Benjamin C. Works, Executive Director

--Celebrating Chaos Theory Since 1990--

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Benjamin C. Works, Director

718 937-2092; E-mail: Benworks@AOL.Com

--Celebrating Chaos Theory Since 1990--

ALERT SIT 9-16; Wednesday. September 16, 1998 4PM

Strategic Issues Today - In this Issue:   Shia v. Sunni; Wag the Dog with Kosovo?

Mr. Greenspan has managed to stabilize the markets in the short term without an emergency cut in the Fed Funds rate; but the IMF's programs are not saving Russia, Indonesia and other struggling economies. It appears a further round of strategic moves by the Fed and other Central Banks may be shaping up for a concerted series of actions starting around the end of the month. Now that there are more melodramatic events with few market implications, we keep our weather eye on the diplomatic arena, while looking over our shoulder at the Dow Jones for other signals.

Iran's confrontation has superceded Kosovo as a giant diplomatic mess for the United States, and it gives Saddam more wiggle room, as I shall start to explain below.

* Shia v. Sunni; Osama as a Chip:

Fascinating and dangerous things are happening to the east of the Persian Gulf; Shia and Sunni are at each others' throats, but it is not Arab v. Persian, this time it is Persian v. the ethnic groups of Pakistan and Afghanistan. Atop the border confrontation, there is communal violence escalating in Pakistan itself, with Sunnis attacking Shiites, not just in the Karachi area --where such attacks are ongoing on a sporadic basis-- but near Islamabad. From Air Security Internationals' "Hot Spots" report in yesterday's edition :

Conflict erupted between Shiite and Sunni Muslim residents of Wah Town, some 24 miles west of Islamabad yesterday. Reportedly, Sunni militants associated with the group "Guardians of the Friends of the Prophet" attacked the Shiite mosque in the town, setting it and several other houses on fire. This attack was apparently in response to an incident

yesterday where four attackers killed a Sunni Muslim leader and his associates near Islamabad.

Iran is rapidly building in strength to an estimated 280,000 troops on its northeast frontier with Afghanistan, facing Herat and to the south, the plain leading to Kandahar. One objective, according to a frequent contributor and SIRIUS associate with excellent connection within the Saudi Kingdom, may be to deliver Osama to justice, one way or another; in any event, he has become a key bargaining chip for both the Saudi-Taliban-Pakistani triad, and for Iran as a token of its increasing willingness to practice civil international behavior.

Iran is directly blaming the Pakistani Army for supporting the extremist Sunni Taliban in what would resemble a "crusade" to homogenize Islam within Afghanistan across its many ethnic and linguistic groups and religious sects. Tales swirl of wholesale massacres of Shiite minorities --I suspect they form a large part of the merchant class and would be targets for looting in a chaotic situation. My associate, quoted before in the August 19^th forecast, wrote this morning:

"Also heard that troop strength is now 280K at the Afgan border, and that the tar baby will be grappled. Bonus - by capturing Osama and trying him, Iran will attempt to secure more favorable relations with US. This is part of reason for Abdullah's visit, as there are still concerns regarding Iranian desires for Shiite hegemony in the Arab world, led, of course, by the Persians. Believe it or not, Saudi will attempt to have us reject overtures from Iran, and would like to try Osama in Saudi courts to favor public opinion and not let Iran take all the glory. Strange doings."

 A little later as we both digested the doings inside Pakistan and Ayatollah Khameini's direct implication of the Pakistani Army in the Taliban movement, the source further suggested:

"The Shiite/Sunni violence in Islamabad may be the first front of some more serious confrontations in the Arab world, and one of the main reasons that Iran is trying to rein in the Taliban as too radical. There is an evolving sense of a more tolerant Islam developing in Cairo and Saudi, which the militants do not want to see, since this tolerant

form could engage in peaceful dialogue with Bibi. Things are changing, and watching the internal strife will give us a good indication as to which way the Islamic world is heading.

"Clearly the financial crisis in Indonesia is not helping matters, and even in the mosque, "it's the economy, stupid," is a ground rule. "The wild card: Azerbujan, Uzbekistan, Tajikistan?? Will alliances develop? Right now, it looks Sunni with Dubai as the major trading partner. Will this remain?"

That, at any rate, reflects on set of possibilities in a situation rapidly getting out of hand.

The US faces the prospect of Taliban handing Osama over to the Saudis for trial, or of Iran seizing and destroying his movement in a punitive invasion.

I did observe at the time of the Pakistani nuclear weapons tests that Islamabad and Tehran were far from friendly and that concerns of an "Islamic Bomb" were exaggerated. A major open question is that Pakistan has a major army and air force capable of giving Iran a hard time as it overextends itself by driving deep into Afghanistan. That creates a big open flank, though it is masked by the mountains of the Northwest Frontier --mountains do not deter jet fighters.

Here is what Ayatollah Khamenei said to the troops, per The Independent, September 16 1998 in "Iranian army confronts the Taliban," by Jason Burke filed from Islamabad:

"Ayatollah Ali Khameini, Iran's supreme leader, called the Taliban "a heartless and oppressive tribe" on Sunday. In a broadcast he said that although he had so far "prevented the raging of a fire in the region ... all should know the threat is very huge and widespread, and very near."

"In a move that will worry the West, Khameini broadened his threat to include Afghanistan's neighbour Pakistan - the world's second largest Islamic state - which supports the Taliban and is believed to have been involved in the militia's recent advances, which have left only north-east Afghanistan in opposition hands.

"War could be averted, Khameini said, only by "forcing the Pakistani army to stop interfering in Afghanistan."

That seems to indicate that Khameini wishes to restore a non-Taliban government to Kabul; an all-or-nothing proposition. I have looked at the terrain and geography and Iran has a straight shot to the Indus River in Central Pakistan itself, though that would be a large and long drive. But Islamabad has to consider that. Further, an Irani invasion may spark Indian ambitions and that would be the end of Pakistan, an artificial nation-state, riddled with factional and ethnic strife to begin with. Iran is 0-0-1 in scoring a tie against Iraq; Pakistan is 0-3 against India. More to follow soon.

In the middle of all this, I read the following in yesterday's New York Times business section:

Phone Deal in Afghanistan Catches Many by Surprise By David Cay Johnston

"A privately owned telephone company in New Jersey has signed a $240-million contract to build a cellular telephone system for the Taliban, the Islamic fundamentalists who control most of Afghanistan and who the White House says are harboring Osama bin Laden, the suspected mastermind of the embassy bombings in Nairobi, Kenya, and Dar es Salaam, Tanzania, last month.

"Telephone Systems International of Parsippany, N.J., said that it would start work in a few weeks and that within two years at least 1 million telephones would be available in 15 cities in Afghanistan, which has been so ravaged by two decades of war that only about 26,000 lines remain from the antiquated telephone system that the Russians built in Kabul, the capital.

"The system will be built using equipment from Motorola, AT&T, Nokia and Ericsson, said Gary Breshinsky, who identified himself as one of three owners of the company. A second owner is Ehsan Bayat, an Afghani who lives in New York. Breshinsky declined to name the third owner.

"There are no federal restrictions on U.S. companies doing business with the Taliban, officials at the Commerce, State, Treasury and Justice departments said Monday·"

© Copyright The New York Times, 1998.

Fundamentalist governments may want to rid their people of the temptations of satellite television, but they need to stay in touch, too.

Bill Clinton continues to assert his presidential behavior aggressively each day, and Serb-Americans and others are increasingly concerned that a desperate Clinton administration will bomb Yugoslavia,

Clinton, just now in a conference with Vaclav Havel of the Czech Republic stressed, again, a three-legged option of policy, asserting that President Milosevic is still attempting a purely military settlement: Avert a humanitarian disaster, negotiate a settlement leading to autonomy comparable to the old constitution, prepare a NATO option.

Apparently Mme Albright may be trying to cut Richard Holbrooke down to size -as some Washingtonians speculate, and the very self-serving Holbrooke is in trouble at last for cutting too many corners in his bouncing between Wall Street and Foggy Bottom. The reasoning goes that Albright wants to maneuver Milosevic out, blaming Holbrooke for allowing Milosevic's survival to create and prolong the Kosovo tragedy. Both have some fault to share for the resurgence of Serb Hardliners in the Bosnian elections, held this weekend, which has upset Mme Albright's number one accomplishment.

I will go more deeply into this tomorrow, but with a "civil war" in Tirana between Geg and Tosk factions, the US cannot further stir up the KLA and the Gegs of Albania. We want things to go the other way.

I think a NATO strike is a meaningless option. Further, US Air Force General John Jumper, commander of NATO air forces in Europe has stressed in a story reported by Agence France Presse that he does not believe that the strike option has the same traction it had in Bosnia. "You can replicate Operation Deliberate Force but you can't predict that the same result would take place," Jumper said yesterday in Washington at a breakfast with defense reporters. Jumper could not have said this so openly if it did not reflect current Clinton policy --he would have been fired if this was his own unsolicited opinion.

Further, there simply are no major sieges to break up and no major targets of immediate consequence. Are we going to Tomahawk police precinct houses? Border guard towers?

I continue to estimate that Saddam is providing one seeming "wag the dog" crisis by mid-October, while the Irani-Pakistan crisis bears more peril --but opportunity for Osama as the "rabbit out of the hat" or "deus ex machina"-- than Kosovo. Rhetorically, though, Clinton can assert leadership through tough talk, and maintain some Liberal support.

© Copyright 1998 Benjamin C. Works-SIRIUS