The effect of a faltering global economy on the Mideast peace process

From Peace will take a plunge as financial markets do :

The economic crisis we are currently experiencing internationally appears to be extreme, largely because it really comprises three major simultaneous and interlocking crises. The first is a complex financial crisis in American capital markets. The second is a prolonged macro-economic crisis in the United States that began several years ago and affects global currency exchange rates. And the third is the extreme rise in oil prices.

Each of these crises is big; but together, they create a critical situation. In what ways will these economic developments directly or indirectly affect Israeli-Palestinian relations?

The new economic reality will, in the near future, divert the world's attention away from the conflict in the Middle East, as the world focuses on economic problems and their domestic significance for each individual country. The scope of this crisis is so broad that virtually no country will escape its effects, with the exception of the oil producing states that benefit from a huge income windfall thanks to the rise in oil prices.

In the US, President George W. Bush will be busy with economic issues. Even the American elections will focus on the economy. Caught in the eye of the economic storm, Washington will redouble its efforts to find a solution in Iraq (though probably not before 2010) that enables it to withdraw, thereby reducing its defense burden and budget deficit. This American weakness, however temporary, will of course immediately be projected onto the Annapolis process and Washington's allies in the region - first and foremost Palestinian President Mahmoud Abbas.

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There are still many unanswered questions with regard to longer-term developments in the global economy and their effect on the Middle East. Conceivably, the world will recover relatively quickly from the economic crisis. But in the short term, the moderates behind the Israeli-Palestinian negotiating track will be weakened with regard to the extremists. In the near future, irreversible developments are liable to confront Israel with extremist forces and a deteriorating political reality.