Take a look at how oil can transform a barren desert into an oasis of wealth and privilege — Kuwait city, 12 years after the gulf war, is a glistening, bustling metropolis; Bahrain looks an awful lot like Tampa or Phoenix; Qatar has transformed overnight with a huge natural gas discovery; Dubai is as modern a city as you’ll find anywhere in the world. And now Iraq: Even before the war, the vast majority of Iraqis lived in extreme poverty — dependent on the U.N.’s oil-for-food program as the nation’s tremendous oil wealth was hoarded by Saddam Hussein and his henchmen.
THE QUESTION TODAY — what will it cost to rebuild?
“Upwards of $20 billion a year for several years for the requirements of post-conflict peace and stability as well as reconstruction in post-war Iraq,” said Eric Schwartz, director of the post-war Iraq task force at the Council of Foreign Relations. Schwartz’s estimate is based on 75,000 U.S. troops on the ground — not the hundreds of thousands the Army’s chief of staff estimated.
“Under the best of circumstances, we’re not going to create a Switzerland in the Persian Gulf in 6 months. It’s not going to happen,” Schwartz said. “The key will be perseverance - which is why it’s all the more important why the president discusses with the American people the magnitude of this commitment and commit to a multi-billion dollar, multi-year engagement.”
Rebuilding will depend largely on tapping Iraq’s oil reserves — thought to be the second or third largest in the world. At its height, Iraq was producing 3.5 million barrels a day. Before the war, it had a capacity of just under 3 million barrels a day.
Daniel Yergin, president of Cambridge Energy Research Associates, estimates Iraq could up that to 6 million barrels a day by 2010, although he noted, “It’s currently estimated it could take $5 billion - $7 billion and about 2 years to get the industry back to where it was. It’s an investment that’s required in oil wells, pipelines, ports — the whole infrastructure of the industry.”
And consider this: There are only 15 developed fields out of 73 already discovered. Tapping those undeveloped fields could require a massive $30 billion corporate investment!
SEEKING STABILITY
“International companies — whatever their nationalities — are not going to rush-in to spend large sums of money until it’s clear that there is a stable business environment and a stable political environment,” Yergin said, adding that it could be ten years before Iraqi capacity increases beyond the daily 3.5 million barrels a day.
There’s one more issue likely to weigh on post-war Iraq: War reparations the new government could be forced to pay to citizens, corporations, governments, and non-governmental organizations who suffered because of Saddam’s actions. And those reparations would likely be paid out of the oil revenues — just as they were after the first Gulf war.
“We’re talking about billions of dollars, ” said Nancy Geenan, formerly the senior legal officer in the United Nations’ compensation commission. “I was in charge of the construction engineering claims from 345 claims from 45 different companies” totaling about $10 billion.
The largest she handled was an $800 million claim from a Russian construction firm. The smallest was a 20-thousand dollar individual claim.
And this war is still hot.