War is in the wind, and the value of the dollar is bouncing all over the place in northern Iraq. The old Kurdish woman with a plastic bag of $100 bills didn't trust the money-changer. She scribbled exchange rates on the palm of her left hand while clutching the bills. Satisfied that the changer's calculations were precise, she handed him the American cash and scooped up a wad of old dinars.
Wall Street has nothing on the grimy alleys of this Kurdish city, where one can buy a live chicken or rabbit for dinner while checking the currency rates for any number of countries. But these days, the economy is in a panic as unsettling forces are coursing through the bazaars -- puzzling the carpet dealers and the turbaned merchants selling chickpeas by the bushel.
The prospect of a U.S.-led war against Iraqi President Saddam Hussein's regime and the countless conspiracy theories that swirl around it have shaken the markets in Kurdistan, the ethnic Kurds' autonomous region of northern Iraq. Add an oversupply of dollars, and the once-stable greenback has become erratic here. In recent months, it has fallen from 19 dinars to a low of 6.5 dinars before rising Tuesday to 8.5.
This is creating turmoil for the two ruling Kurdish parties and for the U.N. operations in the region, which base much of their budgets, contracts and payrolls on U.S. currency.
There's a "big mess in the market now," said Faraydun Abdul-Qadir, deputy prime minister for the Patriotic Union of Kurdistan, or PUK, which controls the eastern portion of northern Iraq. He said that the U.N. Food and Agricultural Organization began furloughing Kurdish employees this week, that contractors are losing millions of dollars, that construction projects are stopping and that people are jittery.
U.N. programs last year spent about $1 billion in the region -- when the dollar bought about 19 dinars. Today, with a narrowing ratio between the two currencies, the value of the U.N.'s dollars has shrunk by more than 50%.
Economists for the PUK and its rival -- the Kurdistan Democratic Party, or KDP, which controls the western portion of northern Iraq -- are holding emergency meetings to figure out how to rescue the dollar. The Kurds' parliament plans to meet today to discuss the issue and possibly enact legislation.
The dollar's slight rise Tuesday came after indications from Washington that there is no fixed timetable for an invasion of Iraq.
There is much speculation about the cause of the economic chaos, apart from the rising number of dollars. Some see renewed faith in the increasingly scarce old dinars used in Kurdistan. Others fear a plot by Hussein to secretly buy up those dinars to destabilize the economy of his enemy. Or a plot by Iran to do the same. Or a fickle twist in the unbridled capitalism practiced by the 3.5 million Kurds living in a mountainous region protected from Hussein's army in a "no-fly" zone patrolled by U.S. and British warplanes.
Since the end of the 1991 Persian Gulf War, the dinar used in Kurdistan has been Iraqi currency printed long ago in Switzerland and no longer used by Hussein's regime. The bills are tattered, and Kurds are accustomed to performing a kind of triage in which parts of some bills are clipped and taped onto others. The money in the rest of Iraq is a nearly worthless paper the regime has pumped into the market.
The Kurdish government is attempting to keep its dinar strong, but not so dominant that it weakens the dollar. It's not an easy task. Kurdistan has no central bank or, for that matter, any banking system.
The PUK money exchange draws hundreds of men -- and a few pickpockets -- who crowd into a cinderblock open-air stairwell and yell out prices while swapping dinars and dollars and the occasional euros and Turkish lire. There is not a computer or tote board in sight. On a recent day, the air was staccato with the hedging of bets. Outside in the alleys, merchants barked out ever-changing prices for teabags, Palm Pilots and vacuum cleaners.
"It's the free market," Omer Ali, a money-changer wearing a tea-stained suit and peeking into a box full of dinars, said of the exchange. "Who knows what will happen next?"
"There is less of a demand for the dollar," said Kosar Jalal, another money-changer, who had two calculators and a ledger the size of a dictionary on his desk. "People believe after the war the dinar will get stronger. People are believing in their future, so their currency is gaining in value. There's an extreme amount of dollars being traded in for dinars."
A genial man with bright eyes, Abdul-Qadir said the dollar's fall is another indication that the "war environment" in Iraq is intensifying as U.S. and British troops mass in the region. Iraq is threatening to close its checkpoints into Kurdistan on Monday, a move that would trigger gas shortages, prevent the severely ill from traveling to Baghdad hospitals and cost the Kurdistan economy about $9 million a month in lost taxes and other revenue collected by the autonomous PUK government alone.
The dollar's volatility, however, is Kurdistan's most serious economic threat. It could ruin its postwar economy and limit its ability to build a democratic entity within Iraq. The U.S. has been using the north as an example of how Iraq could be reconfigured as a nation of federated states controlled by a central government in Baghdad. A stumble by Kurdistan would satisfy foes of the U.S., including Hussein and religious conservatives in Iran.
Abdul-Qadir said he ordered PUK police to temporarily close the money exchange Thursday amid reports that agents from Iran and Baghdad were buying large sums of dinars and shipping them out of Iraq. It was a time when the value of the dollar was bouncing between 6.9 and 7.4 dinars.
"Iran and Iraq are playing with our markets," Abdul-Qadir said. "This month, we don't have the money to pay wages."
Sheik Jamal, a carpet dealer, said these "outside hands" are going to bankrupt him.
"I haven't sold a rug for 35 days," said Jamal, his eyebrows dancing beneath his turban. "The dollar is not stable. Look, I bought this carpet for 1,200 dinars, but today I couldn't get 700 dinars for it. That's even if I could find a buyer. People are expecting the dollar to drop even lower, so they're waiting to buy."
Down the alley and around the bend, past the nut and spice sellers and beyond the men ferrying TVs and topcoats that were recently dumped on the auction market, Hazhar Mohammed runs a shop that sells watches, cell phones and shotguns. He has a theory.
"The world's coming apart," he said. "Whatever you do -- dollar or dinar -- you may lose. My business is down 40%. Everything I have is losing value."
At the money exchange, traders kept up their hollering. Hanging over railings and crammed into the stairwell, they drank tea, smoked and elbowed one another. There was cursing and commiserating. Wads of money swayed back and forth in the air like wind-blown wheat. And the dollar kept falling.
"I want $40."
"Give me 10 leafs." (Translation: $1,000.)
"I need a copybook, copybook." (Translation: $10,000.)
Even when the police arrived and pushed everybody out to prevent the dollar from slipping further, the trading didn't stop. It moved outside to Khanaga Square, where money was pulled from cummerbunds and deals were made.