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Commentary: Iraqi mouse trips up U.S. cat

By IAN CAMPBELL, Chief Economics Correspondent

Sunday the cat looked more than ever ready to pounce. The little mouse cast around and found two weapons to hand. The cat is now sliding through a patch of oil toward a brick wall marked Palestine.

In his constant game of cat and mouse with the United States, Iraqi President Saddam Hussein has again found a trick that deceives the mighty, prowling American cat. It is a clever one that exposes President Bush's policy errors and poses him with a whole series of problems.

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Bush has been stalking Saddam ever since coming into office. But his desire to strike a blow against the Iraqi dictator, either overthrowing him or ensuring that U.N. weapons inspectors renew their investigations of Iraqi military sites, has grown more pressing since the horrific terrorist attacks of Sept. 11 on the United States.

At the weekend, Bush met with British Prime Minister Tony Blair in Texas to discuss the Middle East. Blair said Sunday that Saddam must "let the (U.N.) inspectors back in -- anyone, any time, any place the international community demands." Blair's comments on Saddam's "detestable" regime were seen as indicating more clearly than before that he was willing to support a U.S. military attack on Iraq. The cat appeared ready to pounce.

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As soon as Monday, the mouse had his response. Saddam announced Iraq would suspend its oil exports for one month or until Israel withdraws from Palestinian territories. The announcement has numerous awkward political and economic consequences for Bush.

Its first impact was to cause world oil prices, which have climbed over recent months because of Middle East tension, to jump another $1 higher to around $27.40 for Brent crude in London. The rise would be much higher if other oil-producing Muslim nations were to join Iraq in restricting supply, something for which both Saddam and Iran's Ayatollah Ali Khamenei have called, but at present this seems unlikely.

This further jump in oil prices is unwelcome for Bush. He has staked much on averting a prolonged slowdown of the U.S. economy, cutting taxes aggressively to help sustain consumer demand. Rising oil prices are pushing up the cost of gasoline and diesel in the United States and thereby undoing some of the bonus given to consumers by tax cuts.

Moreover, if the U.S. economic recovery is less rapid than expected, the harm done to the fiscal accounts by Bush's tax cuts will be more serious. Rising oil prices also pose some inflationary risk, which could cause the U.S. Federal Reserve to raise interest rates sooner rather than later.

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But it is not just the West's dependence on Arab oil that Saddam has exposed. He has seen and exploited the weakness of the United States and Bush in the Palestinian territories.

Although Bush called Monday for Ariel Sharon, the Israeli prime minister, to withdraw from the Palestinian territories he has occupied in recent days, Bush cannot escape the fact that in the Islamic world the United States is seen as an inveterate and uncritical supporter of Israel. Bush himself said in his campaign to become the U.S. president, "I want everybody to know, Israel's going to be our friend. I'm going to stand by Israel."

U.S support for Israel is now being tested by the Israeli occupation of more and more Palestinian territory in response to the suicide attacks on Israel by Palestinian militants. But in the Islamic world Bush is being judged by the results on the ground: the clearly visible repression of Palestinian discontent by Israeli military action while the United States plays an ineffectual role.

Bush has mishandled his Middle East policy. He should have acted much sooner to curb the growing violence in the Palestinian territories. His predecessor, Bill Clinton, did act to try to bring peace to the Middle East. One of his final actions as president was to go to Israel to try to broker a peace between the two warring sides.

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But for Bush and his Vice President, Dick Cheney, the conflict in the Palestinian territories has not been a priority. Cheney went to the Middle East in March not to help resolve the Palestinian conflict but to seek support for an attack on Iraq. Now Bush's neglect of the Palestinian conflict is rebounding on him. The decision to dispatch Secretary of State Colin Powell this week is right, but comes late -- too late to prevent some battles being lost, not least to Saddam.

Saddam is now able to portray himself as a defender of the Arab world against the United States. In defending the Palestinians he is pulling around himself the protective cloak of Arab solidarity. It is going to be still harder now to persuade European and moderate Arab leaders that an attack on Iraq would be wise. And, Powell and Bush success in getting Sharon to pull back his forces late Monday from the Palestinian territories, will be claimed by Saddam.

There is an unhappy parallel for Bush between his position and that of Sharon. Sharon has claimed that his aggression was comparable to that of the United States in Afghanistan. Israel, too, was going after terrorists who had killed its citizens; Israel, like the United States, was securing its borders.

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But neither Israel's boundaries with the Arab world nor the vast U.S. frontiers with Canada, Mexico and two oceans can be secured by military force and fences alone. Peace must also be founded on justice. The fate of the Palestinians is making enemies for both Israel and the United States.

Bush is forced now to make a Palestinian homeland a priority. His own priority -- the overthrow of Saddam -- must be relegated. The less than adorable mouse has won again.


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