The US military operations in Iraq and Afghanistan have created uncertainty. The question is not merely about the nature of post war Iraq, or prices in the oil market. The US actions are bound to have an impact on the internal power struggle in the Saudi royal family, contest between reformists and hardliners in Iran, stability of the Karzai government in Afghanistan and the Musharraf government in Pakistan. Moreover, there will be long term implications for terrorism and peace in the region.

The issues mentioned above are explored in detail in a new report- Shifting Sands: Instability in Undefined Asia. Brought out by Strategic Foresight Group, a Mumbai based think-tank, the report looks at the future of Pakistan, Afghanistan, Iran, Iraq, Saudi Arabia and the US role in the region. Since these countries do not belong to any established group of nations, they are collectively described as "Undefined Asia".

The report argues that the principal motive for American engagement in the region is neither combating terrorism, nor ensuring inexpensive oil supplies. Currently, the US depends on Saudi Arabia and other OPEC members for less than 15 % of its needs. Moreover, there is a gradual shift taking place from oil to natural gas in the world energy sector. The US interests in the region go beyond oil. They are primarily to establish long term strategic superiority, especially at this time when China and Russia are relatively weak.

The US involvement is bound to have some impact on political and economic dynamics of the region. But, there are internal discontinuities expected to occur even if US were not to attack Iraq. The five countries covered by the report have a male population in the 15-35 age group of 50 million. With over 20% unemployment rate, at least 10 million young men are unemployed. In Pakistan, Afghanistan and Saudi Arabia, the education system has turned many of them into radicals. Therefore, religious extremism and terrorism are bound to spread, irrespective of US actions in the region.

The US attack on Iraq will impact the internal politics of all the countries. In Pakistan, right wing religious parties have already asked for General Musharraf's resignation. Their strength and demand for islamization of the Pakistani society is expected to increase, as President Musharraf is trying to remain in power by appeasing various extremist groups. Lashkar-e-Taiba is likely to emerge as the main terrorist organisation in the entire region, as the US has focused only on dismantling the Al Qaeda.

In Afghanistan, there are indications of the re-emergence of the Taliban, with support from Gulbuddin Hekmatyar. This combination initially gathered strength in southern and eastern parts bordering Pakistan. It has now spread to the northern areas. The report Shifting Sands predicts that Hamid Karzai will find it difficult to remain in power beyond the end of 2004 or once the US diverts its attention away from Afghanistan.

The US action in Iraq will have maximum impact on Iran. Currently, reformists led by President Khatami have gathered popular support at the cost of extremists led by spiritual leader Khamenie. There are signs of growing frustration among the youth at the slow reform process of President Khatami. It is possible that the spiritual leader and the clerics around him will take advantage of the insecurity created by the US attacks to strengthen their own positions, resulting in a set back for reformists. If the US plays its cards shrewdly, the reformist movement in Iran will strengthen and a liberal leader will be elected as the President in 2004.

The situation in Iraq will also have a dramatic impact on Saudi Arabia. Already, there are growing tensions within Saudi society because of fall in per capita income from 18,000 USD in 1982 to 8,500 USD in 2002. The economic reform process introduced in 1999, is moving very slowly. The report notes that many of the Saudi terrorists in the 9/11 attacks came from the southern districts of the country, where income levels are much below the national average. Moreover, there are indications of a feud between Crown Prince Abdullah and Defence Minister Prince Sultan. The latter represents the traditional power base of the Sudairi faction in the royal family. But the Crown Prince enjoys support of the religious leaders because of his conservative views and distance from the US. The conflict between the two factions is bound to result in the deterioration of Saudi-US relations.

The report presents three scenarios. The first Scenario, Where Eagle Dares, is based on the assumption of dominant US role as a preponderant driver of change. This envisages pro-West governments across the region by 2004, with liberal foreign aid, but low foreign direct investment. In this scenario, oil prices will remain at the current rate and religious extremism will grow in rural areas.

The second scenario, Where Crescent Shines, is based on the ascent of radical Islam in the region. It envisages the establishment of leaders with islamist orientation in all countries, suspension of foreign aid and investment, breakdown of relations with the United States and increase in oil prices to 40-50 USD range.

The third scenario, Where People Smile, envisages the separation between the mosque and the state. Important sign posts in this scenario are introduction of gradual political reforms in the five countries, liberal foreign aid and investment, crack-down on drug trade, regulation of para-state foundations and positive engagement with the West. In this scenario, oil prices will be stable at 25-30 USD per barrel.

Shifting Sands is the fourth report of Strategic Foresight Group (SFG). Earlier reports on the future of India and Pakistan have attracted international attention. SFG is India's foremost private sector think-tank with a multi-disciplinary team. In order to prepare the report and develop the scenarios, Sundeep Waslekar, principal author of the report participated in almost 200 interactions in different parts of the world with leaders and experts.

The report Shifting Sands, does not explicitly offer implications for India, but they are obvious. The first two scenarios will result in growth of terrorism and turmoil in the region. Is India prepared for the challenge or is it merely hoping that the third scenario comes true?