Reconstructing Iraq a Risky Business : Persian Gulf: From $100 billion to $200 billion is needed to rebuild the war-ravaged, bankrupt country.

If the cost of rebuilding Kuwait is staggering, it pales next to the likely price tag for repairing Iraq. The bill there may be at least twice as expensive and the task fraught with far more uncertainties.

Allied bombing raids crippled Iraq’s industrial and civil operations, demolishing as many as three-quarters of its power plants, refineries and water pumping stations, Middle East experts say.

The repair cost is expected to be $100 billion to $200 billion or more.

“There are a few small power stations left, but they’re the ones which the allies did not bother to bomb,” said Sabah (Simon) Kadhim, an Iraqi-born London businessman who is spearheading an effort to install a pro-Western government in Baghdad.

In addition, Iraq is facing another $150 billion to $200 billion in war debts and potential reparations from its two wars of the last 11 years. If Saddam Hussein continues in power, Western analysts say, it may take decades for Iraq to recover and reindustrialize.

“This is a bankrupt country with no source of income,” said Martin Anderson, a senior fellow at the Hoover Institution in Palo Alto. Hussein, he said, “is looking down the barrel of a dangerous economic gun.”

Yet, Western experts say, if Hussein is forced out, a stable coalition government is installed and the United Nations lifts its trade embargo, Iraq may rise from the ashes in the same manner as Japan and Germany after World War II.

Though such a scenario does not appear likely today, it represents Iraq’s best chance of persuading its creditors to forgive or restructure its massive debts, the analysts explain. If the debts and war claims are not forgiven, they could conceivably consume Iraq’s oil-export earnings for decades.

With oil reserves second only to Saudi Arabia, Iraq was one of the most prosperous countries in the Middle East until its eight-year war with Iran began in 1980. It produced more than 3 million barrels of oil a day before the U.N. trade embargo was imposed last August, making it the world’s fourth-largest oil producer.

Following the Baath Party revolution in 1968, which ousted a military government, Iraq’s socialist regime nationalized the oil industry and was soon awash in oil revenues. With a population of about 17 million living in an area slightly larger than California, Iraq had accumulated reserves of $35 billion by 1980.

Two wars later, the surplus has been wiped out by heavy borrowing to finance its martial efforts. Ironically, its biggest creditors include Kuwait, Saudi Arabia, the other Gulf states and Western arms suppliers.

The country went further into debt to finance an expensive modernization effort. That work, principally undertaken by European and Japanese companies, lies in ruins.

A U.S. military spokesman in Saudi Arabia said he had no figures on how much damage to Iraq’s civilian infrastructure had actually been done in the Persian Gulf War. The bombing raids, he said, targeted communications, transportation, utility and energy installations used to aid Iraq’s military effort.

Unlike the rush of Western businesses into Kuwait, Iraq is not getting much attention from the private sector in Europe, the United States or Japan--at least not yet.

“I imagine there will be a real stampede once Hussein goes,” said Marshall Wiley, a Washington lawyer and erstwhile U.S. diplomat in Iraq.

In Kuwait, Western companies are gearing up to aid a rebuilding effort that, in cost, is expected to rival the Marshall Plan in Europe following World War II. The effort, estimated to cost between $40 billion to $100 billion, is being financed by the oil-rich Kuwaiti government.

Some Western experts believe--or at least hope--that Iraq’s dire financial condition will eventually help force Hussein out, leading to a new regime that would privatize Iraq’s socialist economy.

“Iraq is broke, and broke people are generally more open to private enterprise,” said Dan Montano, chairman of VTN Corp., an Orange-based engineering and construction firm that wants to work in Iraq.

That privatization process was actually under way before the Persian Gulf War began. After years of tight government control, Hussein had placed parts of the economy--from bus companies and factories to gas stations and department stores--back in private hands in the late 1980s.

“I was there in July (1990), and the private sector in Iraq was really busy,” said Lawrence McBride, chief executive of Dallas-based Sneed-McBride International, an agricultural irrigation firm.

In the post-war era, the prospect of doing business in Iraq is being greeted with various levels of interest, caution and reluctance in the executive suites of Western nations.

“I think American businesses would be interested but be very cautious,” said one U.S. oil company official who asked not to be identified. “They would probably want their money up front. Money is a coward. It does not like instability.”

In normal times, German industry would stand to be a significant benefactor in the reconstruction of Iraq as well as Kuwait.

Few export more aggressively or successfully than the Germans. And the Germans have a tradition of doing business in Iraq that goes back to the last century, when they built the country’s first railroad, linking Baghdad with Istanbul and Europe beyond.

For the Germans, though, these are not normal times in the Gulf.

Revelations that German companies and technicians helped Iraq develop chemical weapons have tarnished the country’s reputation and made potential contractors skittish about even seeking work.

Germany’s perceived lukewarm support for the allied coalition that fought Hussein has only added to the perception in Germany that bids--at least for initial large reconstruction contracts in either Kuwait or Iraq--would be politically unwise and stand little chance of success.

“Certainly, there’s a reluctance to jump for work after all that’s happened,” admitted Werner Malthis, who monitors German business ties with Arab nations at the Near and Middle East Assn. in Hamburg. “There is a lot more caution now.”

Malthis said he knew of no German company that had so far applied for reconstruction work, either in Kuwait or Iraq. He said that he expected most work would go to American, British or French companies and that Germans might eventually obtain subcontract work.

Anton-Guenther Cromme, spokesman for the Cologne-based Strabag construction company--which built the $800-million airport in Basra and a $600-million highway in southern Iraq in recent years--said his company will look at potential new work in Iraq “very carefully” before making any decision to bid.

A spokesman for a German company previously active in Iraq, who declined to be identified by name, summed up the German business attitude this way:

“After all that’s happened, we don’t want to be seen to be the first scrambling for big contracts. There will be follow-on business and a lot of subcontract work. We may try for some of that.”

But a spokesman for Philipp Holzmann AG, Germany’s largest construction company, said his firm is open to further business in Iraq, noting that the company has considerable building experience there. Its projects in Iraq have included an irrigation canal, a power station and the central bank building.

“It will depend on whether they ask,” he said.

A spokesman for Costain, a large British construction company, also indicated that his firm had an interest in helping reconstruct Iraq. “We’d be fools if we didn’t, on a purely business basis,” he said.

The official added, though, that it was too early to do more than speculate on the prospects.

Times staff writers William Tuohy in London, Joel Havemann in Brussels and Tyler Marshall in Berlin contributed to this story.