How much? And how long? Answers on Iraq are elusive
Pre-war predictions of quick exit, oil-financed reconstruction evaporate

By Mark Matthews
Sun National Staff
Originally published June 28, 2003

WASHINGTON - Even as U.S. troops continue to be killed in Iraq at the rate of about one a day, the United States faces the prospect of occupying the country indefinitely and leading an international reconstruction effort costing tens of billions of dollars, according to several estimates.

Informal figures compiled by the United Nations Development Program put the cost of Iraqi reconstruction at $30 billion over 2 1/2 years, not including long-term investment needed by Iraq's oil industry and the cost of keeping U.S. forces in the country.

A Council on Foreign Relations study prepared in March projected costs of up to $20 billion a year for at least a decade.

Of this, $3 billion to $4 billion in U.S. tax dollars would pay for the actual reconstruction; the rest would pay for keeping an estimated 76,000 troops in Iraq.

Senate Foreign Relations Committee staffers cite reconstruction cost estimates of $30 billion to $100 billion.

Chairman Richard G. Lugar told reporters this week that projected Iraqi oil revenues of $5 billion this year and $14 billion next year will fall far short of what is required to rebuild the country.

"I see no one at this point who estimates that they come close to the needs that are required, first of all, for law and order; secondly, for security of the country; thirdly, for the temporary infrastructure - that is, lights on, water, sewers, roads, the basic things of life," said the Indiana Republican, who just returned from Iraq.

Bush administration officials played down the cost of rebuilding Iraq both before and during the period of major fighting, which President Bush declared over on May 2.

Citing Iraq's vast petroleum reserves, second-largest in the world, top officials said Iraqis would be able to finance much of the reconstruction themselves.

"We are dealing with a country that can really finance its own reconstruction and relatively soon," Deputy Defense Secretary Paul Wolfowitz told Congress on March 27.

Late last fall, his boss, Defense Secretary Donald H. Rumsfeld, told Fortune magazine, "If you [worry about just] the cost, the money, Iraq is a very different situation from Afghanistan.

"Iraq has oil. They have financial resources."

A different tune

This week, however, administration officials joined officials from other countries and the United Nations in a much less rosy assessment.

Meeting in New York to kick off an international planning and fund-raising effort, the group agreed that "petroleum income will not be sufficient to cover Iraq's reconstruction needs over the next few years," according to a statement by the U.N. Development Program.

The Bush administration has declined to produce any estimate of the long-term reconstruction costs or to say how long officials expect U.S. forces to remain in Iraq, noting that the United Nations and World Bank are just beginning an assessment.

"We have said we don't know how long it will last or how much it will cost - there are too many variables. We've resisted making projections because they would be speculative," said a White House official, who insisted on anonymity.

President Bush has said U.S. troops will remain in Iraq as long as necessary and not a day longer.

Inadequate answer

But this kind of response is producing frustration among influential members of Congress who will be asked to spend U.S. tax dollars on rebuilding Iraq.

"This idea that we will be in there just as long as we need to and not a day more - we've got to get over that rhetoric. It is rubbish. We're going to be there a long time," Lugar said.

"At some point we - that is, Congress, the president and people in the know - really have to level with the American people."

Sen. Joseph R. Biden Jr., a Delaware Democrat who accompanied Lugar to Iraq, said that if Bush can't give exact costs and timetables, "he sure knows that it's going to be a lot of money, a long time and a lot of troops."

The administration's optimistic pre-war predictions are beginning to compound a credibility problem caused by top officials' confident assertions that weapons of mass destruction would be found in Iraq.

Estimates far off

"There was nothing nefarious," said Eric Schwartz, who directed the Council on Foreign Relations study.

But he said there is "no question that they underestimated the magnitude of the challenge of peace stabilization, reconstruction and the resources required for each, and overestimated, especially in the short term, the extent to which oil would be a silver bullet."

To be sure, some analysts' pre-war scenarios now turn out to have been excessively gloomy. The war did not produce widespread devastation, major shocks in oil markets or regional instability - all of which would have added to the drain on the U.S. and world economies.

But critics say the administration failed to absorb the lessons of previous post-conflict reconstruction efforts, partly because of its deep-seated skepticism about "nation building" and the international organizations that have experience with it.

Public support

There were also worries about maintaining public support: "There seems to be a fear on the part of the administration that if the American people understood the full extent of the resources [the United States] would have to devote, and the time, we would abandon support for this policy," said J. Brian Atwood, who was director of the U.S. Agency for International Development during the Clinton administration.

While the war caused fewer civilian casualties and less destruction than many expected, Iraq's industrial base and its electrical, water, sewer, health and educational systems had already been seriously damaged by the combined effects of two previous wars and a dozen years of U.N.-imposed sanctions.

These problems were compounded, U.S. officials say, by mismanagement of the economy by Saddam Hussein's government, creating a Soviet-style command economy and decimating the nation's agricultural sector.

Below Third World

National Security Adviser Condoleezza Rice said in London this week that Iraq's infrastructure turned out to be in "far worse shape" than expected, with parts of the country below Third World standards.

More damage has occurred since the war from looting and sabotage, resulting in recurrent power failures. Hanging over the country is a debt burden estimated to be as high as $130 billion.

Even restoring the country to what existed before Hussein formally seized control in 1979 will be a major undertaking, officials say.

But the Bush administration's goals are far more ambitious: to develop a democracy and free-market economy that becomes a model for the Middle East.

Long list of needs

In testimony early this month, the undersecretary of state for economics, business and agricultural affairs, Alan Larson, gave a brief rundown of what Iraq requires:

"The oil and transportation sectors need significant rehabilitation. The telecommunication sector ... has been neglected for decades and will need to be expanded and modernized.

"The food production and distribution systems will need to be overhauled, moving them from a system of price controls and rationing to one based on free markets and individual choice.

"The commercial needs, the commercial regime will need to be revamped in order to encourage trade, promote investments and facilitate private enterprise."

To pay Iraqi government salaries and restore basic services, U.S. occupation authorities have tapped about $2.5 billion in seized cash and Iraqi frozen assets.

Other countries have donated hundreds of millions of dollars worth of humanitarian aid. The United States is spending $3 billion a month to keep troops in the country.

Aware that oil revenues won't be enough to pay for reconstruction, U.S. officials are now seeking help from other countries to help with that burden.

An international donors' conference is planned for October, and officials say that despite the trans-Atlantic acrimony that prevailed before the war, other wealthy countries are willing to cooperate.

But if Afghanistan offers a precedent, the U.S. taxpayer might nevertheless be required to pay the single biggest share of the cost.

And potential donors, such as Germany, have signaled that they will demand a role in deciding how this money is spent, diluting the power of U.S. occupation authorities.

Mortgaging the future

Meanwhile, the Bush administration and key allies are debating a controversial proposal that would effectively mortgage future Iraqi oil revenues to pay for reconstruction costs.

The scheme might involve issuing securities or trade credits backed by projected oil revenue.

Confirming a Wall Street Journal report about the proposal, a spokesman for the U.S. Export-Import Bank, Bo Ollison, acknowledged that the question of whether such a plan is legal under international law is an issue "that has to be addressed."

The Journal reported that the plan has the backing of the Haliburton and Bechtel companies, two key American contractors in Iraq.

Hedging the bets

Atwood, the former AID administrator, said the Bush administration's failure so far to declare the size and duration of America's commitment to Iraq might be limiting Iraqis' willingness to cooperate with U.S. authorities.

"They're fearful we will abandon them. There's an awful lot of hedging of bets," he said.

The two co-chairmen of the Council on Foreign Relations study, James Schlesinger and Thomas R. Pickering, called on Bush this week to make this commitment clear in a foreign policy address that would explain the costs and risks of American involvement in Iraq.

"So much of the future effectiveness of U.S. foreign policy, particularly in the Middle East, will turn on whether we can help Iraqis to a better future and whether others around the world see this is happening," they said.

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