Kuwait has agreed to loan Iraq another $2 billion to help finance its war against Iran, raising the total amount of loans extended to Baghdad by the conservative Persian Gulf states to at least $16 billion since the onset of the conflict 15 months ago.
As a result of Iraq's growing dependence on its oil-wealthy neighbors, a major shift in power is taking place among the gulf states, with Iraq's ambitions for leadership at least temporarily checked.
Reports circulating in the area say the Iraqi government has again gone to its Persian Gulf neighbors for massive financial assistance as the fighting worsens for the Iraqis on the war front and its once substantial oil exports show no signs of picking up.
There are conflicting reports of just how much Iraq has borrowed since the war began. But press reports in Bahrain said Kuwait, the United Arab Emirates, Saudi Arabia and Qatar together had lent $14 billion during the first seven months of the war.
Banking and other sources say the total is now somewhere between $16 billion and $20 billion, with Kuwait contributing possibly $8 billion.
Some has been in the form of interest-free loans and some initially in oil for Iraq's old customers, the revenue from which has gone into Iraqi accounts. Because of the recent oil glut, demand for Iraqi oil has decreased. But the war has made it impossible in any case for Iraq to ship oil through its ports, cutting its production from more than 3 million barrels a day to around 1 million.
As a result of the massive loans, Iraq, considered a radical socialist state, has become increasingly reliant on its conservative neighbors. The effects on the politics of the gulf have been considerable.
Before the onset of the war in September 1980, Iraqi President Saddam Hussein was on the verge of asserting his leadership over As a result of Iraq's growing dependence on its oil-wealthy neighbors, a major shift in power is taking place among the gulf states, with Iraq's ambitions for leadership at least temporarily checked. the gulf, taking advantage of the vacuum caused by the fall of the shah in Iran and the ensuing infighting within the new revolutionary Iranian government of Ayatollah Ruhollah Khomeini.
Now, however, it is the conservative gulf states, led by Saudi Arabia, which are in the ascendency and taking advantage of the war to organize themselves in the new Gulf Cooperation Council, which pointedly has left out Iraq despite Saddam Hussein's public complaint about his exclusion.
While none of the leaders in the six kingdoms and sheikdoms making up the council will say so publicly, the stalemated war has checked what they regard as two of the greatest dangers to their vulnerable governments -- the Iranian Shiite revolution and the secular, socialist Iraqi revolution.
Here on the Arab side of the lower gulf, there is no longer any sense of urgency to either danger. The main focus of private discussions has been the recent exercise of the U.S. Rapid Deployment Force in Oman, and the whole American policy toward the gulf.
The newspapers, often dominated by Palestinians, have been whipping up anti-American sentiment, using pictures of the Bright Star military exercise as a means of doing so. "It seems the United States is the threat," commented one European diplomat. The message is apparently not getting through to Washington that the press and people are becoming anti-American because of Bright Star and the publicity over the Rapid Deployment Force."
The mounting billions in loans given to Iraq by the gulf states may have become a principal factor in the survival of Saddam Hussein's rule. They have enabled him to carry on the war and take ever-mounting casualties, estimated by diplomatic sources in Baghdad at now around 15,000, while at the same time increasing the amount of consumer goods available on the Baghdad markets.
In addition, the Iraqi government has been able to keep up the pace of its ambitious economic development plans, which has helped maintain public support for the war effort and Saddam Hussein.
Without this semblance of normality on the home front, the war might have aroused more public discontent with Saddam Hussein's government. For the conservative gulf Arabs, the loans to Iraq have become a kind of "insurance policy" for the continued well-being of their governments as well as a fulfillment of their pledges of Arab solidarity with the Iraqi cause.
For the conservative gulf Arab states, the loans to Iraq have become a kind of "insurance policy" for the continued well-being of their governments as well as a fulfillment of their pledges of Arab solidarity with the Iraqi cause.
Not only do these vast sums appease Iraq, which feels increasingly aggrieved by the lack of Arab enthusiasm for the war, but they also help to ensure that both Iran and Iraq will continue to be preoccupied by the war rather than their rival ambitions for leadership -- and in some cases territory -- of their gulf neighbors.
The war has given the six gulf council members -- Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates -- time to establish their own economic and military alliances to stand up more effectively to both Iraq and Iran after the end of hostilities.
The two warring nations have far superior military power and the means, through propaganda or agents, to shake the stability of these monarchical governments. They also have the ability to threaten their source of well-being, the oil fields, as the war already has shown.
The dangers, particularly to Kuwait, of playing this balancing act between two powerful neighbors became clear once again Oct. 1, when Iranian bombers hit a Kuwaiti oil field.
While Iran has denied that the planes were theirs, no one has come up with any other credible version, and the United States has said its early-warning surveillance aircraft operating out of Saudi Arabia tracked the jets from the time they left their base inside Iran.
The Iranian bombers did relatively little damage to the Kuwaiti field. But the Iranian political message seemed clear, that Kuwait is open to retaliation for helping Iraq persist in its war with Iran.