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How a War With Iraq Will Change the World
It's not if but when. Here are the consequences.
FORTUNE.COM
Monday, July 8, 2002
By Bill Powell
They made 16,000 of them the last time: Sacks that are about eight feet long and
three feet across, with six handles and a zipper across the top. "Human Remains
Pouches" is the horrible phrase the Pentagon uses for them, but everyone else
knows them by the vernacular: body bags.
Remember the run-up to the first war with Iraq, Operation Desert Storm? The U.S.
was headed to war, and for the first time since Vietnam we were going to take
casualties, probably numerous.
Or so we thought. Three hundred and ninety American troops died in Gulf War I, a
figure that is larger than what you may remember, but far, far smaller than what
we had feared. Now, 11 years later, the U.S. military is fresh from subduing a
band of fanatic tribal warriors in a country sprung straight from the Middle
Ages, a conflict that was, on our side anyway, even more bloodless than
Operation Desert Storm. This recent history of no-muss, no-fuss military success
serves now as the critical backdrop to an atmosphere, both in Washington and
across the country, that one eminence grise in the nation's capital reasonably
describes as "surreal." We appear headed for round two with Saddam Hussein. And
this time, as an HBO promo might have it, it's for keeps.
That prospect, even if it is probably a year away at best, is hugely serious
business. No matter how smoothly (knock wood) any eventual military operation
goes, a "regime change" in Iraq will have vast geopolitical and economic
consequences. Some of them might be good, some not so good, and some of them
could be horrible. But consequences there will be, for Iraq, for the region, and
for the world. What is "surreal" is that for the most part, for now anyway, a
lot of people in Washington talk about punching out Saddam the way they talk
about, say, passing an education bill. Everyone's in favor, passage is a done
deal, everyone will take credit, but please, spare us the details.
This state of denial isn't limited to the Beltway either. Stock analysts,
economists, and other pundits do contortions every day trying to explain why, in
a reasonably healthy economy, the stock market is so bad and so many corporate
executives remain in a blue funk. They seem to focus on everything other than
the 800-pound gorilla sitting in the room. Paul O'Neill, the Secretary of the
Treasury, went so far as to say in mid-June that the market's recent slump was
"inexplicable." But somewhere in the minds of investors, CEOs, and the man in
the street are the following facts: Nine months ago the World Trade Center
towers collapsed after the most heinous terrorist attack in this country's
history. The man responsible for organizing it, Osama bin Laden, is unaccounted
for. One of his alleged acolytes has just been arrested for planning to set off
a "dirty bomb" somewhere, presumably in New York City or Washington. Meanwhile,
in the Middle East, the Israelis and the Palestinians slaughter each other
daily. That fuels anti-American sentiment in the Arab world as the U.S. talks
big about taking out an Arab despot who has openly--and in his own way
successfully--defied the U.S. for more than a decade. (He may be an S.O.B., but
he's their S.O.B.)
Pardon the cliche, but markets hate uncertainty, and in that volatile mix of
facts lies a whole heap of it. With all due respect to the Secretary of the
Treasury, the market's continuing weakness is not necessarily all that
inexplicable, and it probably isn't entirely related to funny accounting or
whether Cisco meets its whisper numbers next quarter.
The fact is, by the beginning of summer 2003, if not sooner, the U.S. could be
in the middle of Desert Storm II, with tens of thousands of troops headed back
to Iraq, this time not to restore an oil-rich monarchy to its throne but to put
Saddam out of our misery once and for all. So before the 2002 summer doldrums
set in, let's at least start to think seriously about what the implications of
that may be.
It's necessary, in any effort to game out scenarios for what a regime change in
Iraq may mean for the world, to start with a basic question that George W. Bush
has already settled in his own mind. Is it really necessary? Bush has decided
that it is. The decision to get rid of Saddam, telegraphed first in his now
famous Axis of Evil speech and most recently in a commencement address at West
Point, is not rooted in some Shakespearean grudge, a desire to correct what is
now widely perceived (rightly or wrongly) to be a family mistake: his father's
"failure" to get rid of Saddam in 1991. For W., it's all about Sept. 11 and
three inescapable truths. When U.N. inspectors left Iraq in late 1998, Saddam
still had weapons of mass destruction, or WMD, at his disposal, despite the fact
that UNSCOM (as the U.N. inspection agency was known) for more than two years
had incinerators disposing of WMD materiel nonstop 24 hours a day. Saddam
already has biological and chemical capacity, and he is well down the road to
developing a nuclear capability that, if attained, would alter the balance of
power in the Middle East forever. Inescapable reality No. 2 is that since UNSCOM
departed, several Iraqi defectors have said that Saddam has redoubled his
efforts to develop those programs, despite the very real burden U.N.-mandated
economic sanctions have placed on those efforts. And fact No. 3 is that Sept. 11
showed all of us, a new President included, that the U.S. has ruthless enemies
that not only aim to hurt us but can. Saddam is one of them. Therefore, he must
go.
Supporters of Bush's conclusion believe that the status quo--keeping Saddam in a
box with sanctions and a new inspection regime--simply can't be sustained
indefinitely; that, in the words of Charles A. Duelfer, former No. 2 man at
UNSCOM, it amounts to a policy of "slow-motion suicide." Saddam, or one of his
like-minded comrades, will use those weapons of mass destruction eventually, and
it will make Sept. 11 look like a junior-varsity exercise in death and
destruction. Thus, the time has come to do whatever it takes to get rid of him.
Everyone, of course, hopes that a fed-up Iraqi general finally does what almost
everyone outside Iraq has wanted for 11 years and offs Saddam in the still of
the night. It's not likely to happen. As Nabeel Musawi, who helped lead the
Kurdish rebels in the north of Iraq until they were abandoned by the Clinton
Administration in 1996, says, there have been no fewer than six coup attempts
since the Gulf war in 1991. None has really come close to succeeding. And Musawi,
like many others, believes it's a "fantasy'' to think that it's going to happen
now. The reason it hasn't, he says, "is hardly a coincidence. Saddam's entire
regime, the whole paranoid security structure, is designed precisely so that it
doesn't." That, indeed, is why Tommy Franks, head of the U.S. Central Command,
and the other U.S. generals are finally, if reluctantly, beginning to draw up
plans for a military operation that could involve up to 200,000 U.S. troops. If
Saddam has to go, we are the ones who are going to have to do it.
The logic behind Bush's conclusion is sufficiently compelling that a lot of
foreign-policy types who are not by instinct hawks accept it. The surprising
thing is that some of Saddam's neighbors--the people you'd think would most want
to be rid of him--don't. At least not completely. And the reason is that they
simply don't believe the Administration has given enough thought to what the
consequences of a move against Saddam might be. Neither Saudi Arabia nor Turkey,
two of the most important players in Saddam's neighborhood, oppose removing him
per se. They are the leaders of what can be called the
law-of-unintended-consequences crowd. They fear that the most likely method of
ousting Saddam--another large-scale U.S. invasion--could lead to madness. And
though the Saudis for very good reason are hardly in good odor among many
Americans since Sept. 11, their concerns are not idle.
First, they are not alone in believing that Saddam is in a box and that he isn't
much of a threat to anyone anymore (his own people, in this cold-blooded
calculation, excluded). "There is an argument that Saddam is deterrable, so why
not just deter him," says Michael O'Hanlon, a senior fellow at the Brookings
Institution. The basic assumption here is that Saddam wants to stay in power
until he dies a natural death, and that he knows that if he is ever linked to
the use of WMD in the U.S. or Israel, he's history. So if he's unlikely to make
real trouble in the region anymore, why risk a military invasion now?
The logic of that argument goes further: An attack intended to get rid of Saddam
will prompt him to use whatever weapons of mass destruction he has, specifically
against Israel, to widen the war and go down as a modern-day Saladin, the slayer
of infidels. And in fact, if he's going out anyway, it's hard to believe he
wouldn't want to do so in what in his mind is a blaze of glory. U.N. inspectors
believe he has managed to hide 12 to 18 Scud missiles left over from the Gulf
war and has legally continued to work on short-range missile development--some
of which is applicable toward long-range missiles. Further, Saddam has devoted
significant resources to figuring out how to keep chemical agents floating in
the air--"aerosol-dispensing technology," in WMD argot. If he believes he's
going down, everything he has will probably be headed toward Israel. If any of
it hits its intended target and the Israelis retaliate, "chaos" is a mild word
for what will ensue. A region-wide conflagration, an oil embargo, ever more
hatred directed at Israel's sponsor, the U.S. You get the picture. Leave him
alone, say the containment advocates, and eventually the world will be rid of
him.
Here, as University of Maryland political scientist Shibley Telhami says,
"context, and the tenor of the times," are critically important. Again, no one
has any brief for Saddam, but skeptics ask, simply, Is this really the moment?
Eleven years ago the Arab world was not nearly as inflamed as it is now, its TVs
not teeming with images of intifada and the Israelis' iron-fisted response to
the deadly reality of teenage suicide bombers. Like it or not, the Saudis and
the Egyptians are two of America's critical allies in the Middle East, and their
governments are now under fierce pressure from their own population because of
it. A campaign against Saddam, particularly one that involves massive air
bombardment and attendant civilian casualties (which it will) could have a
convulsive impact across the region, even if the Bush Administration manages to
rein in the violence with its frantic proposals for a Palestinian state. (And if
by contrast the heat doesn't diminish, Saddam may well get a free pass, which is
why he will continue writing big checks to the parents of Palestinian suicide
bombers.)
How convulsive might the reaction be? Ellen Laipson, a sober-minded Iraq
specialist who was vice chairman of the CIA's National Intelligence Council
until earlier this year, says the Saudis, among others, "can't really be blamed"
for being worried. For 11 years they have played a double game with their own
people and with the U.S., allowing U.S. troops on the sacred soil of Islam while
permitting clerics to preach anti-Western screeds in the mosques and madrassahs.
Sept. 11 and widespread support of the Palestinian cause may have been
sufficient to bring that jig to an end. A U.S. invasion of Iraq is not something
the Saudis want to have to deal with anytime soon, given that at a minimum
Washington would again need the state-of-the-art Prince Sultan air base south of
Riyadh to help run the air war. In short, a collapse of the house of Saud in the
current environment, even if unlikely, is not inconceivable, and what could come
in its wake could easily be a government that wouldn't necessarily disown the
sentiments of the kingdom's most infamous son: Osama bin Laden. Whatever you may
think of the Saudis, they have been a reliable supplier of reasonably priced
crude oil for a long time, and for every American Administration since F.D.R.
that has been the bottom line. The Bush Administration, though unquestionably
attuned to oil interests, is hardly unique in not wanting trouble in Saudi
Arabia.
But trouble it is likely to get. The Saudis, like the Egyptians, don't feel
particularly threatened by Saddam anymore, and they don't really believe they
face a life-or-death threat from bin Laden-style terrorism (even if, on June 18,
the Saudis announced that their security services had arrested 13 suspected al
Qaeda members who had allegedly been planning attacks against various sites
within the kingdom). What they do fear is a growing general discontent among
their own populations, fueled by increasing economic problems, sympathy for the
Palestinian cause, and the anti-American baggage that comes with it. All of
which could be ramped up significantly by a war with Iraq if the regimes in
Riyadh and Cairo are seen to be holding America's coat.
Saudi fragility is not itself a reason to leave Saddam alone, even with the
possible consequences for the oil market that serious turmoil there would imply
(a subject we will get to shortly). But skeptics of any forthcoming Iraq
operation believe there is much more trouble to come should the U.S. move
anytime soon. Maryland's Shibley Telhami, who organizes extensive public-opinion
soundings in the Arab world, believes it is likely that a war with Iraq would
result, at least in the short run, in an increase in terrorism throughout the
Middle East, directed at any regime--Egypt, Jordan, the other Gulf
monarchies--seen as supporting us, and inevitably bring the suicide-bomber
phenomenon to U.S. shores. That's precisely what Bush is trying to avoid.
Duelfer, the ex-UNSCOM official and one of the most knowledgeable Americans
about Iraq, supports removing Saddam but doesn't disagree with Telhami. "There
is," he says glumly, "no shortage of kids in the region who seem to want to grow
up to be cruise missiles." To the skeptics, an invasion now would only increase
the arsenal.
We are, it's true, focusing on the downside here, if only because so little of
it has been heard to date. Bear with us: There's a bit more. Many businesses may
not be overly concerned right now with the prospective geopolitical fallout of
the next war with Iraq, believing that the direct economic impact of any
conflict could be contained, especially if the conflict is short and stays
within Iraqi borders--a plausible scenario. The U.S. in 2000 exported only about
$23 billion worth of goods to the Middle East (Israel excluded), compared with
European exports to the region of $63.7 billion. But there are other numbers
that should concentrate minds.
Most obvious is the cost of another war--and its aftermath. Japan and Saudi
Arabia won't be writing billion dollar checks this time around. A full-scale
invasion, even one smaller than Desert Storm, will not be cheap, and it will
come at a time when the federal budget is already sinking into deficits.
The effect of a war on consumer sentiment may not be negligible, either. In
August 1990, when Saddam invaded Kuwait, the University of Michigan's consumer
sentiment index stood at 76.4. A month later, when the U.S. response remained
uncertain, it had dropped just four points. By October, however, when we began
counting those prospective body bags, the index fell off a cliff, plunging to
almost 30% below the level at which it stood in July. (By March 1991, after the
U.S. rout was over, the index had jumped back up to 87.) The point is obvious.
If, as seems certain, war planning picks up and details of various Pentagon
plans leak to the press (and that's already started), consumers could yet react
negatively, particularly if the planning is drawn out.
And drawn out it will be. Even the most fervent cheerleaders for U.S. military
action--Iraqi exiles in groups like the Iraqi National Congress--concede that
the Administration has so far been painfully slow in trying to figure out not
only what kind of war it wants to wage but what it wants a post-Saddam Iraq to
look like politically. "There's just a tremendous degree of ignorance as to what
it will take to keep things together after a war ends," says Raad al Kadiri,
manager of country-risk analysis for the Petroleum Finance Corp. in Washington,
D.C. Getting up to speed will take time, and that means the uncertainty that
hangs over the forthcoming fight with Saddam will not go away in six months as
it did last time. The drop in consumer sentiment may not be as sharp--with
Americans in effect discounting for swift, painless success once the battle is
joined--but the uneasiness could last longer until it becomes a lot clearer just
how it is going to go.
The mother of all economic nightmares revolves around oil. Iraq, under the
U.N.'s oil-for-food program, has been exporting about two million barrels a day
of crude (compared with about 3.5 million barrels before the Gulf war). Even if
that is disrupted during a war, and even if Saddam takes Iraqi oil off the
market for a while by somehow managing to torch a patch of his own country's
capacity on his way out to spite whoever might succeed him, the Saudis,
Kuwaitis, and other OPEC members could easily mitigate the effects as long as
they were willing to do so.
The oil-driven disaster would probably come only if a wider war involving Israel
prompts an Arab embargo, something angry populations might demand and quaking
Gulf governments would accede to. Six months of oil at $50 a barrel would stick
the U.S. economy with the equivalent of a huge tax increase. As Mark Zandi,
chief economist at economy.com, points out, a mere $10 increase in the price of
oil shaves a full percentage point off of GDP. Another oil shock may not be
likely, but to dismiss it out of hand would not, as President Bush's father used
to say, be prudent. For that and other reasons George W. Bush needs to do as his
father did in 1991 and make sure the Israelis stay out of it when Saddam's
remaining Scuds take flight. But in this environment, and with Ariel Sharon as
Prime Minister, will they?
We don't mean to spoil your summer vacation with these doom-laden scenarios.
There are, make no mistake, people who believe the end of Saddam Hussein will
come with relative ease. They argue that once the U.S. makes it clear that it
will buttress local forces like the Kurds in northern Iraq with our own
contingent of troops--and that this time it really is for keeps--even his most
loyal officers will know the game's over, and most won't even fight. Then, says
Zaab Sethna of the Iraqi National Congress, "the Iraqi people will be kissing
your GIs in the street."
Well, let's hope so. But don't bet on that either. For now, know at least that
some sort of conflict is coming. There is no way the Bush Administration, given
its rhetoric to date, can back down from a confrontation with Saddam. The
800-pound gorilla has begun to stir. It wouldn't be wise to take your eye off
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