Iraq's Odious Debts

Iraq Looks Toward Rebuilding

Deutsche Welle, Germany
April 11, 2003

Once the fighting stops, the new leadership of Iraq — whoever it may be — will have to address the pressing issues of debt and reconstruction. Large oil revenues can provide only some of the relief.

From Berlin, the Iraqi dissident Kazem Habib listens to the debate about postwar Iraq — Who will be the guiding force in the reconstruction of the country? The U.S.-led coalition that is fighting the war? Or the United Nations?

But the economics professor knows that once these political questions are finally settled the international community will have to turn its attention to the numerous dollar-and-cents issues that litter the landscape much like the statues of Saddam Hussein scattered across the countryside.

“I think Iraq needs about $400 billion to $500 billion to complete its reconstruction,” Habib told Deutsche Welle. “And it will not be a matter of one or two years. We will need 10 to 15 years.”

Legacy of war creates problems

One of the primary reasons Iraq will need such money lies in the war-pocked past of Saddam’s iron rule. “The damage in Irak is massive,” Habib said. “We have had three wars: the Iran-Iraq war whose damage still has not been repaired. Then, there was the second Gulf War, which was the worst because of the extensive bombing. From an industrial and infrastructure point of view, we were actually thrown back to the start of the 20th century.”

Iraq’s needs extend beyond these bricks-and-mortar issues, he said. “We have debts of $450 billion,” Habib said. And that total could climb to $600 billion because of the latest war, he added. “If that proves to be true, then we would not be able to start the reconstruction,” he said.

The United States and Britain, the leaders of the coalition fighting to overthrow Saddam, have pointed to the country’s huge oil reserves as a potential source of reconstruction funds. But Habib suggested the oil money would not be able to pay all of the bills.

“First of all, how can we achieve debt relief? Because the Iraqi people are not responsible for these debts. It was the regime,” he said. “Second of all, how can you get new loans? From the country’s oil revenues, from Arab countries and from abroad, international institutions or other developed countries?”

Most of oil industry undamaged

The prospects that Iraq will be able to earn those oil revenues appear bright. Instead of carrying out a scorched earth policy of burning oil wells like the one employed during the 1991 Gulf War, Iraqi forces left the country’s petroleum industry relatively untouched. Only a few of the 1,000 wells in southern Iraq are burning, and coalition forces have secured many of them along with the ports of Umm Qasr and Al Faw. Production in northern Iraq has been continuing as well, according the news service Petroleum Argus.

Once the short-term problems associated with refitting the oil production facilities are finished, the country’s new government can look forward to an oil-filled future for the country, which already has the world’s second largest oil reserves behind Saudi Arabia.

“There is a lot of oil yet to be discovered in Iraq,” said Fadhil Chalabi of the Center for Global Energy Studies in London. Chalabi said that according to one study “there could be 200 billion barrels of undiscovered reserves to go along with the 112 billion barrels whose existence is already known.”

Such capacity could elevate Iraq to the same status as Saudi Arabia on the oil market, Chalabi said.

U. S. seeks new Iraqi leadership

At this point, though, U.S. leaders are still focusing on ending the war and addressing the sticky political issues involved in creating an administration that could lead Iraq toward this petro-dollar future. As a first step in creating this administration, the United States is inviting more than 40 Iraqi politicians to attend a Saturday conference in southern Iraq, said Iraqi National Congress leader Ahmed Chalabi (photo). The conference will be the first of a series of meetings that will culminate in a convention where a transitional government will be created, a spokesman for the U.S. State Department said this week.

But the plan ran into immediate objections from one of the most important exile groups of Iraqis, the Supreme Council for Islamic Revolution in Iraq. “We cannot participate in a military government of the country,” said Hamid el Bajati, a spokesman for the group in London.

The U.S. reconstruction effort is being led by the retired Lt. Gen. Jay Garner, who answers to the commander of the coalition forces, U.S. Army Gen. Tommy Franks. Garner has been critcized by Arab groups for his support of Israel and by humanitarian organizations for his military past.

Chalabi, too, is seen as a divisive figure in the U.S. plan for a postwar Iraq. He is considered to be the favorite of U.S. Defense Secretary Donald Rumsfeld. But Secretary of State Colin Powell reportedly prefers to wait and see who emerges as a potential leader during the upcoming debate over the future government.

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