Iraq: Between a virtuous outcome and catastrophe – three scenarios for an uncertain future

Gulf States Newsletter (GSN), Issue 706 - 21 March 2003

Even before Iraqis are confronted with the awe and terror of an unprecedented US-led bombardment – expected soon after the initial assault on the Baathist establishment and its defences, launched on 20 March as GSN went to press – businesses have been steeling themselves to chase the opportunities that will be offered by a post-Saddam Hussein Iraq . Even before the war starts, it seems to be over for Saddam Hussein, with the USA awarding reconstruction contracts – whose legality of which is questionable – and companies already dreaming about the contracts on offer.

GSN has long argued that the growing grip of neo-conservative thinking on the Bush Administration, and the loss of control over events of players from UK Prime Minister Tony Blair to the League of Arab States, was most likely to lead to war and regime change in Iraq. Follow the neo- con agenda and you have a road map for change in the Middle East – but this is a road map whose routes established in the period since 11 September 2001 (and well before by leading hawks attached to the US Administration), lead into uncharted territory.

The future of Iraq as a territorial entity is in play – although we believe that with intelligent and sensitive post-war governance, and the pragmatism of Kurdish and Shiite leaders it will most likely remain a unitary state – as are the prospects for a better life for a majority of Iraqis.

Anger at the nature of this war with Iraq, for all that Saddam is loathed by many across the Gulf and in Europe, will add to the bitter mood in the Middle East. Ironically, while all eyes are on Iraq, some of the biggest hits in the war against terror have happened in Pakistan. Al-Qaeda will miss Khalid Sheikh Mohammed, just as it will eventually miss Osama Bin Laden and Ayman Al- Zawahiri. But the conflict will go on.

The 16 March warning by the US Embassy in the UAE of potential danger based on “indications of a possible terrorist attack against night clubs in Dubai” underlined the extent of jitters that even the Dubai spin machine cannot overcome. Further attacks against soft Western targets across the Gulf are feared (GSN 705/7).

Efforts to show the US “alliance” is a benign, rather than imperial force, will focus on rebuilding Iraq as a modern, just state and in a more short- term initiative to resolve the Israel-Palestine conflict on a dual-state basis.

Such moves should be much welcomed, but from an Arab perspective they smack of tokenism, at least on the part of President George W Bush and a majority of his team. Bush’s grudging acceptance on 14 March that war with Iraq should be matched by a new effort to resolve the Israel-Palestine dispute was not a diversion from the neo-con agenda. While an exhausted Blair played up the possibilities offered by Palestinian Authority President Yasser Arafat making his old ally Mahmoud Abbas (Abu Mazen) Prime Minister – an issue where the British Premier has exerted effort – Bush’s lack of enthusiasm was palpable.

Bush’s largely pro-Israeli Administration has not changed the substance of its policy to the extent that the 100-plus cavils to the policy interjected by Prime Minister Ariel Sharon’s government will be ignored. Neither is it likely to object too loudly when, as seems possible, the Israel Defence Force (IDF) creates a sideshow in the war on Iraq by moving back into southern Lebanon to take on Hizbollah and attacks Hamas in Gaza.

This would put Syria and Iran, both now anxiously looking on from the sidelines, into play – adding a significant further factor of destabilisation.

In this context, GSN sees a number of scenarios that the region could follow in the coming months, described in brief below.


If the very best case is not achievable – and Saddam and family leave Baghdad for good – a very short war sees the Baathist regime obliterated without too great a loss of civilian life and with easily controllable damage to Iraqi oilfields.

Key regional players Israel, Turkey, Syria and Iran stay out of the conflict. The USA’s use of military facilities in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and Jordan does not reflect too negatively on the monarchies’ rulers.
Terrorist incidents and demonstrations are kept to a minimum and Gulf hotels soon start to fill again allowing the Dubai IMF/World Bank Annual Meetings and other events to go ahead.

The oil price stabilises in a $20-30 band for the rest of 2003 and major projects continue in the Gulf after only a short pause. The war’s virtuous outcome helps stimulate the US, Japanese and other major economies, kick-starting growth.

A brief period of US-led military control is followed by the appointment of a genuine government of national unity, which has sufficient credibility to hold Iraq together and oversee a wide- ranging programme of reconstruction. Huge flows of aid and technical assistance quickly help to unlock Iraq’s own substantial human resources, encouraging new investment in the Arab world.

The Palestinians are not forgotten, with serious moves to tackle Israeli settlements, final status and other critical issues, as well as effective demilitarisation in southern Lebanon, creating a new security framework in which President Bachar Al-Assad can more comfortably move Syria into the mainstream and Iranian reformists can re-engage with the West, outflanking their hardline rivals.


Either short but cataclysmic or much longer than expected as Baghdad becomes the ‘Arab Stalingrad’, the war involves more civilian casualties and essential infrastructure damage than predicted. Oil prices hit $50/bbl after Saddam sets up a wall of flame around his major oil fields which sets off very deep fires; oil fields and pumping stations suffer major damage, with sabotage in Saudi Arabia and other countries creating panic and showing radical Islamists just what damage they can achieve by targeting the oil industry.

Around the periphery, bush wars flare with Turkey entering Iraq, and Syria and Iran backing Hizbollah in a standoff against Israel – whose offensives in southern Lebanon and against Hamas in Gaza and the West Bank earn new international opprobrium, but only a mild telling off from Washington. Arab populations and Western peace movements mobilise against governments that backed the war, and the eventual successor regime in Iraq is totally discredited.

Policing Iraq proves a nightmare and communities split to best protect their interests; the Kurds are sold out again; trouble in the south spills over the neighbours.

In a volatile situation, the GCC leaderships become more isolated; Westerners stay away and opponents gain momentum. Radical Islamists argue that only they can offer an alternative; in response, governments crack down on dissidents while tightening rules of Islamic behaviour.

In Iran, hardliners make gains against President Mohammad Khatami’s government, arguing that reformers have supped with the devil for no material gain, while street fighters force all but the most militant student reformists off the streets.


A short war sees the Baathist regime obliterated and Iraqi oilfields restored to current levels of production at around 2.1m b/d by end-2003. However, after a very short “Baghdad spring”, as those Iraqis not in mourning celebrate their liberation, disillusion sets in at the US Administration’s inability to disengage from making basic political and economic decisions in Iraq, while failing to commit adequate troops and resources to the cause. President Bush’s attentions move on to pasture new, creating new international friction as neo-conservatives push for action on Iran and Syria.

The UN Security Council rift between the USA and UK on one side and France and Russia on the other may take a long time to heal while each of these parties manoeuvres for position, making the expected post-war flow of debt relief and funding more difficult to achieve. This will add to pressures on the new Iraqi administration to deliver anything other than emergency assistance – at least outside the scope of contracts awarded by the USA to predominantly US companies. In a sour situation Iraq becomes a difficult policing problem, especially as deals to accommodate Turkey in the removal of Saddam compromise the Kurds.

Some oil fields could be badly damaged in the coming conflict, but more difficult still will be the task of overhauling the majority of existing fields that are already in a poor state. Biggest gainers here will be drilling companies like (Vice President Dick Cheney’s) Halliburton and Schlumberger.
Major oil development contracts will depend on a new law being introduced and contracts being negotiated, which could drag on into 2004-05.

The world is currently in a very tight oil supply situation; while some of the factors contributing to this will ease (such as the Q1 03 Japanese shutdown on its nuclear power capacity and the bitter North American winter), a post-liberation glut of Iraqi oil is unlikely to materialise quickly. Oil prices could yet average $25-28 in 2003, but substantial newsflow-generated volatility can be expected through 2003-05.

Turkey will be unable not to intervene in the Kurdish region; a military occupation on ‘security’ grounds cannot be ruled out, but more likely is political pressure that confirms the Kurds will not seek independence but rather settle for autonomy in a government of national unity. The extent that groups like the Kurds and Shiites press for full autonomy in this new dispensation will possibly depend on the extent to which this government succeeds in delivering results.

A failed recovery programme will add to communal pressures and could see increasingly desperate efforts to create a new political dispensation in Iraq. This process could take up to three years to unwind.

GSN is pessimistic about Iraq’s northern neighbours. A likely Israeli sideshow during the coming Iraq conflict could seriously destabilise the Levant. The promise of a new Israeli-Palestinian peace initiative must be tempered by the mood of geopolitics in which it is launched. Sharon’s hold over Israeli politics has not diminished – and only a US Administration that is genuinely committed to forcing Israel to change its behaviour can effect change. That seems unlikely coming from Bush, for all that his diplomats led by Colin Powell, abetted by a damaged Tony Blair, will pay lip service to brokering the peace demanded by Arab governments.

Pro-Western governments such as King Abdallah II’s in Jordan and even President Hosni Mubarak’s in Egypt will be squeezed yet again by popular alienation. These sentiments will affect GCC populations – with their frustration reflected in everything from student demonstrations to terrorist attempts on Western targets.

For now, the GCC leaderships seem sufficiently robust to weather the storm. But it is highly unlikely that the outcome of the Iraqi war and/or regime change will leave the Middle East a happier place, however much the region, as well as the Iraqi people, will gain from Saddam’s demise.


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