Volume 1 - Iraq Watch

including abolishing universal employment labor lawsand privatizing key government industries.Collecting Compensation for the First Gulf War• As a result, thousands of government workers werejobless.• Bus companies, gas stations, department stores,agricultural businesses, and factories were left outsidethe responsibility of the government.Rather than shocking the Iraqi economy into performing,these measures, by 1989, deepened the economiccrisis and accelerated the collapse of living standardsfor most Iraqis. Sensing a threat to the viability ofthe Regime, Saddam again imposed price controls,renationalized some former state enterprises, andraised industrial and agricultural subsidies. The Iraqieconomy was pushed to crisis by Saddam’s inabilityto address or resolve a number of economic realities:• The rising cost of maintaining the Iraqi welfarestate, which was among the more generous andcomprehensive systems in the Arab world.• Low oil prices on the international markets, whichSaddam associated with Kuwait and its conducting“economic warfare” against Iraq.The United Nations Compensation Commission(UNCC) was responsible for processing and collectingsuch claims as authorized by UN Security CouncilResolution 692. With the insistence of Moscow, theUN readdressed the revenue allocation of Iraqi oilrevenue. In June 2000 it voted for the UNSC-adoptedUNSCR 1330 that changed the percentage of oilallocated to the UNCC from 30 percent (UNSCR 705)to 25 percent. The UNCC estimated that the reductionto 25 percent would generate an extra $275 million inPhase XII of the OFF program for the Iraqi Regime.As of 7 May 2004, claims totaling $266 billion havebeen adjudicated, and claims worth $48 billion havebeen awarded by the UNCC. Additional claims worth$83 billion need to be resolved.As Saddam stubbornly refused to comply with UNResolutions in the early 1990s, the Iraqi economycrashed to a low point in 1995.• From 1989 to 1995, Iraq’s GDP per capita fell from$2304 to $495. Some estimates reveal that the Iraqiper capita GDP never rose above $507 from 1991 to1996.Regime Financeand Procurement• The lingering debt from the war with Iran.• The cost of rebuilding his military and expandinghis WMD programs.Saddam chose to fight his way out of economic crisisby invading Kuwait.Economic Decline (1991-96)Rather than rescuing the Iraqi economy, the invasionof Kuwait resulted in even greater fiscal strainsas Saddam found himself in a second costly war,this time facing a US-led Coalition. After Saddam’sdefeat in Kuwait, the UN trade sanctions placedon Iraq following the invasion remained in place.These sanctions, supported by over 150 nations, cutIraq’s ability to export oil, its main revenue generator.After Desert Storm, Saddam also had to contendwith compensation claims made for reparations ofdamage inflicted during the invasion and occupationof Kuwait.• Inflation between 1989 and 1995 increased from 42percent to 387 percent.• Simultaneously, the street dinar exchange rate rosefrom 10 ID per $1 in 1991 to 1674 ID per $1 in1995.• During this same period, income inequality becamea larger problem because the limited wealth wasconcentrated in the hands of Regime loyalists andelite traders, while the average Iraqi subsisted onmuch less income. Equally significant, by 1995the plummeting dinar consumed the savings ofthe average Iraqi, causing the Iraqi middle class tovirtually cease to exist.This period of economic decline also resulted ina dramatic increase in corruption, incompetence,and patronage in all facets of government. A goodexample of the Regime’s incompetence in economic21