Magazine article Washington Report on Middle East Affairs

After Sales to Iraq Begin - What?

Magazine article Washington Report on Middle East Affairs

After Sales to Iraq Begin - What?

Article excerpt

After Sales to Iraq Begin -- What?

By the end of February, the United Nations had approved 33 contracts for Iraq to sell oil on the international markets. The proceeds amount to $518 million and the Iraqi government can now use the money to buy food, medicine and other humanitarian items.

What is Iraq buying? By March 5 the U.N., which must also approve Iraqi imports, had okayed some $152 million worth of sales contracts -- 15 requests out of 37. A few large contracts for wheat (France and Australia), rice (Thailand) and tea (Jordan) totaling $100 million have been signed and approved and the goods should begin arriving by the end of March. Other contracts are for baby food (France, Tunisia) and soap (the U.K.).

Few U.S. Companies Interested

Only a few U.S. companies have shown much interest in selling to Iraq. According to the U.S. Treasury Department, whose Office of Foreign Assets Control has to vet potential U.S. sales, five applications, all of them commercial food deals, are in various stages of approval.

That's not surprising. The U.S. has never done a lot of business with Iraq. For much of the first half of this century Iraq was a British commercial preserve. Then, after a bloody military coup in 1958, the country became a hard-to-deal-with military dictatorship with a prickly statist ideology and a definite tilt toward the East Bloc.

Like a number of the more hard-line states in the region, Iraq broke diplomatic relations with the U.S. during the 1967 Arab-Israeli war and kept them broken. Though the U.S. did maintain an interests section in Baghdad, its commercial efforts were low-key.

Bad diplomatic relations were not the only reason the country has been a hard place for Americans to do business. Iraq also became one of the toughest enforcers of the Arab boycott of Israel, a policy that did much to keep U.S. business out of the country, says Howard L. Stovall, a Chicago-based lawyer with extensive experience in the Gulf.

"Tough Iraqi enforcement meant that U.S. companies couldn't register trademarks. In many cases they couldn't set up branch offices and they couldn't compete for Iraqi government contracts," says Stovall. "Doing business there was extremely difficult."

In the 1980s, relations improved and the U.S. opened an embassy in Baghdad in 1984. By the time the U.S. got up to speed in the mid-1980s, Iraq was in a cash crunch in its 1980 to 1988 war with Iran, so there wasn't a lot of money for big projects and there was very little opportunity for the Americans. Most U.S. sales to Iraq were agricultural, many of them financed by the Banca Nazionale di Lavoro's scandal-plagued Atlanta branch.

Beyond the boycott, firms had the difficulty of dealing with a statist government. Before the Gulf war, the Iraqi government controlled 90 percent of foreign imports. When so much trade is in the hands of a government, politics become tremendously important commercially. In Iraq's case it was the politics of the Arab-Israeli dispute. How a company's home government approached that dispute determined, partly at least, whether the company got contracts or not.

All in all, therefore, Iraq has been an unhealthy place for U.S. business.

Europeans, Japanese Major Suppliers

Not so for the Europeans, especially the East Europeans, and the Asians. Some European and Asian firms, in fact, have a 20-to 30-year history in the country. Some of them presumably still have physical assets in Iraq, an old office here or there, some equipment, corporate records. They have dominated foreign contracting in Iraq since the 1950s, a history that is going to count for a lot commercially. …

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