hussein dealt Israel’s peace movement a blow from which it has yet to recover.

The result: Shamir’s right-wing Likud Party definitely calls the shots, and the shots right now call for massive immigration of Jews from the Soviet Union and Ethiopia, settlement-building in the occupied territories and a tough stand on any peace talks with the Arabs.

Israel is clearly alarmed that no one is doing anything about Syria’s growing influence in neighboring Lebanon, and it also doesn’t think much about the multibillion-dollar U.S. arms packages on track for Saudi Arabia and other Gulf states.

But Israeli analysts say they are confident that the Jewish state remains a key strategic U.S. ally in the region, and the proof is already in the pudding: Washington has pledged an additional $700 million in military assistance during fiscal 1991 and is underwriting a substantial share of the development costs of the Arrow antimissile missile system.

But it’s going to take more than military assistance to keep Israel afloat, and now the Israelis, already struggling to house the millions of new Jewish immigrants who have arrived so far, are seeking $10 billion in loan guarantees from the United States to help accommodate the new immigrants.

The Arabs say that is precisely the kind of carrot--or stick, depending on how you look at it--America needs to brandish to stop settlement building in the territories and get the peace process rolling. But so far, there’s been nothing from Washington but warnings.

WINNERS & LOSERS: The Jordanians

Jordan’s king-with-nine-lives appears to have survived a crisis that was predicted to bring, alternatively, financial devastation, revolution or outright attack to the tiny kingdom that sits astride the most politically volatile borders in the world.

King Hussein’s refusal to join the Western coalition against Iraq earned him scorn, if not fury, from his erstwhile supporters in the Persian Gulf and in Washington.

Indeed, the economic consequences have been daunting. A quarter of a million workers have returned from the Gulf, and Jordan’s trade lifeline with Iraq, a source of $500 million in annual revenue before the crisis, has been strangled by the U.N. sanctions.

The king has also been sitting on a political powder keg. A population that is 60% Palestinian and a muscular Islamic fundamentalist movement made it virtually impossible for Hussein to heed the call of Desert Storm, even had he wanted to.

But Jordan’s centrality to the peace process has brought a reprieve of sorts. His backing of U.S. peace efforts--joining Syria, Egypt and Lebanon in accepting Washington’s plan-- has won back some grudging support from the U.S. Administration, and a new national charter paving the way for greater liberalization and legalization of political parties promises at least a measure of domestic tranquillity.

WINNERS & LOSERS: The PLO

However mad the West and the Gulf were at Jordan, they were madder at the Palestine Liberation Organization, stung with images of Chairman Yasser Arafat embracing Saddam Hussein while Palestinians in the West Bank cheered the sight of Iraqi Scud missiles whizzing over their heads as they sailed toward Tel Aviv.

The Palestinians have yet to recover, suffering crippling economic losses in the Israeli-occupied territories and the loss of thousands of jobs in Kuwait and elsewhere in the Gulf. The Lebanese army’s expelling of the PLO from its last remaining guerrilla bases in southern Lebanon in early July seemed the last straw.

Yet as usual, Arafat shows no signs of quitting, and he has perhaps weathered worse crises. The PLO’s approach now is public indignation--proclaiming that the PLO rightly sought only to avert war in the Gulf.

WINNERS & LOSERS: The Saudis

The intensely private Gulf kingdom that opened its doors to the Western coalition when it faced a buildup of Iraqi troops on its northern border last August is in the process of shutting the doors again.

A few thousand American troops remain in the kingdom, home to Islam’s two holy shrines of Mecca and Medina, but the aftershocks of the war have prompted the Saudis to make it clear they will accept no further foreign troops--American or Arab--on Islamic soil.

Pro-Western liberals in the kingdom had hoped to use the crisis as a vehicle for opening the door to greater freedoms. Months of Cable News Network available on local television was sorely missed when the switches were shut off; women began wondering why they couldn’t drive cars; a coalition of those advocating reforms asked the king to institute a national shura , or advisory council, to make recommendations to the ruling Saud family.

King Fahd has indicated that he is happy to continue relying on the West for military backing, so long as that backing remains invisible. But he has also made it clear that he cannot ignore the growing restiveness of Saudi Arabia’s religious conservatives.

WINNERS & LOSERS: The Syrians

Syria could also be counted among the net beneficiaries of the crisis. True, President Hafez Assad took some criticism at home for deploying 19,000 troops to the Desert Storm force--and risked his country’s radical credentials within the Arab world in the process.

But Assad has moved cleverly to capitalize on Western gratitude for the deployment--in financial aid and diplomatic cachet--even as he rendered it a mere memory among the Arabs.

Syria is back in the pilot’s seat in the debate over a peace process with the Israelis; Egypt, Jordan and even, it appears, the Palestine Liberation Organization, which for years has resisted Syria’s influence, so far have made it clear that as Syria goes, so goes the Arab world.

And so far, Syria is going--agreeing to a U.S. plan for a Middle East peace conference.

Syria also capitalized on the crisis to defeat Assad’s longtime rival, Saddam Hussein, and to consolidate its hegemony over neighboring Lebanon. With thousands of Syrian troops deployed in Saudi Arabia, it was a sure shot that neither the United States nor Israel would object last October when Lebanese forces, heavily backed by Syria, moved in to finally oust Christian Gen. Michel Aoun from East Beirut and expand the Syrian-backed Lebanese government’s authority over most of the rest of the country.

WINNERS & LOSERS: The Iranians

Iran, the other side of the Gulf, gained through rival Iraq’s invasion of Kuwait what eight years of war with Iraq failed to produce--domination of part of the strategic Shatt al Arab waterway, return of all Iranian territory, release of its prisoners of war--in short, virtual capitulation on Iraq’s part for what turned out to be little reward.

Iran did provide shelter for much of Iraq’s air force during the war--the planes have yet to be returned--but Iran shrewdly sided with its enemies in the West in upholding U.N. sanctions against Iraq.

The payoff has been a boost in moderate President Hashemi Rafsanjani’s credentials.

Iran also has won support from many of the Gulf states for joining, at least on a limited basis, in any future security arrangements that are determined for the region. That makes Persian Iran, an outsider after the 1979 Islamic revolution, a potential player in the Arab world.

WINNERS & LOSERS: The Egyptians

Cairo lost big when Iraq invaded Kuwait, thousands of miles away in the Persian Gulf. Tens of thousands of workers began flooding home from Iraq and Kuwait, and the temples at Luxor began hurting for visitors. Suez Canal revenues plummeted with the shipping blockade in the Red Sea.

But then the better came flooding in with the bitter. Washington and Gulf states began writing off many of Egypt’s debts, and the breakthrough came in late May, when Western creditor governments meeting in Paris agreed to slash Egypt’s debt to them by half.

Altogether, the debt write-offs will mean a drop in Egypt’s total foreign debt from nearly $50 billion before the crisis to half that figure by the end of 1994. The catch: Egypt had to agree to a grueling, 18-month IMF-inspired economic reform program that includes eliminating subsidies on many of the staples of Egyptian life.

The upshot is that life for most Egyptians is going to be tough over the next few years, but diplomatically, Egypt is shining. Barely a decade after its total isolation from the Arab world in the wake of the 1979 Camp David peace treaty with Israel, the Arab League headquarters has returned to Cairo, and Egypt’s recent foreign minister, Esmat Abdel Meguid, has been unanimously chosen to head it.