When Administrator L. Paul Bremer said last month that it would cost “several tens of billions” of dollars for Iraqi reconstruction next year, he was not exaggerating. Noting his use of the plural form of the decile and applying Defense Secretary Donald Rumsfeld’s baseline definition of several (i.e., three), one could conclude that the minimum ballpark estimate of Mr. Bremer’s projection was $60 billion. So, the Iraqi-reconstruction costs of $20 billion, which are included in the administration’s $87 billion supplemental appropriation that Congress is now considering, could represent a mere downpayment for next year’s total reconstruction costs.
Moreover, due to post-combat looting, ongoing sabotage targeted at Iraq’s oil sector and the administration’s underestimation of the extent of the dilapidation pervading Iraq’s electric- and oil-industry infrastructure, it appears that Iraq will be able to contribute little, if anything, toward its reconstruction costs over the next year.
At a price of $28 per barrel, output of 1.7 million barrels per day (less internal consumption of 500,000 barrels per day) would generate about $12 billion in annual oil-export revenues. That would fall $3 billion short of what the administration calculates will be needed to cover the estimated annual operating costs of the Iraqi government. Mr. Bremer now says the goal is to restore Iraq’s oil output to its prewar level of 2.5 million to 3 million barrels per day by October 2004, at which point Iraq could contribute to its reconstruction.
Iraq is not only suffering a severe liquidity crisis at the moment. The crushing foreign debt run up by Saddam Hussein, much of which needs to be forgiven, virtually requires that its short-term reconstruction costs must be financed by foreign grants. With the world’s second-largest proven oil reserves, however, Iraq has great economic potential over the long run. For example, oil exports of 2.5 million barrels per day would generate more than $25 billion per year at $28 per barrel. At the same price, an export level of 5 million barrels per day, which is easily conceivable following the necessary investment, would produce $51 billion. Once rehabilitated both economically and politically, Iraq can evolve into a model Mideast nation.
Getting from here to there will be the hard part. That makes the international donors conference, which will be held in Madrid in late October, so crucial. But indications so far strongly suggest that Iraq’s reconstruction-funding gap next year will not be closed in Madrid.Indeed, Bathsheba Crocker, co-director of the Post-Conflict Reconstruction Project at the Center for Strategic and International Studies, recently told the Los Angeles Times: “From what we’ve been hearing abut the donors conference, they’ll be lucky if they get $1 billion.”
The administration will need to intensify its pre-conference lobbying efforts. White House National Security Adviser Condoleezza Rice was right to argue recently that “the stability of Iraq, the stability of a different kind of Middle East, will serve well the interests of the entire international community.” Saddam Hussein’s regime was a source of major instability in a region that already contained more than it could handle. “If, after coming this far, we turn our backs and let Iraq lapse into factional chaos, some new tyranny and terrorism,” Mr. Bremer stressed to the Senate Appropriations Committee in testimony Monday, “we will have committed a grave error.” That’s a message that must be strongly conveyed to Europe and Japan, whose cumulative daily consumption of 21 million barrels of oil is heavily dependent upon the 20 million barrels of oil produced each day by Persian Gulf nations.