On February 16, 1989, the leaders of Egypt, Iraq, Jordan and North Yemen signed an agreement forming the Arab Cooperation Council (ACC), a four-country economic trading bloc, and expressed the hope that it would lead to an Arab common market. On the same day, the leaders of Morocco, Algeria, Tunisia, Libya and Mauritania agreed to form a Maghrib Union, the first step toward a Maghrib common market.
 
 The Arab world is now, in a sense, becoming divided into three blocs: the ACC, the Maghrib Union and the Gulf Cooperation Council (GCC), formed in 1981 between the rich oil states in the Arabian Peninsula. These developments suggest that the notion of Arab unity and the ideology of pan-Arabism which fed it are no longer on the agendas of the Arab states even rhetorically. This is further corroborated by the PLO’s unilateral recognition of Israel, which can hardly be reconciled with the pan-Arab conviction that the dispute with “the Zionist entity” is not over frontiers but over the Arab nation’s very existence and survival.
 
 These new attempts to build some level of inter-state unity are no longer justified in terms of pan-Arab ideology but rather in terms of regional regrouping. They are based on a step-by-step approach, making the point of departure economic coordination rather than political integration. In this the Arab states are adopting the approach of the European states. Paradoxically, the only factor bringing together the five Maghrib states, despite their differences on almost every other issue, is the economic threat posed to them all by the European Economic Community integration scheduled for 1992.
 
 Even if not totally conscious, restructuring within the Arab world seems to be a response to global restructuring, of which Gorbachev’s perestroika is only one manifestation. European integration appears to be an attempt to redress the global balance of power at a time when the epicenter of economic/technological power is shifting from the Atlantic to the Pacific. This is bound to affect the Middle East. One pertinent question concerns Israel’s future in a world where the centers of economic power will be, in order of priority: integrated Europe, Japan and, lastly, the United States.
 
 Though also portrayed as an economic regrouping, the ACC has a number of political connotations. One reading is that Saddam Hussein’s Iraq, having emerged from the Gulf war with the most formidable Arab fighting capability, initiated this formation to assert its role as the chief regional power in the Gulf. A less bellicose reading attributes the initiative to King Hussein of Jordan. Three out of the four ACC member states are, with Israel, in key geostrategic positions around the future Arab state of Palestine. They are all keen to retain the credentials of “moderate,” “responsible” Arab states enjoying good images in the West. Iraq, having resorted to chemical weapons against Iranians and its own Kurds, would now like to have the West believe that such acts are a thing of the past. The ACC seems to be a signal to all concerned that it could serve as a guarantee that any future Palestinian state would be “moderate” and “responsible” as well. By declaring itself ready to offer founding member rights to any other Arab state willing to join, the ACC seems to be inducing “radical” states such as Syria or South Yemen to adopt more “moderate” postures as well.
 
 One can no longer exclude the possibility of some settlement of the Arab-Israeli conflict in the foreseeable future, now that other regional conflicts, including the Soviet intervention in Afghanistan and the Iran-Iraq war, have reached some resolution. Soviet Foreign Minister Edvard Shevardnadze’s Middle East tour on the day following the Soviet pullout from Afghanistan marks a spectacular Soviet political comeback to the region. Kissinger’s famous statement in the aftermath of the 1973 October war, that “the Soviets might be of help to the Arabs in making war, but it is only the US that can help them make peace,” no longer stands.
 
 Shevardnadze proposed a deadline of one year for convening an international conference on the Middle East. A preparatory stage has been formulated, along with the idea of instituting, in the office of the UN secretary-general, the post of special representative for the Middle East. Shevardnadze’s meetings in Cairo with both Yasser Arafat and Israel’s foreign minister, Moshe Arens, probed key issues such as the future of the intifada, elections in the West Bank and Gaza, Israeli withdrawal and UN supervision. Soviet diplomacy has also tried to smooth out differences between the Arab “front-line” parties andpushed for a meeting of Egypt, Jordan, Syria, Lebanon and the PLO to work out a common Arab platform in preparation for the international conference.
 
 Yet a settlement need not mean uprooting the causes of the conflict. Lacking the ability to overcome fundamental contradictions between the protagonists, it might merely “displace” them. Let us assume a three-dimensional model of the global political map, and categorize contradictions not only along East-West or North-South axes but also along a “vertical” summit-base axis -- “summit” signifying state institutions heading any given society and “base” the political movements emanating from grassroots factors. The East-West restructuring now underway in the world could eventually bring about North-South rapprochement as well, involving states but not necessarily grassroots movements. Contractual agreements can be signed between belligerent states, but contradictions will still likely reassert themselves in other, non-institutionalized forms.
 
 Until recently, for example, the ideological-nationalist confrontation between pan-Arabism and Zionism retained a distinguishable North-South dimension, if only because pan-Arab ideology was acknowledged as a specific characteristic of the Arab national liberation movement and Zionism had its staunchest supporters in the West/North. Now with pan-Arabism on the wane and religious politics extending to sections of all Middle East societies, including Israel, the alternative to a successful drive toward a peace settlement is growing fanaticism in the name of political/religious conflict. The row over Salman Rushdie’s Satanic Verses is symptomatic of how such developments can engulf any attempt to overcome state conflicts rationally. So the question becomes how to ensure that the Middle East conflict can be settled rationally when efforts to achieve a comprehensive settlement are motivated by external, global (East-West) factors rather than a “balance of interests” struck by local protagonists in a manner satisfactory to them all.