[A-List] The War Economy of Iraq

[Yoshie Furuhashi]

<http://www.merip.org/mer/mer243/parker_moore.html>
The War Economy of Iraq

Christopher Parker and Pete W. Moore

Christopher Parker is assistant professor of political and social
science at Ghent University in Belgium. Pete W. Moore is associate
professor of political science at Case Western Reserve University.

On May 26, 2003, L. Paul Bremer declared Iraq "open for business."
Four years on, business is booming, albeit not as the former head of
the Coalition Provisional Authority intended. Iraqis find themselves
at the center of a regional political economy transformed by war.
Instability has generated skyrocketing oil prices, and as US attitudes
to Arab investment have hardened in the wake of the September 11
attacks, investors from the oil-producing Gulf countries are seeking
opportunities closer to home. This money, together with the resources
being pumped in to prop up the US occupation, is fueling an orgy of
speculation and elite consumption in the countries surrounding Iraq.
The sheer volume of loose change jingling around the Middle East would
be potentially destabilizing even if fighting did not persist in
Bremer's erstwhile domain.

War and profit have always gone hand in hand. In Iraq, as well, a "war
economy" is firmly rooted, yet it has gone largely unexamined in the
stacks of books and articles dissecting Washington's grandiose venture
gone bad. Armed with ideological assumptions and economic quick fixes,
US occupation officials pursued policies that, at a minimum,
aggravated the severe social dislocation wrought by war, privatization
and sanctions before 2003. Today, militias supporting or opposing the
Iraq government—not the government itself—control import supply chains
and, indeed, regulate whole sectors of the Iraqi economy. At the same
time, the people who earned a living through the antecedent networks
of the war economy are attacking the new US-sponsored political order.
These insurgents include not only those "Iraqis who miss the
privileged status they had under the regime of Saddam Hussein," as
President George W. Bush would have it, but also—indeed
mostly—ordinary working people who are protecting livelihoods they
built in the shadow of Baathist dictatorship. Countless other
civilians are caught in the crossfire as the struggle to make ends
meet has become deeply politicized.

Evidence of Iraq's war economy is fragmentary. Amman—arguably the city
where the business of occupied Baghdad is really done—is a veritable
rumor mill. Leads are difficult to follow and confirm, as the
individuals involved are wary of admitting to war profiteering and
economic data are uneven. But the fragments start to form a
recognizable pattern when set in a comparative frame. The Iraqi case
fits well within the large scholarly literature on the economics of
civil war. Not all civil conflicts are the same, of course; some end
quickly, while others endure. When available evidence on Iraq is
compared with the lengthy civil wars in Lebanon from 1975–1991 and in
Algeria in the 1990s, ominous parallels come into view. During those
civil wars, much of the money to fund militias and state-sanctioned
violence alike came from the control of external trade and the
taxation of regions under militia or state control. These dynamics did
not simply emerge in the chaos of war, but were grounded in longer
trajectories of international involvement, state atrophy and
grassroots political economy.

The US project in Iraq, nothing less than a forced revolution, was
more radical in its means than in its way of viewing the political
world. And while today's deepening war economy certainly owes a great
deal to the early zeal with which US officials sought to remake Iraq
as a free marketeer's paradise, any eventual autopsy of the Bush
administration's imperial fiasco needs to cut deeper than the blunders
of Bremer and his subordinates to reveal the fundamental failures of
political imagination that lay beneath.

Iraq Beyond Saddam

"In Iraq, the US fights an enemy it hardly knows," wrote the
International Crisis Group in the executive summary of a 2006 report.
"Its descriptions have relied on gross approximations and crude
categories (Saddamists, Islamo-fascists and the like) that bear only
passing resemblance to reality."[1] Over a year later, US and British
officials from Bush and Prime Minister Tony Blair on down continue to
speak in stereotypes when describing the guerrillas' motivations.
Washing their hands of any responsibility for the violence that
plagues Iraq, they present the insurgency as springing from a yearning
for lost domination on the part of groups linked to the Saddam-era
state. This is the statist narrative—the idea that Saddam's regime
controlled everything worth controlling before it was overthrown. More
amorphously, mainstream analysts trace the insurgency's origins to the
aggrieved "thought world" of Iraq's Sunni Arab community.[2]
Suggesting that the insurgency is rooted in the "majoritarian mindset"
of Iraq's Sunni Arabs, Fouad Ajami further notices a Sunni Arab
susceptibility to the "dark appeal" of revived histories that dredge
up anti-Shi'i prejudices and "the panic of a community that fears it
could be left with a 'realm of gravel and sand.'"[3]

To be sure, sectarian fears and religious extremism—as well as foreign
occupation—are powerful causes of the ongoing violence, but the
sectarian narrative renders invisible the everyday concerns and
struggles of people trying to survive in conditions of war. It makes
more sense to locate the roots of resistance and intra-Iraqi violence
in structures of collective action and social regulation that took
shape over the course of the 1980–1988 Iran-Iraq war, and were
consolidated during the state's economic opening in the 1980s and the
early years of the UN sanctions. Clearly, and contrary to the
assumptions of the statist narrative, the state retreated considerably
from the economy over the last two decades of Baathist rule, a period
that also witnessed plummeting standards of living for ordinary
Iraqis. Yet the social reverberations of these economic upheavals are
rarely considered.

Mainstream accounts of the 1980s and 1990s preserve the centrality of
the state by charting the rise of what Charles Tripp has referred to
as the "shadow state"—a web of informally regulated networks that
leveraged statist agency (e.g., the ability to make and enforce
internationally binding contracts or employ nominally legitimate
coercion) to create domestic enclaves for the private accumulation of
capital and power.[4] Even as the state's formal regulatory powers
began to shrink during the 1980s, the social impressions left by a
legacy of rent-fueled state centralization and militarization remained
to preserve the essence of Saddam's power. This narrative is certainly
persuasive as far as it goes. But the tendency to present the regime,
however formally weakened, as the programmer of economic and social
activity elides the agency of the Iraq—some 27 million Iraqis, in
fact—beyond Saddam. As statist agency receded, it was replaced by
conditions of multiple jurisdiction and sovereignty: Localized social
structures, transnational trade networks and a globalized sanctions
regime came together to create new economic opportunities and impose
new constraints. Nevertheless, even if "the regime" as such controlled
less than conventional analysis would suggest, central regime figures
were elevated by their ability to mobilize the state's remaining
powers and control oil resources. In other words, the regime was able
to dominate, but not necessarily in ways of its own choosing.
Understanding the relationship between conflict and economy in
contemporary Iraq requires a recounting of the rapid economic decline
in the 1980s and 1990s.

In 1980, Iraq was a net creditor and considered home to one of the
region's most advanced economies. By early March 2003, as US and
British forces amassed on its southern border, it had become one of
the world's poorest and most underdeveloped countries. Average annual
income had fallen from between $3,600 and $4,000 in 1980 to between
$500 and $600 by the end of 2003.[5] On the eve of the invasion, Time
reported: "Industry has ceased to exist and unemployment may be as
high as 50 percent. The agricultural sector is in complete disarray,
leaving more than 60 percent of the population to rely on the UN Oil
for Food program [for basic needs]. About 40 percent of the nation's
children are suffering from malnutrition."[6]

This dramatic decline in living standards coincided with a long
deterioration of Iraq's major industries. In the first year of the
Iran-Iraq war, oil production fell from 3.4 million barrels per day to
just under a million.[7] Oil revenues continued to drop off for the
duration of the conflict—totaling $11 billion, less than half the
pre-war amount, in 1988—while military spending remained high.[8] The
result was the increase of foreign debt to over $80 billion by 1988,
the draining of foreign reserves and the abandonment of development
projects.[9] The war also led to a wider militarization of Iraq's
economy, draining human and financial resources away from
manufacturing and agriculture. By the time the war with Iran ended,
more than 20 percent of the labor force—over one million people—were
employed in Iraq's armed forces. While Saddam claimed victory in the
war, his adventure had left a heavily indebted state with a physical
infrastructure in great need of repair.

Saddam responded to the crisis of state accumulation by implementing a
sweeping program of economic liberalization (infitah). The program had
its origins in efforts at reforming the agricultural sector in the
early to mid-1980s, but its scope and intensity increased dramatically
by late 1987 and into 1988. All industries deemed non-essential to the
health of state coffers and military preparedness were jettisoned in a
frenzy of privatization. As Kiren Chaudhry notes, "Whereas Egypt's
widely publicized infitah policy resulted in the privatization of
exactly two factories over a period of 15 years, in a single year the
Iraqi government sold 70 large factories in construction materials and
mineral extraction, food processing and light manufacturing to the
private sector." The selloff was, if anything, more sudden in
agriculture. By 1989, 99 percent of Iraq's agricultural land—half of
which had been state-owned since the 1960s—was either privately owned
or leased from the government by private investors on favorable terms.
The main beneficiaries of Saddam's infitah were by and large the same
people who, by virtue of their connections to government power
brokers, had profited from the massive amounts of government spending
on construction during the oil boom of the 1970s. Laws were changed to
allow for large-scale, cross-sectoral investment, and the tax on
corporate profits was reduced to 35 percent. In the end, most of the
new captains of industry and agribusiness sacked 40–80 percent of
their workers.[10] The end of the Iran-Iraq war also brought the
decommissioning of over 200,000 soldiers, who were simply put out on
the street amidst high unemployment and food shortages.

These moves had the knock-on effect of making many state regulatory
agencies redundant, sparking massive layoffs in the public sector and
precipitating the collapse of effective economic regulation by the
state bureaucracy. Thus, while Saddam's government remained in control
of oil and other strategic industries, and remained the agency of
necessity and choice with regard to large investment or trade
contracts with large foreign firms, broad swathes of economic life
were simply left to the vagaries of petty market action and struggle.
Meanwhile, inflation began to skyrocket.

The international response to Saddam's invasion of Kuwait—a
devastating military campaign during the early months of 1991 and
draconian sanctions in place for the next 13 years—pushed Iraq's
economy from bad to worse. More of Iraq's economic infrastructure was
destroyed in six weeks of allied bombing than in the eight years of
war with Iran.[11] Sanctions further eroded the gross domestic product
and wrought havoc upon the personal finances and life chances of
untold numbers of Iraqis. Following the freezing of Iraqi banks'
foreign assets and the subsequent devaluation of the dinar, "savings
of 2,000 dinars that once would have paid out $6,000 were suddenly
worth only $2."[12] Experienced technicians and professionals working
in Iraq's crumbling hospitals, laboratories and universities found
themselves forced to emigrate or seek income-generating opportunities
in the informal sector to make ends meet. The precipitous decline in
the number of children attending school in the sanctions years may
have caused the adult literacy rate to drop from 80 to 58 percent.[13]
In 1996, the World Health Organization concluded that sanctions had
set back Iraq's health care system by 50 years.

Inevitably, as the ability and willingness of state officials to
govern economic life through formal channels dissipated, new
configurations of regulatory power arose to take their place. These
configurations were not necessarily congruent with, or contained
within, Iraq's borders. Transnational tribal allegiances were
mobilized to facilitate and regulate trade across international
borders. Businessmen-politicians in neighboring countries cultivated
links with members of Iraq's Republican Guard (among others) in order
to facilitate and protect networks of transport and distribution. And
small-time trade networks emerged to profit from differentials between
countries in prices for petroleum and other products. Major
multinational corporations also took advantage of the multiple
jurisdictions. Consider the case of RJ Reynolds, whose involvement in
cigarette smuggling to Iraq was the subject of European Union legal
action in 2002. Coordinating operations from Switzerland, home to
congenial bank secrecy and business privacy laws, the company sent
master cases containing 10,000 cigarettes each for loading and
unloading at ports in Spain, from whence they were shipped onward
through holding companies in Cyprus, before being redistributed
through the free zone in Mersin, Turkey. They were then transported
over the mountains between Turkey and Iraq via Silopi Pass, moving
through the hands of agents operating in Kurdish-controlled regions of
northern Iraq before ending up at one of the many smoke stands located
along Iraq's roads and highways.[14]

Cats of the Embargo

It is difficult to imagine any regime surviving intact—much less
retaining statist agency in the economy—through turmoil such as that
experienced by Iraq over the past three decades. Nevertheless,
observers have been remarkably consistent in presenting capital
formation and livelihood in Saddam's Iraq as variables strongly
determined by state intervention. As late as 2003, observers could
note that the state sector accounted for 80 percent of Iraq's GDP,[15]
a figure which hardly measures state power or economic centralization.
Nevertheless, it is typical for an author writing on the present day
to first assert that transforming "a centrally planned economy to a
market economy" is a primary challenge facing the engineers of change
in Iraq, only to later note that "the United States found [in Iraq] an
economy that essentially needed to be rebuilt from scratch, crushed by
decades of wars, sanctions and atrophy due to Saddam's neglect of the
population's needs."[16] The contradiction apparent in these
statements reflects the degree to which emphasis on the person of
Saddam Hussein led mainstream observers to imagine the passivity, even
emptiness, of the Iraq that lay beyond his extended circles.

Claims regarding state control over the economy tend to brush over key
facts. For example, while over 75 percent of Iraq's labor force
remained employed in the public sector on the eve of the March 2003
invasion, the average salary of a civil servant was only $5 per
month.[17] Similarly, while more than half of the population was
dependent upon government-controlled food rationing during the early
1990s, these rations accounted for only 37 percent of per capita
caloric intake in the pre-sanctions era.[18] Inadequate diets and
purchasing power placed a premium upon plots of arable land and their
crops. Local tribal sheikhs were given considerable scope in the
regulation of the rural economy, and used their position and networks
to expand and diversify their economic activities. In short, the kind
of formal accounting upon which claims about the nature of economic
transition in Iraq are made obscures the importance of gray and black
markets to the simple tasks of eating and earning a living over the
past two decades.

In a very real sense, the conditions that obtained in Iraq from the
late 1980s onward resembled conditions of war. People accustomed to "a
culture of laziness" sustained by enormous oil revenues were forced to
take extraordinary measures to make ends meet.[19] Hyperinflation,
massive public-sector layoffs and food shortages shaped Iraqi society
as it moved from the dislocations of the infitah to the devastation of
war to the ruin of sanctions.

Highly profitable transnational alliances between elite businessmen
cum regime figures emerged in the 1980s and 1990s. But smaller-scale
networks of trade flourished as well. In her 1999 study of
sanctions-era Iraq, Sarah Graham-Brown noted:

        The people who run the black market in both petrol
        and basic foodstuffs, and luxury items like whiskey
        and Western cigarettes, are actually members of the
        lower middle strata of Iraqi society, hardened war
        profiteers who managed to survive as soldiers and
        smugglers during the Iran-Iraq war as well as the
        Gulf war which followed. Many of these "new elements"
        in society have links with Iraq's large and once
        powerful rural clans. Coming mostly from the lower
        echelons of these clans, the new merchants are both
        Shiites and Sunnis…. The goods they handle are
        mostly smuggled from Syria, Turkey and Iran.[20]

Proprietors of small retail businesses came to rely on the smugglers'
"taxi service" to stock their shelves. One Baghdad repair shop owner
told Joseph Braude: "My supplier sends me products via Jordan in
trucks. The driver charges you $100—but you are not paying any tax. As
for the border guards, just give them a pack of cigarettes and a can
of Coke—that's more than enough. They will leave you alone."[21] Even
petroleum smuggling—typically seen as an activity requiring the
resources of big players operating within the purview of the
regime—was a source of livelihood for thousands of Iraqis operating
beyond the control and surveillance of the state. Drivers equipped
their cars and trucks with extra tanks that were filled with
subsidized diesel and gasoline at filling stations on Iraq's border
with Jordan, and then simply driven over and sold to middlemen in
Zarqa or Amman.

In between, one could find the qitat al‑hisar—the "cats of the
embargo." "Unlike high-ranking Baath Party hacks who lived mainly by
leveraging their government influence," writes Braude, "the cats
engaged each other in rough-and-tumble competition in what became an
underworld's dark meritocracy. They spanned Iraq's ethnic and
sectarian rainbow, including many Shi'a and Kurds. Cats hailing from
disenfranchised communities maintained a businesslike rapport with the
country's political bosses, paying them with the bribes they demanded
in exchange for autonomy in the black market."[22] But outside this
"dark meritocracy," the system relied on regular working people to
drive the trucks carrying oil and other goods, walk through the
mountains from Turkey with backpacks full of cigarettes and look the
other way as some aspect of state regulatory control was subverted.
These activities were not simply individual acts of opportunism, but
practices within a grassroots political economy of meaning. Today,
many of these same people—people who can hardly be described as
beneficiaries of the Baathist regime—ply their trade under threat from
new agencies, technologies and infrastructures that have been
introduced with US-sponsored "reconstruction." While presented in the
neutral language of development and modernization, these agents and
infrastructures are hardly politically neutral. Those whose livelihood
depended on the oil tanker trucks, for example, are now threatened by
the repair and restoration of Iraq's pipelines. Thus even resistance
to foreign control over Iraqi oil is often motivated by something
other than nationalism.

To date, observers have not fully taken into account how the project
of reconstituting a market in Iraq has selectively criminalized
certain socioeconomic actors and empowered others.[23] The imposition
of new rules through the barrel of a gun has abruptly rendered petty
trade networks constructed over decades untenable or even illegal.
Moreover, sovereignty in Iraq is now even more fragmented than in the
1990s. The new Iraqi constitution allows for de jure autonomy for
geographic regions—the majority-Kurdish provinces and several
provinces in the south—that are already autonomous de facto. The
current government's would-be monopoly on coercive violence is
distributed among US forces, Iraqi security forces and private
security contractors who are becoming an increasingly
institutionalized feature of the post-Saddam landscape. Furthermore,
Iraqi security forces have clear and overlapping ties with local
militias: Insofar as security force elements were active in the
informal economy under sanctions, army decommissioning may have simply
led to a privatization of coercive violence from below that ironically
mirrors the Bush administration's subcontracting of war- and
occupation-related services to US firms.

On the Road

Whether cats of the embargo or regime fat cats involved in sanctions
busting on a grander scale, informal traders were but one node in
wider networks that were regional, even global in scope. It stands to
reason that these networks survived the 2003 invasion, but the
question of how the evolving war economy of Iraq is connected to
regional political economies is a tricky one. By their very nature,
such linkages are not well-advertised. Who is making the money? Who is
deciding who makes the money? In many cases the complete answer lies
outside Iraq, so one place to start is on the road.

<http://www.merip.org/mer/mer243/parker-moore_map-copy.jpg>
The roads, rivers and pipelines of Iraq. Only major highways are
shown. (Holly Syrrakos/Go! Creative)

In Iraq today, there are three major trade routes that are the loci of
struggle between competing militias and the various agents of
occupation as they seek to shape and regulate economic exchange. The
first follows Highway 1, heading north from Baghdad through the oil
refining and industrial town of Bayji. From Bayji, the route continues
to Mosul and on toward the Syrian border. The second route is Highway
10, which heads west from Baghdad to Amman, passing through Falluja
and Ramadi—the "Sunni heartland" of al‑Anbar province—before
traversing the vast desert. Highway 6 is the main road from Baghdad to
Basra, with way stations in Kut and 'Amara—strongholds of Muqtada
al‑Sadr's Mahdi Army. Highway 8 offers a western passage to the south,
leaving Baghdad and running through the town of Hilla—skirting the
Shi'i shrine cities of Najaf and Karbala'—before heading to Basra,
where it meets up with Highway 6, which continues down to Umm Qasr and
Kuwait. These towns are all noteworthy locales, as either frontier
outposts along long-distance trade routes or nodes of oil
infrastructure or centers of the rise of the Shi'a. Bayji is also
located close to the de facto border between central Iraq and the
Kurdish-regulated areas, while Hilla and Kut are the gateways to
southern Iraq. Not coincidentally, all of these cities have been
flashpoints of conflict over the past four years.

The importance of these trade routes cannot be overstated. Like most
Gulf countries, Iraq has been highly dependent on a full range of
consumer and industrial imports since the 1950s. Control of those
supply chains and roads facilitated the selective privatization begun
in the late 1980s, and re-exporting neighbors utilized those same
links for their own political ends. All of this trade was organized
through bilateral protocols ensuring the political control to reward
allies and punish rivals. Of course, these arrangements were not
foolproof, and so smuggling networks concentrated in border areas
thrived, especially as war and sanctions began to take their toll and
Baathist officials lost control over whole sections of the country. In
tandem—formal, state-regulated trade on top and tolerated local
smuggling at the bottom—these arrangements tied Iraq to its neighbors
in politically consequential ways. Powerful Baathist bureaucrats
leveraged their political positions to cement connections to traders
in neighboring states. Lower-level smuggling also involved
cross-border connections, though these were more based on tribe and
kinship than political power. Following Highway 10 to Jordan
illuminates how these networks shaped post-2003 Iraq.

Though fears of Iranian influence, Turkish invasion and Syrian
complicity seem to dominate discussion of the external players in
Iraq's violence, by far the most important country in political
economy terms, to the Sunni insurgency (responsible for the vast
majority of American causalities) is the Hashemite Kingdom of Jordan.
The political and social histories of modern Iraq and Jordan are bound
tightly together. The deep ties between families, tribes, political
movements and economic actors across the borders of these two
countries have a history that, by and large, has yet to be written.
While far from transparent, linkages between the Jordanian
establishment and the constituent elements of Baathist power—together
with connections to the Sunni tribes of al‑Anbar—are less obscure.

The war with Iran ended operations of Iraq's only port, Umm Qasr. By
1982, Jordan's port of 'Aqaba became the primary location receiving
imports destined for Iraq and shipped by sea. A number of
Iraqi-Jordanian trade agreements followed, to expand 'Aqaba's
capacity, widen Highway 10 and establish a trucking firm to move goods
from 'Aqaba to Baghdad. Iraq quickly became Jordan's largest trading
partner. Officials agreed to a protocol whereby oil priced
significantly below market value was supplied to the Jordanian
government in order to fund exports back to Iraq. Estimates of that
fund vary, but reasonable estimates suggest a value in the hundreds of
millions of dollars each year.[24] Wild stories about side deals and
the general graft of the protocol decades still make the rounds in
Amman today.

Like their Baathist counterparts, Hashemite officials in Jordan chose
the recipients of these lucrative deals. These cronies and their
supporters helped keep the Hashemite regime afloat during its own
financial storms in the 1980s and 1990s. This form of direct political
patronage coexisted alongside extra-legal forms of trade that were
also winked at. Over-invoicing of exports, false bills of lading at
the port of 'Aqaba and substandard goods were among the ways Jordanian
and Iraqi traders increased their profits. In addition, the trade
networks supported an increasingly important labor market in Jordan.
Thus did gilded trade linkages within and between Iraq and Jordan tie
the political future of each regime to the other.

Many but not all of the traders and industrialists connected to Iraq,
then and now, are East Bank Jordanians (as opposed to Palestinians).
Additionally, the transportation labor dependent upon Iraq trade is
composed of lower-income, rural East Bankers located in the southern
part of the country. The economic and political rationales that linked
the Jordanian transportation labor, the Amman-based exporters and the
Sunni importers in Iraq also overlapped with and animated tribal and
religious sympathies. That some of the truckers and small-time traders
might moonlight for the black market was to be expected. The
imposition of sanctions after the invasion of Kuwait only forced this
network to craft more durable and clandestine mechanisms of operation.
Thus, it was hardly a secret that the failure of the 1990s sanctions
to impoverish Baathist elites was due primarily to sanctions-busting
trade routed through Jordan.

On the eve of the 2003 invasion, Highway 10 was both sinew and symbol.
It was a mainstay of the Iraqi regime's political economy of survival,
yet also emblematic of how much its power had dissipated and been
disfigured since the 1980s. If Highway 10 is the path to understanding
Iraq before 2003, then Highway 8 heads south into the post-2003
period.

Same Truck, Different Driver

In 2003, Highway 8 from Kuwait carried US troops and the bureaucrats
of the Coalition Provisional Authority (CPA) northward to Baghdad. It
also served as the spinal cord of the political economy of Shi'i
militias and parties freed from Baathist control. CPA officials came
primed to supply Iraq with "the most liberal investment regime in the
entire region."[25] What they provided instead was a regulatory vacuum
in which local networks of trade found themselves arrayed against
politically favored, well-armed agents of corporate America, backed by
the US military.

While presenting their project as introducing universal values of free
markets and good governance to Iraq, US policymakers, CPA officials
and American firms were themselves deeply implicated in selecting the
winners and losers of the new order, revealing the deep politicization
of the supposedly neutral occupation regime. In any case, promise of
access to the Iraqi market and reconstruction projects was central to
Bush administration efforts to build a domestic and international
coalition in advance of the war. By luring into Iraq commercial actors
whose interests coincided with dominant perceptions of the US
interest, policymakers no doubt sought to erect an edifice of indirect
rule without the undue burden of direct US military, financial and
diplomatic input. Indeed, in predicting $50–100 billion in oil
revenues in the first two to three years after Saddam's fall,
ex-Deputy Defense Secretary Paul Wolfowitz drew a picture of a
self-financing (and market-regulated) transformation, thus freeing US
strategists to advance wider goals in the region.[26]

Bremer used this new mandate to justify implementation of a
wide-ranging agenda of neo-liberal economic reforms. In the June 20,
2003 Wall Street Journal, he announced a "wholesale reallocation of
resources and people from state control to private enterprise." The
makeover list included: revamping the banking system, modernizing the
stock exchange, privatizing some 120 state-owned enterprises, tax
reform and removal of all restrictions on foreign investment through
suspension of all customs duties and tariffs. The idea that free
trucking and bartering generate stable liberal politics has a spotty
record in the developing world and is a uniform failure in the Middle
East,[27] but this did not deter Bremer and his staff of experts. The
viceroy himself was no stranger to political risk in the name of
profit, having set up Crisis Consulting Practice in 2001, under the
umbrella of insurance company Marsh and McLennan, to advise major
corporations on investing in trouble spots. Anecdotes about how the
CPA's neat ideological ordering of the world eventually yielded to
reality are now numerous.[28] US economic consultants arrived to find
that "street-corner money-changers, some of whom the US suspects are
linked to organized crime," were setting the currency exchange rates.
With "no data available to crunch," experts found themselves reduced
to "figuring out how best to stack money inside a truck."[29] By the
time of the handover in June 2004, CPA economic and development teams
were doing little more than claiming progress on granting commerce
licenses and visiting business delegations.

Given the pre-2003 roots of the war economy, how much responsibility
do CPA policies shoulder for its maturation? The blunders of the CPA
have become lore, allowing criticism of the project to focus on
failures of execution. It is not hard to pick up the refrain that if
only the US had done this or that, the US could have succeeded.

The failure was not in execution, however, but in the delivery itself.
Occupation plans and security contingencies, good or bad, simply added
to the maelstrom of political, social and economic dislocations that
had already had most Iraqis feeling the pinch. Big cats and small
cats, together with American corporations and the would-be empire
builders among returning Iraqis, all saw CPA policies for what they
were, ideological fantasies, and none were squeamish about using
violence to shape the market in their favor. Just consider the words
of an Iraqi businessman quoted in internal CPA documents: "It is
nothing personal. I like you and believe you could be bringing us a
better future, but I still sympathize with those who attack the
coalition because it is not right for Iraq to be occupied by foreign
military forces."[30]

After the dissolution of the CPA, militias appear to have carved out
or coopted their own areas of economic control and regulation. If the
Algerian and Lebanese experiences are a guide, then these militias and
underground economies are likely interdependent. Also, far from
representing forces that are somehow excluded from or antithetical to
globalization or market forces, they are firmly linked to big players
in the global economy via connections in neighboring countries. Their
trade was not simply in oil and alcohol, but also in food and consumer
goods, and with the arrival of the CPA, they found themselves suddenly
in competition with well-positioned big traders surfing atop a tidal
wave of duty-free consumer goods and packaged meals.

Down Highway 8, the main Shi'i militias and parties—under the nose of
the occupying powers—have monopolistically carved up the economy in
ways that resemble the practices of their Baathist predecessors. Media
reports depict southern cities overrun with goods coming over the
border from Iran and re-exported from Gulf ports, primarily Dubai.
Control over the transportation and lodging of Shi'i pilgrims has
reportedly been centralized by 'Ammar al‑Hakim, son of the powerful
leader of the Supreme Islamic Iraqi Council, 'Abd al-'Aziz al‑Hakim.
Al-Da'wa and Sadrist elements can logically be assumed to be in the
game as well. Below the major players, minor smugglers shuttle smaller
amounts of goods across the Iranian border. Marshland oil smugglers
amount to thousands of pinpricks that have cut southern Iraq's oil
production in half.[31] More sophisticated pipeline attacks underscore
the links between post-2003 acts of sabotage and the legacy of a
grassroots political economy beyond the state. For most of the past
four years, such attacks have been interpreted as a tactic for
undermining the occupation. More recently, however, observers have
become aware of the economic motives for these attacks. Throughout the
1990s, most of Iraq's oil was transported in relatively small tanker
trucks—to Jordan and Turkey with dispensation from Washington and
undercover to Syria and the Gulf. As the pipelines to Turkey and the
Gulf were turned back on in 2003, most of these truckers—many of whom
had close ties with, and indeed colleagues in, neighboring
countries—were out of a job. Hence, it is not surprising to learn that
pipeline attacks "are now orchestrated by [insurgents and criminal
gangs] to force the government to import and distribute as much fuel
as possible using thousands of tanker trucks." The same news story
continues: "Ibrahim Bahr al-'Uloum, a former oil minister, said it was
obvious that crude oil pipelines connecting the northern wells with
refineries and power plants farther south, in the Baghdad area, had
been repeatedly struck to force trucks to move the crude. Oil
employees trying to fix the pipelines had sometimes been kidnapped and
killed. Both the trucking companies and groups in the protection
rackets were probably complicit in some way, he said. 'This is a
business for the people who are working in the trucks.'"[32]

Headed west on Highway 10 the same themes vary slightly. Thousands of
Iraqi trading companies have relocated to Amman, drastically inflating
real estate prices in the upscale neighborhoods of the Jordanian
capital. The families and finances of former Baathist officials have
followed. Re-exports from 'Aqaba are up, as is cross-border truck
traffic to Iraq. Jordan's massive trade deficit is driven in large
part by the increase in imports, which are re-exported to Iraq. Today,
Amman is a bizarre menagerie of war profiteers, not so secret agents,
gloomy security consultants and former Baathists all rubbing elbows in
the same upscale bars and hotels. Interviews with businessmen in
Jordan suggest that, after initial chaos along Highway 10 from Jordan,
rural insurgent groups now protect and manage the trade through
internal agreements and with the cooperation of their Jordanian
counterparts. The city of Falluja is a notorious example of these
arrangements.

Strategically located on Highway 10, Falluja is home to many people
who have strong links with their tribal kin across the border in
Jordan and Saudi Arabia. Also, the proportion of Fallujans in the
Iraqi intelligence services is reported to have been the highest in
the country.[33] This combination made Falluja a key node for
underground trade during the 1990s, and a focal point for efforts to
control trade in the post-2003 order. Against this backdrop, it is no
coincidence that the overwhelming majority of foreigners kidnapped and
held in Iraq have been truck drivers, mostly from Turkey, Egypt and
the Philippines.

It seems most plausible that these various sources of revenue support
the insurgents and local militias as much or more than the foreign
funding vaguely claimed to exist by the US. Recently, US forces have
nodded to the possibility that economic variables are behind some of
the violence in Iraq, going so far as to present this as the basis for
a tactical alliance with erstwhile insurgents. Following a recent
visit to Iraq, Gen. James T. Conway, commandant of the Marine Corps,
reported that Sunni tribal sheikhs in Anbar had decided to start
cooperating in operations against al‑Qaeda jihadis. "Some commanders
said the extremists' key misstep was to interfere with the locals'
black market trading, which al‑Qaeda coopted in order to finance
itself.… Cooperation by the sheiks also has quickly created a Sunni
police force in areas where none existed before."[34] On the surface,
this would seem to be a practical application of the "Sunni buy-in"
that was much discussed by US Embassy officials in late 2005 and early
2006. But this surprising acknowledgement of a war economy raises some
important questions. One regards the link between jihadi involvement
in trade and connections in neighboring countries: The largely
unreported visit of around 200 tribal elders from the town of Ma'an in
southern Jordan—a town whose population is historically invested in
long-distance overland trade between Jordan and Iraq—to pay
condolences to the family of slain jihadi leader Abu Mus'ab al‑Zarqawi
takes on a different significance if we view it in this light.[35]
Second, one might conclude that al‑Qaeda coopting local economic
assets signals an increase, not a decrease, in the strength of
America's number one enemy in Iraq. Attacks on infrastructure and
roads that were high in the first year and a half after the US
invasion are generally down, not because the insurgents have
retreated, but because they now control access to these assets. Taking
sides among the actors in the war economy is unlikely to produce
stability that will last beyond the departure of US forces.

There is no US military or even diplomatic solution to the problem of
a war economy in Iraq. The reconstruction and development plans that
have accompanied the "surge" resemble warmed-over CPA policies.
Political economy changes do figure in civil conflict resolution, but
the recent historical examples are not heartening. Luis Martinez has
shown how a strong Algerian state selectively liberalized investment
in the oil sector as a means of enticing business elements backing the
Islamists to the government side.[36] In Lebanon, intra-Christian
fighting, combined with the rise of Shi'i and Sunni business interests
in the 1980s, financially squeezed militias' business interests,
paving the path to the Ta'if agreement in 1989. In Iraq, by contrast,
the strong state died in the early 1980s, and signs of militia
financial fatigue do not appear.

In the first two years after the US invasion, business interests,
groups and individuals who might have comprised a professional middle
class on which to build a different Iraq fled. Some of the initial
violence—the road attacks, assassinations and bombings of
civilians—was designed precisely to push out those potential rivals to
the war economy. Unintended effects of more mundane activity in
protection rackets, monopolies and weapons smuggling probably
propelled others to exit. Most of those without the means to leave lay
low and do what it takes to get by. Much of what may be rebuilt by a
weak Iraqi government or a weak US military, therefore, will
eventually fall back into the hands of the guys with the guns and the
money.

The Sorcerer's Apprentice

Baghdad travel agent checks passports of Iraqis looking to leave the
country, June 7, 2006. (Ali Mashadani/Reuters/Landov)

Queried about the chaos that reigned immediately after the fall of
Baghdad, then Defense Secretary Donald Rumsfeld rejoined, "Freedom is
untidy. People have to make mistakes." Four years on, there is little
evidence that Bush administration officials have learned from theirs.

Faith in the capitalist firm as an agent of transition brought with it
only unprecedented levels of graft, plunder and incompetence.
Nevertheless, in the spring of 2007 US officials helped to fashion a
new draft law that, if passed, would go a long way toward privatizing
Iraq's oil sector. The specter of sectarian logic—encouraged by US
officials as they sought to manage the residual passions of a
political world beyond the market through intermediaries of their own
choosing—now haunts Iraqi political life with violent consequence. And
yet, walls are being built around Baghdad neighborhoods cleansed of
Sunnis or Shi'a, partially imprisoning the remaining residents within
sectarian cages. Recent "troop surges" correspond with an intensified
campaign of bombings in civilian areas. As of mid-2007, more than two
million Iraqis have left their country, one million have been
internally displaced and one million have been killed or wounded. Many
Iraqis who might have had the resources to resist the control of
violent groups have departed. Like Goethe's sorcerer's apprentice, the
architects of Iraq's forced revolution find themselves flailing to
contain the ghosts that they themselves called into existence.

To paraphrase de Certeau, tactics are for the poor, while strategy is
for those who make and control boundaries.[37] Part of the predicament
faced by policymakers lies in the very categories of analysis that
made the project of forced revolution thinkable in the first place. By
dividing the political world into dichotomous spheres of state and
society, regime and market, endogenous and exogenous, and so on,
transitions theory (and the invasion of Iraq was essentially
transitions theory by other means) provided categories that only
remotely corresponded with the lived experience of the Iraqis
themselves. By designating the Iraqi state, the Iraqi economy and
Iraqi society as discrete objects of transition, mainstream analysis
obscured the extent to which state, economy and society were in fact
linked to broader complexes of production and exchange that extended
far beyond Iraq's borders. For strategists in Washington and London,
war was an instrument of reform: Actors, objects and meanings would be
detached and isolated from their milieux, making it possible to
establish new relations of power and value between them. Strategists
imagined Iraq as an entity that defined the frontiers of global
transition and newness, and they saw their project as one of opening
those frontiers to the agents of a political world remade according to
the "laws of the market." Yet unlike the frontiers in the neatly
staged Hollywood westerns that seemingly formed the neoconservative
worldview, the frontier that they projected to contain their strategic
vision did not hold, not least because they arrived to find that they
were already there. Not only was Saddam's Iraq made possible by a long
history of engagement by great powers and global institutions, but the
Iraq beyond Saddam was also shaped by complex entanglements with
regional and global networks of authority and exchange. And corporate
America itself proved ambivalent about the revolutionary role assigned
to it by Pentagon planners, and did not hesitate to use US military
force, political connections and graft in the pursuit of profit.

Nevertheless, supporters of the forced revolution project continue to
present Anglo-American violence as a facilitator of historically
inevitable transformations. The violence of the insurgent, by
contrast, is presented as emanating from the recesses of a pre-market
culture. Yet the war economy in Iraq does not pit the dark,
essentialist world of the tribal smuggling networks against the agents
of an enlightened and transparent global capitalism, nor can it be
reduced to a conflict between global and local. Rather—heightened by a
peculiarly American sense of manifest destiny—it provides an extreme
example of the violence that underpins the wider project of
neoliberalism, a project that actively seeks to transform the world in
ways that make its assumptions appear as true. Resistance to such a
project is thus likely to express itself through alternative
ideological visions, thereby projecting the frontiers of conflict in
terms of a clash of worldviews. In the face of the "creative
destruction" wrought by invading forces, regular people articulate
alternative paths of "creative destruction" that may express
themselves with reference to alternative political and economic
projects, or simply arise in the struggle to get by. Absent clear
boundaries, strategy is reduced to tactics. The agents of a war
economy thus do not necessarily fight to win as such: They are engaged
within and act so as to reproduce an emergent, constantly shifting
tactical environment. Meanwhile, there will be no single declaration
of victory, no event signaling the end of one order and the beginning
of a new one. Sadly, the one thing we can be sure of is that Bremer's
cohorts in the political risk business will be there to profit from
his mistakes.

Endnotes

[1] International Crisis Group, In Their Own Words: Reading the Iraqi
Insurgency (Brussels/Amman, February 2006).

[2] Michael Eisenstadt and Jeffrey White, Assessing Iraq's Sunni Arab
Insurgency (Washington, DC: Washington Institute for Near East Policy,
2005), p. 23.

[3] Fouad Ajami, "Heart of Darkness," Wall Street Journal, September 28, 2005.

[4] Charles Tripp, "Iraq: National Power and Local Authority,"
presentation at the British Society for Middle Eastern Studies,
University of Exeter, July 15, 2003.

[5] BBC News, October 10, 2003. See also Abbas Alnasrawi, "Iraq:
Economic Sanctions and Consequences, 1990–2000," Third World Quarterly
22/2 (2001), p. 215. According to Alnasrawi, "GDP per capita in 1999
was estimated to be $883 in 1990 dollars compared with the $6,151 that
obtained in 1980."

[6] Time, April 18, 2003.

[7] Alnasrawi, p. 206.

[8] Tripp, p. 248.

[9] Charles Tripp, A History of Iraq (Cambridge: Cambridge University
Press, 2002), p. 248; and Alnasrawi, p. 207.

[10] Kiren Chaudhry, "On the Way to Market: Economic Liberalization
and Iraq's Invasion of Kuwait," Middle East Report 170 (May-June
1991).

[11] Tripp, p. 261.

[12] Braude, p. 106.

[13] Richard Garfield, "Changes in Health and Well-being in Iraq
During the 1990s: What Do We Know and How Do We Know It"(Cambridge:
Campaign Against Sanctions on Iraq, 2000), pp. 32–51, cited in
Alnasrawi, p. 214.

[14] See "The Cigarette 'Transit' Road to the Islamic Republic of Iran
and Iraq: Illicit Tobacco Trade in the Middle East," WHO Tobacco
Control Papers, University of California, San Francisco, 2004. See
also Wall Street Journal, October 31, 2002.

[15] Kilian Balz, "Reconstruction of Iraq: Dealing with Legal
Uncertainty," International Bar News (June 2003).

[16] These quotes come from Bathsheba Crocker, "Reconstructing Iraq's
Economy," Washington Quarterly 27/4 (2004), pp. 73, 75.

[17] Braude, p. 101.

[18] Food and Agriculture Organization statistics cited in Alnasrawi, p. 209.

[19] Braude, p. 115.

[20] Sarah Graham-Brown, Sanctioning Saddam: The Politics of
Intervention in Iraq (London: I. B. Tauris, 1999), p. 172.
Graham-Brown cites "Surviving Sanctions," Middle East International,
June 25, 1993.

[21] Braude, p. 119.

[22] Braude, pp. 120–121.

[23] See Christopher Parker, "Livelihood, Aggregation Problems and the
Persistence of War: Reframing Iraq's Insurgency," Conflict in Focus 4
(December 2004), pp. 4–9.

[24] Coalition for International Justice, Sources of Revenue for
Saddam and Sons: A Primer on the Financial Underpinnings of the Regime
in Baghdad (Washington, DC, September 2002).

[25] Transcript of a January 18, 2004 speech by CPA Chief Policy
Officer Richard Jones (former ambassador to Kuwait), posted at
http://www.cpa-iraq.org/transcripts/jones_kuwait.html.

[26] See Christopher Parker, "From Forced Revolution to Failed
Transition," UNISCI Discussion Papers 12 (October 2006), especially
pp. 84–90.

[27] See Pete W. Moore and Andrew Shrank, "Commerce and Conflict: US
Effort to Counter Terror with Trade May Backfire," Middle East Policy
10/3 (2003).

[28] See, for instance, Rajiv Chandrasekaran's Imperial Life in the
Emerald City (New York: Random House, 2006), which follows the few CPA
officials who quickly realized the senselessness of US privatization
programs.

[29] Fortune, July 7, 2003.

[30] See Pete Moore, "The Secret Iraq Documents My 8 Year-Old Found,"
Salon.com, May 18, 2007.

[31] United Press International, December 15, 2006.

[32] New York Times, June 4, 2006.

[33] Nir Rosen, "Losing It," Asia Times, July 15, 2004.

[34] Army Times, April 9, 2007.

[35] Our knowledge of this visit comes from André Bank, personal
communication to Parker, November 2006.

[36] See Luis Martinez, The Algerian Civil War: 1990–1998 (London: C.
Hurst and Company, 2000).

[37] See Michel de Certeau, The Practice of Everyday Life (Berkeley,
CA: University of California Press, 2000).



-- 
Yoshie