Volume 1 - Iraq Watch

matters was illustrated when the government set up aDirectorate in 1992 to combat economic crimes underIbrahim al-Battawi, who reported directly to WatbanIbrahim Hasan al-Tikriti, the Interior Minister andSaddam’s brother. The task of the Directorate was topunish merchants and traders guilty of “profiteering.”In July 1992, the Regime summarily executed 42merchants in front of their shops in Baghdad’s marketdistrict. Saddam felt that the duty of the private sectorwas to provide goods and services to the Iraqi peoplewhile constraining price increases. These merchantswere found to be shirking their “duty.”Economic Recovery (1997-99)We judge that the harsh economic conditions from1995 to 1996 were the primary factors in Saddam’sdecision to reluctantly accept the UNSCR 986 (seeUnited Nations OFF Program section).• Saddam wanted to perpetuate the image that hispeople were suffering as “hostages” to the internationalcommunity under the UN sanctions.UN-approved oil exports from Iraq began in December1996. The trade fostered under the UN OFFprogram opened the door for Iraq to develop numerouskickback and illicit money earning schemes,possibly beginning as early as 1998. These legitimateand illegitimate revenue streams bolstered the Iraqieconomy enough to raise it out of depression, at leastfor the Iraqi leadership and the elite.• In the 1996 to 2000 period, Iraq’s GDP increasedfrom $10.6 billion to $33 billion.• According to the UN International Children’sEmergency Fund (UNICEF), Iraq’s chronic malnutritionrate dropped from 32 percent in 1996 to justover 20 percent in 1999.• Iraqi oil production jumped from under 1 millionbarrels per day (bbl/d) in 1997 to 2.5 million bbl/din mid-2000.Economic Transition and Miscalculation (1999-2003)After 2000, Iraq’s economic growth slowed for anumber of reasons, most involving the productionand sale of oil. As the Iraqi economy improved,Saddam began to restrict oil production to influencethe price of oil in the world market and to leveragepolitical influence. Additionally, Iraq’s oil sectorcould not meet demand because of years of poorreservoir management, corrosion problems at variousoil facilities, deterioration of water injection facilities,lack of spare parts, and damage to oil storage andpumping facilities. These petroleum infrastructureproblems limited Saddam’s ability to export oil andhampered the Regime’s ability to sustain the economicgrowth shown in 1997 to 2000.• Iraq’s GDP slipped from a peak of $33 billion in2000 to $29 billion in 2001.• Iraqi oil production dropped from 2.5 million bbl/din mid-2000 to under 2 million bbl/d in 2002.Nevertheless, from the late 1990s until OperationIraqi Freedom, Saddam steadily strengthened thefiscal position of the Regime while investing, as hewished, in development, technology, industry, anddefense. Saddam also had enough revenue at hisdisposal to keep his loyalists in the Regime well paid.In short, after 1996 the state of the Iraqi economy nolonger threatened Saddam’s hold on power in Iraq.• The budget for the MIC, a key illicit procurementorganization, grew from $7.8 million in 1996 to$500 million in 2003.• Despite Iraq’s economic problems, MIC DirectorAbd al-Tawab Mullah Huwaysh stated that Saddamwent on a palace and mosque building spree in thelate 1990s that employed 7,000 construction workers.Iraq’s Revenue SourcesDuring UN sanctions on Iraq, from August 1990until OIF in March 2003, Saddam’s Regime earnedan estimated $10.9 billion utilizing four primaryillicit sources of hard currency income. The UNOFF program became Saddam’s sole legitimatemeans to generate revenue outside of Iraq (see Figures7, 8, and 9):22