Re: Iraq Debts Add Up to Trouble

[Clifford Poirot <cpoirot@xxxxxxxxxxx>]

That they have this influence is incredibly alarming. These shows create a
view of accepted and received facts that the audience agrees is true and
then becomes the basis for mobilizing opinion and sentiment in favor of some
amazingly reactionary causes. What is more worrisome is that they seem to
feed on a wellspring of resentment, anger and bitterness that is easily
directed at even mild dissent. But what is ultimately frightening is that
they are crossing the line from local talk radio, to national syndicated
shows on formerly respectable cable news outlets. Witness the current
success of "Savage Nation" on MSNBC.

In other news, I'm using the left over copies of your comparative systems
text. Is there any chance that the new edition might have a chapter on the
history/origins of the market economy? I find that to be the only thing
lacking. Also, I might put the chapter on traditional economies before the
chapter on Marx. Anyway, just a passing thought.

Best regards.

-----Original Message-----
From: J. Barkley Rosser, Jr. [mailto:rosserjb@xxxxxxx]
Sent: Tuesday, April 08, 2003 12:55 PM
To: Henry C.K. Liu; gang8@xxxxxxxxxxxxxxx; pkt@xxxxxxxxxxxxxxxx;
a-list@xxxxxxxxxxxxxxxxxxx; TheNewForum@xxxxxxxxxxxxxxx
Subject: Re: Iraq Debts Add Up to Trouble


     I probably should not get bothered by such things.  But on the
way to work I occasionally listen for a minute or so to one of the
radio talk shows that pollute our airwaves.  This morning the guy
running one of them, I don't even know who he is, was asked about
Senator Biden's remarks that Iraq's oil revenues are expected to
be about $15 billion per year in the near term.  This radio show host
declared (as a supposed fact) that this was a "ridiculously low number"
and also declared (as a supposed fact) that Iraq's oil reserves are
just barely below those of Saudi Arabia.  The fact is that they are just
barely ahead of Iran's, but substantially far behind Saudi Arabia's.
      But, of course I suppose I should not get upset by what these folks
say, other than that they seem to have so much influence over what so
many people think is true.
Barkley Rosser
----- Original Message -----
From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
To: <gang8@xxxxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>;
<a-list@xxxxxxxxxxxxxxxxxxx>; <TheNewForum@xxxxxxxxxxxxxxx>
Sent: Sunday, April 06, 2003 11:42 PM
Subject: Iraq Debts Add Up to Trouble


> Iraq Debts Add Up to Trouble
>
>
> Economists say Bush administration officials are wrong to assume that
> petroleum revenue will pay for postwar reconstruction.
> By Warren Vieth
> Times Staff Writer
>
> April 4, 2003
>
> WASHINGTON -- To hear some Bush administration officials tell it, the
> reconstruction of Iraq will largely pay for itself, thanks to a postwar
> gusher of petroleum revenue.
>
> "The one thing that is certain is Iraq is a wealthy nation," White House
> Press Secretary Ari Fleischer said.
>
> A look at the national balance sheet tells a different story.
>
> Iraq will emerge from the war a financial shambles, many economists say,
> with a debt load bigger than that of Argentina, a cash flow crunch
> rivaling those of Third World countries, a mountain of unresolved
> compensation claims, a shaky currency, high unemployment, galloping
> inflation and a crumbling infrastructure expected to sustain more damage
> before the shooting stops.
>
> And the more oil Iraq produces to pump up its earnings, the more likely
> it becomes that prices will fall, leaving it no better off than before.
>
> "Clearly, it's a basket case," said Dean Baker, co-director of the
> liberal Center for Economic and Policy Research in Washington. "Once you
> start talking about it, you see what an impossible situation it is. I
> don't think the Bush administration is anxious to have that conversation."
>
> Bathsheba Crocker, director of the Post-War Reconstruction Project at
> the centrist Center for Strategic & International Studies, said Iraq's
> oil money is not the panacea many Bush officials seem to think it is.
>
> "It's unreasonable to think that oil is going to finance all of the
> needs of the country," Crocker said. "All told, there's just not enough
> money to go around."
>
> Baker and Crocker are among a small but vocal contingent of
> nongovernment economists and foreign policy analysts who say it is time
> for the United States to stop pretending that life in Iraq after the war
> will resemble something out of "The Beverly Hillbillies."
>
> The reality, they say, will look more like Chapter 11. In their view,
> the only satisfactory solution is an international aid and debt relief
> program as ambitious as the Marshall Plan that helped Europe recover
> from the ravages of World War II.
>
> "Unless debt and reparations are dealt with properly, Iraq is basically
> bankrupt," said Rubar Sandi, an Iraqi American investment banker who is
> pressing administration officials to embrace a major debt relief
initiative.
>
> "I know they might not like what I'm saying," said Sandi, whose
> Washington-based Corporate Bank Business Group has investments in
> several developing countries. "But I am a businessman, and it's simple
> mathematics."
>
> Although the debt write-offs would be spread far and wide, some of the
> biggest hits would be taken by countries such as Russia and France,
> which supplied Saddam Hussein with military gear and other goods before
> the 1991 Persian Gulf War and have been staunch opponents of the current
> conflict.
>
> Even then, experts say, Iraq's oil revenue probably would fall short of
> what is needed to pay for postwar reconstruction, and much of the
> immediate shortfall would wind up being financed by U.S. Treasury bonds.
>
> So far, the administration seems not to have noticed. Deputy Defense
> Secretary Paul Wolfowitz told Congress last week that Iraq would be able
> to pick up much of the tab for postwar rebuilding.
>
> "We're dealing with a country that can really finance its own
> reconstruction relatively soon," he said.
>
> Office of Management and Budget Director Mitchell Daniels Jr. asserted
> that oil and gas revenue and confiscated Iraqi assets would provide
> abundant resources for reconstruction.
>
> Some members of Congress agree. "I don't think it makes sense to ask
> U.S. taxpayers to pay the full cost of rebuilding Iraq when the Iraqi
> state has plenty of resources to do so itself," said Sen. Byron L.
> Dorgan (D-N.D.), who introduced a resolution Thursday calling for the
> use of oil proceeds to finance the rebuilding effort.
>
> However, Bush administration officials have declined to make specific
> estimates of the long-term costs of rebuilding Iraq.
>
> Without question, Iraq possesses assets any country would covet.
>
> It sits atop the world's second-biggest pool of proven oil reserves,
> some 112 billion barrels, as well as huge deposits of natural gas and
> petroleum yet to be discovered.
>
> But wealth in the ground does not necessarily translate into money in
> the bank, at least not immediately. Iraq's oil infrastructure has
> deteriorated badly during Hussein's reign, and most experts say it would
> take up to two years and $5 billion to restore production to its
> pre-Gulf War level.
>
> Estimates of Iraq's potential oil earnings during the first year or two
> after the war range from about $15 billion to $20 billion, depending on
> price and production assumptions.
>
>  From that income, at least $11 billion would be needed initially for
> routine government spending on state employees' salaries, public health,
> safety, education, agriculture and welfare programs, Sandi said.
>
> That would leave $4 billion to $9 billion to finance repairs,
> infrastructure development, humanitarian assistance, debt payments,
> claim settlements and war reparations.
>
> And that's where the numbers stop making sense.
>
> Estimates of Iraq's reconstruction needs start at about $25 billion and
> run as high as $100 billion. The Council on Foreign Relations predicts
> that reconstruction will consume about $20 billion a year for several
years.
>
> Iraq's external debt loans from foreign countries and international
> creditors totals at least $60 billion and as much as $130 billion.
>
> Sandi, who has contacted a number of governments to discuss Iraq's
> financial situation, said his best estimate is about $115 billion.
>
> At 10% interest, as low a rate as indebted countries can expect to pay,
> Iraq's interest payments alone could cost more than $10 billion a year.
>
> Iraq also faces thousands of compensation claims totaling more than $200
> billion.
>
> Nearly $100 billion is being sought by Iran as a result of the
> eight-year war instigated by Hussein.
>
> As well, many claims were filed by Kuwaiti interests in connection with
> the 1990 invasion that triggered the Gulf War.
>
> The United Nations, which is arbitrating a portion of the claims,
> already is deducting about $4 billion a year from Iraq's oil revenue to
> pay claimants. If the rest of the pending claims were resolved, the
> payments could increase substantially.
>
> In addition, Russia, France, China and several other countries have
> signed contracts with Iraq totaling about $60 billion. Russia, in
> particular, is insisting that a new Iraqi government must honor those
deals.
>
> Iraq's debt burden is several times the size of its entire economy,
> which means it is more heavily leveraged than most of the countries
> qualifying for the World Bank's Third World debt relief program. Its
> financial obligations amount to more than $16,000 for every man, woman
> and child in Iraq, a country whose per capita gross domestic product has
> fallen to $2,500.
>
> A number of economists say the only practical solution is for creditor
> countries and commercial lenders to write off a substantial portion of
> the debt, perhaps as much as 80%, and to allow a moratorium on all
> payments and reparations for five years or so after the war. The United
> States and other members of the Paris Club creditor group did that for
> Yugoslavia after the war in Kosovo in 2001.
>
> "There's a very good argument for a massive restructuring or writing off
> of debt," said Crocker, of the Center for Strategic & International
> Studies. "The international community has certainly done that in the
> past. The problem is, it needs to be dealt with now. This is not a
> longer-term issue. The minute Saddam is gone, people are going to start
> demanding the money."
>
> The United States may be reluctant to take the lead on debt relief.
>
> Not only would it focus attention on the substantial costs associated
> with the war effort, it would require asking Russia, France, Saudi
> Arabia and other war skeptics to swallow a disproportionately large
> share of the debt forgiveness.
>
> "It's going to be hard for them to say, 'OK, Iraq, you don't have to pay
> your debts,' especially when they're insisting that everyone else has to
> pay all their debts all of the time," said Baker, of the Center for
> Economic and Policy Research.
>
> Philip K. Verleger Jr., an energy economist and senior fellow at the
> Council on Foreign Relations, said Iraq's postwar financial stability
> and the United States' future expense tab would depend in large part on
> the Saudis, who hold $25 billion of Iraq's external debt.
>
> Any increase in Iraqi oil output is likely to drive down oil prices,
> currently about $29 a barrel, unless the Saudis are willing to throttle
> back their own production to keep supply and demand in sync, Verleger
> said. Whether they would be willing to do so is an open question.
>
> "Most calculations suggest that if Saudi Arabia does not cut production
> and we put the Iraqi oil back in the market, we're going to be dealing
> with a price back in the teens," Verleger said. "If the Saudis so
> choose, they can make life very, very difficult and very, very expensive
> for the United States."
>
> But Sandi, the investment banker, said it is only fair for foreign
> creditors to wipe the slate clean so Iraq doesn't suffer the same
> financial fate as Germany after World War I, when crushing debts and
> hyper-inflation helped set the stage for World War II.
>
> "The whole world knows they gave that money to Saddam. The international
> community has to come together and discharge Iraq's debt, if not all of
> it, then at least a portion," said Sandi, who is circulating a "Phoenix
> Plan" for repairing Iraq's economy.
>
> "Why? To have a good neighbor, a peaceful neighbor, a stable neighbor.
> It's a good price to pay, I think."
>
> Times staff writer Richard Simon contributed to this report.
>
>