Can the economic sanctions against Saddam Hussein, carefully constructed by the United Nations, force the Iraqi dictator to leave Kuwait? The economic noose looped around Saddam's neck is clearly having an initial impact, judging by the effort Iraq is undertaking to get special exemptions for food and medical supplies.
Washington experts on economic sanctions say that the package of penalties assembled against Saddam is the most complete and costly to a target nation in history. It is based on two key elements -- the freeze on Iraq's assets abroad and the near-total embargo on its oil exports. The price tag for Saddam is estimated at $31 billion, a staggering 60 percent of Iraq's gross national product -- 43 percent if the Iraqi and Kuwaiti GNPs are combined. Measure that against the cost of all sanctions against all target nations of $5.9 billion in 1980, the previous record.
But Gary C. Hufbauer, Kimberley A. Elliott and Jeffrey J. Schott -- who made these estimates -- predict that the sanctions against Iraq won't be enough. The three staff members of the Institute for International Economics said the other evening that to get Saddam out of Kuwait a compromise is likely to emerge, providing face-saving cover for him.
It could take the form of a new government in Kuwait that dismisses the emir, and the acquisition of a disputed oil field and/or Kuwait's islands that would give Iraq a Persian Gulf port outlet for its oil. It might also call for cancellation of Iraqi debts owed to Saudi Arabia as well as Kuwait, and the legalization of Saddam's quick heist of gold and currency from Kuwait.
The institute's experts on sanctions were not advocating such a course, merely giving an educated judgment on how it might turn out. Factors working for the success of the sanctions include pledges of the best cooperation since the Second World War, under the aegis of a United Nations freed from major battles between the two superpowers. Moreover, there doesn't appear to be much offsetting assistance to Iraq, unless it comes through the new peace treaty with Iran.
Working against the success of the sanctions are several factors. World sympathy is being aroused for the plight of Asians deprived of food and basic facilities as they try to exit Iraq. Western hostages will be used for the same purpose. Inside Iraq, say Hufbauer-Elliott-Schott, Saddam is able "to unite the populace behind a pan-Arab banner, and accept potential food deprivation."
But perhaps the most significant element operating in Saddam's favor is that the sanctions are also very costly to the Western countries that imposed them. At $30 a barrel, crude oil is priced more than 50 percent above pre-crisis levels, and it could go higher. There is almost unanimous agreement that the impact of higher oil prices, just as in the two prior oil shocks, will give inflation an extra kick, and will slow economic growth in industrialized nations in Europe, North America and Asia, and in poor nations everywhere, except for a handful of Third World oil exporters.
In the United States (except in the Southwest), it will worsen a recession that has either already started or will get underway by the end of the year.
The loss of oil from Iraq, and of exports of goods to Iraq as a result of the embargo and sanctions, comes with an especially crunching impact on the newly emerging countries of Eastern Europe as well as Turkey and Brazil. In addition, Turkey, Egypt, Pakistan, the Philippines and a few other countries lose the huge remittances they enjoyed from nationals who were laborers in Iraq and Kuwait.
An effort is being made to compensate those smaller nations joining in the fight against Saddam. Significantly, President Bush proposed canceling $7 billion in Egyptian debt. But the American financial structure has been weakened by the huge pileup of national debt in the past 10 years. Bush thus can't freely whip out the checkbook to support American strategic objectives in the Middle East.
To help cement the necessary solidarity with Gorbachev, Bush was forced at the Helsinki conference to welcome the Soviet Union as an equal player in the Middle East arena. In better times, he might have sealed the bargain with a more generous monetary commitment to bail the Russians out of their economic troubles.
What the Free World faces is an extremely unpredictable future. No one can read Saddam's volatile mind. The longer the stalemate exists in the Gulf, the better the chances for erosion of the sanctions.
And as pressure for a diplomatic solution builds up -- from Gorbachev and from isolationists such as right-wing commentator Pat Buchanan -- we should remember this: If we let Saddam off the hook with a compromise that leaves him in possession of much of Kuwait's resources in one form or other, it will be face-losing for the United States. To argue that the deal outlined by Hufbauer and his colleagues at least keeps Saudi Arabia out of Saddam's clutches misses the point: he'll be back for more in short order, next time with nuclear weapons.