Bust a Deal, Face the Wheel

Baghdad's news shadow nearly obliterates a regime fracture in another world capitol. House Republicans, Senate Republicans and White House budgeteers came to serious fighting words last night as the Senate passed its budget resolution (as narrowly as possible ... 50-50, with VP Dick Cheney breaking the tie).

"The secret agreement . . . violates the spirit of this budget compromise," said Speaker J. Dennis Hastert (R-Ill.). House Majority Leader Tom DeLay (R-Tex.) called on Frist to rectify the situation. "This goes to the heart of our ability to work together," he warned. "This is pretty serious business and has serious long-term implications."

A senior Bush administration official said of the $350 billion tax cut limit: "My understanding is a handful of senators reached a side agreement. We were not a party to it and we don't agree with it."

... Frist said he should have informed House leaders ... (WaPo)

But if Frist informed the House, the deal wouldn't have worked either. W's budget was engineered as a coalition of the willing, as long as the willing weren't all on the same page. If they had been, they couldn't have sold enough subscriptions to make quota. So solemn agreements were struck, though inevitably not all of those agreements could be honored.

Interesting enough in itself, but more interesting as a recurring theme. How did the war start?

We achieved a stunning unanimous Security Council vote on Resolution 1441 ... mainly by extending assurances that the draft language did not confer "automaticity". In other words, we promised the undecided's a second vote in event of material breach, and we breached that promise.

And how does the war wind up?

Slate's Tim "Chatterbox" Noah has been running a "Kurd Sellout Watch". We could not have moved in northern Iraq -- nor signed up foreign and domestic support for the larger Plan -- without finessing the Turk/Kurd conflict. In this case "finesse" (oui, it's French) means "raise irreconcilable expectations and decide later who gets the shaft".

"Later" is coming up real soon now, and somebody will go home feeling skinned. Again, agreements were struck (or signaled) knowing that some would be breached -- but not knowing which. One side (or maybe both) are going to hate us. On both sides, faction will set against faction, accusing each other of bungling the "deal". If the ruckus gets out of hand, the neighbors may insist on putting their two cents in, and "Pop!" goes the weasel.

On a different front, Australia (one of our willing coalescers) apparently labored under the impression they'd supply wheat to New Iraq just like they did to Old Iraq ... only more so. They have multiple 50,000-ton shiploads (each four pounds of wheat per Iraqi) waiting in the Gulf. (Waiting? At least until some dredging projects are contracted and completed to revive Umm Qasr's nearly nonfunctional deepwater port.) But they not the only ones ...

With sanctions coming off, and money flowing like oil, "The American Farmer" thinks he's going to feed Iraq. The Canadian Farmer may have his own views on the matter. India does. So do Turkey, and others. To paraphrase Jim Baker, "screw the Turks, they didn't vote for us" ... OK, but we're on course to screw the Aussies, who may suffer regime change for signing on in the first place.

That wheat, of course, was to be paid for with oil ... and the oil, as you might guess, has been "sold" several times over in the pre-invasion expectations game.

Geneva Conventions say the US, as the occupying power, can do what it wants with the oil. But the last thing we want is to be identified as the "occupying power", dammit, and besides we're not occupying Iraq ... the Coalition of the Willing is occupying Iraq ... on behalf of the Iraqi people. But the Coalition per se never reached a divide-the-spoils agreement.

Neither did the Iraqi People, or any of various factions who spoke up for them and bought into Plan Iraq on that basis. Big Oil may have its own ideas how the pie would be divided and who gets to lick the plate. And then there's the Debt Bomb.

Iraq has nearly $400B in pending external obligations -- excluding a decade's accrued interest -- all suspended while sanctions were in effect. Some is ordinary monetary debt, which ordinarily survives regime change. Some is Oil for Food already in the pipeline. Some is in commercial contracts. (Russia is the biggest contract creditor by far. France is a bit player.) Finally, reparations from the last war make up about half the total. (Kuwait holds the lion's share of IOU's.)

Iraq has expensive internal deficits, too ... upwards of $100B in ordinary disinvestment and wreckage from the long legacy of Ba'athist skimming, the sanctions regime, the recent bombing, and a few days comprehensive looting. Looting is more costly than you'd imagine. Rearrange a society's small moving parts at random -- without destroying anything -- and it's cheaper to buy or build from scratch than to sort it out again.

All those accounts and double-counts must be settled before Oil buys the Iraqi People their first bite of falafel. And that may not be the half of it.

If the Iraqi People want reconstruction, they'll pay for it the old-fashioned way -- by going deeper in debt ... empowering multinationals, middlemen and carpetbagging fixers. Petroleum extraction and monumental construction are narrow-vortex economic whirlwinds ... most of the value-added gets picked up and deposited elsewhere.

If New Iraq is reconstructed as some sort of libertarian paradise -- as most of Plan Iraq's think-tank sponsorship intends -- the typical Iraqi, with nothing to bring to market, ends up poorer still ... while the UN Oil for Food safety net is going, going, gone. [Even after Saddam's rake-off, Old Iraq had broader distribution of wealth than the typical oil state (or for that matter, the USA).]

As negotiating levers for domestic political buy-in, UN resolutions, Coalition recruitment, and regional "silent partner" buy-out's, Bush played the prospect of reconstruction contracting and commercial opportunities ... lavishly but non-specifically . We probably "sold" more than 100% of the house again ... but even if we didn't, we probably can't make good on the underlying promises (or threats).

If we cut Bulgaria in and cut France out, we blow up the whole hard-won framework of market-oriented global trade reform, which favors open bidding and bars most forms of nationalist favoritism. Are we that bold? More likely our Plan Iraq partners get stiffed, and hold-outs get dealt in. A lot of hard feelings around the table, either way.

Internationally, it's unclear how wide -- or how open -- our break is with the Brits, but US and UK clearly entered into the project with divergent expectations. UK took WMD seriously. [And still do. If no WMDs ever turn up, Bush is still a local hero. Blair is toast.] Their brass -- even more than our brass -- thinks "this is not the war we signed up to". And we're at odds over UN involvement, reconstruction schemes, war crime tribunals, exit strategy ... almost everything up to and including snubbing the French.

Kuwait looks like the ultimate loser. Gulf War I claims get settled at steep discount. Accounting and recovery of national treasures from the looting of Kuwait probably went up in smoke during the looting of Iraq ... and those looters were amateurs. Wait til they meet the professionals! The Port of Umm Qasr will be vastly improved, as will overland routes and air transport elsewhere, making Kuwait a less vital waystation. Iraqi oil will compete with Kuwaiti oil (even more aggressively with US trying to bust OPEC) and Iraq -- with US on its side -- may even reinstate some of those old slant-drilling complaints. Kuwait will no longer cling to the US out of fear of Saddam, and US will no longer court Kuwait as a staging ground for Iraq. Kuwait probably goes anti-American.

Of Iraq's other immediate neighbors, Turkey and the Kurds will never find peace, but Kurds probably lose autonomy and both may experience anti-US regime change. Syria and Iran are on the designated hitlist. Saudi Arabia wants US military out, and think-tankers always plotted Iraq as the "pivot" for military, diplomatic and commercial leverage against Saudi. Jordan is left as the only likely adjoining neutral, caught in the middle as usual, playing both sides of the Arab Street, muddling through, hoping for the best ... but if we try to push them around (like we did Turkey), that can change.

Is there a pattern here? Maybe someone will point one out. Meanwhile, the wheel is turning, turning, turning ...

RonK, Seattle

Posted April 12, 2003 11:59 AM | Comments (49)