Following Haddad's death, Carlos was free to approach many of the Popular Front operatives who were now without a leader.  His plan was to form a group of experienced people who would be capable of running multiple operations at the same time supported by another force of "sleeper" agents who could be counted on to provide on-site intelligence and become active when needed.  Carlos managed to recruit experienced radicals from Syria, Switzerland and Lebanon with the core members taken from West Germany's Revolutionary Cells.  At that time, Weinrich introduced Carlos to his girlfriend, a German divorcee named Magdelana Kopp who had joined the Revolutionary Cells in 1970.

Carlos told Weinrich that he'd like to meet Kopp and arranged for her to meet him in Algiers.  Kopp made such an impression on Carlos that he set out to seduce her with scant regard for her relationship with Weinrich.  Kopp initially showed no interest in his advances but was soon won over by his charms.  Life was good for Carlos; he had his organization, backing from several Arab states and a new girlfriend who was to become his wife in January 1979.  All he required was a name for his terrorist group, which was solved by taking the name that Michel Moukharbal had devised during his time in Paris, Organisation of Arab Armed Struggle.

While Carlos was putting the finishing touches to his new organisation, the CIA and the French clandestine operations unit, SDECE were intensifying their hunt for him.  The CIA had previously hired a European man who knew Carlos, to gather intelligence on their behalf and if given the opportunity, to have him killed.  The SDECE, on the other hand, appointed Phillipe Rondot, a brilliant agent with impeccable contacts in the Arab world, to track him down.

In order to learn more about his quarry, Rondot chose to start with Carlos's family as they had intelligence that indicated that Carlos occasionally visited his mother.  Following this line, Rondot arranged for an agent to settle in Colombia to befriend the divorced Elba.  The ruse succeeded as Carlos was spotted in a Colombian restaurant but Carlos left when he overheard the agent speaking French to his companion.  Another agent was sent to San Cristobal to befriend Ramirez Navas.  One theory suggests that the SDECE intended to infect Navas with Hepatitis B so that Carlos would run to his bedside, making him available for capture but no such plan ever eventuated.

During a trip to East Berlin in 1979, Carlos came to the attention of the Ministry for State Security or Stasi who were responsible for internal security, which mainly consisted of spying on East Germany's 17 million residents.  Stasi had first become aware of pro-Palestinian terrorism after the Munich Olympics attack in 1972 and soon after established relations with Palestinian guerrilla groups.  An alliance was formed and in exchange for information on Israel and Arab countries the East Germans provided training in espionage and guerrilla warfare. 

No direct approach was made to Carlos during his time in East Berlin but Stasi agents monitored his movements in a way that ensured that Carlos was aware of their presence.  They later made direct contact with Johannes Weinrich to ascertain his leaders intentions and eventually endorsed his actions.  Carlos later travelled to Cuba and formed an alliance with Fidel Castro but a further trip to Moscow failed to gain any such support from the Soviets.  The Hungarian authorities, while failing to officially endorse Carlos and his group, allowed him to maintain a string of safe houses in Budapest.