APPAN, N.Y. — In 1991, America's so-called Operation
Tin Cup got enough money from its allies to cover the costs of the first
Persian Gulf war. In contrast, what could be called "Operation Begging
Bowl" after the latest war in Iraq has come up empty, leaving us stuck
with the bill for the invasion and occupation — the full extent of which
is only now becoming apparent.
The Bush administration's recent willingness to consider a greater
United Nations role on the ground is the first sign that it is aware of
how vastly mistaken its assertions about the occupation were. Contrary to
the prewar view that Iraq's oil revenues would greatly offset American
costs, we now know that Iraq — with its shattered economy, devastated oil
industry and plundered national wealth — is incapable of making any
significant reimbursement of the invasion and occupation costs. And the
military expense is only a fraction of the total expense of making Iraq
into a functioning country.
So, how much is this experiment in nation-building going to cost the
American taxpayer? First, let's consider what has already been spent.
According to the Pentagon, the cost of preparation, aid to noncombatant
allies and the invasion itself amounted to $45 billion. Then there is the
much-bandied "billion dollars a week" phrase, which seems an accurate
estimate of military expenses since the end of serious fighting in May.
Assuming a five-year occupation, that's some $300 billion.
But these familiar figures are only part of the story. First, as these
are borrowed funds, they are already incurring interest charges. More
important, according to material released by American officials, the
United States must meet an estimated $5 billion in initial humanitarian
aid and $8 billion in Iraqi government salaries, as well as about $7
billion for repairs to public utilities and to restore vital services over
the next two years.
In addition, Iraq is buried under a mountain of foreign debt — roughly
$350 billion. This consists of $90 billion in conventional foreign debt
(mostly for arms purchases from Russia, China, France and Germany), $60
billion in pending contracts, and war reparations of $200 billion for
Iraq's 1990 invasion of Kuwait. It is anticipated that, through the Paris
Club system, the commercial debt may be reduced and repayment will be
deferred until Iraq's economy can get back on its feet. It is also
possible that the United Nations' Kuwait claims commission will find a way
to reduce the war reparations burden. But even so, these debts will have
to be paid off eventually.
It will also most likely cost $3 billion to re-settle nearly one
million Iraqi refugees who are returning from exile (there are also an
estimated 1.5 million Iraqis who were displaced within the country and
will need aid to rebuild their communities). Ordinarily, assistance could
be expected to come through United Nations and nongovernmental groups, but
in this case the diplomatic difficulties surrounding the invasion leave
the situation unsettled.
Still, the biggest problem facing Iraq is that after decades of
corruption, economic stagnation and declining productivity, it faces at
least a decade's worth of reconstruction and improvements. This will
include rebuilding ports, farms, roads, telecommunications systems, power
plants, hospitals and water systems, as well as introducing a medical
benefit plan, a national pension scheme, and new laws for foreign
investment and intellectual property rights. The country needs a revised
criminal code and judiciary system, a new tax code and collection system,
and an electoral voting system with appropriate technology. Using postwar
American and United Nations estimates for these and many other tasks, the
total bill is likely to be at least $200 billion over a decade.
Clearly, such a program cannot be financed entirely by Iraq's oil
reserves. Those who accused the Bush administration of instigating a "war
for oil" certainly hadn't done the math. Before the war the hope was that
Iraq's annual production could relatively quickly rise to $15 billion to
$20 billion per year. However, the system is far more decrepit than such
estimates assumed, and combined with the near-daily sabotage of facilities
and pipelines, it appears that oil revenues will rise only slowly over the
next three years, from approximately $10 billion in 2004 to $20 billion in
2006.
Major international oil companies are expected to invest $40 billion in
joint ventures with Iraq's state oil company, but this will be for
exploration and new development, not to rehabilitate the existing
facilities. By 2010, even in the best case, production would increase at
most to six million barrels a day, bringing total revenues to about $40
billion a year.
Obviously, America cannot make up the difference on its own. Iraq will
need long-term loans from the World Bank, the United Nations Iraq
Development Fund, the British Foreign and Commonwealth Office, the Arab
Development Fund, the European Union Aid Program and others. Yet few of
these organizations will be keen to make loans until Iraq has a new
constitution and an elected government that has put in place effective
legal, arbitration, banking and fiscal systems.
Let's face it, rebuilding Iraq is going to be far more expensive than
Americans have been led to believe. Just as it seems inevitable that
concessions must be made to get other countries to relieve the burden on
American troops, now is the time to mend fences with the United Nations
and our allies to relieve the burden on American taxpayers as well.
Donald Hepburn, former chief executive of the Bahrain Petroleum
Company, is an adviser to the Middle East Policy
Council.
