WASHINGTON, March 19 (UPI) — As U.S. troops brace for war, several Middle East analysts held a briefing Wednesday on how a new government could rebuild itself financially.
And Iraqi oil reserves will be at the crux of any effort to get the country on a path to growth, regardless of who may be at the government’s helm.
“Iraq’s (gross domestic product growth rate) will be five times as much as it was in 2003,” said Salah Al-Shaikhly, a member of the Iraqi National Accord Leadership, emphasizing that the country’s oil output is expected to surge once sanctions are lifted against a new Iraqi government. Last year, GDP actually shrank by 7.5 percent as the country struggled under growing debt burdens amid ever-increasing isolation from the international community.
Certainly, the economic sanctions against the country that has the second-largest oil reserves in the world have prevented Iraq from investing in building up its oil processing facilities for the past decade. Analysts are hoping that a regime change will not only encourage private companies to start investing in the country, particularly in the oil sector, but also that the new government will start pumping in money into developing public infrastructure.
“We expect imports to go up…and government expenditure as well,” Al-Shaikhly added, pointing out that increased oil revenue will allow the new regime to invest more in its own people, and to play an active part in the world economy. Currently, the bulk of the country’s imports are food under the United Nations’ food-for-oil program, while 95 percent of its exports are crude oil and petroleum products.
In 1998, the latest available figure, France was the single biggest supplier to Iraq providing 21 percent of all goods to Iraq. Australia ranked in second with 16 percent, while the United States was third, with 9 percent.
Still, there are concerns about Iraq’s debt levels accumulated over more than 20 years of war and isolation. There are no reliable figures from any international organization on how much debt the country has amassed over the years under Saddam Hussein, but it is clear that the country is burdened with considerable civilian as well as military debts.
“We would want at least the civilian debts to be forgiven,” said Rubar Sandi, president of the U.S.-Iraq Business Council and chairman of the Corporate Bank Business Group. He stressed that military expenditure accumulated under Saddam Hussein’s regime had nothing to do with the people of Iraq, and thus they should not be held accountable for those debts.
He did, however, acknowledge that Iraqis would have to be responsible for debts accumulated by civilians. But Sandi said that even those liabilities should be restructured and “at least frozen and renegotiated…to ease the burden.”
While no policy has been publicly unveiled by the Bush administration on how to deal with Iraq’s debt burden, the White House has made clear that the reconstruction of Iraq could be paid for in large part by tapping into the country’s vast oil reserves. Still, it is still not clear how exactly the oil reserves will be tapped, both between the private and public sectors, and between a new Iraq and other interested countries.
Regardless of how the oil revenues are spent and taxed, it is clear that the country’s petroleum reserves will be crucial to getting the Iraqi economy back on its feet and allowing the country to ease back into the international community. Together with securing jobs for people and ensuring that the Iraqis will quickly see the benefits of a regime change, the United States and other nations engaged in the reconstruction of Iraq will be facing a number of issues to ensure the swift rebuilding of a country that has been squeezed under a dictatorship. And the issue of tapping into the oil reserves will be only one of the many challenges.