from Follow the Money

Nation Building 101

August 4, 2005

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Make sure the army gets paid on time.

The reformed Iraqi Ministry of Defense, a crucial element of any American plan to withdraw troops, is riddled with crippling problems that have raised concerns about its ability to keep Iraqi units paid, fed and equipped once it assumes full responsibility for the army, American and Iraqi commanders say.  ... "What are lacking are the systems that pay people, that supply people, that recruit people, that replace the wounded and AWOL, and systems that promote people and provide spare parts," said a top American commander in Iraq, who asked not to be identified because his assessment of Iraqi abilities went beyond the military's public descriptions.

Nation building 101 (a)

Make sure the army pays its suppliers.

The ministry has responsibility for feeding troops and for operating the growing number of bases where soldiers are stationed around the country, but those jobs are handled largely by Iraqi contractors, many of whom came close to shutting down their operations last month after not being paid for weeks, American officials said.

Nation building 101 (b)

Don't ration gasoline.

Separately, Iraq, claimant to the world's second-largest oil reserves, announced fuel rationing during a summer of miles-long gas lines. The reasons for the rationing cited by government officials and analysts matched a litany of Iraq's problems: insurgent attacks, corruption, decayed infrastructure and mismanagement.

There is a real dilemma here. Saddam kept the domestic price of gas very, very low.   The CPA and subsequent Iraqi governments have hesitated to raise the price.   That is understandable.  Raising the price of gas is never popular.  Among other things, Iraqis uses petrol to run their generators ...

But rationing is not popular either.  Keeping prices low means there is an enormous incentive to smuggle gasoline out of Iraq and sell it for more abroad.   That is, if you can get your hands on the gasoline. 

There is certainly something strange about a world where Iraq exports crude oil, imports refined gasoline from outside Iraq, sells the refined gasoline below costs - and then watches as a substantial share of that gasoline is exported (illegally) back out of Iraq.  If nothing else, though, the current system does employ far more people than pumping crude to a refinery and then selling the refined petrol.

Iraq's economic reconstruction does not get the attention it once did, for obvious reasons.  But it certainly seems behind schedule.  Consider Anthony Cordesman's gloomy take:

Once wartime profiteering is subtracted, most areas of the economy are in decline and unemployment is at the crisis level - particularly in the Sunni areas that are the source of most insurgency. Electricity, water and other services are barely creeping back to prewar levels ...

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