Fear of oil shortages in the West drove oil prices to unprecedented levels, about three times the pre-war price. Gasoline shortages in the United States resulting from the Arab embargo, combined with the rise in oil prices, began a spiral of world-wide inflation and a recession in 1974-75. Attempts began to resume the peace process when Security Council Resolution 338 was passed and a ceasefire was ordered on October 22, 1973. The resolution was meant to immediately terminate of all military activity, implementation of Resolution 242 and the start of negotiations "aimed at establishing a just and durable peace in the Middle East." Resolution 338 subsequently became a companion piece to 242 as the basis of future proposals for a peace settlement. In December a Middle East Peace Conference convened in Geneva under the cochairmanship of the Soviet and American foreign ministers and the U.N. secretary-general. Egypt, Jordan and Israel attended, but Syria refused to participate. After opening speeches and two days of wrangling over procedure, meetings were suspended, and the conference failed to reconvene. An Egyptian-Israeli Military Committee also met in Geneva to discuss separation of forces in Sinai, but it too accomplished little.

The most important diplomatic achievements resulting from the war were a series of disengagement agreements between Israel and Egypt and Syria brokered by U.S. Secretary of State Henry Kissinger. Collapse of the Geneva Conference provided Kissinger with an excuse to bypass the U.N. And the Soviet Union. Initially, Kissinger sought a comprehensive agreement, but it was soon evident that the conflict could not be resolved quickly. Instead, U.S. policy turned to a "step-by-step" approach.

The initial step was a cease-fire agreement providing relief for Egypt's beleagured Third Army and the return by Israeli forces to the lines of October 22. This was the first bilateral accord signed between Israel and Egypt since the 1949 armistice. Kissinger began another round of shuttle diplomacy in January 1974. He persuaded Israel to withdraw its forces in the Sinai to some 20 miles east of the Suez Canal. Egypt agreed to reduce the number of its troops east of the Canal, not to place missiles east of Suez, to establish a buffer zone in Sinai patrolled by a U.N. Disengagement Observer Force (UNDOF) and to reopen the canal to non-Israeli shipping. The agreement led to renewal of full diplomatic relations between the United States and Egypt after a 7-year hibernation.

It was much more difficult to persuade Syria to sign a disengagement agreement with Israel. Damascus maintained a hard line, and border clashes with Israel continued for months after the October 1973 cease-fire. After several shuttle trips between Damascus and Jerusalem, Kissinger finally obtained an agreement in May 1974. Israel agreed to leave territory it had seized in Syria during October 1973 and to withdraw from the town of Kuneitra in the Golan region. A buffer zone patrolled by UNDOF was established between Israeli and Syrian forces in the Golan Heights, and President Assad agreed to prevent Palestinian guerrillas from using Syria as a base for attacks on Israel. This agreement was also followed by renewal of U.S.-Syrian diplomatic relations.

Attempts to extend the disengagement agreements with Syria were unsuccessful. However, Kissinger negotiated another Israeli-Egyptian agreement in September 1975 providing for further withdrawal of Israeli forces into...

buffer zone. Surveillance and early-warning stations were set up, one manned by American civilian technicians. Oil installations on the Red Sea coast occupied by Israel were restored to Egypt and demilitarized under U.N. supervision. Egypt agreed to permit cargoes bound for Israel to pass through the Suez Canal provided they were not on Israeli ships.
The disengagement agreements were the diplomatic climax of the 1973 war; they were the major accomplishment in peace negotiations until Sadat's 1977 iniative. Sadat's popularity and Egypt's standing in the Arab world improved as a result of the war. Egyptian forces had performed better during October 1973 than in the three previous wars with Israel. In Egypt the October War was regarded as a great victory and the "crossing" (of the canal) was commemorated annually as a national holiday. Postage stamps and other memorabilia were produced to honor the "victory." Egypt's 1973 military accomplishments opened the way for Kissigner's diplomacy and were a prelude to Sadat's 1977 startling peace initiative.

Relations between Egypt and Syria deteriorated after the war. Sadat's concessions in the second disengagement agreement between Egypt and Israel angered Assad. He feared that Egypt's compromise would undermine his own efforts to regain the Golan. Assad refused to participate in further peacemaking efforts and joined a new anti-Israel Rejectionist Front that included Iraq, Algeria, Libya, South Yemen and the PLO.

For Israel the long-term consequences were disastrous, despite its military recovery after the first few days of the war and occupation of additional Egyptian and Syrian territory. Casualties exceeded those in the two previous conflicts, and military intelligence was discredited because it failed to predict the attack. It would take more than a decade to recover from the economic consequences of the war. The setback broke through a psychological barrier to territorial concessions and raised doubts about Israel's invincibility. Although the war enhanced Arab self-confidence, it shook Israeli belief in the idea ("conception") that no concessions were needed and that the territories could be kept indefinitely. The war led to closer relations with, and greater dependence on, the United States, but it caused a break in relations with most Third World nations, which severed their diplomatic ties with Israel.

Agranat Commission was established to study the reasons for the great disaster. The commission that came into being in November 1973 concluded that it was IDF's mistaken "conception" of Egypt's war prowess that could be blamed for disaster. It also suggested the removal of the chief of staff and other high-ranking officers. The Agranat report led to a major overhaul in the Labor government, the resignation of Prime Minister Golda Meir and a new cabinet led by Yitzhak Rabin in June 1974. The 1973 setback and the Agranat report were among the major factors leading to Labor's defeat in the 1977 Knesset elections.