Iraq's Economic Problems

Book Review by Tanweer Akram

March 3, 2003

Alnasrawi, Abbas, Iraq's Burden: Oil, Sanctions, and Underdevelopment. Westport, Connecticut: Greenwood Press, 2002. 180 Pp. ISBN 0-313-32459-X.

Alnasrawi's recent book, Iraq's Burden, is a timely one. His earlier scholarly research (1985, 1991, 1994, and 2001) on oil industry, OPEC, and Iraq's development planning and economic problems gives him a useful perspective on Iraq's economic problems and its origins. This book is a useful addition to the literature. The author is a knowledgeable commentator on Iraq's economy. There are a number of books on the impact of sanctions and war on Iraq, such as Arnove (2002), Graham-Brown (1999) and Simons (1996, 1999). Although these books have discussed the geopolitics and the consequences of the sanctions on Iraqis, none of these have dealt primarily with Iraq's economic problems. Alnasrawi's book fills a lacuna in the literature. He engages in a detailed discussion of the emergence of modern Iraq and the evolution of its economic policies. He traces the rise of Iraq's national oil industry, the role of oil in the country's development, the consequences of Iran-Iraq war, the invasion of Kuwait, and the effect of sanctions. Last but not the least he examines the future prospects of Iraq's economy.

Alnasrawi's book is a thorough study with reference to the literature and the available data. Only limited data on Iraq is available, since the Iraqi authorities decided to stop publishing national income and product accounts in the late 1970s. However, the author makes good use of available data and cites facts and figures from various Iraqi planning documents. He also describes Iraq's developing planning process and its limitations.

The author goes over modern Iraq's economic and political history. As Alnasrawi documents, its modern history is marked by instability, coups, countercoups, purges, wars, and sanctions. Iraq was one of the first Middle Eastern countries to break out of the "concession system" imposed on the Middle East during the colonial period by the oil majors. The revolution of 1958 brought about major changes in Iraqi society. The land tenure system was reformed. It also brought to end the enclave-type nature of foreign domination. Since 1958, Iraq has been ruled by middle class led nationalist and authoritarian regimes. The author shows that although Iraq succeeded in increasing its oil income per unit of oil output, its economy continued to become more dependent on oil. Iraq's development program became dangerously tied to the oil sector. Though Iraq was an agricultural country, the authorities neglected the development of the agriculture sector. Indeed, the actual expenditure on agriculture was less than the allocated amount. As a result, Iraq became highly dependent on food imports. The authorities also did not devote sufficient resources to develop Iraqi industry. Nevertheless, due to the revenue generated by oil, Iraq was able to make substantial progress in literacy and education, health, social services, and infrastructure. By the late 1970s, it was a middle-income country with impressive social development. The authoritarian regime provided out of the oil revenue transfers in order to consolidate its political basis. However, the relative material prosperity of Iraqis was not to last.

The oil supply shock that resulted from Iranian revolution of 1979 made Iraq the second largest exporter within OPEC. Iraq benefited from the rise of price. However, the war with Iran resulted in a substantial reduction of Iraq's oil revenue due to the damage of its production facilities and the difficulty of shipping oil from Iraq. With the loss of exports, Iraq's development plans were severely curtained. Whereas prior to the war Iraq was making progress, the war started the process of Iraq's decline. Alnasrawi gives details of the destruction caused by the Iran-Iraq war. However, the end of war with Iran did not end its problem.

Within two years of the end of Iran-Iraq war, the Iraqi leadership brought to the country to a conflict with Kuwait. Iraq had a long-standing border dispute with Kuwait. But it was Kuwait's policy of overproduction causing downslide in oil prices that led to events resulting in the invasion. Iraq regarded Kuwait's action in the oil market as tantamount to war. The Iraqi authorities claimed that a dollar reduction in world oil price meant a US$1 billion in revenue loss per year for Iraq. It also accused Kuwait of appropriating its oil through diagonal, slant drilling in Rumaila field. It demanded that the loans given by Arab countries, including Kuwait, to Iraq during the Iran-Iraq be changed to grants. When negotiation between Kuwait and Iraq broke down, Iraq's leadership ordered the invasion on August 2, 1990. Comprehensive economic embargo was imposed on Iraq since August 6, 1990. Even after the United States defeated Iraq and forced it to withdraw from Kuwait, sanctions continued. The sanctions that were imposed on Iraq were the toughest sanctions the world has ever seen.

The effects of sanctions were immediate because it was quite easy to shut off Iraq's pipelines and prevent Iraq from exporting its oil. A post-war study revealed the sharp collapse of household's purchasing power in Iraq (Dreze and Gaider 1992). Post-war Iraq is characterized by high unemployment, inflation, and substantial debt. The sanctions have transferred a relatively successful Arab middle-income country into a poor and devastated nation. At present, Iraq's economic is in shambles and its people face tremendous hardship and difficulty. The US-imposed and UN-legitimized sanctions on Iraq have been in force for more than a decade. The consequences of the sanctions have been quite deadly. It is reported that that more than 1 million Iraqis have died due to sanctions. Researchers estimate that more than half a million children have died as a result of the increase in child mortality. Child mortality has risen from a level that was comparable to advanced countries to that of least developed countries with chronic shortages of food or under civil war. According to Garfield (2000), Iraq is the only case of sustained rise in child mortality in the last two hundred years. Iraq's war supply facilities and waste disposal system, its schools and hospitals, its infrastructure and its oil industry are in shambles. Iraq is barred from importing spare parts and critical equipment. The sanctions have destroyed Iraqi intellectual life and civil society and have strengthened the grip of the Iraqi ruling elite.

Under the sanction regime Iraq's oil imports have been heavily restricted. In fact even though Iraq is allowed to export oil, it does not have control over its oil revenue, which goes to an UN-administered escrow account in New York. Iraq's oil revenue is used to compensate Kuwait and other claimant against Iraq for war damages, purchase food and administer the oil-for-food program. The oil-for-food program did not permit imports for the oil sector until 1998. The existing regime of sanctions and weapons inspection seems to work well for the UN bureaucracy. While the author provides a detailed description of how the sanction regime operates, he does not comment on this aspect of the sanctions. It can be argued that the UN bureaucracy financially benefits from the oil for food humanitarian program. The oil for food program is probably one of the few self-financing programs of the United Nations that does not rely on transfer of funds from advanced economies. This program is completely funded by Iraq's own oil revenue. Therefore, it cannot be regarded as an aid program.

Alnasrawi examines the evolution of Iraq's economic and covers the devastating effects of the sanctions on the population in details. He regards Iraq's oil wealth as a burden instead of a blessing. It can be rather argued that the social system that has been fostered by Iraq's oil wealth as well as imperialist passion for control of its wealth are the country's "burdens," not its hydrocarbon resources. The author does not emphasize the key role of the U.S. and the U.K. in perpetuating and prolonging the sanctions. Throughout the 1990s, though France, China, and Russia have occasionally expressed reservations about the continuation of the sanctions, they have gone along with the Anglo-American elites. The Arab regimes, such as Saudi Arabia and United Arab Emirates, have not really voiced their dissatisfaction with the sanction regime. Moreover, one can argue that OPEC countries gained from the absence of Iraq in the international oil market. Yet this is not an argument that Alnasrawi even consider anywhere.

One problem with the book is that it is rather repetitive. Each chapter seems to have been written as separate articles for publication in academic journals. The same information is often provided in different chapters; the repetition of the same facts could have been advantageously edited.

Another missing dimension of the book is a discussion of the role of the Western powers in providing military and financial support to the Iraqi regime during its worst days of human rights abuse, slaughter of the Kurds, and attacks on Iran (Arnove 2002; Parenti 2003). The US and other Western envoys and politicians were providing Iraq with military intelligence and subsidies when the regime was killing Iraqis, Kurds, and Iranians. It was after the invasion of Kuwait that Saddam Hussein was transformed into an official enemy. Until then, he and his regime were worthy partners of the West. The U.S. had no qualms about permitting American Type Culture Corporation, a US company, to supply spores that could be used as biological weapons. Much of this is rarely mentioned in current discussions about Iraq. It is barely discussed that US war planners had deliberated damaged Iraq's water system (Nagy 2001), which is a war crime.

The book does not deal with the latest developments concerning Iraq, but given the urgency of the issues, this review examines these briefly. At the time of writing [Feb. 25, 2003] the U.S. is trying to create a military confrontation and war with Iraq. The war on Iraq has grave risks and puts million of people into serious danger, as the United Nations (2003) scenario planning exercise shows. However, for the Anglo-American leadership such consequences are of little concern. The United States certainly has a goal on achieving control over Iraq's oil reserves. Its large unexplored reserves have always been regarded as a material prize. The events of 9-11 with which Iraq had no links provided the Bush administration with an excuse to provoke the confrontation on the pretext of disarming Iraq. The looming war is, by no means, solely about oil. It is rather about increasing US dominance and control. The planned war, however, is not inevitable. The recent mass rallies in North America and Europe as well public opinion polls show that the public is unwilling to accept the Bush-Blair rationalization for war. Despite public opinion against the war, the Anglo-American ruling elites are pursuing war plans.

The possibility of an end to sanctions is remote today and a new Persian Gulf war is highly likely unless there is a massive a popular movement in the industrialized world, particularly the United States, to stop the war. If the U.S. pursues war with Iraq, once again the country is likely to face not just instability but also further destruction and immense suffering. According to a confidential United Nations (2002) document, prepared by the Office for the Coordination of Humanitarian Affairs, the UN predicts that 30 percent of Iraqi children under 5, or 1.26 million, "would be at risk of death from malnutrition" in the event of a war. Its other observations and predictions include the following:

•  "The collapse of essential services in Iraq ... could lead to a humanitarian emergency of proportions well beyond the capacity of UN agencies and other aid organizations."
•  "The effects of over 12 years of sanctions, preceded by war, have considerably increased the vulnerability of the population."
•  "WFP [World Food Program] estimates that approximately 10 million people ... would be highly food insecure, displaced or directly affected by military action."
•  "In the event of a crisis, only 39 percent of the population would be serviced [with water] on a rationed basis."
•  "UNHCR estimates that up to 1.45 million refugees and asylum-seekers may seek to flee Iraq in the event of a military conflict."
•  "Up to 900,000 people may be displaced in addition to the 900,000-1,100,000 existing IDPs [internally displaced persons]."

Even though the risk of a second Persian Gulf War is very serious, the devaluation of people's lives in the Third World permits Anglo-American elites to pursue war. Citing the case of Irish famine, the economist Sen (1999, 170-175) argues that the British ruling class was deeply alienated from the Irish and, therefore, allowed Irish famines to occur. The notion that "the sense of distance ruler and the ruled---between 'us' and 'them'" (Sen 1990, 175) is an indispensable element of alienation is applicable not just to the case of famine but also in cases of imperialist wars, such as that planned against Iraq. It is only with the globalization of solidarity that the anti-war movement will be capable of stopping the planned war and the subsequent occupation of Iraq.

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References and Related Internal Links

Alnasrawi, Abbas (1985). "OPEC in a Changing World Economy." Baltimore, MD: Johns Hopkins University Press.

Alnasrawi, Abbas (1991). "Arab Nationalism, Oil and the Political Economy of Dependency." New York, NY: Greenwood Press.

Alnasrawi, Abbas (1994). "The Economy of Iraq: Oil, Wars, Destruction of Development and Prospects 195-2010." Westport, CT: Greenwood Press.

Alnasrawi, Abbas (2001). "Iraq: Economic Sanctions and Consequences, 1990-2000," Third World Quarterly 22(2): 205-218.

Arnove, Anthony, ed., (2002). "Iraq under Siege: The Deadly Impact of the Sanctions and War." Cambridge, MA: South End Press.

Dreze, Jean; and Gazdar, Harris (1992). "Hunger and Poverty in Iraq," World Development 20(7): 921-945.

Garfield, R., (2000). "Changes in Health and Well-being in Iraq during the 1990s: What do We Know and How Do We Know It," in Campaign Against Sanctions on Iraq, Sanctions on Iraq: Background, Consequences, and Strategies. Cambridge, UK: Campaign Against Sanctions on Iraq.

Graham-Brown, Sarah (1999). "Sanctioning Saddam: The Politics of Intervention in Iraq." New York, NY: St. Martin's Press.

Nagy, Thomas J., (2001). "The Secret Behind the Sanctions How the U.S. Intentionally Destroyed Iraq's Water Supply," The Progressive (September), http://www.progressive.org/0801issue/nagy0901.html.

Parenti, Michael (2003). "To Kill Iraq: The Reasons Why," http://www.michaelparenti.org/IRAQGeorge2.htm.

Sen, Amartya (1999). "Development As Freedom." New York, NY: Alfred A. Knopf.

Simons, Geoff (1996). "The Scourging of Iraq: Sanctions, Law and Natural Justice." New York, NY: St. Martin's Press.

Simons, Geoff (1999). "Imposing Economic Sanctions: Legal Remedy or Genocidal Tool." London, UK; Sterling, VA: Pluto Press.

United Nations (2003). "Integrated Humanitarian Contingency Plan for Iraq and Neighboring Countries," http://www.casi.org.uk/info/undocs/ocha030107.pdf.

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Tanweer Akram is an economist who works for a multinational corporation. His articles and reviews have appeared in many publications such as, Applied Economics, Third World Quarterly, Kyklos, Savings and Development, Journal of Emerging Markets, Journal of Bangladesh Studies, Bangladesh Development Studies, Z Magazine, Counterpunch, and Pressaction. This is Akram's first contribution to Swans.

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Published March 3, 2003
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