10.3 |
Reconstruction: oil, commercial interests, debt relief, asylum and
stabilisation policy
45.
The Treasury
paper stated that Iraq’s economy was distinguished by the
dominance
of oil and
gas revenues. Iraq currently produced around 2.5m bpd, though
this
“fluctuated
wildly” as Iraq used oil production as a bargaining tool in
negotiations with
the UN over
the operation of the OFF programme. Around 2.25m bpd were
exported.
Oil revenues
represented 60 percent of Iraq’s GDP and 95 percent of its
foreign
currency
earnings.
46.
Oil markets
already thought that war with Iraq was probable, driving up
prices
to around
US$27 per barrel. Globally, a conflict could lead to a rise in the
oil price of
US$10 a
barrel and a consequent reduction in global growth by 0.5
percentage points
and a rise
in inflation by between 0.4 and 0.8 percentage points.
47.
The Treasury
paper did not address the impact of a conflict on the UK
economy.
48.
The Treasury
advised that recent experience suggested that the cost of “putting
a
country
back on its feet” could be high. The Federal Republic of Yugoslavia
had already
received
US$10bn in support. Iraq could be “even more expensive”,
given:
•
the
possibility that a conflict could cause significant damage, and the
existing
poor state
of Iraq’s infrastructure;
•
the need to
stabilise the economy, including by addressing Iraq’s huge
external
debt;
•
the need
for a large peace-keeping force “to keep a lid on the ethnic
and
religious
tensions that Saddam’s dictatorship has hidden for so long”;
and
•
the
pressure for a “generous [reconstruction] package, given the
perception
in the
region that invading Iraq is of dubious legality and
worth”.
49.
On who would
pay for that generous package, the Treasury assessed
that:
“… the US
might expect Iraq to pick up the bill after a short ‘bridging’
period,
especially
as – with investment – oil revenues could quickly exceed US$20
billion
per
year.
“But it is
more likely that strong pressure will come to bear on the US and
its allies
to pay
the lion’s share, given their role in the war …”
50.
The Treasury
paper did not consider more specifically what the UK’s contribution
to
meeting
post-war costs might be.
51.
The Inquiry
has seen no evidence that Mr Brown responded to this analysis,
or that
it was
circulated outside the Treasury.
52.
In September
2002, the Energy Infrastructure Planning Group was
established
within the
US Department of Defense (DoD) to plan for the rapid restoration of
Iraq’s oil
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