Bush Points Some Big Economic Guns at Iraq : Strategy: If the plan succeeds, such weapons could become key to U.S. influence in post-Cold War era.

Five days into the nation’s first post-Cold War crisis, President Bush has succeeded in implementing a strategy that eluded most of his predecessors--economic warfare.

Although the possibility of moving U.S. military forces to the Persian Gulf has attracted a lion’s share of public attention, the less dramatic use of economic power is the Bush Administration’s chief hope for forcing Iraqi President Saddam Hussein to disgorge his conquest of Kuwait, officials say.

If Bush succeeds, the use of economic weapons could become a key element in how the United States influences events in this new era. On the other hand, if Bush fails, U.S. leadership could be severely damaged at precisely the time when policy makers both at home and abroad are testing the boundaries of a world no longer sharply divided between rival superpowers.

“This is a defining moment for the Bush presidency,” presidential biographer Steven Ambrose said. “And he’s got a real tough one.”

So far, Bush’s plans have proceeded smoothly, in sharp contrast to past U.S. efforts to use economic power to influence world affairs.

Beginning with a flurry of calls Thursday and Friday, the President quickly galvanized the Europeans into following the U.S. lead in an economic embargo of Iraq. When Japan balked at joining the boycott, Bush’s weekend telephone calls to Japanese Prime Minister Toshiki Kaifu helped bring that crucial player along as well.

On Monday, after the Chinese agreed to go along after a quick visit to Beijing by Assistant Secretary of State Richard Solomon, the U.N. Security Council ratified the boycott, giving it the legitimacy and force of international law.

Now, with the basic structure for a boycott in place, Bush and his advisers are convinced that if they apply enough pressure, Iraq will crack--sooner or later.

“Everything we’re doing is designed to weaken him,” said one senior U.S. analyst, referring to Hussein. “Once the vital interests of the state are threatened,” he said, opposition to Hussein will surface within Iraq.

Although Iraq looks strong on paper, it is highly vulnerable in reality, Middle Eastern experts said. Hussein’s economy is already stretched to the limit. His vaunted 1-million-man army contains many lightly armed militia units that would fare badly in a military clash with the United States. And his nation is surrounded by hostile neighbors--Iran to the east, Syria to the west and a rebellious Kurdish minority in the north.

Given those vulnerabilities, “there is a feeling economic pressure can work,” said a senior Administration Middle Eastern expert. “But,” he cautioned, “no one thinks it’s going to work very soon. (Hussein) is not going to walk out of Kuwait at the end of the week.”

And it is that element of time, officials concede, that is the critical problem for the Administration.

During the eight-year Iran-Iraq war, Hussein and his people demonstrated a willingness to absorb fearsome losses.

The industrial world, by contrast, rarely in recent years has demonstrated an ability to stick to an unpleasant course, particularly one in which the most immediate beneficiaries--Kuwaitis in this case--are widely envied and disliked.

“This is not exactly a cause to make a patriot’s heart beat faster--restoring the emir to his profits,” historian Ambrose said.

Cutting off oil exports from Iraq, whether by a simple boycott or a more dramatic naval blockade, would raise prices worldwide. That would cause, at the least, political problems within the United States and potentially very serious economic difficulties in Europe and Japan, which depend on the Middle East for more of their oil than do Americans.

But if the boycott can be held, the stresses on Iraq could be severe.

“We know there are divisions” within Iraq’s political and military structure, said Michael Dunne of International Assessment, an international consulting firm based in Washington.

Because of the secrecy in Iraq “we don’t know what the divisions are,” Dunne said, but frequent rumors of assassination plots and executions of military officers within the country make clear that Hussein does have opponents.

Because Iraq’s economy is single-mindedly devoted to oil--an industry that requires relatively less labor than most--Hussein can afford to divert a huge percentage of his population to the military. Upwards of 15% of the male population of Iraq is under arms, one of the highest percentages in the world. By contrast, the American military enrolls roughly 2% of the male population.

But the Iraqi army is highly expensive to support. During the Iran-Iraq war, Hussein kept his army in the field and his nation fed by borrowing heavily abroad, mortgaging his nation’s oil reserves. Also, although Iraq grows some of its own food, the country has become highly dependent on imported grain and it uses oil revenue to pay for the costs.

If the oil flow is cut off or even seriously disrupted, “Iraq would really be stranded,” said Andrew C. Goldberg, senior associate at the Center for Strategic and International Studies in Washington.