The Monetary Costs of a New Gulf War: The Global Economy Will Be Rocked by Soaring Fuel Prices, Severe Recession and Market Turmoil If the United States Iraqi Policy Backfires. (Gulf War)

By Siddiqi, Moin A. | The Middle East, April 2003 | Go to article overview

The Monetary Costs of a New Gulf War: The Global Economy Will Be Rocked by Soaring Fuel Prices, Severe Recession and Market Turmoil If the United States Iraqi Policy Backfires. (Gulf War)


Siddiqi, Moin A., The Middle East


The pending Iraqi conflict and the wider war against terrorism have cast a shadow of uncertainty over the US and by extension the global economy in the post 11 September environment. The Yom Kippur War (1973/74), the Iranian revolution (1979/80), the 1990-91 Gulf War, each conflict carries its own set of bad memories of economic depression and soaring inflation caused by runaway fuel prices.

Today, both developed-and-developing nations alike remain hostage to renewed downturns in global trade and foreign direct investment. The World Bank cautioned: "Fragile consumer confidence, under-performing stock markets and concerns about a war with Iraq could all knock global recovery off course in 2003 and there is a significant risk that the world could slip back into recession."

The Bank of England in its quarterly Inflation Report said: "Uncertainty surrounding Iraq hangs heavily over the short-term outlook for the world economy". Meanwhile, Alan Greenspan, Chairman of the Federal Reserve Board, warned: "The cocktail of uncertainties has created formidable barriers to new investment".

The potential costs of striking at Saddam Hussein's regime will depend largely on the scale and duration of military hostilities, as well as the overall capacity of the Iraqi army to withstand a US-led onslaught on a nation crippled by decades of poor governance and stringent United Nations sanctions. In recent months, various estimates of the costs of a new Gulf campaign have been reported in the British and American press. A report by the US Congressional Budget Office, noted: "Prosecuting a war would cost between $6bn and $9bn a month ... after hostilities ended, the costs of returning US forces to their home bases would range between $5bn and $7bn."

Initial deployment cost is widely assessed at $9bn to $13bn. Mitchell Daniels, the White House's Budget director, quotes a figure of $50bn-$60bn, well below the $100bn-$200bn previously arrived at by Larry Lindsey, the President's former chief economic adviser. The International Institute for Strategic Studies believes the costs of a second Gulf War at $38.5bn will fall significantly below the $65bn spent during Operation Desert Storm in 1991, when 500,000 US troops were deployed. However, in the 1991 hostilities, which lasted 43 days, wealthy allies, namely Saudi Arabia, Kuwait, the UAE, Japan and even Germany, covered almost 90% of the US's bill, which totalled $80bn in real terms. This time, with a marked lack of wider international support America may have to bear the lion's share of the financial costs of any conflict.

Asked if the flagging US economy could absorb the $60bn war costs, President Bush argued that although expensive, a pre-emptive attack would be cheaper than waiting for the Iraqi leader to make his move: "An attack from Saddam Hussein, or a surrogate of Saddam Hussein would cripple our economy," the President said.

The Washington-based Centre for Strategic and International Studies has presented an interesting analysis of the broader macroeconomic impact of war on the US economy. It suggests three possible scenarios: benign outcome (40%-60% probability); intermediate outcome (30%-40% probability) and worst case outcome (5%-10% probability).

The benign-case scenario envisages a swift campaign lasting four to six weeks and costing around $55bn. This case envisages core OPEC producers, led by Saudi Arabia, agreeing to increase oil production, thereby offsetting the loss of Iraq's 2m b/d exports. This scenario envisages no collateral damage to regional energy infrastructure such as oilfields, pipelines and export terminals.

Such a short, effective strike leading to `regime change' in Baghdad could stimulate business confidence and enable the US economy to recover this year. Crude prices might rise to as high as $36 a barrel but would drop sharply once the success of the US-led coalition was assured.

The `intermediate-case' assumes war lasting for three months with some collateral damage to oil facilities. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Monetary Costs of a New Gulf War: The Global Economy Will Be Rocked by Soaring Fuel Prices, Severe Recession and Market Turmoil If the United States Iraqi Policy Backfires. (Gulf War)
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.