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As President Bush prepares to unleash war on the people of Iraq , it is time to reflect on what other costs this invasion might incur.

The Economic Fallout

    An attack on Iraq by America would have a dramatic affect on the price of oil with prices expect to rise to between $30 and $40 a barrel in a short term, which will impact on world growth prospects and will likely slow further any improvement in world markets. Regionally, the only certain prediction that can be made is that an invasion of Iraq will bring a period of uncertainty to Arab regional economies and unsettle local stock markets. It is clear that Arab countries, such as Syria , UAE and Jordan , who have established strong trade ties with Iraq , have the most to lose. However, if, the as the analysts predict, the military strike is swift, lasting no more than a few months, then it is predicted that the price of oil will plunge to $20 a barrel. As the Americans will bring Iraqi oil (an estimated 6 million barrels a day), back on stream after lifting sanctions, the price could go even lower, as Saudi Arabia and other OPEC countries resist cutting production to accommodate additional Iraqi oil exports.   

The Cost to The American Taxpayer

    It is estimated by the US House Budget Committee that the total cost of another war with Iraq will cost the American people around 100 billion dollars, if, as the Whitehouse predict the war is won in a relatively short time. Unlike the 1991 Gulf War, when the Gulf countries contributed over 80per cent of the cost of the war, the American taxpayer will have to pick up the entire bill. This will considerably increase the US budget deficit and require the Government to borrow extra money to finance the war, Putting pressure on the Federal Reserve to increase interest rates at a time when lower interests rates are needed to offset the US ’s current economic weakness. However, the costs to American taxpayer would not stop there. If America is successfully in forcing regime change on Iraq , it is estimated by some economists that the cost of reconstruction a war ravaged Iraq , supplying humanitarian assistance and maintaining a force on the ground to ensure stability, will cost another 50 billion annually. As America may have to stay engaged in Iraq for many years, the cost of maintaining the peace in the country could eventually outstrip the cost of the war itself. Even staying for five years will cost the Americans another 250 billion dollars.

Impact on the Gulf Countries

    The Gulf States have taken steps to diversify their economies. However, almost all of them are still dependant on oil for their income. Lower oil prices will depress Gulf economies, rising internal and external imbalances. GDP already fails to match population growth in most of the Gulf States , with Saudi Arabia most affected. The average age of Saudi Arabia ’s 22million people is 16 years and, as the economy slows, unemployment will become an increasingly important issue. Saudi Arabia already suffers from enormous internal debt, estimated at $168 billion in 2001, accounting for 95 per cent of its GDP. Any lengthy period of low oil prices will only exacerbate its problems. The UAE and Bahrain are better off because they have built up viable non-oil sectors. However, they too, will suffer from an invasion of Iraq . Both of these countries, along with Egypt , Lebanon and Oman have over the last decade been developing a profitable and growing tourism sector. This will inevitably suffer, for just as after September 11th 2001 , people will stop travelling by air and hotel bookings throughout the region will fall as holiday makers and businessmen avoid the region seeing it as a war zone and for fear of reprisals but extremists. This will have a sever impact on their economies.

    As stated earlier, the countries that have the close trade ties with Iraq will suffer the most from an American invasion. Jordan , Egypt , and Syria will be affected most, followed by Lebanon , the UAE and Turkey , as Iraq has become an important export market for these countries, nearly all of whom have trade agreement with the Iraqi regime.

    If America is successful and trade sanctions with the rest of the world are lifted, then a new regime will inevitably change them, for it would enable any new government to base its trading relationship on economic, rather than political interests. Therefore, Egyptian and Syrian exports to Iraq would diminish as they are mainly based on political decision. This will cost Syria an estimated $2 billion a year in trade flows and Egypt could lose up to $2.8 billion worth of exports, which will be a major blow to both countries’ economies.

    For Jordan , an American invasion of Iraq would disrupt Iraqi oil to the Kingdom that is delivered mainly by road and this would severely affect several import industrial sectors and the country’s infrastructure.

    A US attack will also have a damaging affect on the region’s stock markets. Already, just the threat of war has a negative impact on their performance and seen them fall. Nearly all regional stock markets suffered in the first three quarters of this year with Palestine , Lebanon , Morocco , Tunisia and Egypt suffering the most. The GCC stock markets performed well in the first six months of this year but have since fallen back. As long as uncertainty persists in the region, Arab stock markets are likely to remain unsettled.

    Apart from the known economic cost of an American invasion of Iraq , there may be others that are yet unforeseen. What would be the regional and global economic impact of Mr. Hussein setting fire to his oilfields just as he did to those in Kuwait just over a decade ago? What, if feeling cornered and desperate, he actually uses whatever chemical, biological and nuclear weapons he possess on his neighbours, say for instance Kuwait and Saudi Arabia, crippling their oil production? These are yet unanswered questions. President Bush, Dick Chaney, Donald Ramsfield and all the right wing American hawks, who have been talking up the invasion have so far failed to mention these possibilities.