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Of course I say you couldn't be more wrong as a joke, I've traveled throughout the region, lived there and just saw the great differences from country to country. This summer I was in Libya for the first time and while I'm not a fan of Ghaddafi, I could see how the islam practiced there was far more open and progressive than in (for example) Egypt or Algeria. At least religion was well monitored in the state. Again, I think Ghaddafi is not a nice person and the country is a nervous wreck, though the outrages of radicals are kept well out of the way.
I still think compromise is the best route. Imposing Western Democracy is clearly not the best route for peace in the Middle East. Obviously there will still be a fringe of lunatics, but having, say, a constitution that confirms the rights of women, and non-Muslims, while having an elected upper house of religious leaders, would bring a lot more Muslims on board.
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You've hit a good note with an honest broker role, though China, it's food for thought. I had a very weird experience in Sudan back in 2002, standing in a dusty desert town trying to figure how I was going to catch a lorry bus when three impeccably turned out Chinese (in shiny suits) appeared with brief cases and looked at me as if I were out of place. It was +35 and I was melting, these guys in their shiny acrylic suits must have been liquid. Up pulls a large Nissan Patrol, they jumped in and disappeared. Apparently they were in doing deals and had that air of neutrality and honesty, according to some I spoke with. The Japanese would also be decent with no religious ties whatsoever (there is a substantial muslim population in China so this might be a hold up). I can't remember where I read it, could have been a novel, but the Swiss Guards have been suggested as peacekeepers as the head of the Catholic church carries relatively good weight and has good relations with Jewish and Islamic leaders. Though hand on heart, I just can't see anything being enough for the hard core on either side.