Halliday said there were similarities between the present crisis and previous episodes such as the 1990-91 Gulf war and last year’s Kosovo war, but in many crucial respects the current campaign is much more difficult and more complex. ‘We are all flying blind. We still don’t know precisely who the enemy is, and we don’t know when or even how the crisis will end. As [US Defence Secretary Donald] Rumsfeld said, there is no silver bullet. The consequences will reverberate for a very long time.’

Halliday identified three principal elements to be grappled with. The first is what he termed the Greater Western Asia Crisis – a series of distinct issues that have become linked in the rhetoric of Osama bin Laden’s Al-Qaeda organisation and its sympathisers. The Palestine question, the suffering of the Iraqi people and the conflict in Afghanistan are seen to be connected, and part of a general campaign by the US and the West against Muslims.

The second element has been a shift in the character of Islamic fundamentalism, Halliday argued. He said he would not go so far as some French academics such as Gilles Keppel, who have argued that the entire Islamist project has failed, but there were clear signs in Iran of fatigue with extremist political Islam, and the failure of Islamist groups to make political breakthroughs in countries like Egypt had produced a growing detachment from mainstream Islam. ‘This has resulted in a much more brutalised, ignorant and free-floating Islam’ being proselytised by Al-Qaeda. Halliday acknowledged that this world-view commands respect, and he said that he understood from Iranian sources that some 10,000 Arabs have gone to Afghanistan in the past month to take part in the resistance to the US action.

The third element is what Halliday defined as globalised rancour: ‘The view that the West is against us, and America is responsible for everything.’

Halliday said ‘the good news’ is that he is convinced that the power of the US and its allies will prevail. There is deep political support for the decision to seek retribution for the horrors of 11 September, and the Western powers are deploying all the instruments of economic management to mitigate the effects of the recession. The overt alliance between the US, the EU, Russia and China is secure, in Halliday’s view. ‘There are also allies who have not put their heads above the parapet,’ he said, citing Iran as the most important example. ‘Iran would like to see the job done in both Afghanistan and Iraq.’ He described the state of the oil market as being at ‘indifference point’, with prices pulled up by political tension and down by a recession-induced fall in demand.

Set against these factors, there is of course some bad news to absorb and consider, Halliday said. The military campaign is likely to be prolonged, and the task of sorting out the political future of Afghanistan will be an arduous one. It will be complicated by the squabbles among the country’s neighbours about the balance of power between Afghan factions. Iran, for example, can be expected to oppose any role being given to the Taliban, while Pakistan will argue that there are ‘good Taliban’ who must be included.

Another issue to grapple with is Iraq. Both Halliday and Rubin made clear their view that Baghdad was not involved in the 11 September attacks, but Halliday said it was highly likely that Iraqi President Saddam Hussein would try to take advantage of the crisis in some opportunistic way. Rubin said it would be surprising to find that Saddam Hussein had been behind the attacks on the US because his political campaign to erode sanctions had been going so well. ‘The propaganda war was going his way, despite my best efforts and those of my colleagues,’ Rubin said in a wistful reference to his former role as chief spokesman for the US State Department.

Halliday said the alliance against Al-Qaeda has to be fully aware of the danger of ‘weak links’. He said he was concerned about the stability of the Pakistani military establishment, and drew a parallel with the collapse of the army command in Iran during the 1979 Islamic revolution. A Pakistani banker in the audience took issue with this point, and said that the army was a stable institution, even if there was a minority of officers with Islamic fundamentalist sympathies. Halliday said the guarded response of Saudi Arabia to Western urging on it to play an active role in the coalition had been a source of grave disappointment in London and Washington. He said there was a crying need for a more open political discourse in Saudi Arabia and other Gulf states, because the present environment provided a breeding ground for conspiracy theories and discontent. John Xefos, a Riyadh-based partner in Baker & McKenzie, commented that the Majlis al-Shura, the consultative assembly formed in Saudi Arabia in 1992, had proved itself a much more open forum for policy discussion than many had expected, and it could be seen as a promising first step in the evolution of the Saudi system.

Halliday offered the view that the essential ingredient in reforming Arab political systems was not so much applying a parliamentary democratic model, but providing more transparency, particularly with respect to the uses made of the Gulf states’ oil revenues. Rubin also addressed the issue of why the West seemed so reluctant to press the issues of democracy and human rights in the Middle East, while showing no such inhibitions in other parts of the world, notably China. ‘There seems to be a tension between the short-term interest of stability, for example as regards the supply of oil, and the interest in long-term stability whereby the regimes are not so fragile.’

Halliday concluded by drawing a worst-case scenario and a more optimistic scenario. In the former case, the alliance would crack, US forces would suffer major casualties in a prolonged military campaign, there would be political instability in Pakistan and the Gulf, terrorism would spread and the world would suffer a major recession. He made clear that he regarded this outcome as unlikely, and there was a good chance that terrorism would be contained, a new UN-backed government would take over in Afghanistan, the Palestine question would be settled and there would be a marked improvement in relations between the US and Iran. He said he did not believe there was chance of resolving the Iraq problem as long as Saddam Hussein remained in power, and he could see no solution in sight for the Kashmir problem.

Rubin said he believed the Western campaign was going as well as could be expected, and he said he was particularly encouraged that the Bush administration had committed itself to the humanitarian side of dealing with the Afghanistan problem. ‘It is a remarkable development that Bush is prepared to engage in nation-building,’ he said, noting how Bush’s Republican Party had previously been opposed to this essentially Democrat theme.

Rubin was less sanguine than Halliday on the Palestine question. He said Palestinian leader Yasser Arafat had been offered an historic opportunity by then Israeli prime minister Ehud Barak at the Camp David meetings in the summer of 2000, but he had been unable to articulate even the bare recognition that this had been a progressive step by Israel. He said it was difficult to see anything approaching the Camp David formula being revived for at least five years, and the Arabs would be deluding themselves if they believed the US would put serious pressure on Israeli Prime Minister Ariel Sharon. Halliday took a more positive view, and pronounced himself one of the last remaining supporters of the Oslo peace process.

Fred Halliday, professor of international relations at the London School of Economics, and James Rubin, Partner at Brunswick, were speaking at the MEED conference on Corporate & Project Finance in the Middle East, held in London on 16-17 October.