ACCORDING TO ISRAEL'S leading newspaper of record, Yediot Ahronot, fascinating developments are underway in the Arab world. They appear to be stimulated by a possible breakthrough between Israel and the Palestinian leadership, against the backdrop of America's toppling of the dictatorship in Iraq.

On December 6, Yediot reporters Itamar Eichner, Haim Shibi, and Gad Lior wrote that the Libyan regime of Muammar Qaddafi has invited Moshe Kahlon, the deputy speaker of the Israeli parliament, to Tripoli. The purported topic of conversations there: Jewish properties in Libya.

By all logic, such a discussion could only involve restitution to Jewish owners, either of the properties themselves or of payment for them. Qaddafi expropriated Jewish assets in Libya after he took power in 1969.

Earlier, Libya had been a center of North African Jewry. Italian colonial rule, which began in 1911, favored the community's prosperity, as the Jews represented an important section of the merchant and intellectual class. As late as 1941, Tripoli was one-fourth Jewish, with 44 synagogues.

The horrors visited on the Libyan Jews began when fascist Italy adopted anti-Jewish legislation. German troops began arriving in Libya in 1940. With the foundation of the Jewish state in 1948, some 36,000 Libyan Jews emigrated to Israel.

Qaddafi's sudden announcement a year ago of his desire to get rid of his weapons of mass destruction, and their subsequent removal by U.S., British, and other international representatives, was widely interpreted as a bonus produced by the U.S. intervention in Iraq. With one dictator gone, others felt their positions creaky. The death of Yasser Arafat, another corrupt and deceitful dictator, may have left Qaddafi feeling even more vulnerable to the tides of history.

If so, he may not be alone. Israeli foreign minister Silvan Shalom has predicted that "ten Arab countries will soon open diplomatic relations in Israel. A good period awaits us with the Arab world."

The Israeli foreign ministry similarly suggests that the elections for the Palestinian Authority on January 9--shaping up to be the first truly contested Palestinian balloting--could lead, in the near term, to revived and improved diplomatic relations with four Arab countries: Morocco, which already has a private policy of civility with Israel, Jordan, Tunisia, and Oman. Before the second Palestinian "intifada," or uprising, began in 2000, Tunisia and Oman had opened mutual liaison or trade offices with Israel, and Jordan had promised to send an ambassador to Israel. While that ambassador was never sent, Jordanian-Israeli economic cooperation continued; as a result of Israeli investment, Jordanian exports to the United States have risen to $1 billion.

For close observers of the Arabian Peninsula, the inclusion of Oman on the list of countries that could recognize the Jewish state is, at first glance, remarkable. Oman and Israel once cosponsored United Nations resolutions on road safety, but Oman suspended its relations with Israel in 2000.

Oman's majority follows an obscure religious tradition known as Ibadhism that is the most conservative form of Islam in the world--in contrast with the radical Wahhabi state cult in the neighboring Saudi kingdom. Oman's constitution, the Basic Charter, declares that the state is founded on Sharia law and makes Islam the state religion.

Yet Oman also differs from Saudi Arabia in permitting open religious worship by non-Muslims, mainly Christians and Hindus. As noted by the State Department's 2003 report on International Religious Freedom, Oman's Sultan Qaboos has donated land for the construction of several Catholic and Protestant churches and Hindu temples. Oman is not a Western democracy, but that is just the point: It is an Islamic state, whose recognition of Israel would furnish a stunning rebuff to Saudi Arabia and Iran, both of which claim to be more Islamic than any other Muslim society, and both of which are dominated in reality by Islamist ideology rather than Muslim faith, law, and tradition.

Reports are also circulating that Israel has developed secret links with Dubai and Abu Dhabi, in the United Arab Emirates. And finally, Egyptian relations with Israel have warmed to the point where Israeli foreign ministry director general Ron Prosor said, on December 5, that Cairo will also reestablish its embassy-level relations with the Jewish state after the Palestinian elections. Egyptian president Hosni Mubarak may visit Ariel Sharon in Israel.

America's influence, and elections like the one coming up in Iraq, may prove beneficially contagious in the Middle East--notwithstanding the contempt for the idea of encouraging the spread of democracy expressed by the chattering classes in the West.

Stephen Schwartz is the author of The Two Faces of Islam: Saudi Fundamentalism and Its Role in Terrorism.

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