The War Economy of Iraq
Christopher Parker and Pete W. Moore
Christopher Parker is assistant professor of political and social science at Ghent University in Belgium. Pete W. Moore is associate professor of political science at Case Western Reserve University.
British Soldier on patrol in Basra province. (Toby Melville/Reuters/Landov)
On May 26, 2003, L. Paul Bremer declared Iraq “open for business.” Four years on, business is booming, albeit not as the former head of the Coalition Provisional Authority intended. Iraqis find themselves at the center of a regional political economy transformed by war. Instability has generated skyrocketing oil prices, and as US attitudes to Arab investment have hardened in the wake of the September 11 attacks, investors from the oil-producing Gulf countries are seeking opportunities closer to home. This money, together with the resources being pumped in to prop up the US occupation, is fueling an orgy of speculation and elite consumption in the countries surrounding Iraq. The sheer volume of loose change jingling around the Middle East would be potentially destabilizing even if fighting did not persist in Bremer’s erstwhile domain.
War and profit have always gone hand in hand. In Iraq, as well, a “war economy” is firmly rooted, yet it has gone largely unexamined in the stacks of books and articles dissecting Washington’s grandiose venture gone bad. Armed with ideological assumptions and economic quick fixes, US occupation officials pursued policies that, at a minimum, aggravated the severe social dislocation wrought by war, privatization and sanctions before 2003. Today, militias supporting or opposing the Iraq government—not the government itself—control import supply chains and, indeed, regulate whole sectors of the Iraqi economy. At the same time, the people who earned a living through the antecedent networks of the war economy are attacking the new US-sponsored political order. These insurgents include not only those “Iraqis who miss the privileged status they had under the regime of Saddam Hussein,” as President George W. Bush would have it, but also—indeed mostly—ordinary working people who are protecting livelihoods they built in the shadow of Baathist dictatorship. Countless other civilians are caught in the crossfire as the struggle to make ends meet has become deeply politicized.
Evidence of Iraq’s war economy is fragmentary. Amman—arguably the city where the business of occupied Baghdad is really done—is a veritable rumor mill. Leads are difficult to follow and confirm, as the individuals involved are wary of admitting to war profiteering and economic data are uneven. But the fragments start to form a recognizable pattern when set in a comparative frame. The Iraqi case fits well within the large scholarly literature on the economics of civil war. Not all civil conflicts are the same, of course; some end quickly, while others endure. When available evidence on Iraq is compared with the lengthy civil wars in Lebanon from 1975–1991 and in Algeria in the 1990s, ominous parallels come into view. During those civil wars, much of the money to fund militias and state-sanctioned violence alike came from the control of external trade and the taxation of regions under militia or state control. These dynamics did not simply emerge in the chaos of war, but were grounded in longer trajectories of international involvement, state atrophy and grassroots political economy.
The US project in Iraq, nothing less than a forced revolution, was more radical in its means than in its way of viewing the political world. And while today’s deepening war economy certainly owes a great deal to the early zeal with which US officials sought to remake Iraq as a free marketeer’s paradise, any eventual autopsy of the Bush administration’s imperial fiasco needs to cut deeper than the blunders of Bremer and his subordinates to reveal the fundamental failures of political imagination that lay beneath.
Iraq Beyond Saddam
“In Iraq, the US fights an enemy it hardly knows,” wrote the International Crisis Group in the executive summary of a 2006 report. “Its descriptions have relied on gross approximations and crude categories (Saddamists, Islamo-fascists and the like) that bear only passing resemblance to reality.”[1] Over a year later, US and British officials from Bush and Prime Minister Tony Blair on down continue to speak in stereotypes when describing the guerrillas’ motivations. Washing their hands of any responsibility for the violence that plagues Iraq, they present the insurgency as springing from a yearning for lost domination on the part of groups linked to the Saddam-era state. This is the statist narrative—the idea that Saddam’s regime controlled everything worth controlling before it was overthrown. More amorphously, mainstream analysts trace the insurgency’s origins to the aggrieved “thought world” of Iraq’s Sunni Arab community.[2] Suggesting that the insurgency is rooted in the “majoritarian mindset” of Iraq’s Sunni Arabs, Fouad Ajami further notices a Sunni Arab susceptibility to the “dark appeal” of revived histories that dredge up anti-Shi‘i prejudices and “the panic of a community that fears it could be left with a ‘realm of gravel and sand.’”[3]
To be sure, sectarian fears and religious extremism—as well as foreign occupation—are powerful causes of the ongoing violence, but the sectarian narrative renders invisible the everyday concerns and struggles of people trying to survive in conditions of war. It makes more sense to locate the roots of resistance and intra-Iraqi violence in structures of collective action and social regulation that took shape over the course of the 1980–1988 Iran-Iraq war, and were consolidated during the state’s economic opening in the 1980s and the early years of the UN sanctions. Clearly, and contrary to the assumptions of the statist narrative, the state retreated considerably from the economy over the last two decades of Baathist rule, a period that also witnessed plummeting standards of living for ordinary Iraqis. Yet the social reverberations of these economic upheavals are rarely considered.
Mainstream accounts of the 1980s and 1990s preserve the centrality of the state by charting the rise of what Charles Tripp has referred to as the “shadow state”—a web of informally regulated networks that leveraged statist agency (e.g., the ability to make and enforce internationally binding contracts or employ nominally legitimate coercion) to create domestic enclaves for the private accumulation of capital and power.[4] Even as the state’s formal regulatory powers began to shrink during the 1980s, the social impressions left by a legacy of rent-fueled state centralization and militarization remained to preserve the essence of Saddam’s power. This narrative is certainly persuasive as far as it goes. But the tendency to present the regime, however formally weakened, as the programmer of economic and social activity elides the agency of the Iraq—some 27 million Iraqis, in fact—beyond Saddam. As statist agency receded, it was replaced by conditions of multiple jurisdiction and sovereignty: Localized social structures, transnational trade networks and a globalized sanctions regime came together to create new economic opportunities and impose new constraints. Nevertheless, even if “the regime” as such controlled less than conventional analysis would suggest, central regime figures were elevated by their ability to mobilize the state’s remaining powers and control oil resources. In other words, the regime was able to dominate, but not necessarily in ways of its own choosing. Understanding the relationship between conflict and economy in contemporary Iraq requires a recounting of the rapid economic decline in the 1980s and 1990s.
In 1980, Iraq was a net creditor and considered home to one of the region’s most advanced economies. By early March 2003, as US and British forces amassed on its southern border, it had become one of the world’s poorest and most underdeveloped countries. Average annual income had fallen from between $3,600 and $4,000 in 1980 to between $500 and $600 by the end of 2003.[5] On the eve of the invasion, Time reported: “Industry has ceased to exist and unemployment may be as high as 50 percent. The agricultural sector is in complete disarray, leaving more than 60 percent of the population to rely on the UN Oil for Food program [for basic needs]. About 40 percent of the nation’s children are suffering from malnutrition.”[6]
This dramatic decline in living standards coincided with a long deterioration of Iraq’s major industries. In the first year of the Iran-Iraq war, oil production fell from 3.4 million barrels per day to just under a million.[7] Oil revenues continued to drop off for the duration of the conflict—totaling $11 billion, less than half the pre-war amount, in 1988—while military spending remained high.[8] The result was the increase of foreign debt to over $80 billion by 1988, the draining of foreign reserves and the abandonment of development projects.[9] The war also led to a wider militarization of Iraq’s economy, draining human and financial resources away from manufacturing and agriculture. By the time the war with Iran ended, more than 20 percent of the labor force—over one million people—were employed in Iraq’s armed forces. While Saddam claimed victory in the war, his adventure had left a heavily indebted state with a physical infrastructure in great need of repair.
Masked insurgents on patrol in Ramadi. (Ali Mashadani/Reuters/Landov)
Saddam responded to the crisis of state accumulation by implementing a sweeping program of economic liberalization (infitah). The program had its origins in efforts at reforming the agricultural sector in the early to mid-1980s, but its scope and intensity increased dramatically by late 1987 and into 1988. All industries deemed non-essential to the health of state coffers and military preparedness were jettisoned in a frenzy of privatization. As Kiren Chaudhry notes, “Whereas Egypt’s widely publicized infitah policy resulted in the privatization of exactly two factories over a period of 15 years, in a single year the Iraqi government sold 70 large factories in construction materials and mineral extraction, food processing and light manufacturing to the private sector.” The selloff was, if anything, more sudden in agriculture. By 1989, 99 percent of Iraq’s agricultural land—half of which had been state-owned since the 1960s—was either privately owned or leased from the government by private investors on favorable terms. The main beneficiaries of Saddam’s infitah were by and large the same people who, by virtue of their connections to government power brokers, had profited from the massive amounts of government spending on construction during the oil boom of the 1970s. Laws were changed to allow for large-scale, cross-sectoral investment, and the tax on corporate profits was reduced to 35 percent. In the end, most of the new captains of industry and agribusiness sacked 40–80 percent of their workers.[10] The end of the Iran-Iraq war also brought the decommissioning of over 200,000 soldiers, who were simply put out on the street amidst high unemployment and food shortages.
These moves had the knock-on effect of making many state regulatory agencies redundant, sparking massive layoffs in the public sector and precipitating the collapse of effective economic regulation by the state bureaucracy. Thus, while Saddam’s government remained in control of oil and other strategic industries, and remained the agency of necessity and choice with regard to large investment or trade contracts with large foreign firms, broad swathes of economic life were simply left to the vagaries of petty market action and struggle. Meanwhile, inflation began to skyrocket.
The international response to Saddam’s invasion of Kuwait—a devastating military campaign during the early months of 1991 and draconian sanctions in place for the next 13 years—pushed Iraq’s economy from bad to worse. More of Iraq’s economic infrastructure was destroyed in six weeks of allied bombing than in the eight years of war with Iran.[11] Sanctions further eroded the gross domestic product and wrought havoc upon the personal finances and life chances of untold numbers of Iraqis. Following the freezing of Iraqi banks’ foreign assets and the subsequent devaluation of the dinar, “savings of 2,000 dinars that once would have paid out $6,000 were suddenly worth only $2.”[12] Experienced technicians and professionals working in Iraq’s crumbling hospitals, laboratories and universities found themselves forced to emigrate or seek income-generating opportunities in the informal sector to make ends meet. The precipitous decline in the number of children attending school in the sanctions years may have caused the adult literacy rate to drop from 80 to 58 percent.[13] In 1996, the World Health Organization concluded that sanctions had set back Iraq’s health care system by 50 years.
Inevitably, as the ability and willingness of state officials to govern economic life through formal channels dissipated, new configurations of regulatory power arose to take their place. These configurations were not necessarily congruent with, or contained within, Iraq’s borders. Transnational tribal allegiances were mobilized to facilitate and regulate trade across international borders. Businessmen-politicians in neighboring countries cultivated links with members of Iraq’s Republican Guard (among others) in order to facilitate and protect networks of transport and distribution. And small-time trade networks emerged to profit from differentials between countries in prices for petroleum and other products. Major multinational corporations also took advantage of the multiple jurisdictions. Consider the case of RJ Reynolds, whose involvement in cigarette smuggling to Iraq was the subject of European Union legal action in 2002. Coordinating operations from Switzerland, home to congenial bank secrecy and business privacy laws, the company sent master cases containing 10,000 cigarettes each for loading and unloading at ports in Spain, from whence they were shipped onward through holding companies in Cyprus, before being redistributed through the free zone in Mersin, Turkey. They were then transported over the mountains between Turkey and Iraq via Silopi Pass, moving through the hands of agents operating in Kurdish-controlled regions of northern Iraq before ending up at one of the many smoke stands located along Iraq’s roads and highways.[14]
Cats of the Embargo
It is difficult to imagine any regime surviving intact—much less retaining statist agency in the economy—through turmoil such as that experienced by Iraq over the past three decades. Nevertheless, observers have been remarkably consistent in presenting capital formation and livelihood in Saddam’s Iraq as variables strongly determined by state intervention. As late as 2003, observers could note that the state sector accounted for 80 percent of Iraq’s GDP,[15] a figure which hardly measures state power or economic centralization. Nevertheless, it is typical for an author writing on the present day to first assert that transforming “a centrally planned economy to a market economy” is a primary challenge facing the engineers of change in Iraq, only to later note that “the United States found [in Iraq] an economy that essentially needed to be rebuilt from scratch, crushed by decades of wars, sanctions and atrophy due to Saddam’s neglect of the population’s needs.”[16] The contradiction apparent in these statements reflects the degree to which emphasis on the person of Saddam Hussein led mainstream observers to imagine the passivity, even emptiness, of the Iraq that lay beyond his extended circles.
Claims regarding state control over the economy tend to brush over key facts. For example, while over 75 percent of Iraq’s labor force remained employed in the public sector on the eve of the March 2003 invasion, the average salary of a civil servant was only $5 per month.[17] Similarly, while more than half of the population was dependent upon government-controlled food rationing during the early 1990s, these rations accounted for only 37 percent of per capita caloric intake in the pre-sanctions era.[18] Inadequate diets and purchasing power placed a premium upon plots of arable land and their crops. Local tribal sheikhs were given considerable scope in the regulation of the rural economy, and used their position and networks to expand and diversify their economic activities. In short, the kind of formal accounting upon which claims about the nature of economic transition in Iraq are made obscures the importance of gray and black markets to the simple tasks of eating and earning a living over the past two decades.
In a very real sense, the conditions that obtained in Iraq from the late 1980s onward resembled conditions of war. People accustomed to “a culture of laziness” sustained by enormous oil revenues were forced to take extraordinary measures to make ends meet.[19] Hyperinflation, massive public-sector layoffs and food shortages shaped Iraqi society as it moved from the dislocations of the infitah to the devastation of war to the ruin of sanctions.
Highly profitable transnational alliances between elite businessmen cum regime figures emerged in the 1980s and 1990s. But smaller-scale networks of trade flourished as well. In her 1999 study of sanctions-era Iraq, Sarah Graham-Brown noted:
The people who run the black market in both petrol and basic foodstuffs, and luxury items like whiskey and Western cigarettes, are actually members of the lower middle strata of Iraqi society, hardened war profiteers who managed to survive as soldiers and smugglers during the Iran-Iraq war as well as the Gulf war which followed. Many of these “new elements” in society have links with Iraq’s large and once powerful rural clans. Coming mostly from the lower echelons of these clans, the new merchants are both Shiites and Sunnis…. The goods they handle are mostly smuggled from Syria, Turkey and Iran.[20]
Proprietors of small retail businesses came to rely on the smugglers’ “taxi service” to stock their shelves. One Baghdad repair shop owner told Joseph Braude: “My supplier sends me products via Jordan in trucks. The driver charges you $100—but you are not paying any tax. As for the border guards, just give them a pack of cigarettes and a can of Coke—that’s more than enough. They will leave you alone.”[21] Even petroleum smuggling—typically seen as an activity requiring the resources of big players operating within the purview of the regime—was a source of livelihood for thousands of Iraqis operating beyond the control and surveillance of the state. Drivers equipped their cars and trucks with extra tanks that were filled with subsidized diesel and gasoline at filling stations on Iraq’s border with Jordan, and then simply driven over and sold to middlemen in Zarqa or Amman.
In between, one could find the qitat al‑hisar—the “cats of the embargo.” “Unlike high-ranking Baath Party hacks who lived mainly by leveraging their government influence,” writes Braude, “the cats engaged each other in rough-and-tumble competition in what became an underworld’s dark meritocracy. They spanned Iraq’s ethnic and sectarian rainbow, including many Shi‘a and Kurds. Cats hailing from disenfranchised communities maintained a businesslike rapport with the country’s political bosses, paying them with the bribes they demanded in exchange for autonomy in the black market.”[22] But outside this “dark meritocracy,” the system relied on regular working people to drive the trucks carrying oil and other goods, walk through the mountains from Turkey with backpacks full of cigarettes and look the other way as some aspect of state regulatory control was subverted. These activities were not simply individual acts of opportunism, but practices within a grassroots political economy of meaning. Today, many of these same people—people who can hardly be described as beneficiaries of the Baathist regime—ply their trade under threat from new agencies, technologies and infrastructures that have been introduced with US-sponsored “reconstruction.” While presented in the neutral language of development and modernization, these agents and infrastructures are hardly politically neutral. Those whose livelihood depended on the oil tanker trucks, for example, are now threatened by the repair and restoration of Iraq’s pipelines. Thus even resistance to foreign control over Iraqi oil is often motivated by something other than nationalism.
To date, observers have not fully taken into account how the project of reconstituting a market in Iraq has selectively criminalized certain socioeconomic actors and empowered others.[23] The imposition of new rules through the barrel of a gun has abruptly rendered petty trade networks constructed over decades untenable or even illegal. Moreover, sovereignty in Iraq is now even more fragmented than in the 1990s. The new Iraqi constitution allows for de jure autonomy for geographic regions—the majority-Kurdish provinces and several provinces in the south—that are already autonomous de facto. The current government’s would-be monopoly on coercive violence is distributed among US forces, Iraqi security forces and private security contractors who are becoming an increasingly institutionalized feature of the post-Saddam landscape. Furthermore, Iraqi security forces have clear and overlapping ties with local militias: Insofar as security force elements were active in the informal economy under sanctions, army decommissioning may have simply led to a privatization of coercive violence from below that ironically mirrors the Bush administration’s subcontracting of war- and occupation-related services to US firms.
On the Road
Whether cats of the embargo or regime fat cats involved in sanctions busting on a grander scale, informal traders were but one node in wider networks that were regional, even global in scope. It stands to reason that these networks survived the 2003 invasion, but the question of how the evolving war economy of Iraq is connected to regional political economies is a tricky one. By their very nature, such linkages are not well-advertised. Who is making the money? Who is deciding who makes the money? In many cases the complete answer lies outside Iraq, so one place to start is on the road.
The roads, rivers and pipelines of Iraq. Only major highways are shown. (Holly Syrrakos/Go! Creative)
In Iraq today, there are three major trade routes that are the loci of struggle between competing militias and the various agents of occupation as they seek to shape and regulate economic exchange. The first follows Highway 1, heading north from Baghdad through the oil refining and industrial town of Bayji. From Bayji, the route continues to Mosul and on toward the Syrian border. The second route is Highway 10, which heads west from Baghdad to Amman, passing through Falluja and Ramadi—the “Sunni heartland” of al‑Anbar province—before traversing the vast desert. Highway 6 is the main road from Baghdad to Basra, with way stations in Kut and ‘Amara—strongholds of Muqtada al‑Sadr’s Mahdi Army. Highway 8 offers a western passage to the south, leaving Baghdad and running through the town of Hilla—skirting the Shi‘i shrine cities of Najaf and Karbala’—before heading to Basra, where it meets up with Highway 6, which continues down to Umm Qasr and Kuwait. These towns are all noteworthy locales, as either frontier outposts along long-distance trade routes or nodes of oil infrastructure or centers of the rise of the Shi‘a. Bayji is also located close to the de facto border between central Iraq and the Kurdish-regulated areas, while Hilla and Kut are the gateways to southern Iraq. Not coincidentally, all of these cities have been flashpoints of conflict over the past four years.
The importance of these trade routes cannot be overstated. Like most Gulf countries, Iraq has been highly dependent on a full range of consumer and industrial imports since the 1950s. Control of those supply chains and roads facilitated the selective privatization begun in the late 1980s, and re-exporting neighbors utilized those same links for their own political ends. All of this trade was organized through bilateral protocols ensuring the political control to reward allies and punish rivals. Of course, these arrangements were not foolproof, and so smuggling networks concentrated in border areas thrived, especially as war and sanctions began to take their toll and Baathist officials lost control over whole sections of the country. In tandem—formal, state-regulated trade on top and tolerated local smuggling at the bottom—these arrangements tied Iraq to its neighbors in politically consequential ways. Powerful Baathist bureaucrats leveraged their political positions to cement connections to traders in neighboring states. Lower-level smuggling also involved cross-border connections, though these were more based on tribe and kinship than political power. Following Highway 10 to Jordan illuminates how these networks shaped post-2003 Iraq.
Though fears of Iranian influence, Turkish invasion and Syrian complicity seem to dominate discussion of the external players in Iraq’s violence, by far the most important country in political economy terms, to the Sunni insurgency (responsible for the vast majority of American causalities) is the Hashemite Kingdom of Jordan. The political and social histories of modern Iraq and Jordan are bound tightly together. The deep ties between families, tribes, political movements and economic actors across the borders of these two countries have a history that, by and large, has yet to be written. While far from transparent, linkages between the Jordanian establishment and the constituent elements of Baathist power—together with connections to the Sunni tribes of al‑Anbar—are less obscure.
The war with Iran ended operations of Iraq’s only port, Umm Qasr. By 1982, Jordan’s port of ‘Aqaba became the primary location receiving imports destined for Iraq and shipped by sea. A number of Iraqi-Jordanian trade agreements followed, to expand ‘Aqaba’s capacity, widen Highway 10 and establish a trucking firm to move goods from ‘Aqaba to Baghdad. Iraq quickly became Jordan’s largest trading partner. Officials agreed to a protocol whereby oil priced significantly below market value was supplied to the Jordanian government in order to fund exports back to Iraq. Estimates of that fund vary, but reasonable estimates suggest a value in the hundreds of millions of dollars each year.[24] Wild stories about side deals and the general graft of the protocol decades still make the rounds in Amman today.
Like their Baathist counterparts, Hashemite officials in Jordan chose the recipients of these lucrative deals. These cronies and their supporters helped keep the Hashemite regime afloat during its own financial storms in the 1980s and 1990s. This form of direct political patronage coexisted alongside extra-legal forms of trade that were also winked at. Over-invoicing of exports, false bills of lading at the port of ‘Aqaba and substandard goods were among the ways Jordanian and Iraqi traders increased their profits. In addition, the trade networks supported an increasingly important labor market in Jordan. Thus did gilded trade linkages within and between Iraq and Jordan tie the political future of each regime to the other.
Many but not all of the traders and industrialists connected to Iraq, then and now, are East Bank Jordanians (as opposed to Palestinians). Additionally, the transportation labor dependent upon Iraq trade is composed of lower-income, rural East Bankers located in the southern part of the country. The economic and political rationales that linked the Jordanian transportation labor, the Amman-based exporters and the Sunni importers in Iraq also overlapped with and animated tribal and religious sympathies. That some of the truckers and small-time traders might moonlight for the black market was to be expected. The imposition of sanctions after the invasion of Kuwait only forced this network to craft more durable and clandestine mechanisms of operation. Thus, it was hardly a secret that the failure of the 1990s sanctions to impoverish Baathist elites was due primarily to sanctions-busting trade routed through Jordan.
On the eve of the 2003 invasion, Highway 10 was both sinew and symbol. It was a mainstay of the Iraqi regime’s political economy of survival, yet also emblematic of how much its power had dissipated and been disfigured since the 1980s. If Highway 10 is the path to understanding Iraq before 2003, then Highway 8 heads south into the post-2003 period.
Same Truck, Different Driver
In 2003, Highway 8 from Kuwait carried US troops and the bureaucrats of the Coalition Provisional Authority (CPA) northward to Baghdad. It also served as the spinal cord of the political economy of Shi‘i militias and parties freed from Baathist control. CPA officials came primed to supply Iraq with “the most liberal investment regime in the entire region.”[25] What they provided instead was a regulatory vacuum in which local networks of trade found themselves arrayed against politically favored, well-armed agents of corporate America, backed by the US military.
While presenting their project as introducing universal values of free markets and good governance to Iraq, US policymakers, CPA officials and American firms were themselves deeply implicated in selecting the winners and losers of the new order, revealing the deep politicization of the supposedly neutral occupation regime. In any case, promise of access to the Iraqi market and reconstruction projects was central to Bush administration efforts to build a domestic and international coalition in advance of the war. By luring into Iraq commercial actors whose interests coincided with dominant perceptions of the US interest, policymakers no doubt sought to erect an edifice of indirect rule without the undue burden of direct US military, financial and diplomatic input. Indeed, in predicting $50–100 billion in oil revenues in the first two to three years after Saddam’s fall, ex-Deputy Defense Secretary Paul Wolfowitz drew a picture of a self-financing (and market-regulated) transformation, thus freeing US strategists to advance wider goals in the region.[26]
Iraqi businessmen look at a bullet-riddled armored car during the Iraq Rebuild exhibition held in Amman, April 4, 2005. (Ali Jarekji/Reuters/Landov)
Bremer used this new mandate to justify implementation of a wide-ranging agenda of neo-liberal economic reforms. In the June 20, 2003 Wall Street Journal, he announced a “wholesale reallocation of resources and people from state control to private enterprise.” The makeover list included: revamping the banking system, modernizing the stock exchange, privatizing some 120 state-owned enterprises, tax reform and removal of all restrictions on foreign investment through suspension of all customs duties and tariffs. The idea that free trucking and bartering generate stable liberal politics has a spotty record in the developing world and is a uniform failure in the Middle East,[27] but this did not deter Bremer and his staff of experts. The viceroy himself was no stranger to political risk in the name of profit, having set up Crisis Consulting Practice in 2001, under the umbrella of insurance company Marsh and McLennan, to advise major corporations on investing in trouble spots. Anecdotes about how the CPA’s neat ideological ordering of the world eventually yielded to reality are now numerous.[28] US economic consultants arrived to find that “street-corner money-changers, some of whom the US suspects are linked to organized crime,” were setting the currency exchange rates. With “no data available to crunch,” experts found themselves reduced to “figuring out how best to stack money inside a truck.”[29] By the time of the handover in June 2004, CPA economic and development teams were doing little more than claiming progress on granting commerce licenses and visiting business delegations.
Given the pre-2003 roots of the war economy, how much responsibility do CPA policies shoulder for its maturation? The blunders of the CPA have become lore, allowing criticism of the project to focus on failures of execution. It is not hard to pick up the refrain that if only the US had done this or that, the US could have succeeded.
The failure was not in execution, however, but in the delivery itself. Occupation plans and security contingencies, good or bad, simply added to the maelstrom of political, social and economic dislocations that had already had most Iraqis feeling the pinch. Big cats and small cats, together with American corporations and the would-be empire builders among returning Iraqis, all saw CPA policies for what they were, ideological fantasies, and none were squeamish about using violence to shape the market in their favor. Just consider the words of an Iraqi businessman quoted in internal CPA documents: “It is nothing personal. I like you and believe you could be bringing us a better future, but I still sympathize with those who attack the coalition because it is not right for Iraq to be occupied by foreign military forces.”[30]
After the dissolution of the CPA, militias appear to have carved out or coopted their own areas of economic control and regulation. If the Algerian and Lebanese experiences are a guide, then these militias and underground economies are likely interdependent. Also, far from representing forces that are somehow excluded from or antithetical to globalization or market forces, they are firmly linked to big players in the global economy via connections in neighboring countries. Their trade was not simply in oil and alcohol, but also in food and consumer goods, and with the arrival of the CPA, they found themselves suddenly in competition with well-positioned big traders surfing atop a tidal wave of duty-free consumer goods and packaged meals.
Down Highway 8, the main Shi‘i militias and parties—under the nose of the occupying powers—have monopolistically carved up the economy in ways that resemble the practices of their Baathist predecessors. Media reports depict southern cities overrun with goods coming over the border from Iran and re-exported from Gulf ports, primarily Dubai. Control over the transportation and lodging of Shi‘i pilgrims has reportedly been centralized by ‘Ammar al‑Hakim, son of the powerful leader of the Supreme Islamic Iraqi Council, ‘Abd al-‘Aziz al‑Hakim. Al-Da‘wa and Sadrist elements can logically be assumed to be in the game as well. Below the major players, minor smugglers shuttle smaller amounts of goods across the Iranian border. Marshland oil smugglers amount to thousands of pinpricks that have cut southern Iraq’s oil production in half.[31] More sophisticated pipeline attacks underscore the links between post-2003 acts of sabotage and the legacy of a grassroots political economy beyond the state. For most of the past four years, such attacks have been interpreted as a tactic for undermining the occupation. More recently, however, observers have become aware of the economic motives for these attacks. Throughout the 1990s, most of Iraq’s oil was transported in relatively small tanker trucks—to Jordan and Turkey with dispensation from Washington and undercover to Syria and the Gulf. As the pipelines to Turkey and the Gulf were turned back on in 2003, most of these truckers—many of whom had close ties with, and indeed colleagues in, neighboring countries—were out of a job. Hence, it is not surprising to learn that pipeline attacks “are now orchestrated by [insurgents and criminal gangs] to force the government to import and distribute as much fuel as possible using thousands of tanker trucks.” The same news story continues: “Ibrahim Bahr al-‘Uloum, a former oil minister, said it was obvious that crude oil pipelines connecting the northern wells with refineries and power plants farther south, in the Baghdad area, had been repeatedly struck to force trucks to move the crude. Oil employees trying to fix the pipelines had sometimes been kidnapped and killed. Both the trucking companies and groups in the protection rackets were probably complicit in some way, he said. ‘This is a business for the people who are working in the trucks.’”[32]
Headed west on Highway 10 the same themes vary slightly. Thousands of Iraqi trading companies have relocated to Amman, drastically inflating real estate prices in the upscale neighborhoods of the Jordanian capital. The families and finances of former Baathist officials have followed. Re-exports from ‘Aqaba are up, as is cross-border truck traffic to Iraq. Jordan’s massive trade deficit is driven in large part by the increase in imports, which are re-exported to Iraq. Today, Amman is a bizarre menagerie of war profiteers, not so secret agents, gloomy security consultants and former Baathists all rubbing elbows in the same upscale bars and hotels. Interviews with businessmen in Jordan suggest that, after initial chaos along Highway 10 from Jordan, rural insurgent groups now protect and manage the trade through internal agreements and with the cooperation of their Jordanian counterparts. The city of Falluja is a notorious example of these arrangements.
[font="Times New Roman Times serif"]Strategically located on Highway 10, Falluja is home to many people who have strong links with their tribal kin across the border in Jordan and Saudi Arabia. Also, the proportion of Fallujans in the Iraqi intelligence services is reported to have been the highest in the country.[33] This combination made Falluja a key node for underground trade during the 1990s, and a focal point for efforts to control trade in the post-2003 order. Against this backdrop, it is no coincidence that the overwhelming majority of foreigners kidnapped and held in Iraq have been truck drivers, mostly from Turkey, Egypt and the Philippines.