What do main patterns of cooperation and conflict among Arabs in the last 20 years tell about the future of their regional system? For instance, did the accumulation of petro-dollars and the rise of petro-politics bring us nearer to, or further from, the declared goal of Arab unity? Serious observers offer divergent theories. But no simple answer is possible because the Arab regional system is itself in a state of flux. This transition is characterized by a) a change in poles of leadership (from Nasserist Egypt as a base to petro-politics), and b) rules of behavior are fluid, alliances often shift and even defection is permissible (e.g. if Egypt has established "peace" with Israel, why not Jordan or Lebanon?). The result is that external factors are increasingly dominant (e.g. Pax Americana), and the Arab world is going through an agonizing self-examination (e.g. the accelerated and violent search for identity through Islamic fundamentalism, the pain of "reconciling itself" to the continuation of an Israeli state). It is deemed that the political economy analysis applied in this paper helps to go beyond the fog of the state of transition and explore patterns of future evolution.