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    Read articles about Iraq from The Post and the AP

    By Howard Schneider
    Washington Post Foreign Service
    Thursday, October 22, 1998; Page A27

    BAGHDAD, Iraq – As neighbors in the Middle East, Syria and Iraq have shared little in recent years except a closed border and enmity between their leaders. Yet at this city's international trade center, the Syrian flag is again flying, and a freshly painted sign advertises the offices that Syrian trade representatives will soon occupy.

    Likewise, Saudi Arabia was a pillar of the coalition that battled Iraq in the 1991 Persian Gulf War, providing the platform from which U.S. and other troops drove Iraqi forces from Kuwait. But late last month, for the first time since the war, Saudi firms were back in Baghdad doing business, signing an estimated $100 million in contracts for food and medicine.

    Trading in humanitarian supplies is permitted under strict international trade sanctions aimed at forcing Iraqi President Saddam Hussein to give up his programs to develop weapons of mass destruction. But the growing economic ties between Iraq and previously hostile Arab neighbors – even within the confines of the trade embargo – show just how far the country has come in breaking out of its isolation.

    Coupled with the resumption of oil sales under the U.N.-authorized "oil-for-food" program, a thriving smuggling industry and a recent relaxation of government restrictions on trade and private enterprise, such contacts are beginning to ease the suffering of ordinary Iraqis and, by some reckonings, could enhance prospects for the survival of Saddam Hussein's regime.

    "What we see now is that the numbers are stabilizing" for several health and nutrition indicators, said Philippe Heffinck, head of UNICEF's mission in Iraq. "It is not increasing. . . . The idea now is to have the curves go down."

    To be sure, the combined effects of war and sanctions have devastated living standards in a country that one U.N. official said counted obesity as its primary nutrition problem before the invasion of Kuwait. Notwithstanding any improvements in living conditions here, more than half of Iraqi children under 5 still suffer some degree of malnutrition. For the middle class, the city's antique and junk shops reflect the cost exacted by rampant inflation and the embargo, full as they are with complete sets of dinnerware and family trinkets that store owners say have been sold to buy food.

    And for the poor, surviving only on a government-issued food ration and with little outside income to supplement it, meat has become a luxury and hunger common.

    Nevertheless, in small but notable ways, Iraq is beginning to reintegrate with the outside world.

    Iranian religious pilgrims, for example, are once again bringing their devotion and their currency to Shiite holy sites here and in nearby Karbala and Najaf. Amid the bustle of downtown Baghdad, meanwhile, pharmacist Imad Jawad is arranging the import of a privately financed, for-profit shipment of antibiotics – the first of what he expects will be many such ventures under relaxed government rules meant to supplement shortages through private enterprise.

    "This is a very, very new thing" in a country whose strong central government has controlled all pharmaceutical purchases, said Jawad, who also has started making and marketing herbal substitutes for common remedies such as aspirin. "It's better. I think many things are changing, and we hope the private sector will be opened."

    Bridges and warehouses destroyed during the war have been rebuilt, and some key social indicators are beginning to improve. Malnutrition appears to have peaked, for example, and merchants say that the prices of food staples on the open market are far below their highest point – related trends attributed to the oil-for-food program, which allows Iraq to sell limited quantities of oil and use the proceeds to buy food and other essentials, and to local efforts to expand farm production.

    The spread of diseases associated with war damage and maintenance problems at Iraq's 210 water treatment plants also has slowed. U.N. officials say they expect the rates of serious diarrhea and other ailments to begin to drop soon under new efforts to refurbish that system, a key public health step that is also important for the country's eventual economic renewal.

    "Things are better, but it's still expensive," said Mohammed Abbas, a corner grocer, explaining that the street prices of staple commodities have swung wildly in recent years. He said that a kilogram of sugar, for example, has cost as much as 1,800 dinars ($1.50), but is currently around 600.

    Although much of the talk on the street is about scarcity and hardship, Baghdad society still has a pulse. Some private clubs and hotel discos remain open late. While public alcohol sales have been restricted under Islamic rules imposed several years ago, some restaurants still offer imported beers and allow patrons to sip brown-bag whiskey with their meals.

    The markets along Rasheed Street are jammed during the day; fruit and vegetable stands are well-stocked. Window shoppers find plenty to browse – from Citizen watches to Roland music synthesizers. At night, brightly lit Zatoon Street bustles with crowds enjoying the fall air as shoppers flip through music cassettes or catch an imported film at a downtown theater.

    What isn't apparent in this central part of the country, far removed from the Kurdish-controlled north and other regions more troublesome to Saddam Hussein, is any sense of imminent upheaval. Moreover, companies and countries in the region and elsewhere appear to be placing their bets, in at least token ways, on Iraq's reemergence into the world economy with Saddam Hussein still at the head. An Egypt-based company, for example, last month announced the resumption of bus service between Cairo and Baghdad, via the Jordanian port of Aqaba, and Iraqi officials recently held high-level trade talks with their formerly bitter rivals in Iran.

    Any normal trade activity, of course, will have to await the lifting of the embargo. And for now, at least, that prospect seems remote given Iraq's decision in August to suspend cooperation with U.N. weapons inspectors.

    Until that dispute is resolved, much of what happens in Iraq's economy will be governed by the United Nations, which closely monitors Iraqi oil sales under the oil-for-food program. While some oil is still sold on the black market, U.S. and U.N. officials assert that they have effectively walled off the country's oil wealth from Saddam Hussein's control.

    At the same time, Iraqi Trade Minister Mohammed Madisaleh argues that the sanctions have forced the country to diversify its economy in ways that could prove beneficial once they are lifted – and indeed already have had a positive effect.

    Before the embargo, for example, Iraq tended to contract big construction jobs to foreign companies, using oil revenue to foot the bill.

    Now, Madisaleh said, the government employs local labor to rebuild warehouses and other war-damaged buildings, using concrete blocks filled with rice husks to replace imported insulating materials. The government recently completed a hydroelectric dam and a large irrigation channel running south from Baghdad.

    "We are going to reduce our dependence on oil," Madisaleh said. "This potentially makes the economy stronger for the future."

    The changes are evident in small ways that might not individually mean much but collectively mean more money and more jobs – and, by extension, a stronger position for the regime.

    At the Zamzam Hotel in Karbala, for example, the rooms are often booked with bus loads of Iranian tourists returning to the area's important Shiite shrines for the first time since the 1980-88 Iran-Iraq war.

    The pilgrims are not big spenders. But businessmen like hotel manager Mohammed Abbed say their arrival is a step forward to a day when airlines, currently barred from flying to Iraq, can begin carrying European or even American tourists to ancient sites like Babylon.

    "I'm glad to see people here in my city," Abbed said. "It is good for life."

    © Copyright 1998 The Washington Post Company

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