How A War With Iraq Will Change The World
It's not if but when. Here are the consequences.
By Bill Powell
FORTUNE - July 2002
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 it.