Why did Iraq President Saddam Hussein invade Kuwait, when he had already strong-armed it and the rest of the OPEC cartel into a price increase they had been resisting? It's clear that in his own egomaniacal style, Saddam wants to be King of the Persian Gulf.

Beyond that, oil expert Eliyahu Kanovsky suggests, Saddam had a plain old shakedown in mind, maybe on the order of $10 billion or more. But by swallowing up Kuwait in one gulp, he may have unintentionally placed the royal family's vast monetary -- not its oil -- reserves beyond his reach, thanks to quick American, French, British and Swiss action freezing both Kuwaiti and Iraqi assets abroad.

Saddam, Kanovsky said in an interview, planned a crass raid on the Kuwaiti treasury. He estimates Kuwait's financial assets in gold, hard currencies and gilt-edged investments abroad at a staggering $70 billion to $100 billion.

"Hussein will try to plunder as much as he can, and Kuwait will have no choice," Kanovsky said. "There is this tempting target, a huge pot of gold sitting next to Hussein, and the pressures on him are very strong." A tidy sum like $10 billion would cover Saddam's claims on disputed oil reserves on the Iraq-Kuwait border.

But that presumed leaving the emir of Kuwait and his family in place, who would then be willing to pay a ransom as the price of a withdrawal of troops. Saddam's raw grab of control may have cost him dearly: With the royal family having escaped to Riyadh, Saddam's puppet regime can't unlock money chests comfortably residing in London and elsewhere in Europe.

Nonetheless, Saddam will have the short-term benefit of an oil price rise to around $25 per barrel, and has established himself as the ruthless big wheel in the Persian Gulf. Iran is weak, and Saudi Arabia -- which once was able to set oil prices -- no longer seems to be a countervailing power, despite the billions the United States poured into Riyadh's military establishment.

Instead, given Saddam's still desperate economic situation, the Saudis may be next on his hit list. Kanovsky said the internal economic pressures on Iraq are so severe that Saddam is forcing small creditors, such as Jordan, to accept payment for loans in oil -- at list, rather than real market prices.

At the beginning of its war with Iran in 1980, Iraq had $35 billion in reserves. Saddam not only blew that, but $40 billion to $50 billion he borrowed from other Arab nations, and another $30 billion to $40 billion he got from the West, according to Kanovsky's calculations.

Nonetheless, Kanovsky, who accurately predicted the glut of the 1980s at a time others foresaw shortages and rising prices, believes firmly that the oil price rise triggered by Saddam will be of short duration.

"Sure, Hussein now dominates Persian Gulf oil supplies, but not global oil supplies. When oil prices go above $20 a barrel, it triggers all sorts of reactions -- more explorations, greater efficiency and so on," Kanovsky said. "So, there will a swift and powerful short-term reaction, maybe even panic. But as was the case in 1980, within six months it could be over."

Kanovsky's view is that oil market action now is likely to duplicate closely what happened after the 1980 Iraqi invasion of Iran. The underlying supply-demand situation has striking similarities. The war dramatically cut oil sales by both Iran and Iraq, but there was a steady decline from oil price peaks that were set in 1981.

Not only was demand sluggish, as it is today, but non-OPEC supplies began to rise, as they are doing today -- from Mexico, the North Sea and West Africa, among other countries. Kanovsky noted that oil consumption in the United States was down one-half of a percentage point in 1989, even with a real gross national product gain of 3 percent. For the first six months of 1990, consumption is down 2 percent from the comparable period of 1989. In West Germany, oil use dropped 6 percent to 7 percent last year, yet real gross national product rose about 4 percent.

Kanovsky's optimism is not shared by some others, including many who have agreed with his earlier predictions. Analyst Joseph Lerner, a former Washingtonian, said in a conversation Friday from Jerusalem: "The theory that the cartel can't hold a price is based on the expectation and experience that some country will break away, in its own self-interest. But they can't do that when someone has a gun at their head."

But, whatever happens to oil prices in the longer run, is it in the American interest to allow Saddam to call the shots, even in the short run? The last thing the U.S. economy needs, as recessionary forces grab hold here, is an inflationary price boost. Equally, higher energy costs will be a drag in the Third World.

Kanovsky, who has dual American and Israeli citizenship, called on the United States, as leader of the free world, to intensify economic pressures against Saddam, especially by persuading America's allies to join in choking off any new credit to Iraq.

"These measures can be very effective, but not overnight. If the United States is the leader of the free world, which I think it is, it can apply a squeeze that the Iraqis will feel," he said.

He's right: President Bush is facing his biggest test. He must take a bold stand, with a mixture of military and economic sanctions. Regaining control of the Persian Gulf would be no Panama-style cream puff. Yet, it's not in America's interest to let a loose cannon like Hussein be the enforcer of global oil prices and supply. It's not in America's interest to allow an inexcusable invasion to go unanswered.

America's global leadership has been challenged on many fronts, economic and otherwise, in the last decade. If the Bush administration crawls away from its responsibilities on this one, our claim to a global role as peace-keeper will have no further credibility.