Costly War (II)

Iraq counts its debt

As the Iran-Iraq war approaches its third anniversary, the government of the Ayatullah Ruhollah Khomeini still hopes to overthrow the regime of Iraqi President Saddam Hussein, who began the conflict by invading Iran. But since the fighting shifted to Iraqi territory last summer, the war has essentially remained in stalemate, characterized by fierce and bloody battles followed by long periods of inactivity. Now, however, there are reports in the Arab world that the Saddam Hussein government is hurting badly, not so much from the Iranian offensive as from the punishing cost of the war.

According to diplomats in Beirut, Iraq owes at least $5 billion to the governments of France, Yugoslavia, South Korea and Rumania for arms purchases and construction projects, and hundreds of millions more to banks and private companies in Western Europe. Iraq has also refused to pay bills due to companies in such gulf states as Qatar and the United Arab Emirates on the ground that the governments of those countries have not honored their pledges to help Iraq's war effort.

Some of the disputes have been settled. South Korea's Hyundai Engineering and Construction Co. reportedly reached an agreement in which, in exchange for prompt payments, it sent 2,000 Korean workers back to Iraq. But the Iraqis have not yet convinced the Philippine government that its citizens, who work in Iraq in a variety of service jobs, should receive 40% of their pay in local currency and the balance in bonds that could be redeemed in hard currency after two years. Nor have foreign businessmen been able to find their own financing for projects that Iraq no longer backs.

In an effort to hold down costs, Iraq has banned the import of most luxury goods, including cars, watches, TV sets and even clothing. The staffs of Iraq's embassies overseas have been cut by at least 30%. According to reports heard in Beirut, the Iraqis have sold much of their $4 billion in gold reserves in the past six months. But none of these measures, however drastic, would be sufficient to underwrite a war that is costing Iraq $1.5 billion a month.

There is speculation that if the economic crunch continues, Iraq's military leaders and party officials might band together and ask Saddam Hussein to resign. But it is also possible that the prospect of an Iraqi collapse would so worry Saudi Arabia and the other gulf states that they would substantially intensify their efforts to keep Saddam Hussein afloat. This file is automatically generated by a robot program, so viewer discretion is required.