Relations between the United States and Iraq used to be just fine
A certain retrospective analysis is needed in order to estimate real consequences of the war in Iraq. This analysis needs to embrace the policy of both Iraq and the USA over the recent year. Speaking of Saddam Hussein, his relations with the United States developed very successfully in the beginning of the career as the Iraqi leader. It was the USA that took maximum efforts to arm Iraq, which became an American base for penetrating in the Persian Gulf region. This role increased a lot after the Islamic revolution in Iran, which wiped off the pro-American monarchic regime. It was Saddam Hussein, who launched the war against Iran, which made Iraq-USA relations grow stronger.
There is something to be said about Kuwait too. Kuwait became the regional bank center by the middle of the 1980s. Kuwait’s banks started ousting American ones from the Persian Gulf region. When the pressure became unbearable, the damage that was caused to USA’s financial interests was obvious. This led to Iraqi incursion in Kuwait. After that people started using past tenses, when they talked about Kuwait’s banks. It should be mentioned here that if Hussein wanted to obtain the control over the whole region, he should have advanced further on. However, Saddam was not intended to do that at all.
American financial position in the region became a lot stronger. Maybe, that was the reason why then President George Bush started overthrowing the Iraqi dictator. After the war in Iraq, Saddam became an outlawed persona for the world. The USA repeatedly used him for demonstration of its force, its relations with the United Nations and other tactic goals, economic goals, first and foremost.
American economic policy was changed considerably after the events of September 11th, 2001. Monetary Liberalism was thrown out in the bin, Keynesianism was put on its place instead. Direct payments from the budget, which resulted in the sudden growth of the state budget deficit, financial institutions back up, and other methods brought their local results. There was an impression at the end of 2001, in the beginning of 2002 that the American economy was recovering. However, it was an illusion. According to our estimations, about 200 billion dollars a month are necessary to stop negative processes in the American economy. However, it was possible to allocate only 50 billion a month for that purpose. Foreign investments in the American economy dropped in April of the year 2002. The level of foreign investments became lower in comparison with the balance of payment deficit. Stock indexes started going down in the beginning of last summer. It was clear that it was time for the USA to look for alternatives for those 200 billion dollars. The reduction of American manufacturers’ costs appeared to be a natural idea. It was believed that the oil price reduction to the level of ten or twelve dollars per barrel would give a powerful incentive to the growth of the American economy. That was the time, when the USA launched the propaganda of its anti-Iraqi military intentions. The USA gave more emphasis not to Iraq, but to Saudi Arabia at that. Numerous leaks of information from such Pentagon-close organizations as RAND Corporation, for example, showed that it was Saudi Arabia, where American military analysts saw their enemy. That was rather natural. It was possible to reduce the oil price to the necessary level only if the United States managed to establish the control over all oil-extracting countries (save, probably Iran) of the Persian Gulf.
Needless to mention that such a plan could not but cause the oil lobby opposition in Washington. The lobby protracted the process considerably, although it continued anyway, since there were no other variants. The preparation lasted until autumn, it definitely caused a counter-activity on the part of Arab countries. Terrorist organizations intensified their threats for the oil infrastructure, a French super tanker was exploded in the Arabian Sea. It became clear by the end of autumn that it was absolutely impossible to achieve a considerable reduction of prices on oil. The protection of the oil infrastructure would cost too much, not only in the Persian Gulf.
George W. Bush’s administration found itself in a rather complicated situation. It was impossible for the American administration to refuse from the operation, while the economic point of the operation was lost completely. It is not ruled out that numerous negotiations at the United Nations were basically conducted on account of the fact that the USA was willing to find a “sponsor” for its operation in Iraq.
George W. Bush’s internal political problems are a real reason of the current war in Iraq. American electors still believe that a war beyond the USA provokes an economic rise in the country. That was really so in the beginning of the 20th century, when the USA joined the winner of someone else’s war, when it came to its end. Yet, things turned totally different in Vietnam. The war in the year 1991 put everything back into place, although it was paid by sponsors. It is not clear now, why the war in Iraq is going to bring local economic advantages to America. At the end of the day, American economic problems are basically the problems of the internal character. It is impossible to solve the economic transformation problem with the help of air raids in Baghdad. This means that the recent rise in the States is nothing but propaganda and intervention on stock and currency markets. Even the reduction of oil prices is not going to be considerable. It is absolutely not logic to raise the price from $22 per barrel to $38 and then to make it drop down to the level of $25 per barrel with the help of the war.
Latest opinion polls in the USA show that consumers’ confidence in economy reached the minimum level in ten years. George W. Bush’s rating drops, it would be possible for it to recover only if operation in Iraq is successful. Saddam Hussein serves America for the very last time.
There can be only one thing said for sure for the time being. Dozens and, maybe, hundreds of thousands of civilians are to die just because of one man’s wish to improve his reelection chances. It should be said here that those are rather phantom chances: the dollar devaluation is inevitable this year, both for budget and macroeconomic reasons. This was said many times by American senior officials, including the chairman of the Federal Reserve. The reduction of dollar implies the decrease of both the consumer demand and the living standard in the USA. American electors will not forgive Bush for that, which makes his crimes a lot more horrible.
Mikhail Khazin, economist
Translated by Dmitry Sudakov
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