For all the carnage taking place on the dismal, waterlogged battlefield of Iraq's Faw Peninsula on the Persian Gulf in recent weeks, the outcome of the war between Iran and Iraq is more likely to be decided by economics than military combat.
The issue is not so much which side can prevail over the other with its soldiers and sophisticated armaments as which can afford to keep paying the cost of the war longer. That, for two nations who depend almost exclusively on oil to fuel their economies and war machines, means which side can keep pumping the most oil and getting it to market.
With the price of oil on world markets and the value of the dollars they get for that oil plummeting, both Iran and Iraq are facing some hard decisions about the future of their bitter 5 1/2-year-old war.
"The reality is that even with increasing oil exports, neither side can afford much longer to continue the war at the level they have been waging it," said one western economist here who asked not to be identified. "Though both sides are talking of waging an indefinite war if that is what is necessary, neither really is in a position to do so without great, maybe crippling, internal sacrifices."
Simply put, these economists state, income for oil sold by Iraq and Iran today is down, and the value of that income is 20 to 25 percent less than it was just six months ago.
In those terms, the future of the war looks infinitely grimmer for the Iraqis than the Iranians, western diplomatic and economic analysts here believe.
These sources claim that the future here bodes particularly ill for the government of Iraqi President Saddam Hussein, which has sought to maintain public support for the bitter and costly war by an elaborate artificial economy that sought to provide his nation of 13.6 million people with plenty of butter to go along with its guns.
Iran, with almost four times Iraq's population, is given the upper hand when it comes to the economic sacrifices in the future because it has based its popular support for the war effort not on artifical economic incentives but on religious fervor. To the Iranian regime of Ayatollah Ruhollah Khomeini, the conflict with Iraq is nothing less than an Islamic holy war against the secular Arab Baath Socialist Party of Saddam Hussein.
"Iran has always shown itself more able than Iraq to tighten its belt during the course of this war because the motivation of its population depended not on economic benefit but on religious fervor," said another western economist here. "Iraq has only managed to cushion the shock of the war to its population because it was able to call on vast economic help from its worried neighbors -- mostly Kuwait and Saudi Arabia."
In the first years of the war, which began in September 1980, both Kuwait and Saudi Arabia, worried by the prospect of a victory by revolutionary Iran on the borders of their conservative nations, contributed about $20 billion of their reserves to help Iraq carry the cost of the war, which in its initial phase virtually shut down Iraq's oil production.
Iran's shutdown of Iraqi oil production in the first weeks by closing Iraq's Persian Gulf oil-loading platforms of Khor Amaya and Mina Bakr, off the tiny oil port of Faw, was not matched by a similiar shutdown of Iranian production. Initially, Iranian oil production was less vulnerable to Iraqi air attacks, as Iran's main distribution terminal at Kharg Island was out of range of Iraqi warplanes until the recent acquisition by Iraq of French Super Etendard jets.
Having cut its own production in the aftermath of the Khomeini revolution against the shah in 1979, the Iranians already had tightened their belts before the war began and since then, despite occasional setbacks, have been able to keep at least enough exports flowing to fuel their bare needs. Iran's war effort is much less dependent on costly, sophisticated armaments and its economy is less dependent on survivor benefits than is the case in Iraq.
Iraqi Air Force assaults on Kharg Island and the supertanker traffic that picks up oil for export there has been disruptive but not fatal to Iran.
In recent years, as recession has set in among members of the Organization of Petroleum Exporting Countries, the Saudi Arabian and Kuwaiti subsidy to Iraq has taken the form of a contribution of 300,000 barrels of oil a day taken from the so-called "neutral zone" bordered by Kuwait, Iraq and Saudi Arabia.
That help has been crucial to the Iraqi war effort as it slowly has rebuilt its shattered oil exports from nothing in the first months of the war, to 900,000 barrels a day in 1981 to the estimated 1.7 million barrels (including the neutral zone contribution) estimated today. Before the war, Iraq's production was 2.4 million barrels a day.
Not only was the subsidy by fellow Arabs necessary to help Iraq keep buying the sophisticated jets, artillery and tanks that its high-tech Army has relied on to confront the numerically superior, if less well-armed, Iranians, but it allowed Iraq to continue its ambitious development plans into 1982 and to shore up its internal economy artificially to cushion the deprivations of war.
Though a government austerity drive at the end of 1982 essentially halted development schemes in Iraq and forced a drastic drop in imports, the facade of normality has been preserved through subsidized food and extensive government compensation -- in the form of gifts of cars, plots of land, homes and cash -- to the relatives of the tens of thousands of casualties of the war.
Iraqi hopes to keep these up were based in large part on their plans to increase oil exports through the construction of a new pipeline through Saudi Arabia to the Red Sea, completed late last year, and the expansion of the present pipeline through Turkey that it hoped would make up for the loss in the first weeks of the war of its traditional oil export terminals on the Persian Gulf at Faw.
Those plans were based on the high value of the dollar and OPEC oil priced at $28 to $32 a barrel. Despite the gradually growing Iraqi oil exports, the plans of their economists to increase Iraq's income have fallen victim to the drop of the price of oil and value of the dollar.
Iraq, which was getting about $28 per barrel of exported oil six months ago, now gets no more than $18, economists in Iraq say.
With billions of dollars in foreign loans and deferred payments to contractors from the first years of the war coming due this year, Iraq is facing serious problems, western economists said.
Things are so uncertain, foreign economists here said, that Iraq so far has been unable to come up with a state budget for the current year, having been forced repeatedly by dropping revenue to revise plans.
Kuwait and Saudi Arabia still provide a cushion for the Iraqis, but they, too, are facing recession and dropping revenues and reserves. Their ability to keep Iraq living so far beyond its means during a war is considered limited.
Said one western diplomat here: "There are some major decisions that are going to have be taken that will probably affect the war more than any battlefield action."