Shihoko Goto
The Washington Times
September 17, 2003

Washington: As the Bush administration tries to convince legislators to approve $87 billion in funds for continuing the war against and reconstruction of Iraq, senior government officials have made clear that the United States can not only bear the military responsibility alone nor can it foot the bill for all costs on its own.

The White House projects cost for reconstruction to reach between $50 billion and $75 billion, though some analysts argue that the price tag could actually well exceed $100 billion. The price, incidentally, does not include the Iraqi government’s operating budget.

“Clearly, this is a cost that will need to be shared widely, and underscores the importance of a major donor effort for Iraq,” said Treasury’s John Taylor, under secretary for international affairs, testifying before the Senate Banking Committee’s subcommittee on international trade and finance Tuesday. “We believe our own substantial contribution of $20 billion, as reflected in (President Bush’s) forthcoming supplemental request, will be critical to leveraging support from other governments,” he added.

The Treasury under secretary also said that international financial institutions including the International Monetary Fund and the World Bank continue to provide technical assistance and finalize their needs assessment, even though both agencies pulled out their staff from the country after a number of U.N. officials were killed by a bomb last month.

The Gulf War of 1991 cost the United States and its allies $60 billion, but the United States only covered a fraction of the total price. Instead, $54 billion was offset by contributions from other countries, with the Gulf nations providing $36 billion and $16 billion paid by Japan and Germany.

Such an arrangement for paying the bills for occupying Iraq would certainly appeal to the Bush administration. Certainly, a key objective for the White House at the Oct. 23-24 donor meeting in Madrid will be to ensure that the European Union, Japan and key Middle Eastern nations will foot a not insignificant portion of total costs.

But obstacles to ensure firm commitment from other nations will be an uphill task, not least because of the controversy the war has had in the first place and the ongoing debate about just how the United Nations could play a role in reconstruction as well as peacekeeping. There is also concern that because the donor meeting will be so late in the year, no country except the United States will have any real say in forming Iraq’s budget for 2004 and any financial contribution from other nations will only be allocated for 2005 onward.

Another source of contention is the debt burden Iraq has accumulated under Saddam Hussein’s regime, which continues to bog down the country’s economy. It is estimated that Iraq is saddled with anywhere between $70 billion and $120 billion in foreign debt, and negotiations continue as to what extent such debts can be written off altogether.

There is also the problem of aid fatigue, given that the call for more financial contribution comes soon after donors committed nearly $2 billion to Afghanistan.

Indeed, Sen. Evan Bayh, D-Ind., said as much, questioning whether the United States actually needs to put in so much money into getting Iraq’s government going again, suggesting that the United States should refrain from providing much more than humanitarian relief.

Of course, U.S. policymakers expect not only coalition member countries to foot part of the bill, but they also are anticipating Iraqis to be able to pay their own way for the road to recovery, namely through oil revenues. For the past seven years, the bulk of the country’s petroleum wealth had been channeled through the United Nations under its food-for-oil program, given that Iraq was blackballed by the international community.

The plan is, however, to give the nascent government direct control over its reserves so that it can draw up its own budget and plan its economy accordingly.

“Iraqi resources could begin making a significant contribution to economic reconstruction,” said Alan Larson, the State Department’s undersecretary for economic affairs before Senate members. He pointed out that the Iraqi oil exports could generate $12 billion next year, and as much as $19 billion in 2005 and 2006. But of course, that would still not be sufficient to cover all costs incurred by the government to keep running.

So as donors prepare to gather in Madrid, the focus will be on just how willing other countries will be to burden-share on an initiative led by the United States which has far exceeded initial cost expectations.