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Operation Desert Market: A Thirst For U.S. Goods


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OPERATION DESERT MARKET: A THIRST FOR U.S. GOODS

When Kuwaiti Airways Corp. revealed at last summer's Paris Air Show that it would spend $2 billion on 15 Airbus Industrie jetliners and take options on 9 more, Washington was not amused. Robert A. Mosbacher, then Commerce Secretary, dashed off a letter to Kuwait's ruling al-Sabah family suggesting that they also keep Boeing Co. in mind. The message got through: Any week now, Boeing is expected to sign a $500 million contract with the Kuwaitis for three 747s.

Boeing isn't the only U.S. company enjoying a bit of pampering in Kuwait. One year after the liberation of the tiny nation, American companies have stormed into the emirate, hawking everything from construction rigs to Chevrolet Caprices. Indeed, Kuwait has steered to U.S. companies roughly 70% of the initial $600 million in contracts from its emergency recovery program, as well as much of its multibillion-dollar oil industry reconstruction efforts. In fact, American exports to Kuwait last year swelled to about $2 billion--more than double 1989's prewar level of $855 million. This year, the Commerce Dept. projects, exports could hit $3 billion.

That's good news for the Bush Administration. Although Iraq's Saddam Hussein remains in power and Kuwait has dragged its feet on political reform, Bush can at least point to some big economic dividends for the U.S. from the gulf war--often at the expense of once dominant European and Japanese rivals. Says one White House official: "We're very pleased with the business climate" in Kuwait.

Of course, not every U.S. company can tell tales of conquest. Kuwait's early reconstruction efforts have been poorly organized and routed exclusively through the office of the Crown Prince, where deals have been known to be mysteriously deep-sixed at the last moment.

JOYRIDES. Such problems aside, a number of U.S. outfits are having a sweet time of it. Bechtel Group Inc., the San Francisco-based global engineering company, pulled in about $1 billion helping put out the nearly 650 oil wells torched by Saddam's retreating troops. And it stands to lap up even more work. The state-owned Kuwait Oil Co. recently began the second phase of reconstruction, which includes drilling 300 new wells, repairing 200, and fixing gas and oil separator systems. Such U.S. oil-patch outfits as Dallas-based Halliburton Co. have also won a piece of the action. In all, the Kuwaitis will probably spend $8.5 billion over 10 years reviving their oil industry.

Then there's Detroit's Big Three, which are enjoying their own joyride in Kuwait. Together, the three rang up 1991 sales of $700 million, as Kuwaitis began to replace the estimated 250,000 to 300,000 cars looted and destroyed by the Iraqis. The emirate has become a major market for the Chevrolet Caprice, whose 23-gallon gas tank and powerful air conditioning made it the getaway car of choice during the war. Now, it's a favorite among the region's police.

PHONE BID. Other companies see gold in Kuwait as well, but they may have to wait a bit for their share. Take American Telephone & Telegraph Co., which won praise for rigging makeshift phone service right after the fighting stopped, so folks could call out of Kuwait, gratis. Now, AT&T has a strong shot at getting part of a new $1 billion phone system.

How long can American companies bank on gratitude? "The real question for me is whether the U.S. will do well in 1993 when the foreign competition will surely stiffen," says Representative Lee H. Hamilton (D-Ind.), who heads the foreign affairs subcommittee responsible for the Middle East. While European and Japanese rivals have lost some choice deals, they remain a formidable presence. Kuwait, for instance, likely will go ahead with a $1 billion deal with Mitsubishi Electric Corp., struck in 1989, to construct a new power plant.

For now, though, the Kuwaiti appreciation of things American is running strong. Through 1996, the Kuwaitis will spend roughly $25 billion to put their country back together. That gives U.S. executives plenty of reason to work the kingdoms of Arabia.Brian Bremner in Washington, with John Rossant in Rome and Peter Coy in New York


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