War on Iraq to
Cost U.S. 80 Billion Dollars
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Will
Bush bear the brunt of an economic fallback due to the costs of
a war on Iraq?
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WASHINGTON,
July 31 (IslamOnline & News Agencies) – U.S. President George W.
Bush has been warned that a war with Iraq costing billions of dollars
would harm the American economy and stall his domestic agenda, a
British newspaper said Wednesday, July 31.
A
military operation on the scale of the 1991 Gulf War, which involved
500,000 U.S. troops and military assistance from dozens of other
countries to evict Iraqi troops from Kuwait, would cost $80 billion at
today’s prices, U.K. daily newspaper, the Times, reported.
So
far, the largest number of American troops estimated by the Pentagon
for military action aimed at toppling Iraqi President Saddam Hussein
is half that figure. However, the United States would have to bear the
whole burden, which is likely to come to tens of billions of dollars,
the paper said.
In
the 1991 Gulf War, the $61 billion cost of Operation Desert Storm
(almost 80%) was split between Saudi Arabia, Kuwait, Japan and the
U.S. The first three paid $48 billion, with the U.S. picking up the
rest.
The
difference this time is that the U.S. cannot count on any allies to
make financial contributions, even though Tony Blair has hinted
broadly that Britain would play a part, the Times reported.
In
fact, each has signaled that it is not eager to be asked, diplomats
say.
“Just
open a map,” said a member of the Kuwaiti royal family in close
consultation with Washington. “Afghanistan is in turmoil, the Middle
East is in flames, and you want to open a third front in the
region?”
The
U.S. government has already started trying to offset the future costs
of a war by stockpiling American oil reserves in anticipation that
global supplies would be disrupted and oil prices would rise.
Oil
shipments into America’s strategic reserve have reached record
levels, adding some 150,000 barrels a day, the paper said. The White
House aims to add more than 100 million barrels to the reserve, which
would bring it close to its 700 million barrels capacity. Iraq is the
sixth-biggest oil supplier to the United States, contributing 8% of
U.S. oil imports last year, a million barrels a day at its peak.
While
the U.S. is boosting its oil reserves, there is less that it can do to
guard against the wider economic impact of a war. Due to the
after-effects of September 11, combined with Bush’s ten-year, $1.3
thousand billion tax cut, a $127 billion U.S. budget surplus has been
transformed into a $165 billion deficit in less than 12 months.
Congressional
representatives have said that Bush will have a domestic price to pay.
John
Spratt, the senior Democrat on the House Budget Committee and a member
of the Armed Services Committee, said that Washington would spend what
it took in a war with Iraq, but that issues such as drug provision and
other care for the elderly would suffer, the Times said.
“While it’s not beyond our means, we can’t have it all. Since
there is no surplus in the budget, there will be trade-offs and there
almost certainly will be deeper deficits and more debt.”
The
New York Times reported Monday, July 29, that an American attack on
Iraq could profoundly affect the American economy, because the United
States would have to pay most of the cost and bear the brunt of any
oil price shock or other market disruptions, government officials,
diplomats and economists say.
“I
think a good case can be made that voters will want to understand the
case for a war or any kind of extended military action better than
they do now because the economic considerations are considerable,”
Kim N. Wallace, a political analyst for Lehman Brothers in Washington,
told the New York Times.
Already,
the federal budget deficit is expanding, meaning that the bill for a
war would lead either to more red ink or to cutbacks in domestic
programs, the paper said.
If
consumer and investor confidence remains fragile, military action
could have substantial psychological effects on the financial markets,
retail spending, business investment, travel and other key elements of
the economy, officials and experts said.
If
oil supplies are disrupted, as they were during the 1991 Gulf War, and
prices rise sharply, the economic effects would be felt in the United
States and around the world.
All
of that could present a complicated political problem for Bush, both
in the Congressional mid-term elections in November and as he manages
a war and looks ahead to his re-election campaign in 2004, the New
York Times said.
James
R. Schlesinger, a member of the Defense Policy Board that advises the
Pentagon who held senior cabinet posts in Republican and Democratic
administrations, said he believed that the president would opt for a
significant ground presence in Iraq, the paper said. He said he did
not think that fear of economic instability by itself would cause the
United States to refrain from trying to unseat the Iraqi leader.
“My
view is that given all we have said as a leading world power about the
necessity of regime change in Iraq,” Schlesinger said, “means that
our credibility would be badly damaged if that regime change did not
take place.”
Still,
the fear is that Hussein, who set afire oil fields in Kuwait a decade
ago, might strike out with chemical, biological or radiological
weapons at Kuwait or Saudi Arabia, the world’s largest oil producer
with the largest capacity to expand its oil production to stabilize
oil supplies.
“Everybody’s
nightmare is Saudi Arabia,” said an Energy Department oil analyst.
“People are deathly afraid of any military campaign spreading to
Saudi Arabia.” That country contains one half of the spare
production capacity in the Organization of Petroleum Exporting
Countries, the New York Times said.
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