Iraq to face crushing reconstruction costs

Any government in a post-President Saddam Hussein Iraq would face crippling costs as it sought to feed the people, repay debt and rebuild the country's shattered oil industry, a leading opposition figure said.

"How are we supposed to feed people and develop the country with an oil revenue of $25 billion and have money left to pay for debt and war reparations?" said Ahmad Chalabi, effective leader of the opposition Iraqi National Congress (INC).

He said the United States had to be prepared to aid Iraq and keep creditors off its back or risk instability in the country.

Whoever ends up ruling Iraq, said the former banker and professor of mathematics, would struggle to rebuild the country, even if it managed to up oil production to the six million barrels per day capacity.

He said Iraq would need $14 billion a year to import food and medicine, $8 billion to maintain oil production at present levels and $38 billion in investment to raise production. Reconstruction would require $50 billion annually for 10 years.

Chalabi expects a significant rise in Iraq's oil output to send prices plummeting, unless fellow producers in the Organisation of Petroleum Exporting Countries cut production to accommodate Baghdad.

"Iraq would have to enter into negotiations with OPEC about its share," Chalabi said, dismissing speculation that a post-Saddam Iraq would pull out of the cartel.

For decades, oil has been almost the sole source of Iraq's foreign exchange.

Iraq, which is not assigned an OPEC quota, now produces 2.3 million barrels a day, almost all under a UN oil-for-food programme. The country's 112 billion barrels of oil reserves are second behind Saudi Arabia.

Two wars and UN sanctions imposed after Iraq invaded Kuwait in 1990 have destroyed the economy.

Domestic pressure, Chalabi said, might force Iraq's future rulers to open the taps, reeking havoc on oil prices. "Iraq is a time bomb for the oil market. We will be in a serious quandary."

Chalabi is an enigmatic figure. A Jordanian military court sentenced him in absentia to life in prison on charges of swindling Petra Bank, which he headed until the late 1980s. Chalabi says he is innocent.

After escaping from Jordan, Chalabi brought scores of Iraqi opposition groups under the auspices of the INC, an umbrella organisation based in London. He lobbied for the passage of the Iraq Liberation Act in 1998, which gave money to the Iraqi opposition and committed the United States to support a transition to democracy in Iraq.

But many Iraqi opposition figures oppose Chalabi and are trying to convene a conference in Brussels later this month without his approval.

Chalabi said Saddam's military and financial blunders would come back to haunt Iraq unless there was a strategy to deal with the economy.

He was speaking as Washington took a revised resolution to the UN Security Council that gives Iraq a "final opportunity" to comply with UN weapons inspectors but leaves room for US military action if it fails to disarm.

Iraqi commercial debt, including interest, amounts to an estimated $200 billion. "It is owed to countries all over the world, including Bulgaria and Brazil. We cannot escape from it," Chalabi told Reuters in his London office.

Saddam accumulated most of the debt to pay for his 1980-1988 war with Iran, which cost Iraq an estimated $453 billion. Iraq stopped servicing its debt in 1988. Iran demands $600 billion from Iraq for starting the war.

The 1991 Gulf war was costlier. Kuwait wants $240 billion in compensation and under UN resolutions, Iraq surrenders 30 percent of its oil revenue to pay for Gulf war reparations.

The solution, Chalabi says, is for the United States to implement the Iraq Liberation Act, passed by Congress in 1998.

The legislation says the United States should provide assistance for Iraq once Saddam is removed and convene a conference for the country's creditors.

"The United States must step in," says Chalabi. "Iraq could end up harming everybody, including itself."