As the US-led illegitimate war against Iraq draws to its 'desired' end, attention is heavily focussed on who will be in-charge of the post-war reconstruction programme and how the sharing of the Iraqi booty will take place. While initially there was the conundrum of whether the UN should be co-opted into providing ex post de facto legitimization for this illegal war, the legal opinion that prevailed was that only a UN resolution can provide legitimacy to any post-war programme in Iraq, whether it be to provide governance or to help reconstruct the economy. More importantly, concerns regarding the economic and political implications of Iraq being under the total control of the US seem to have swayed international opinion unambiguously towards demanding a central role for the UN in post-war Iraq.

But the 'vital' role of the UN in post-war Iraq so far appears to be limited to humanitarian aid. The US remains very clear in its stand that while it expects international financial support to cover its own humanitarian obligations under the occupation, it has no intention of sharing authority or decision-making with anyone, either in issues of governance or in the sphere of reconstruction. The Pentagon's Office of Reconstruction and Humanitarian Affairs (ORHA), headed by retired US General Jay Garner, has assembled a 'government-in-waiting' of Iraqi exiles and American advisers and is gearing up to do it all-govern the Iraqi people, provide humanitarian support and administer the lucrative business of reconstruction. Under the plan, the government will consist of 23 ministries, each headed by one American and four Iraqi advisors appointed by the Americans.

The US is clearly aiming for a large share of the reconstruction booty. It was only after widespread criticism erupted regarding the selection process of USAID, which limited the biggest reconstruction contracts to five of its largest MNCs, that the US promised to throw open the bidding to non-US firms as well. It will be interesting to see how 'fair' a private sector-driven, military industrial state like the US will be in keeping this promise. A significant counterbalance in this whole process are the economic interests of Iraq's major creditors and other economic partners, and the overall balance-sheet of Iraq itself. While the present war has brought about ruinous destruction of the Iraqi economy, it was already in severe decay before the occupation, brought about by a decade of sanctions.

The State of Iraq's Economy and its Financial Obligations
As a UN report on Iraq rightly notes, data on economic and social conditions in Iraq are notoriously incomplete and sometimes contradictory. However, what has been clearly established is the acutely negative impact that the economic sanctions of 1990–96 have had on the Iraqi economy. The blockading of oil exports as part of the UN-imposed sanctions completely crippled the economy, which was heavily dependent on oil exports. Even after the oil-for-food programme began in 1996, Iraq was permitted to sell only $1 billion of oil every 90 days. During the six-year-long oil-for-food programme, Iraq thus earned less revenue than it did in 1980 alone. The average GDP growth rate, which stood at 4.7 per cent during 1960–80, dropped to –6.4 per cent during 1980–2000. It is estimated that GDP per capita may have fallen to as low as US$ 500–700 by the year 2000.^[1] The destruction caused by the coalition forces during the present war has caused a further delay in the resumption of oil exports, exacerbating the situation even more. However, the countries that will be a part of the reconstruction project only stands to gain from all the destruction and misery caused to Iraq.

For instance, consider the fact that Iraq is almost totally reliant on imports for most of its needs, as its non-oil sectors are undeveloped. The flow of imported durable goods, which constituted about 75 per cent of Iraq's imports before the sanctions were imposed, had dropped sharply during the sanctions period itself. Following this squeeze in the normal supply chains, annual inflation, running at 45 per cent before 1990, jumped dramatically to an estimated average of 500 per cent the very next year, and continued to sharply contract the purchasing capacity of the Iraqis. The drastic drop (54 per cent) in employment in four key sectors-construction, manufacturing, water supply and electricity-during 1989–96 also contributed to this drop in purchasing power. Most Iraqis have long since used up their financial and material assets. The agriculture sector too has steadily declined over the last decade. From a situation before 1990 when Iraq had the highest rate of per capita food availability in the region, food security had become a mounting issue even before the present war. This was because, even under the oil-for-food programme, only about 66 per cent of the approved export revenue was available for importing the essential humanitarian needs in the permitted list; the remaining one-third of Iraq's export income went towards compensating companies and individuals for losses incurred during the 1991 Gulf War. All the destruction brought on by the present war adds to this already desperate situation.

Getting the economy back on track will generate immense opportunities for companies across a large spectrum of sectors. Normalizing imports to meet the humanitarian needs of food, clothing, medicines, agricultural goods, seeds, etc., will itself generate a large market for the private sector in post-war Iraq. In the context of a recessionary global economy, Iraq could thus offer the coalition powers a guaranteed market in barter for oil. Further, there are huge opportunities in sectors like transportation and communication infrastructure, which have been totally destroyed. Essential public services such as health, education, water supply, power and sanitation systems will also have to be restored. All this will require a large quantity of capital goods, for which the natural choice would be US companies. Their advantage lies in the fact that it is the US that will define the scope of this emerging market, as it is expected to call for a total revamping of the existing economic structure in Iraq.

In fact, the US seems to be going all the way to expand the scope of this potential market. One cannot but agree with Robert Fisk's cynicism, who, writing in The Independent on 14 April, noted a pattern in the response of American forces to the looting in Baghdad. He writes about how the US troops sat back and allowed mobs to wreck and then burn selective ministries like those of Planning, Education, Irrigation, Trade, Industry, Foreign Affairs, Culture and Information as well as the National Museum and hospitals. "The Americans have, though, put hundreds of troops inside two Iraqi ministries that remain untouched and untouchable-the Ministry of Interior with its vast wealth of intelligence information on Iraq, and the Ministry of Oil with its archives and files of Iraq's most valuable asset, its oilfields and massive reserves. Both are safe and sound, sealed off from the mobs and looters, and safe to be shared, as Washington almost certainly intends, with American oil companies."

However, coming in direct conflict with the US plans for restarting and expanding its market in post-war Iraq is the country's external financial burden, which is an estimated $383 billion and includes foreign debt, Gulf War compensation claims and pending contracts. The pending contracts are with public and private foreign companies, in Russia, Holland, Egypt, the UAE, China, and France, and are estimated at $57.2 billion, primarily in the energy and telecommunications sectors. The US reconstruction package will have to settle these contracts with the countries concerned and also coerce some agreements on the reduction and removal of war compensation.

Mostly owing to its war with Iran in the 1980s, during which time it had easy access to credit with the backing of the US, Iraq had generated a debt of $42 billion by 1990. Subsequently, no debt payments could be made because all economic and financial transactions were frozen under the sanctions regime. Iraq's debt since then is estimated to have mounted to between $62 and $130 billion.^[2] Most of this is in the form of short-term loans from private commercial banks and private companies, though it also includes some long-term loans from foreign governments. It has been estimated that Iraq now has a debt-to-export ratio that would place it in the World Bank's most burdened category, far surpassing the average of 3:1 for highly indebted poor countries (HIPC). Iraq will legitimately need to be freed from this overwhelming debt burden before its oil revenues can be used to help stabilize the economy.

The precedence of Yugoslavia's debt restructuring process, a country that has a parallel experience with Iraq in terms of sanctions, may be encouraging to some extent.^[3] However, the process in Yugoslavia has been long-drawn, and although government-to-government debts have been forgiven, no agreements have been reached with the private sector. This kind of debt work-out will not provide adequate relief to Iraq where private creditors dominate. In fact, investors owning previously worthless Iraqi loans can make huge returns, mirroring the performance of the Yugoslavian economy during its regime change. As Iraqi loans that trade at between 8 and 10 cents on the dollar look set to bounce,^[4] private investors will have a clear enough interest in prolonging the restructuring process by holding out. Thus, along with substantial debt forgiveness, complete debt standstills will need to be in place during the process of negotiation and restructuring. But, the fact that, under pressure by its private sector creditors, the US recently blocked a move from the IMF to proceed with a new sovereign debt restructuring mechanism (SDRM), under which debtor countries could have hoped for the ability to declare a moratorium on debt servicing during a debt renegotiation process, does not offer encouraging signals to the prospects for a quick settlement in the Iraqi case. This could further burden the efforts to rebuild Iraq's ruined economy, which is already considered to be one of the costliest reconstruction projects since World War II.

Reconstruction Costs and Oil Revenues
Estimates of the overall costs of Iraq's reconstruction vary widely. An action strategy drawn up for post-conflict Iraq by the Washington-based think-tank with strong links to the US armed forces-the Centre for Strategic and International Studies (CSIS)^[5], has estimated that the reconstruction will cost tens of billions of dollars in the first year alone, and as much as $25 to $100 billions overall. The UNDP has estimated it at $30 billion in the first two years, while a study by William Nordhaus of Yale University has offered scenarios ranging from $100 billion to a staggering $1.9 trillion over the next decade. The US government's allocations of $500 million in humanitarian aid and $1.7 billion to rebuild Iraq (out of a total $75 billion in the war budget), come nowhere close to even the most optimistic of these cost projections, even taking into account the $1.4 billion in Iraqi government money frozen in US banks since 1990, reported to have been seized by the US Treasury Department. This money, along with $600 million frozen by Britain and ten other countries, is expected to be used to help defray the costs of rebuilding Iraq.

The US government expects the bulk of the reconstruction costs to be covered by Iraq's oil revenues. The American plan is to instal a friendly government in Iraq with which they can do business. Under this arrangement, the post-Saddam Iraqi regime will either drop out of OPEC (with American prodding) or ask for a long quota holiday under the pretext of rebuilding the nation. Iraq has so far been producing less than 2.8 million barrels of oil a day, down from a pre-sanctions peak of 3.5 million barrels. According to oil industry analysts, new exploration will probably raise Iraq's production to 200–300 billion barrels of high-grade crude, which is extraordinarily cheap to produce. This will unleash a flow of Iraqi oil into the world market, pushing prices down. In such a situation, Saudi Arabia will have to either risk losing its market share or boost its own production, and this will effectively dismantle the OPEC's production quotas and its control over international oil pricing.

This would support the suggestion that, apart from the strategic energy concerns, the American need to support the falling dollar is the underlying reason for its push to control the world's second largest oil reserves in Iraq. It has been reported that Iraq changed over to the euro in November 2000 as its oil transaction currency and such continuing momentum by the OPEC threatened to undermine the dollar's hegemonic position. For Iraq, the political decision taken as a rebuff to the US against its hard-line stand on sanctions, in fact turned out to be profitable, as the dollar has depreciated vis-à-vis the euro since late-2001. Saddam also converted his $10 billion reserve fund at the UN to euros. A widening move within OPEC towards the euro as the 'oil transaction standard currency' would have threatened the dollar's reserve currency position.^[6] Thus, it has been suggested, the US would achieve two goals by bringing Iraq's large oil reserves under its control and controlling oil prices: one, dismantle the OPEC mechanism with its production quotas leading to artificially high prices of oil, which has been hurting the world's largest oil importer for too long^[7], and two, pre-empt a wider shift towards the euro.

However, the US ambition of creating massive investment in the Iraqi oil sector, boosting oil output beyond the current OPEC quota of 2 mbd, is premised on the 'successful' reconstitution of Iraq into a 'functioning' (read western-friendly regime) state. If the current churning in Iraq throws up an Islamic state, as some religious leaders envision, this would surely run counter to the US administrative plans for the country. It has been suggested that even a democratically elected government in Iraq might not necessarily play the oil game as sought by the US. The examples cited include Kuwait, which was liberated by the US twelve years ago and has not yet opened up upstream oil to foreign companies, and Venezuela, where democracy did not bring in a friend of Washington. The nationalist sentiment in the oil sector in Iraq, which prides itself on being the first country to have nationalized its petroleum wealth in 1972, is said to be very strong. For 75 years since oil was first discovered in Iraq in 1927, modern Iraqi nationalism has defined itself around the issue of control of oil and resistance to foreign intervention. Therefore, privatization of Iraq's huge oil reserves may not be that easy to carry out.

In the meantime, the US administration is pressing ahead with its unilaterally drawn-up plans. It is reported to have installed a former Shell Oil Co. chief executive, Philip J. Carroll, to oversee Iraq's oil exploration and production. It is believed that foreign oil companies' participation will be sought under production sharing agreements (PSAs) that allow them a guaranteed favourable profit margin and, unlike royalty schemes, insulate them from losses incurred when the oil price drops. Even if the US succeeds in bringing Iraq's huge oil reserves under its control, which it would then use for breaking up OPEC by undermining the cartel's pricing policies, this could itself trigger accelerated adoption of the euro as the oil standard by OPEC-an eventuality that will weaken the dollar. Again, a privatized oil sector in Iraq pumping large amounts of supply into the market, with a view to profiteering, could push crude prices down, as other oil producers also compete to retain their market share. The ensuing fall in prices may also squeeze the proposed reconstruction fund availability.

Conflicting Interests of Major Economic Partners
As the complexities on the ground in Iraq are being unravelled by the day, the Bush administration's plans for rebuilding Iraq are being laid bare faster and faster. The USAID reconstruction plans have called for private American corporations to undertake much of the work, sidelining UN development agencies and other multilateral organizations. This is a sharp departure from similar reconstruction efforts in the last decade, which were largely undertaken by international peacekeeping operations.

Only a handful of US companies have been allowed to compete for the reconstruction contracts under a provision of the US federal procurement law that allows for streamlined bidding in special circumstances. These companies are all giant engineering firms: Bechtel Group, Fluor Corp., Halliburton Co.'s Kellogg Brown & Root (KBR) unit (a subsidiary of Halliburton Company, which Vice President Dick Cheney once headed), Parsons Corp. and Louis Berger Group. Several of them are major Republican Party donors and are close to the White House. The Louis Berger Group has a reputation for water and transport privatization, and is presently involved in Afghanistan too. At least four of the favoured five companies are involved in some kind of investigation or the other for cost over-runs, false invoices, questionable accounting practices, etc., which the Bush administration has apparently chosen to ignore.

Even before the fighting was over in the city of Umm Qasr, USAID awarded a $8 million contract to the Seattle-based Stevedoring Services of America (SSA), to manage this key Persian Gulf port; the company has never worked in a war zone before. After the basic infrastructure is restored, American telecommunications and IT companies are also believed to be strongly placed to get contracts for these systems. The returns expected from these investments in Iraq outrun expected returns on same investment levels domestically.

But the US administration is already feeling the pressure to expand the list of nations and corporations for reconstructing Iraq. The reconstruction package will have to take into account the interests of a wide range of Iraq's economic partners. Although France, Germany and Russia stubbornly resisted the US waging a unilateral war on Iraq, nobody wants to be left out of the potential economic benefits to be gained from sharing reconstruction contracts. Consider the following details about Iraq's major economic partners:
partners:

• France controls over 22.5 per cent of Iraq's imports. Some 60 French companies did $1.5 billion in trade with Iraq under the UN oil-for-food programme.^[8] France's largest oil company, Total Fina Elf, has negotiated deals to develop and explore the Majnoon and Nahr Umar oil fields, which are estimated to hold 25 per cent of Iraq's reserves. From 1981–2001, France also accounted for 13 per cent of Iraq's arms imports.
  
• Russian business has had long-standing interests in Iraq. Russia controls 5.8 per cent of Iraq's total imports, and supplied half of all Iraqi arms imports during 1981–2001. Further, a Soviet-era debt to Iraq of about $7–$8 billion, generated by arms sales during the Iran–Iraq war, is still outstanding. Russian oil and gas companies have contracts to service and develop sites throughout Iraq, with a $40 billion economic agreement between Iraq and Russia reportedly having been signed in 2002 to allow oil exploration in western Iraq.These contracts can be fully realized only if the UN sanctions are lifted. Meanwhile, Russia believes that the US has brokered a deal with the coalition of Iraq's opposition forces that it backs, whereby support to them against Saddam is conditional on their declaring-on taking over power-all oil contracts conceded under his rule to be null and void. US access to Iraqi oil and its ability to dictate oil prices can spell major trouble for Russia, which is poised for major production expansion over the next one to three years, and hopes for an expanded market share in the US too.
  
• China controls 5.8 per cent of Iraq's annual imports. Under the food-for-oil programme, China's Aero-Technology Import-Export Co. (CATIC) was contracted to sell metereological satellite and surface observation equipment to Iraq. CATIC had also received UN approval to sell optic cables to Iraq. Further, during 1981–2001, China was second only to Russia in sales of arms to Iraq.
  
• The United States, too, traded with Iraq and provided large military support to Saddam Hussein during the 1980s. However, US sales to Iraq stopped after the Gulf War, and resumed on a greatly limited scale only in 1997, when the UN oil-for-food programme kicked in. Last year, Iraqi imports from the United States totalled just $31 million, mostly in technology for oil production. On the export side, Iraq sold the United States some $3.5 billion in oil.

Companies based in countries like India, Indonesia, Syria and Vietnam, which had exploration or development contracts with the Saddam regime in Iraq, are also likely to try to enforce their claims in the post-war environment. South Korea's big construction companies, including the Hyundai Group, hope that the war in Iraq will produce a bonanza for them in a lucrative market they had to abandon twelve years ago. There has also been lobbying to include companies from Egypt and Jordan to show appreciation for their cooperation in the war effort.

Thus, while all these countries are waiting to seize and utilize the new opportunities that Iraq's reconstruction will throw up, the US will have to strike deals with them for existing contracts. If the Bush administration wants significant international help, it will have to make concessions. Resentment across the world will rise again if Washington is perceived as being interested in the UN only as an instrument to serve its own purposes. Amidst mounting criticism, Halliburton has now been dropped from the bidding, either at its own request or of the US governments. At this stage, however, according to USAID, the only scheme for including foreign corporations is as sub-contractors to the American companies that win the bids.

A Taste of Things to Come
Numerous studies have highlighted the shortcomings of previous international efforts in post-conflict reconstruction. For example, about 75 per cent of the $1.5 billion spent on assistance in Afghanistan thus far has been devoted to military expenditure and short-term humanitarian assistance rather than longer-term reconstruction. This has severely limited the Karzai government's ability to deliver benefits to its people, and undermined its legitimacy. In Kosovo, three-and-a-half years into its mission, the UN is only now beginning to seriously focus on development.^[9] Further, every recent instance of post-conflict reconstruction has suffered from problems due to lack of donor accountability, double counting of pledged funds, and delays in disbursement, all caused due to the lack of a transparent tracking and accounting mechanism. The imbalance and lack of coordination among donors willing to provide funds directly to a post-conflict government through UN-led trust funds, and those that insist on providing funds bilaterally or through international NGOs, have also hampered efforts to support fledgling post-conflict governments.

Meanwhile, the report of the Commission on Post-Conflict Reconstruction convened by the Association of the US Army (AUSA) and the Centre for Strategic and International Studies (CSIS) in January 2003 has concluded that despite more than a decade of experience in post-conflict reconstruction, the capacity of the US to address these challenges, even as part of an international coalition or in a UN-led mission, remains woefully inadequate.^[10] The report unambiguously states that a major lack exists in USAID's ability to address the issue of livelihood creation for crucial parts of the affected population in a cohesive and effective manner.

The US, then is, clearly not in a position to take up reconstruction of post-war Iraq on its own. On the other hand, the UN, which effectively implemented the oil-for-food programme and made a positive impact, has the relevant and useful experience to undertake and coordinate the reconstruction programme. The insistence of the US that it needs to be in control is a blatant display of its desire to dominate and rule over the oil revenues and the contract-awarding process.

Even if the US eventually comes around to giving a central or coordinating role in post-war Iraq to the UN, under which its own agencies would operate, will the UN be able to provide anything better than multilateral legitimacy for a policy set by Washington hardliners? The current US plans are to replace the Iraqi dinar with the dollar, parcel out contracts to US companies and set forth free market parameters for the future 'interim Iraqi administration',^[11] strengthening the future demand for dollar. Meanwhile, the favoured Iraqi in-charge, Ahmed Chalabi-part of the old Iraqi ruling class who last set foot in Baghdad 45 years ago, and convicted of fraud and embezzlement-is being lined up as the head of the Interim Iraqi Authority.

USAID envisions important contributions from the IMF and World Bank as well. But, a UN mandate is a pre-condition for their involvement. The World Bank has stated that even providing technical assistance to Iraq might not be possible without a UN Security Council resolution. The Bank's stand that it cannot lend to Iraq without an internationally recognized government sealed by a UN mandate has now been accepted by the US, reflecting how the US might consider this necessary to break any potential deadlock and proceed with its economic plans for post-war Iraq without any delay. Indeed, the involvement of the IMF and the Bank will provide the US plans to 'reconstruct' Iraq into a foreign-owned market economy with just the required multilateral 'legitimacy', if one goes by the recommendations in the latest volume of IMF's quarterly magazine, Finance and Development (March 2003).

This volume is fully devoted to studying the Middle Eastern and North African Countries (MENA). Predictably, the Fund locates the problems inflicting the mineral-exporting MENA countries and the reasons for their slow down since the mid-1980s in opaque and highly politicized fiscal systems, lagging political reforms, dominant public sectors, underdeveloped financial markets, high trade restrictiveness, inappropriate (pegged or narrow band) exchange rate regimes, etc. The solutions, again, are predictable-accelerated and broad action on structural reforms, including a fundamental reassessment of the role of the state in the economy; the creation of appropriate incentives for private sector initiative; faster trade liberalization; financial market reform; improved transparency, governance and quality of state institutions. Following these mandates will achieve the dismantling of Iraq's national economy with the speed and efficiency of a structural adjustment programme.

For the Fund, public sector reform is one of the keys to reinvigorate these stagnating economies that have been 'missing out on the benefits of globalization and world economic integration'.^[12] While it criticizes the centrally planned Arab economies for their 'mismanagement' of oil revenues and the creation of welfare-oriented public sector monopolies, it conveniently forgets that the so-called efficient capitalist economies, since the sixties, have thrived directly or indirectly on the extra-normal profits derived from their technology sales,^[13] and that the surplus has been used to build up their economic and social infrastructure. The public did not have to pay for the price of infrastructure development unlike the present capitalist neoliberal consensus on privatization of public utilities and infrastructure provision which mandates that prices have to reflect their costs, and imposes a heavy economic burden on the population.

The country and region experts at the BWIs have time and again proved their convenient ignorance of the history of economic development and its linkage with social and political factors. Under the prevailing paradigm, none of the direct and indirect forms of support to public utilities, such as price controls on public utilities, or bank support for public entities requiring periodic bail-outs by the government, or low interest rates, or written-off bank loans, have 'a good economic rationale'. One is left wondering about the 'good economic rationale' behind the repeated bail-outs that the US government have been undertaking on behalf of its beleaguered airline industry firms.^[14]

Iraq has a large technocratic middle class of which the state is the largest employer currently. To avoid any further disruption to the economy, at the least, the coalition will need to retain them in their present jobs and continue paying salaries to government employees. But, going by the existing neoliberal consensus, reconstruction will in all likelihood involve privatization of public utilities. Experiences from across the globe suggest that such privatization will impose heavy costs on the ordinary Iraqi people who have been previously accustomed to free health and educational services, and gasoline, electricity and water at negligible costs, thanks to subsidies from the state. There will be increasing conflict between the old practices and the private sector-dominated, capitalistic economic policy framework that the US wants to see in place in Iraq. This will be another challenge that the new administration will have to address.

Eventually, the outcome of Iraq's 'reconstruction' will hinge on how the major countries trade off their individual interests for a share in the reconstruction project. As seen across the board in the past, bilateral solutions will also be choreographed by the US itself. Thus, as the US readies to 'reconstruct' post-war Iraq into a foreign-owned, free-to-trade and fully liberalized market economy, the interests of the Iraqi people will be thrown by the wayside.


April 21, 2003.

[1] Source: Draft UN Confidential Report on Iraq, 20 January 2003, at www.cesr.org

[2] The disparities in estimates are due in part to a disagreement between Iraq and its neighboring states over the nature of approximately $30 billion in assistance given to Iraq by several Gulf States during the Iran-Iraq War, which Iraq considers as grants and the creditor states consider to have been loans. Figures also vary depending on whether they include accrued interest, which some estimates put at $47 billion and rising. See CSIS, 2003, "A Wiser Peace: An Action Strategy for a Post-Conflict Iraq", Supplement III, at www.csis.org
[3] Yugoslavia had 11 years of debt arrears, had been subject to sanctions and was bombed by NATO. Its $4.5 billion of debts were restructured by the government creditors who forgave 66 percent, giving it 22 years - including a six-year grace period, to repay the rest.
[4] There is approximately $1 billion in Iraqi paper that is relatively easy to trade, syndicated loans issued by Rafidain Bank, Iraq's and once the Gulf's largest bank, in the 1980s. These bonds are in demand among investors who trade in'exotic debt'. For them, the experience with Serb loan paper which rose from around eight cents in the dollar before the first round of Yugoslavia's presidential elections in 2000 to trade around 42 cents in the dollar in 2002, is a big incentive. See David Chance, Reuters, Sep 13, 2002.
[5] See CSIS, 2003, "A Wiser Peace: An Action Strategy for a Post-Conflict Iraq", at www.csis.org
[6] Iran started thinking about switching too; Venezuela, the 4th largest oil producer, began looking at it and has been cutting out the dollar by bartering oil with several nations including Cuba. Russia is meanwhile seeking to ramp up oil production with Europe (trading in euros) an obvious market. If Iran, Venezuela and Russia join Iraq and sell large quantities of oil for euros, the euro would have the leverage it needs to become a powerful force in general international trade. Other nations would have to start swapping some of their dollars for euros. This will undermine the unique flexibility which the US central bank enjoys in handling its large twin deficits.
[7] See Dinkar Ayilavarapu, 'OPEC in the Line of Fire', Asia Times, October 1, 2002, and W. Clark, The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and Geo-strategic Analysis of the Unspoken Truth', January 2003, at www.indymedia.org.
[8] Source: .The CIA World Factbook
[9] See CSIS, 2003.
[10] See Play to Win, The Final Report of the Commission on Post-Conflict Resolution, January 2003, CSIS and AUSA, at www.csis.org
[11] Seumas Milne, "Iraqis have paid the blood price for a fraudulent war", April 10, 2003, The Guardian.
[12] See Adam Bennett, 2003, "Failed legacies: Escaping the ghosts of central planning", in Finance and Development, Vol. 40 (1), March.
[13] This is an appropriate parallel because, just like oil, the entire world is dependent on technologies produced in the industrialised countries, particularly due to the convergence towards a mono-culture and therefore, the developed world's returns on technological investments have been exorbitant.
[14] In the second major injection of aid into the US airline industry in less than two years, the US Congress has approved at least $3.2bn in aid for struggling airlines, despite objections from the White House that the sector was being bailed out too readily. (The first one was a $15 billion bailout after September 11, doled out on a case-by-case basis). The plan is to roll this airline aid into an $80bn finance package for the Iraqi war, so that domestic business interests ensure that a bill George W Bush wanted passed quickly will indeed happen. (The US national railway company, Amtrak also relies on state funding to survive.)