Although not mentioned today in the establishment news - much of the Middle East problems today stem from actions by European governments at the close of World War One with decisions made at the well known Treaty of Versailles. Thomas Jefferson described history best when he said, "History, in general only informs us what bad government is". This was certainly true in the Middle East during the early 20^th century.

I'll date the start of modern day Middle East conflict as beginning around 1914 with the beginning  of the First World War. Although the war was an accident caused by entangling alliances, economic competition and sparked by an assassination in the Balkans, then like now, this area of the old Austria-Hungarian Empire was a meeting point of three competing cultures and religions. This competition and conflict of Moslem, Eastern Orthodox religions and the the West made the area a flash point of world politics then as well as now.

The end of the war, described in Allied propaganda as "the war to make the world safe for democracy" and "the war to end all wars" was of course, nothing like the slogans and promises. Rather the Allied victory and the vengeful Treaty of Versailles created a power vacuum in the Middle East because the defeat of the Central Powers including Turkey destroyed the old Turkish Ottoman Empire that had ruled most of the area for hundreds of years.

n the war, Turkey sided with Germany and the Austria-Hungarian Empire and when they were defeated all of the Middle East formerly part of the Ottoman Empire became "up for grabs" as spheres of influence for the victorious Allied nations. . This is where many of the Middle East problems we face today began. The basically unfair Treaty of Versailles and distant, European politicians arbitrarily created the Middle East national boundaries we have today without any regard to local geography, tribal affiliations or national identity. This outside meddling in what should have been decided by the people and local power structure of course created discord, infighting and hatred between groups of people in these artificially created nation states.

So, how do politicians generally stay in power in this kind of artificial nation? They sadly tend to bind together populations with competing tribes, religious sects, customs, languages and power structures, through the hatred and fear of a common enemy of course. If they don’t have one they invent one. This is one reason for the Israel/Arab conflict among nations in the Middle East. Many of the Arab political leaders play this game outside of Israel to remain in power as Arafat does with the Palestinians inside of Israel. Political expediency and as a means for Arab politicians to stay in power are two unreported reasons for the continuing conflict in the Middle East. It is also important to remember that many Israeli politicians also play this game in their political process.  So, while the vast majority of all sides in the conflict would benefit economically and personally by peace, this wouldn't be good for most Middle East politicians.

Now the history books have of course covered up the imperialism and territorial land grabs with talk about the League of Nations mandates etc. But remember, all history is written by the victors or winners and about everything put out by the governments of France and England during this time is just so much government lies and propaganda.

Remember, any written history is just a viewpoint, often subsidized by the political establishment of a nation to make them look good and of course the former enemy appear bad and evil.  Think of history as a testimony in a divorce court or  the always differing accounts of an auto accident. If you only listen to one side, you usually will not get the complete story.

Today in May 2001, on the Global Investing for the New Millennium Cradles of Civilization Cruise, I want you to consider a few questions and answers about modern Middle East history that you probably haven’t heard before. Remember history and present day news are often distorted by politicians and the news media. It was the same during World War One and of course it continues today in the early months of the 21^st Century. To give you an idea about what I'm talking about, consider these questions:

(1)  What nation created the 2nd worst European holocaust in 20th century Europe? We all know the most deadly holocaust was the Nazi holocaust but what nation comes in second and what people was it directed against? The answer is Turkey against the Greeks. I'm talking about the Greek Holocaust of Thrace, Asia Minor and Pantos. For example, the Christian population in Turkey decreased from 4.5 million in 1900 to around 150,000 today. The number of Greeks living in Turkey fell from around 2 million to around 7,000 today. Actual victims were around 2.5
million including 1.5 million Armenians.

Why did this take place? After the First World War, the Turks who had lost Asia Minor, reoccupied the region. Then there was a war in the region between Greece and Turkey ending around 1921 that resulted in a partition of the region. About 300,000 Turks had to leave their homes in Greek territory and 1.4 million Greeks in Turkey that survived the holocaust had to also move back to Greece.

Now, let's don't get too tough on the Turks. As we Christians during the crusades did the same thing to Moslems in Turkey and throughout the Middle East. Our so called "Christian Crusaders" even laid siege and wiped out most of Christian Constantinople several times on their way to the Holy Land. By the way, this city is now Istanbul, Turkey where we will be visiting next week.

(2)  Since we are talking about Istanbul, what war time World War One leader was blamed for such a military disaster near this city, that everyone said his political career was finished, he was voted out of office and there was near unanimous belief that he would never hold office again? Who was it? Answer, Winston Churchill and the British Expeditionary Force invasion of Turkey and the subsequent Allied Defeat at Gallipoli made very famous in the Australian movie by the same name.

(3)  In what war was the most tonnage in bombs dropped by the US air force and your choices are Vietnam, WW 2 or Operation Desert Storm. Answer - Desert Storm  We have learned since the War with Iraq how little damage was done to the Iraq War machine by our air attacks as was the case recently in Serbia. 

(4) Now, let's talk about the "so called" Palestinian uprising today. What successful terrorist or freedom fighter example are the Palestinians following today in Israel? The answer is Menachen Begin, the Prime Minister  who led Israel during Jimmy Carter's Camp David Accords. Beginning in 1946, his underground forces made Palestine, a guerrilla war zone. They attacked the British police stations, kidnapped soldiers and attacked civilians. The British civilians in Palestine were forced to live behind armed compounds surrounded by fences and barbed wire. Does this sound familiar to how more and more Israeli civilians are being forced to live today?  Note, I am not saying this doctrine today will work against Israel because the British were occupying a distant Palestine while today's war is taking place inside the nation of Israel. Still the parallels are interesting and of course not lost on the leaders of both sides in the conflict.

(5) How many of you remember the terrorist attacks that blew up the marine barracks in Beirut, Lebanon during the Reagan Administration killing over 200 American soldiers. What was the 2nd worst terrorist attack in the Middle East? Answer In July 1946, Jewish freedom fighters blew up the British headquarters in the King David Hotel killing 91 and wounding 45. This action helped turn the tide of British public opinion against further British occupation of Palestine and led to the establishment of the modern day nation of Israel.

(6) What is the biggest obstacle to Israel giving up the entire West Bank (less Jerusalem) to the Palestinians? Answer - water as there is a major natural underground water reservoir there that provides Israel 50% of its agricultural water and 40% of the drinking water and all of it is located under the West Bank..

(7) What area makes up the modern day Middle East? The region of course includes: Egypt, Israel, Iraq, Turkey, Iran and the other Middle East entities plus some of the Moslem former Soviet Republics. Note that I said national entities rather than nations because except for Israel, most Arab peoples feel far more loyalty to their religion, local mosque and religious sect of Islam than to any nation state they might live in.

There are two reasons for this, first their cultural and historical way of seeing the world around them, second and most important because almost every nation in the Middle East was created by foreigners simply partitioning and
drawing a line over maps. For example, Iraq and Jordan were invented and crated by British politicians. The borders of present day Saudi Arabia, Kuwait and Iraq were made by a British civil servant named Mark Sykes in 1922. Syria and Lebanon national boundaries were drawn by France as a frontier line between Lebanese Christians and Syrian Moslems. In the old Soviet Union, the borders of Armenia and Azerbaijan were established by the Russians. So you get the general picture.

As an analogy, imagine if you will, what if Japanese conquerors suddenly landed on the shores of Europe during the dark Middle Ages finding a multitude of individual city states, fiefdoms and moving alliances with no large nation states and little national identity.

Then what if they proceeded to carve up and create individual nations (a concept "by the way" foreign to Europe since the fall of the Roman Empire 1,000 years earlier. The invaders then draw the boundaries, work with
different power groups making one tribe or people leaders and rulers over another in exchange for loyalty and support. So I think you can see the problem with the Middle East. These nations did not then and for the most part now, do not exist as a nation state with citizen loyalty and participation like we think of here in the Western
democracies. Most are held together by non democratic police state type governments  that attempt to unite their citizens people primarily though hatred of Israel.

Note that Great Britain basically created these national boundaries when oil was just beginning to become a factor in the Middle East. Oil was assuming great importance because of the war. Before World War One, all the experts thought that coal and steel were the prime resources needed for war but the advent of motor transport and aircraft caused a massive oil shortage by 1917. Since oil had been discovered in Persia much earlier, the Middle East oil race was on.

So how were the victorious Allies allowed to carve up the entire Middle East? Here is where the US enters the picture. President Woodrow Wilson promoted his idea of "Self- Determination For All Peoples". A great utopian dream but not very applicable to the real world of European politics after World War One. The main benefit of this was the Allies were charged with deciding when a prospective nation was ready for self-government. They devised a provision for "nurturing and helping a nation until it was prepared for independence called the Mandate System. Now this is typical political double-speak that would have been right at home in George Orwell's 1984.

While Wilson might have meant this as a philanthropic provision in practice, it was nothing of the sort. Great Britain and France used this Mandate System as a self - serving imperialistic tool to create spheres of influence and take over German colonies from Africa to the Pacific Ocean. More importantly, Great Britain used this to takeover
and control all the former territory formerly controlled by Turkey under the defeated Ottoman Empire.

So who were the players in the Middle East at this time. Lloyd George, Kitchener of Khartoum fame, T E Lawrence (Lawrence of Arabia) and the "claimed creator" of the famed Arab Revolt during the war which actually was more propaganda than real. Still, the person that most impacted the Middle East was Winston Churchill. Great Britain's goal was to remake the Middle East into another India at a time when UK public opinion was turning against this.

I have two interesting stores for you concerning Churchill. One had a major impact on the Middle East and the other you may find appropriate since this is an investment conference.

In a few days when we visit Istanbul, we will be sailing through the Dardanelles Straits that separate the Mediterranean from the Black Sea. Back in 1915, the First World War was locked in stalemate and Great Britain and France were worried that their ally Russia might get out of the war. After all Russia & the Tsar were already having Bolshevik problems. Winston Churchill devised a well thought out plan to send a squadron of British and French warships up through the straits which were lightly guarded by Turkish forts. They would knock out the forts, land a small army in Constantinople and Turkey would be out of the war.

On the first day of the battle, they lost a couple of major ships but they didn't know that the Turks had fired all of their ammunition and were getting ready to surrender the forts. This would have ended their participation in the war and could have ended the war in 1915 instead of 1918 after millions of more causalities.

But the British "freaked out" over the naval losses and transferred command of the operation to the army, just when they unknowingly had victory within their grasp. What do armies do - they land and fight military battles on land. So an easy battle victory ended up lasting over one year with over 200,000 causalities before their withdrawal.

Although Churchill only advocated the naval campaign, after the army landed it was out of his hands, but he was made the fall guy for the Gallipoli campaign disaster. He was eventually forced out of the government, lost his seat in Parliament and everyone considered his political career finished for good.

Churchill continued to promote the British Empire in his books and newspaper columns. Since this is an investment conference, I'll tell you another related story. He became caught up in the 1920's stock market mania much like the technology and Dot.com mania that has just about run its course today. Winston scraped up as much money for investment as he could and gave it to his NY stockbroker or advisor. Churchill was so excited about his paper stock market profits that he came to the US and Canada to meet his broker while making a book promotion and speaking campaign in 1929.

The great 1929 Crash actually took place while Churchill was over here. He lost everything - almost including his home. For the rest of his life he lived off his writing income and political career and was in tough financial condition for years. Do you know who his broker was? Answer, Bernard Baruch, the famous financial insider. Someday I'll write a report about Baruch, "The Stockbroker That Changed History".

Middle East Investment Considerations: What concerns, risks and problems concerning the Middle East, should investors keep in mind during the present turmoil in the region:

(1) Be aware there is always the risk that Middle East terrorist activities could impact the US financial infrastructure. It isn't a big risk, but something to keep in the back of your mind. What if the Arab terrorists had targeted the New York Stock Exchange instead of the World Trade Center. Here, you can see the possible risk of terrorist activities.

(2) Due to the continued conflict in the Middle East, there is the risk of the Arab nations using their oil weapon again should the US be drawn into another Arab/Israel conflict. Remember that possible flash points include not just Israel but also Turkey & Greece that could be drawn into conflict over Macedonia. Remember their short war in Cypress that is still a divided island today much like the partition between North and South Korea. The Middle East is the world's most unstable region and this combined with oil, is a dangerous combination.

(3) In order to reduce Middle East portfolio risk, continue to build a diversified, global portfolio that is diversified around the world. For example, while a conflict in the region could negatively impact the US and many European markets, it could benefit the French market as France is considered the most European friendly nation to the Arabs. Given this scenario, it is possible that French stocks could be an counter cyclical market in the event of a serious Arab conflict.

(4) Closely follow the Middle East Conflict on the news. Don't just depend on the sound bites of the Establishment news and major networks. My favorite news web site that  always pays particular attention to the Middle East  situation is World Net Daily, the most popular news site in the United States today. The site address is http://www.worldnetdaily.com  If you want to know more about how politicians and foreign interventions cause most wars but how this is always hidden behind patriotic slogans, trumped up war crimes, prejudice and hatred, check out LewRockwell.Com http://web.archive.org/web/20030201230228/http://www.lewrockwell.com/ and AntiWar.com http://web.archive.org/web/20030201230228/http://www.antiwar.com/  Someone said that "truth is always the first casualty in war" and this was the case in the War Between the States, both world wars, our attacks on Iraq and Serbia as well as today's Middle East conflict. 

Originally published in RedZoneNews.org