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War Shatters Prosperity That Nourished Mideast Ambitions

May 12, 1991

Undated (AP) _ By TERRY LEONARD Associated Press Writer

NICOSIA, Cyprus (AP) - With awesome swiftness, decades of prosperity that nourished the forlorn hopes and grand ambitions of the Middle East vanished in loud, violent flashes of light.

Iraq is in ruins. Kuwait is burning. Saudi Arabia is in debt.

The Gulf War laid bare the disparity between oil-rich and dirt-poor Arabs. It mortgaged the future of both.

Kuwait and Saudi Arabia had bankrolled Arab aspirations from North Africa to Jordan.

But a vengeful Saddam Hussein left Kuwait shattered, aflame and shrouded by the smoke from burning oil wells. That compromised its ability to help Arab states that feel cheated out of riches by history, geography and geology.

Saudi Arabia, despite enormous wealth, is overburdened with the staggering cost of the war to eject Saddam from Kuwait. Finance Minister Mohammed Abalkhail says it will have to borrow from abroad for the first time in 30 years.

Tiny Kuwait was one of the richest countries in the world before the Iraqi invasion.

Annual per capita income neared $20,000. Earnings on about $100 billion in foreign investments exceeded what it got each year from the 1.5 to 2 million barrels of oil it pumped daily.

The Iraqis torched more than 600 of Kuwait’s 1,000 oil wells as they fled the country toward the end of February, but hundreds are still burning. Officials say it will take three to five years to restore production to pre- war levels.

The government, which refuses to liquidate lucrative foreign investments to salvage the country, says it will borrow billions from abroad to rebuild.

Financial sources predict Saudi Arabia’s estimated deficit of $6.6 billion in 1989, will be pushed as high as $18 billion this year because of the war. The kingdom committed about $48 billion to the war effort.

Amid the turmoil, world demand for oil is falling. OPEC is over-producing and world strategic reserves are high. Western diplomats who follow the Saudi economy say they foresee no bright spots.

Prospects are considerably dimmer elsewhere in the Middle East.

Egypt figures it lost $20 billion because of the war, Turkey $7 billion, Jordan $3 billion to $5 billion and Israel $2.5 billion. Even tiny Bahrain calculates it lost nearly $2 billion.

″This war has brought to light the severe imbalance of wealth in the region,″ said Osama al Ghoussein, vice president of the Kuwaiti-owned Bahrain International Bank.

Poorer nations hope some of the disparity can be addressed by enhanced Arab economic cooperation and point to the six-member Gulf Cooperation Council’s $15 billion regional development fund.

But with the two principal Arab benefactors reeling, poor Arab states must learn to cope with a diminished largess.

Iraq was savaged by an allied air war and crippled by United Nations trade sanctions. A U.N. report said the bombing had reduced Iraq to a pre-industrial state. Its oil wealth has been mortgaged to pay reparations.

The Iraqis face enormous rebuilding costs, without the money or credit. Moreover, the country’s plight has worsened dramatically because of the brutal repression of a postwar Kurdish minority uprising that sent streams of starving refugees into the countryside.

The war weakened the confidence and resolve of investors once easily lured by the Persian Gulf’s tremendous wealth.

″We’ve been preaching all along that this is the land of stability and prosperity and that industrial countries should invest here. This crisis shattered that totally,″ said Abdullah al-Kuwaiz, the Gulf Cooperation Council’s associate secretary general for economic affairs.

″Now we not only have to convince people from the outside to invest, we have to convince our own people. This won’t be an easy job.″

Only Iran seemed to benefit directly from the war that left it largely unscathed and bolstered economically by higher oil prices.

Tehran also gained politically. It restored severed ties with Saudi Arabia and elicited new promises of cooperation from wary Arab neighbors.

Egypt and Syria hope the military cooperation that defeated Iraq will lead to new Arab economic and political alliances.

″There’s a new reality, a new fact of life that’s already starting. It will lead to wider inter-Arab economic cooperation,″ said Farouk Nasser, chairman of the investment committee of the American Chamber of Commerce in Cairo.

″It’s the new six-plus-two formula. Egypt and Syria, with their military strength and human resources, and the oil-rich Gulf states and their money.″ Egypt has made significant gains, despite the money it says was spent during the war. It got billions of dollars in aid from Japan, Western and Gulf countries to help defray the cost.

Before the war it owed about $50 billion in foreign debt. But grateful gulf countries forgave $7 billion, the United States forgave $6.5 billion, and other industrialized nations agreed to forgive an additional amount.

The economic upheaval of the war hit others harder. Jordan suffered from the sanctions against Iraq, its main trading partner. Its pro-Iraqi sympathies cost it economic aid.

Jordan, Egypt, Lebanon and the Palestinians were hard hit by a loss of remittances from their people who had worked in the gulf.

The war brought tourism to a standstill throughout the region. The pain was especially felt in Morocco, Tunisia, Egypt, Jordan and Israel.

The Israelis, like their poor Arab neighbors, hope to be be compensated by the allies for their losses.

Washington has approved $400 million in loan guarantees to house Soviet immigrants. Congress approved $650 million in aid to help cover Israeli war expenses. The European Community has expressed willingness to grant large- scale loans at low interest.

End Adv Sunday, May 12

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