Already a Bloomberg.com user?
Sign in with the same account.
`Executive travel" reads the sign on a drab building in London's West End. But inside is the office of an Iran-linked Iraqi opposition group, the Supreme Council for the Islamic Revolution in Iraq (SCIRI). Couches and chairs are in a rough circle, and food, probably from a late-night meeting, has yet to be cleared away. "We kept the old sign because we didn't want [Iraqi agents] to know we're here," says an aide.
The U.S. may be taking the lead in the effort to oust Saddam Hussein, but London is the center of gravity for the estimated 3 to 4 million Iraqis who have left their homeland. At least six opposition groups agitating for Saddam's overthrow are represented in the British capital, and many of the better-known Iraqi scholars and writers live there as well. They debate each other endlessly, but they nearly all agree on one important point: If the U.S. does manage to oust Saddam, it will have its hands full managing the country the moustachioed strongman leaves behind. "There will be wild jubilation," says Faleh A. Jabar, an Iraqi sociologist. "But it could quickly turn into wild opposition."
Post-Saddam Iraq. American policymakers latched onto that phrase to summon up an almost utopian vision of a country that springs quickly back from the devastation of wars and dictatorship, establishes a real Arab democracy, and becomes an outpost of prosperity and stability in the turbulent Mideast. Now, U.S. officials know they face a long, hard stretch of nation-building. And anti-war protesters around the world fear something worse: A new nightmare for the Mideast as the U.S. discovers how unmanageable Iraq--even without Saddam--really is.
After all, Iraq will still be Iraq--a desperately poor, faction-ridden country where power has been exercised by the sword for hundreds of years. Washington will have to play the referee between a welter of competing forces, from those who were dependent on the regime and fear prosecution and loss of privilege to disenfranchised Shiites who represent the largest religious bloc in Iraq and are chafing to improve their political and economic status.
And anyone who thinks all of Saddam's followers would be quickly removed from power after his fall will see how hard such a purge really is. Saddam is just the top dog in a vast web of patronage and repression, much of which would likely remain after he goes. Supporters from his hometown of Tikrit have key roles in the military command units and the secret police. Clans associated with the Iraqi leader have been rewarded with income from sequestered businesses and lucrative government contracts. Saddam's son Uday and his associates may have stashed the billions they made in oil and cigarette smuggling into offshore accounts and properties such as hotels. There will be a fight to reclaim that money.
It could take years to untangle all of these relationships and their distorting effect on the economy, which suffers from woes almost too numerous to list. Two decades of war plus 12 years of U.N. sanctions have slashed gross domestic product per capita by over 70%. The U.N. Development Programme calculates that on a purchasing-power-parity basis, Iraq's per-capita income is only $700, making it one of the poorest nations on earth outside Africa.
Saddam's economic policies have made matters worse. Since 1991, the regime has been churning out local currency, which it uses to soak up whatever dollars are available in the local market. This practice has created hyperinflation and destroyed the value of the dinar. On the black market, the currency has plunged from about 8 per dollar in 1990 to 2,000 per dollar now. Members of the once thriving middle class can feed themselves only by selling their jewelry and household goods and by receiving transfers, typically $100 per month, from relatives abroad. Crime is soaring, and girls and women from respectable families are increasingly turning to prostitution--a deeply humiliating trend in a conservative Arab society.
Even Iraq's oil reserves are unlikely to be a panacea. The fields are in a decrepit condition, with equipment broken and missing. Oil production--currently about 2.5 million barrels per day--may have to be cut in the short term while contractors replace antiquated hardware and stabilize pressure in the reservoirs. That could cost $3 billion to $4 billion--assuming Saddam doesn't sabotage the fields.
Unless oil prices stay at current high levels, Iraq's oil income of around $15 to $20 billion per year isn't likely to be enough to pay for food and other needed imports as well as rebuilding and development costs. That tab is estimated at $20 billion a year over several years. "The oil income has been spent 20 times over," says analyst Raad Alkadiri at Washington consultant PFC Energy. With a $30 billion to $40 billion investment, Iraq's oil revenues could rise to 6 million barrels per day. But that could take years--and could sink oil prices.
Meanwhile, Iraq faces mammoth debts and war reparations estimated at anywhere from $61 billion to $297 billion. Unless most servicing of these obligations is postponed for many years, Iraq will wind up a financial cripple like the Weimar Republic. Fareed Mohamedi, PFC Energy's chief economist, predicts that under a U.S.-administered Iraq, Arab debt, estimated at about $31 billion would be forgiven, and reparations dropped. Other bilateral debt, such as the $6.5 billion owed to Russia, would have to be rescheduled, he adds. That still leaves a big chunk to reschedule.
Nevertheless, Iraq is not hopeless. Despite the depredations of recent decades, Iraqis remain relatively well-educated. The status of women in Iraq is better than in most Arab countries. Many Iraqi exiles, who hold advanced university degrees in everything from medicine to nuclear physics, remain intensely concerned about the fate of their home country. "Having 4 million Iraqis outside [the country] is not good, but in another way, they are a major asset. They can contribute experience and money," says Sinan Shabibi, an Iraqi economist at the U.N. Conference on Trade & Development in Geneva.
But creating a real private economy will take years. Billions of dollars in assets, from factories to farms to choice real estate in Baghdad, have either been nationalized or sold to associates of the regime. Redistributing or privatizing such assets will be tricky. Ex-intelligence bosses or other members of the elite could use their riches to grab choice properties. Iraqi businessmen also doubt there's enough local managerial talent to run the large state enterprises.
As rebuilding gets under way, fiercely nationalist Iraqis will watch closely for self-dealing by Americans and locals who have offered their services to U.S. companies--particularly in the oil industry. "I am very wary of strong groups finding their way into Iraqi politics with big bucks and trying to influence the process," says Laith Kubba, an Iraqi exile associated with the National Endowment for Democracy in Washington.
Kubba and other exiles want the U.S. to confine its role largely to establishing an environment that allows an indigenous political leadership to emerge. Already, influential opposition figures such as writer Kanan Makiya are accusing the U.S. of betraying the cause of a democratic Iraq. Washington's plan for a military occupation amounts to "the retention under a different guise of the repressive institutions of the Baath and the Army," Makiya wrote recently in The Observer in London.
Independent analysts, too, wonder if the U.S.'s avowed commitment to the country will be put to the test. Charles Tripp, a professor of Middle East politics at the School of Oriental & African Studies in London and author of A History of Iraq, thinks U.S. resolve could waver once Americans on the ground face difficulties and the criticism from Iraq's neighbors crescendos. Any number of incidents, from the killing of an Iraqi by American soldiers to food shortages, could spark trouble. In a worst-case scenario, U.S. personnel in Iraq could become the targets of bombers, just as they once were in Lebanon.
In such circumstances, some analysts and exiles predict, the U.S. might decide to turn over power to another, less brutal ruler who could maintain order and protect American interests. That solution, according to Tripp, would be "the least trouble for the region. It would get the Americans out, and it would be quite reassuring for some Iraqis." It may not come to that. But creating a democratic, prosperous Iraq could still cost plenty in both blood and treasure. By Stanley Reed in London