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By Paul Blustein
Washington Post Staff Writer
http://www.washingtonpost.com/
Wednesday, May 28, 2003; Page E01

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The Treasury Department yesterday lifted most remaining U.S. economic sanctions on Iraq, allowing American companies to conduct trade and investment with the country, and Secretary John W. Snow exhorted other countries to do the same.

But with lawlessness and power shortages still widespread in Iraq, experts said the U.S. move holds little promise of ending the country's economic misery in the near term.

The Treasury's announcement of a general license permitting firms to engage in commerce with Iraq implemented the resolution approved by the United Nations Security Council last Thursday that ended nearly 13 years of international sanctions imposed after the Iraqi invasion of Kuwait. A limited number of transactions are still barred under the license, including trade in arms and stolen cultural artifacts, and trade with Baath Party officials.

"It is no longer a crime for U.S. companies and individuals to do business with Iraq," Snow said in a prepared statement that he read at a news conference. "Trade and the opportunities that come with it will unleash the forces of the free market, bringing a better life for the people of Iraq. Oil can now be exported to finance reconstruction and humanitarian needs. Vital goods and services can be imported and the entrepreneurial spirit, inherent in people everywhere, can flourish once again in Iraq.

"Now it is imperative that other nations take similar steps," he said.

One immediate, practical result of the U.N. and U.S. decisions is that Iraq can sell 8 million to 9 million barrels of oil that it stored at the Turkish port of Ceyhan.

President Bush has signed, in addition to the license, an executive order to protect the proceeds of Iraq's oil sales from litigation against the former regime of Saddam Hussein, implementing another part of last Thursday's U.N. resolution.

But Iraq's energy industry is operating at a small fraction of its former capacity because of security and logistical problems stemming from the war and its chaotic aftermath. The country's oil wells are producing less than 300,000 barrels a day, far short of meeting domestic needs. Before the war, Iraq supplied its domestic market and exported about 2 million barrels a day.

For that reason, among others, experts were skeptical that Snow's projections of a vibrant Iraqi market would materialize soon.

"Clearly the regime of sanctions has added significant economic distortions to an economy that was already essentially a planned economy, so the lifting of sanctions is going to remove an additional cost of distortion," said Jean-Louis Sarbib, vice president for the Middle East and North Africa region at the World Bank.

"Now, how quickly will the entrepreneurship of the Iraqis flourish again -- that's going to depend on what makes a market economy work, a financial system that works, trade contracts that can be written, and near term, the major challenge we see . . . is the security situation," Sarbib said. "Until the security situation is better than it is now, I think it's going to be very difficult for investors to go back in and for people to take advantage of the greater openness of the economy."

Bathsheba N. Crocker, a fellow at the Center for Strategic and International Studies, said she spoke with an executive at a Turkish trucking concern who estimated that in six months he will be able to double the business he is doing in Iraq. "But I'm not sure we're going to see companies racing into Iraq to do major business," she said. "Some stuff is still too up in the air in terms of security."

At the Treasury briefing, David D. Aufhauser, the department's general counsel, said the hunt for Iraqi assets recently turned up accounts containing more than half a billion dollars, identified by the Bank for International Settlements in Basel, Switzerland. That money brings to about $1.7 billion the total of Iraqi assets that have been found in overseas financial institutions.

The money will be sent to Iraq and used for the benefit of the Iraqi people, Aufhauser said, although some of it may be subject to third-party claims.

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Direct Link:
--http://www.washingtonpost.com/wp-dyn/articles/A46314-2003May27.html

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