Cost of Iraq war and occupation

[k hanly <khanly@xxxxxxxxxxxxxxx>]

 Even if it does cost the US taxpayer a bundle, the windfall profits of a
privatised oil industry going to the willing Bush buddies and the crony
capitalists capturing of rebuilding contracts is surely worth it even if one
adds the life values of a few US soldiers martyred to liberate Iraq

Cheers, Ken Hanly

Analysis: Soaring costs of 'rescuing' Iraq
By Martin Sieff
UPI Senior News Analyst
Published 7/31/2003 10:49 AM


(This is the first installment of United Press International's seven-part
series on the U.S. presence in Iraq.)


WASHINGTON, July 31 (UPI) -- The liberation of Iraq was to have been the war
that paid for itself in spades, and gave U.S. corporations the inside track
on the greatest energy bonanza of the 21st century. Instead, it has become a
fiscal nightmare, a monetary Vietnam that already accounts for around 15
percent of the U.S. annual budget deficit, a figure likely to only grow
remorselessly into the unforeseeable future.

The unforeseen cost of the war is already attracting powerful and
influential critics, most worryingly to U.S. President George W. Bush, from
within the GOP itself.

On July 26, Republican Sen. Richard Lugar of Indiana, chairman of the Senate
Foreign Relations Committee, told National Public Radio that rebuilding Iraq
is certain to cost U.S. taxpayers tens of billions of dollars over the next
few years. He estimated the rebuilding costs alone at $30 billion.

"But they do not wish to discuss that," he said.

In financial terms, it should have been a sure thing. The Energy Information
Administration records that Iraq is believed to have the second-largest
reserves of high quality, easily accessible oil in the world: more than 112
billion barrels.

In the run up to this year's Iraq war, conferences and studies commissioned
by hawkish conservative think tanks in Washington debated and prepared
models for privatization of the Iraqi oil industry with, of course, major
U.S. participation.

A Heritage Foundation study by Ariel Cohen and Gerald O'Driscoll argued,
"The Bush administration should provide leadership and guidance for the
future Iraqi government ... (including) a massive, orderly and transparent
privatization of state-owned enterprises, especially the restructuring and
privatization of the oil sector."

Commented John B. Judis in The New Republic Jan. 20, "The study has been
well-received by administration neo-conservatives."

And according to reports by Jamie Dettmer in Insight magazine and Judis in
The New Republic, Eliott Abrams, now senior director for Near East and North
African Affairs on the National Security Council, even authored a proposal
in December calling for U.S. rather than U.N. management of Iraq's oil
fields after U.S. conquest (or liberation) and occupation.

Neo-conservative pundits with equal faith and fervor argued that Iraqi oil
revenues would finance the country's own reconstruction after the war and
that they could even be used to offset some U.S. military operating costs,
surely a cheap price to pay for liberating the Iraqi people from the
terrible yoke of President Saddam Hussein?

But it hasn't worked out that way.

The cost of the war itself exceed previous public projections from the
office of the Secretary of Defense. At an April 16 news conference, Pentagon
comptroller Dov Zakheim acknowledged that the cost of the war to that point
came to $10 billion-$12 billion. But the cost of returning troops to base
would be another $5 billion-$7 billion, plus another $9 billion for the
3-1/2 weeks of combat operations, bringing the total cost at that point to
between $24 billion-$28 billion.

Since then, the continued cost of occupying Iraq and of the continued
pacification and counter-guerrilla operations mounted there has been widely
estimated at around $1 billion a week.

Combining these two figures -- the Pentagon's own admitted costs of the war
and the generally accepted cost of occupation operations, the costofwar.com
Web site has estimated the cost of the war for the fiscal year after it took
place at $76 billion.

Costofwar.com also notes interest rates on the $1-billion-a-week occupation
costs will make them $1.5 billion a week, or $78 billion per year. And even
that figure may prove optimistic, as it assumes larger numbers of U.S.
troops will not be required and the current levels of violence against U.S.
forces will not escalate either.

The federal budget deficit for the coming year has been projected by the
Bush administration's own Office for the Management of the Budget at $455
billion: the largest in history. That means the Iraq war and its
consequences alone will comprise 15.5 percent of the annual federal deficit
at a time when it is larger, and rising faster, than ever before. Far from
being a windfall to the U.S. economy, the Iraq war has already proven itself
to be a ball and chain around the economy's neck.

What happened to the vast oil production bonanza that was going to flow from
Iraq? It hasn't happened and quite possibly never will. No one doubts the
oil is there. But what the war planners and energy strategists never
factored into their considerations was that, far from welcoming the U.S.
Army and Marines as their liberators, the Iraqis -- Sunni and Shiite
alike -- might resent any continued U.S. military occupation and very
quickly make it too hot to handle, which is exactly what has happened.

The Pentagon hawks and their favorite energy strategists also turned out to
have no strategy for rebuilding Iraq or maintaining security in the oil
fields and pipelines running from them.

First, they assumed an almost bloodless march to Baghdad instead of three
weeks of high-speed and utterly successful, but still heavy, fighting.
Collateral damage to oil facilities was considerably greater than
anticipated.

Second, and far more important, the grand strategy, insofar as there was
one, anticipated an orderly takeover of occupation duties by an undersized
U.S. military force that could rapidly be half evacuated. This plan ignored
the warnings of Army Chief of Staff Gen. Eric Shinseki that hundreds of
thousands of U.S. troops would be needed to ensure security in Iraq,
including the security necessary to rebuild and operate the country's oil
industry.

Deputy Defense Secretary Paul Wolfowitz even hung Shinseki out to dry
publicly for making this estimate. But since then he has had to swallow
crow.

Wolfowitz and even his gung-ho boss, Defense Secretary Donald Rumsfeld, have
been forced to acknowledge that at least 200,000 U.S. troops, or more than a
quarter of the standing strength of the U.S. Army, will be needed to occupy
Iraq for the foreseeable future. And that kind of presence costs money:
currently $1 billion a week.

So far, no significant amounts of Iraqi oil have been produced for world
markets since the war ended. Therefore Iraqi oil exports, which were running
at 2.6 million to 2.8 million barrels per day before the war began in March,
have now further dropped.

The complete failure of two successive U.S. administrators in Baghdad to
restore security, order and basic services to Iraq is a major reason why
this has not happened.

The administration, indeed, has been unable to even recruit any significant
number of volunteers from conservative think tanks or the federal government
to volunteer to work in Iraq for the next year or two, so the occupation
administration there remains seriously undermanned.

But there is a second reason that is in large part a consequence of the
first -- U.S. planners never anticipated the rapid emergence of nationwide
guerrilla war against the U.S. occupation, which is already costing up to
one U.S. soldier killed per day. And as part of this guerrilla war, sabotage
operations against oil pipelines are already widespread.

Even with 150,000 U.S. troops in Iraq, they are spread far too thinly to
aggressively fight the guerrilla war, lock down Iraq's borders with Iran and
Syria and protect the oil facilities and pipelines at the same time.
Furthermore, the troops currently deployed are not trained in police
tactics.

Pentagon officers speaking on condition of anonymity to United Press
International have said at least twice the current manpower -- 300,000 U.S.
or allied troops -- may be necessary to do this.

In the meantime, the supposed "macro-economic" benefit of "liberating" Iraqi
oil for the world market not only has not happened, precisely the opposite
has occurred. Iraq is now in far-worse position to export either crude or
refined oil to the world markets. As a result, the continuing effect of the
war has been to strengthen the market position of the three leading global
producers, Saudi Arabia, Russia and Iran, while keeping global energy prices
relatively high and thereby adding a further burden to the U.S. annual
balance of trade deficit, already by far the largest of any country in world
history.

And even if Iraqi oil finally starts to flow under optimum conditions, the
total amount of revenue realistically projected from it would do no more
than balance the already horrendous costs of the U.S. occupation.

John Cassidy made the relevant calculations in the July 14 issue of The New
Yorker. He wrote: "Assuming that oil prices hover around twenty-five dollars
a barrel, which is in the middle of OPEC's target range (twenty-two to
twenty-eight dollars a barrel), a resurgent Iraqi oil industry producing six
million barrels of oil a day for export would generate about fifty-five
billion dollars a year in revenues."

But the cost to the United States of occupying Iraq is already running at
between $52 billion to $78 billion a year on the U.S. government's own
projections. And even if none of that $55 billion went to offset the costs
of U.S. occupation, divided among the 30 million people of Iraq, it comes
to, as Cassidy wrote "about five dollars per person per day -- enough to
place Iraq above the World Bank's global poverty line of two dollars a day,
but not by very much."

This is hardly a region-transforming bonanza.

Yet so confident were Office of the Secretary of Defense planners and their
neo-conservative allies of the coming oil bonanza from Iraq that they openly
advocated using it, as Judis wrote in The New Republic "to remake the Middle
East in our democratic, capitalist image by leveraging Iraqi oil production
to undermine Saudi dominance in the region and, perhaps, to destroy OPEC
itself."

Instead, the escalating woes of Iraq and the soaring costs of the war look
likely to boost the Organization of Petroleum Exporting Countries and, by
imposing huge additional budgetary strains on the United States at the worst
possible time, weaken democracy and capitalism back in the United States
itself.