IT'S THE ECONOMY, STUPID:

In Iraq, it’s the state of the economy, more than anything else, that drives politics and stability. The economy stagnated from 1990 to 2003, because of the UN embargo following Iraq’s invasion of Kuwait. The invasion in 2003 caused another major hit to the economy, causing it to contract 21.2 percent. Since then, the Iraqi economy has had no place to go but up. The economy grew 54 percent in 2004, and is headed for a 34 percent increase this year. Most of this growth is not reported, the violence in Sunni Arab areas being considered more newsworthy. But in the south and north, the economic boom is very visible, just from the growing number of traffic jams, satellite dishes and new construction.

Iraq needs about $100 billion to rebuild. Most of this is not repairing war damage, but doing maintenance of infrastructure that Saddam did not do for two decades. He stopped work on roads, schools, hospitals, and utilities when he went to war with Iran in 1980. Before Saddam was ousted, China, France, and Russia signed $38 billion worth of contracts to rebuild Iraq’s oil industry. The current Iraqi government refuses to honor these contracts, believing they are partially in payment for weapons and assistance in running Saddam’s police state. Some $33 billion has been pledged by foreign nations for this reconstruction. But only about a quarter of this has been spent so far, mainly because of the corruption problem, and continuing disputes within the government over which faction (Kurd, Sunni Arab or Shia Arab) gets what.

Saddam also left Iraq with major debts. These comprised about $100 billion in trade loans (mainly for weapons from Russia, France and China), and industrial equipment and construction services (largely from European nations). There are another $250 billion in reparations claims from the 1990 Kuwait invasion. The creditor nations have agreed to forgive $34 billion of the debt initially, with more possible later.

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