From The New York Times, 9/3/03:
http://www.nytimes.com/2003/09/03/opinion/03HEPB.html
Nice War. Here's the Bill.
By DONALD HEPBURN
TAPPAN, 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.
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And that's just for starters. Only a down payment.
Harry
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