What it may cost to stay in Iraq

Alan Greenspan certainly kicked up a storm when he wrote in his new book, "the Iraq war is largely about oil."

After the White House reaffirmed that the US invasion of Iraq was really about weapons of mass destruction, the former Federal Reserve chairman backtracked somewhat from his controversial statement during a publicity push last week for his book, "The Age of Turbulence."

Whatever the motive or motives of President Bush for his decision to go to war, his oil-industry background would have made him aware of the importance of Middle East oil, including that of Iraq, to the energy needs of the United States.

As Mr. Greenspan writes: "The intense attention of the developed world to Middle Eastern political affairs has always been critically tied to oil security."

Mr. Bush didn't specifically mention oil in his talk to the nation 11 days ago. His emphasis was on fighting terrorism. But, he warned, "Extremists could control a key part of the global energy supply." And he did talk of an "enduring relationship" with Iraq requiring a United States political, economic, and security engagement extending beyond his presidency.

That relationship could be expensive.

The latest estimates of the cost of the Iraq war by Steven Kosiak, an analyst at the Center for Strategic and Budgetary Assessments, a Washington think tank, puts the cost of the Iraq war so far (measured by congressional appropriations) at $450 billion, and that of the Afghanistan operation at $127 billion. By the end of fiscal year 2008, about a year away, the combined bill will be $808 billion.

"The war in Iraq, alone," notes Mr. Kosiak, "has already cost the US more in real [inflation-adjusted dollars] than the 1991 Gulf War and the Korean War, and it will almost certainly surpass the cost of the Vietnam War by the end of next year."

If the two military operations drag on for a decade, the cost could amount to between $1.09 trillion and $1.62 trillion, he speculates, depending partly on what level of military forces are left in the two nations.

Those numbers, admits Kosiak, don't include the cost of the extra debt piled up by Washington to pay for the operations. Those would add "several hundred million" more to the bill in the next decade. He says the Bush administration has put the cost of the operations "on the national credit card."

Linda Bilmes, a Harvard University expert on the cost of the wars, says the price tag will easily exceed $2 trillion if such factors as replacing worn or used military equipment, benefits to soldiers injured in noncombat activities, and humanitarian assistance to Iraqi refugees, and other items are included. Also relevant is the rise in the price of oil with the war.

The upside of the war, from an economic standpoint, says Kosiak, is if it has improved long-term security in the region, which might reduce the cost of oil in the future or the cost of other US military operations abroad.

So far, any such benefit is hard to see. Oil reached a record price of more than $81 a barrel last week. And it is far from clear what the US will do with its roughly 75 military bases in Iraq. Some 14 of them are described as "enduring," which may or may not really mean "permanent," depending on what the Iraqi government finds comfortable.

There has been talk of closing 40 or 50 of the bases. The US did close its Prince Sultan Air Base in Saudi Arabia after it put up a similar facility in Iraq. But it retains another smaller base, Eskan Village, south of Riyadh, the Saudi capital. The US also has military facilities in Qatar, Oman (on standby at the moment), Kuwait, and Abu Dhabi along the Gulf Coast. All these are part of a US goal of preventing mischief in the area with its military dominance.

The US, is the "ultimate guarantor of territorial integrity" in the Gulf area with its immense oil resources, says John Pike, director of globalsecurity.org, a website devoted to military news and information. The multibillion-dollar question for any Democratic successor to Mr. Bush trying to fulfill the desire of the Democratic base to get out of Iraq quickly remains one of security.

Mr. Pike sees Iraq as a US "protectorate." It will remain dependent on the US for years to come for its defense. It will take "at least a decade," says Pike, for Iraq to get "a real air force and army" again to defend itself. In the meantime, its sovereignty will "depend upon the kindness of strangers" – namely the US.

To A.F. Alhajji, a Syrian-born economist at Ohio Northern University, US energy policy doesn't require control of Iraqi oil. It can get oil elsewhere. But Iraqi oil has strategic value in US foreign policy. Oil was Saddam Hussein's main strength. Today, whoever controls the flow of Iraqi oil controls the nation's destiny, he says. There have been literally hundreds of insurgent attacks on oil pipelines, refineries, wells, workers, etc., to limit the Iraqi government's oil income, and thus its power. Professor Alhajji argues that no matter what the rhetoric, a Democratic president may decide to stay in Iraq in some way to assure that no one else controls its oil.

Major international oil companies won't invest in Iraq until they see long-term stability. Even then, says Alhajji, it will take at least three years for any major investment to boost oil output.