Sanctions Put Squeeze on Iraq Economy

Behind Iraqi leader Saddam Hussein’s latest act of military bluster lies the harsh reality of an economy imploding under the weight of international sanctions.

Analysts and economists said Saturday that Baghdad’s complaints about the sanctions reflect the very real hardships that four years of restrictions have placed on the country’s oil-driven economy.

Iraq’s top diplomat, Deputy Prime Minister Tarik Aziz, said in a U.N. speech Friday that the sanctions are leading to malnutrition, inadequate medical care and widespread suffering.

Conditions appear to have reached a critical level in recent months, analysts said, which may explain Hussein’s decision to move now.

“I think there is no doubt the sanctions have had an impact on the general population of Iraq,” said James Placke, a Middle East analyst with Cambridge Energy Research, an oil industry consulting firm. “The regime has taken steps to protect its security apparatus and to a lesser extent its military from the brunt of the sanctions, but it is clear there has been some impact there as well.”

Iraq’s inflation rate is now more than 1,000% annually, and its currency is virtually worthless. Government-imposed monthly rations for rice, sugar, cooking oil and flour have been halved in the last few weeks, and hunger and starvation are now said to be commonplace, according to international observers who have visited Iraq recently.

There are reports that as many as 500 Iraqi soldiers are deserting from Iraq’s 400,000-strong military each month, and there are signs that much of the country’s remaining military equipment is only marginally serviceable, Iraqi dissidents have said.

“The military is finding it very difficult to obtain spare parts for its equipment, and it is clear that its readiness is nowhere near the levels it achieved” before the 1991 Persian Gulf War, Placke said.

Indeed, every industry in the country faces critical shortages of parts and equipment, and the average Iraqi household is being forced to make do despite shortages of almost every necessity.

The deprivation has led to a rising tide of violent crime, much of which is reportedly being committed by members of Hussein’s ruling clique, desperate to survive the crisis, say dissidents and Western journalists reporting from Baghdad.

The deterioration can be traced, in large measure, to Iraq’s loss of its main source of foreign revenue: oil exports.

Before the Persian Gulf War, Iraq was producing as much as 3.3 million barrels of oil per day, the bulk of which went for export. Today, analysts believe that only a small trickle of Iraqi oil is making its way out of the country through cracks in the U.N. embargo, mostly to neighboring Jordan.

Hussein is reportedly so desperate that he has invited foreign oil companies to open potentially lucrative negotiations for future drilling and exploration, hoping to get the industry poised for rebirth after the sanctions are lifted.

As the sanctions bite into Iraqi society, they offer one of the few instances in recent history when international economic restrictions have had a significant impact on an aggressor nation.

Recent efforts to use economic sanctions against Haiti and the rump Yugoslavia, for example, did not bring about U.S. or U.N. policy objectives. The sanctions’ failure in Haiti to force out a military junta created conditions that led the U.S. to intervene to reinstate exiled President Jean-Bertrand Aristide.

But the impact of sanctions on Iraq shows that “it is dangerous to generalize about the effectiveness of sanctions,” noted Jeffrey Sachs, an international economist at Harvard University.

“Sometimes they work, sometimes they don’t. It all depends on the context, on the commitment of the international community to adhere to them and on what you are trying to accomplish with the sanctions,” Sachs said. “But just because they were unsuccessful in Haiti doesn’t mean you will see the same result in Iraq.”

On the other hand, the sanctions against Iraq certainly would not have struck so deep if they had not been preceded by the devastating 1991 military defeat of Hussein’s army.

And even with that war as a backdrop, the sanctions have still not yet achieved their primary purpose of forcing Hussein’s regime to alter its behavior and comply with all of the U.N. resolutions imposed after the war.