What to Expect in the Postwar Middle East

The war’s end is in sight, and financial markets are retreating as professional investors step to the sidelines to see which way things will develop--in the Gulf and in the U.S. economy back home.

The U.S. economy is an easier call: Peace will be good for business. Consumer confidence will rise, car sales will revive--it would be hard for them to be slower than they are today.

Many of the 46 million foreign tourists expected to visit the United States this year will renew their travel plans. The economy will quicken as people begin to move around. Business investment was cut back for the recession, not for the war, but it will get a green light now. Peace may not bring a boom, but it will spur business.

Energy prices will be moderate--not low, but moderate. And they will stay that way because the United States will have a lot to say about the price of oil from now on. Yes, there will be an OPEC and Saudi Arabia will be a large producer. But if the war has proved anything, it’s that oil and money must be backed by power.

Which is why the postwar Middle East presents such challenging questions. The region will not quickly or easily return to peace and tranquility.

The disposition of Iraq--and the reparations it owes--will be the first question on which the United States will have a lot to say. Iraq ensured that by pushing everything to the limit--including vengeful murders and the burning of Kuwaiti oil fields in the closing days.

“Iraq may disintegrate,” says a Middle Eastern expert--an Egyptian at the United Nations who wishes to speak anonymously. The Kurdish people--who comprise 3 million of Iraq’s 17 million population--”will have less allegiance to a nation called Iraq without Saddam Hussein’s gun to their heads. And the people of southern Iraq, who have suffered through the Iran-Iraq war and now this, will question allegiance to Baghdad.”

More ominously, the Soviet Union wants to have influence on Iraq, say Washington sources.

Before the war, the Soviets had been selling weapons to Iraq and taking payment in oil, which the Soviets could then sell on world markets for hard currency. The Soviets will want to resume such arms trade, because weapons are all they have to export these days.

A U.S. presence will be needed if there is to be any hope of turning the Middle East from an arms bazaar to a region of economic growth and development--although hopefully the American presence will be administrators and counselors, not tanks and troops.

There is some thought in Washington of creating an internationally administered buffer zone in Iraq’s southern region, around Basra and the Rumailia oil field that lies on the Kuwaiti border.

And a most interesting possibility is that Iraq’s oil may be used to pay reparations--as well as to rebuild its own country and finance regional needs. Iraqi oil wells are not as badly damaged as Kuwaiti wells, say oil experts, who estimate that Iraq this year could produce 1.8 million barrels a day, increasing to 3 million barrels a day next year. That would mean revenue of $32 million a day at the current oil price, rising to $54 million a day.

There will be ample use for such money. Engendering economic growth among the discordant and poverty-stricken societies of the Middle East will take capital. Egypt, Turkey, Syria and other coalition allies will want cash help immediately.

Rebuilding Kuwait will take billions. However, Kuwait may come back fast on its own, says Daniel Yergin, president of Cambridge Energy Research Associates and author of “The Prize.” “The Kuwaitis are organized, and they have the money or can get the credit to get their oil wells fixed and their infrastructure rebuilt.”

Already Red Adair Co. and other Houston oil fire specialists are on their way to Kuwait. And U.S. oil service and engineering firms--Halliburton, the M. W. Kellogg subsidiary of Dresser Industries, Fluor, Parsons and Jacobs Engineering--are negotiating contracts. Bechtel already has a letter of intent.

There will be big contracts to rebuild refineries in Iraq and Japanese and German firms will try for them--but the U.S. victors should have something to say on behalf of U.S. companies there, too.

Long-term, the United States will have two, perhaps three years, to encourage economic reforms in a region where the real problem is not a clash of religious faiths but lack of development and a yawning division between rich and poor nations.

It won’t be easy. The United States will be resented and disliked, even by those it has just helped. That’s human nature, and one of the burdens of authority.

President Bush’s “New World Order of nations secure in the rule of law” is still an overstatement. The lion is not yet lying down with the lamb. But let there be no doubt of the value of authority used wisely.

In the war now ending, the U.S. has brought the world relief from a reckless dictator who would have wielded ever more fearsome weapons to subjugate his neighbors and extort tribute from the global economic system.

With the end in sight, the markets Tuesday relaxed and took profits. The American people will take heart.