Iraq sits on bigger war chest than Iran
London — Along with men, machines, and motivation, war requires money. How well equipped are the treasuries of Iran and Iraq to endure their present conflict?
Middle East specialists contacted by the Monitor here and in Paris are unanimous in one conviction; Iraq is financially very much stronger and far more stable than Iran. It is therefore able to endure disruption of its income-producing oil exports with much less hardship than is its rival to the east.
The relative economic strength of the two countries is the outcome of some fairly recent decisions. Iraq has maintained trade links with the Soviet Union, signing an arms agreement in December 1978. In the past two years, it also has built up trade worth $4.75 billion with Britain, France, Italy, West Germany, and Japan.
It has kept its lines of supply open, in other words, should the present fighting exhaust locally held stocks of ammunition and spare parts or cut into food supplies. And outside the United States (where its reputation for terrorism persists, but where it would like to do more business), it is generally seen as a credit-worthy country that pays its bills promptly.
Iran, by contrast, has increasingly isolated itself from outside suppliers. Following the revolution, it canceled numerous overseas contracts agreed to by the Shah's government -- a move that paved the way for the decision by the United States to freeze an estimated $8 billion of Iran's foreign assets held by US banks at home and abroad.
The upsurge of antagonism against the United States and Britain has cut off the normal supply routes for spare parts and ammunition for the highly sophisticated armaments the Shah had purchased from these two countries. It also has put a crimp in the availability of specialists to help maintain them.
Finding figures to compare among generally secretive Middle East countries is not easy. One measure of Iraq's wealth, however, is the growth of its budget. According to Jonathan Crusoe of the Middle East Economic Digest (MEED) here, this year's budget totals $47 billion and represents a whopping 49 percent increase over 1979 figures.
Of this, $17 billion is allocated for development projects -- a 59 percent increase over 1979 -- and another $13 billion is set aside for imports, some 40 percent of which is allocated for capital goods.
How does Iraq pay for it all? Quite simply, oil. The country's oil income for 1980 is expected to be about $40 billion. In addition, its net foreign assets for 1979 totaled $26 billion and will rise, estimates the First National Bank of Chicago, to $52 billion in 1981.
By contrast, says MEED Iran expert Vahe Petrossian, the Iranian budget at $40 billion is lower than Iraq's, and Iran has three times the population and nearly four times the area. Iran's budget for this year originally called for $25 billion in oil revenues -- a figure later slashed to $13 billion as production dwindled and as Shell, British Petroleum Company, Ltd., and the Japanese cut back sharply on purchases of over-priced Iranian crude. The result, says Mr. Petrossian, is that more than half the budget requires deficit financing even without a war.
On the other hand, Iran can draw on foreign assets (aside from those frozen by the US) of about $7 billion, although some estimates put the figure as low as has so far this year repatriated some 17.6 metric tons of gold from Switzerland, worth about $388 million.
But a large part of those foreign assets may now have to be consumed to keep the nation operating.