What is MacroWeb?

As Operation Iraqi Freedom comes to a close, Iraq's former regime's balance sheet is being pieced together.  A tentative accounting of the assets of Iraq's Baath Party which were seized by Allied Forces is as follows:

Assets
$   600 million in already-frozen Iraqi assets
$1,740 million in Iraqi government bank accounts that the U.S. confiscated March 2003
$1,200 million assets which include currency, real estate and diamonds found April 2003
$   756 million+ stashed away American dollars
$4,296 million

Many questions come to mind after one sees the huge amount of Iraq's liquid wealth, such as, "What was its intended use?" "Where did it come from?" and "Did withholding all these assets from the Iraqi economy hurt it?"  The first question can only be answered by Saddam's regime.  Many people believe that the money was intended for illegal military spending and terrorist activity.  Why would a government hold such large amounts of depreciating cash unless it were intended to be used for illegal activities?  As far as where the money came from, borrowing is a likely source.  However, sources at the Wall Street Journal state that most of Iraq's revenue came from oil exports.  Due to the fact that the Iraqis were not allowed to sell this oil, they chose instead to smuggle it out of the country and sell it for cash, bypassing the oil-for-food sanctions.  This, in turn, helps answer the complicated third question. 

At first appearance, one would conclude that the withholding of such large amounts of liquid assets would be detrimental to Iraq's economy.  However, it is much more complex than it appears.  Iraq is a member of OPEC.  OPEC restricts its members petroleum output in an effort to keep prices high.  Iraq was exporting its fullest potential in oil under the "oil-for-food" sanction.  In order to obtain cash from oil revenues, Iraq would have to smuggle oil out under the noses of both the UN and OPEC.  The end result would be a decrease in the world's price of oil, and a little cash in Iraq's pocket.  The winners in this deal are the consumers of oil and the Iraqi government.  The losers in this deal are the oil exporters and the additional deaths caused by Iraq's increased military capabilities.  Are the Iraqi people hurt by this?  One can sometimes find an answer to a question by posing another question, "Would the Iraqi government have illegally exported oil and then use the money to improve the welfare of the Iraqi people?"  Considering Iraq's track record, it's not likely.

Works Cited:

Dow Jones Newswires.  "5 US Soldiers In IraqUnder Investigation For Theft."  WallStreet Journal.  [New York] 23 Apr. 2003.

Schroeder, Michael. "U.S. and Its Allies Have Found $1.2 Billion of Hussein's Assets" Wall Street Journal.  [New York]10 Apr. 2003.

Dow Jones Newswires.  "US Soldiers Find An Estimated 656M US Dollars In ." Wall Street Journal.  [New York] 19 Apr. 2003.

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Copyright, Jake Miller, 2003.