Neighbor Suffers for Iraq’s Sins : Sanctions: Trade, aid, tourism--Jordan’s whole economy sags as the embargo begins to bite Baghdad. Amman asks for U.N. help.

Foreign tourists have vanished, Red Sea dockworkers are idle and 70% of the national truck fleet is off the road. International air tickets out of Amman carry a $100 war-risk surcharge.

Jordan is paying a heavy price for the international sanctions against neighboring Iraq--and is demanding help to offset it.

“Our economy was pitiful before the trouble began. Now it is finished,” said Riad Khouri, a private economist in Amman whose pessimism is echoed in the private sector and government circles.

There is broad popular support in Jordan for Iraqi President Saddam Hussein, but Jordan, after resisting, is now observing the embargo against its No. 1 trading partner.

“It took some time for the orders from on high to get translated into action down below, but over the past two weeks Jordanian sanctions have become a reality,” one diplomat said. “The effect is being felt across the board.”

Their number has dropped sharply, but laden trucks bound for the Iraqi border are still a common sight on the Amman-Baghdad highway. Despite the apparent blockade running, the Jordanian government says it is observing sanctions in fact as well as in principle.

For a Third World country, the loss of trade with Iraq leaves a giant hole. In normal times, up to 70% of the trade at the Jordanian port of Aqaba is Iraqi. About half of Jordan’s exports went to Iraq, or through it to other countries in the Persian Gulf. Jordan relied on Iraq for up to 90% of its oil--at bargain rates through barter arrangements. And before the gulf crisis, Jordan was receiving $135 million in aid from Kuwait and $50 million from Iraq.

The economy was flagging, though, even before Iraq’s invasion of Kuwait on Aug. 2. In the aftermath, a foreign debt of $8.4 billion may rise by as much as an additional $2.6 billion, the government estimates.

Economist Fahed Fanek estimates that 12% of the Jordanian work force produces goods and services for export to Iraq. Fanek says the full impact has not yet been felt, but he warns that unemployment, now close to 20%, may rise by another 16%. Annual direct losses to Jordan from the blockade could reach a staggering 20% of gross national product, according to Fanek.

Appealing to the United Nations for help, the government of Jordan’s King Hussein formally estimated potential losses at $1.56 billion, about 42% of the country’s 1989 gross national product.

Help is promised by the United States and other industrial countries, including the European Community, which over the weekend pledged $2 billion to Jordan along with Egypt and Turkey, countries that are also paying heavily in lost trade for their support of the embargo. The European aid is contingent on strict commitment to the trade embargo.

“We are observing the sanctions and we are asking for compensation for our budget losses, but while it is possible to compensate a country, how do you compensate a worker who now sits at home, a farmer who has nowhere to send his produce?” a senior Jordanian official asked.

Importers complain that some ships are dropping cargo for Jordan at distant ports rather than risk passage through the gulf. Insurance companies are assessing stiff war-risk surcharges for both sea and air traffic.

Protesting Jordanian manufacturers who have lost their markets are demanding an interest freeze on outstanding loans. One Jordanian company says it is stuck with the raw material for a $6-million contract for electrical sockets and switches for Iraq. By one count, around 15,000 of Jordan’s 21,000 trucks are idle because of the loss of the transit trade with Iraq. Last weekend an Australian journalist found himself the only guest in a 92-room hotel at the spectacular desert ruins at Petra, Jordan’s premier tourist attraction.

The collapse of Kuwait’s economy under the Iraqi occupation also has had a stinging impact on Jordan. At least 350,000 Jordanians and Palestinians worked in Kuwait. Nearly 80,000 of them have joined the flight out, with more to come. This hurts Jordan two ways.

One, it means the loss of hundreds of millions of dollars a year the workers have been sending to their families here. Two, it adds huge numbers of workers to the labor force--and there are fewer and fewer jobs.

Worse, the sudden spurt of population places a stinging burden on Jordan’s infrastructure and social services just when government resources are tightest. Schools, for example, opened last week with enrollment 1,000 over the expected level. The difference: the children of returning workers in Kuwait.

“All the problems that existed before are dramatically worse now,” economist Khouri said. “Nobody is going to invest a penny in this country for a long time to come. And no one on Earth, the U.N. or anybody else, can make up our losses.”