"The reconstruction of Iraq will largely pay for itself," said US Deputy Secretary of Defence Paul Wolfowitz on morning television talk shows before the onset of the war. "One thing that is certain is that Iraq is a wealthy nation."
White House Press Secretary Ari Fleischer echoed the same comments as one after another the Bush administration hard liners tried to assuage the American public's rising anxiety over the costs of the war in Iraq.
A look at Iraq's national balance sheet tells a different story. "This will add up to trouble," a small, but growing number of economists say, "and the Bush administration is wrong to keep repeating the mantra that petroleum revenues will pay for the post-war reconstruction of a war-torn Iraqi nation."
Iraq is a financial shambles. Its debt load is bigger than that of Argentina, its negative cash flow a tightening noose around the country's throat. Mountains of legal problems over unresolved compensation claims lurk in the wings and the debtors are ready to pounce. Add this to a shaky currency, 50% unemployment, galloping inflation and a crumbling infrastructure--sure to be damaged even further by a low key guerrilla war expected to continue for years to come and one can see why the negative comments are beginning to ring alarm bells among Wall Street experts battling with a floundering American economy.
"The doubters forget that Iraq has the world's second largest oil reserves," administration promotion men insist: "the country has the potential to become a second Saudi Arabia." Such comments completely ignore the fact that it will take billions of dollars just to get the oil flowing to western markets.
"Iraq is clearly a basket case," Dean Baker, co-director of the Centre for Economic and Policy research in Washington told an economics meeting. "Once you start talking about the situation in the country you see what an impossible task it is. I don't think that the Bush administration is anxious to talk about the subject of costs openly."
Iraq sits atop of the world's second-largest pool of proven oil reserves, some 112bn barrels. It also possesses huge deposits of natural gas, with even more still undiscovered. But all this wealth in the ground does not translate into cash, at least in the short term. In the meantime the world is sliding into recession, the slack requirement for crude causing most producers to cut back production just to keep prices above the $25-a-barrel break even point. And there are a more serious problems looming on the horizon as increased Iraqi oil production reaches the markets.
"The more Iraq pumps out of the ground to...