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Iraq's Next Move Remains Unclear In Bid to End Pinch of UN Embargo

Military challenge seen as desperate act to resolve domestic woes

IN his military brinksmanship on the Kuwait border, Saddam Hussein has made an apparent attempt to draw attention to Iraqi suffering under United Nations-imposed sanctions. But will he again risk further economic suffering to maintain aggressive military strength?

``Saddam felt he had to do something rather than just sit there and take bad news every two months [about the UN's decision to maintain sanctions],'' says Nathaniel Kern, a Washington-based analyst of politics and oil issues. ``Right now he's managed to put Iraq on the front burner'' and convince his people that their president has a master plan for ending the economic misery, Mr. Kern says. With Saddam's latest show of force, he adds, Iraqi spirits have been boosted, even among the disaffected.

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A senior State Department official sees a slippage in domestic support for Saddam, and greater potential for his eventual defeat. Yes, the Iraqi president's move toward Kuwait ``was driven by desperation of the sanctions,'' he says. But the government's cutback on subsidized food rations last week, the soaring price of goods, and the new gruesome punishments for economic crimes and Army defections ``altogether paint a hopeful picture if you buy [the notion] that the disintegration of Iraqi society will lead to the replacement of Saddam.''

Reasserting control

Iraq specialist Laurie Mylroie says the regime's severing of hands for dealing illegally in foreign currency and cutting off of ears for military deserters - reportedly widely used - depict a government trying to regain control of a society hobbled by sanctions and of armed forces bucking their leader. As the economy worsens, so does Saddam's standing, she says.

While numbers on Iraqi finances are sketchy, analysts, bankers, and international businessmen all point to a regime that is rapidly depleting funds, squeezing the economy to pay for essential imports, and putting precious resources into military preparedness.

Patrick Clawson, a specialist in Middle Eastern economics at the National Defense University's Institute for National Strategic Studies in Washington evaluated the Iraqi economy for the Pentagon at the end of the Gulf war. He recalls, the country had ``large amounts of money in gold.'' Since then, the government and residents spent savings and sold off most of their gold reserves. Soaring prices have sent private citizens scrambling for cash to pay for basic consumer goods.

To pay for imports, the government has drawn on its reserves - which Mr. Clawson estimates at no more than $300 million - and the $500 million it earns annually from oil revenues. But these resources fall dramatically short of the $1 billion worth of humanitarian goods the regime has been importing, the $900 million in pharmaceuticals, and about $200 million spent on other basic needs. ``Saddam is trying to save enough money to get through the winter,'' Clawson says.

As he did during the eight-year Iran-Iraq war, and his buildup to the Gulf war, the Iraqi leader has also been vigorously pursuing credit from foreign suppliers and banks so he can make purchases for both the civilian and military sector. United States Pentagon officials have unveiled elaborate procurement networks the regime has set up. During the sanctions, they say, Iraq has managed to finesse the imports of ``dual-use'' materials and equipment - with both military and civilian purposes - smuggling through illegal channels as well as through UN export licenses.

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International businessmen report that Iraqi officials have dangled the prospects of lucrative post-sanction contracts in order to lure them into immediate deals. Saddam has succeeded in keeping his war machine well-tuned in part ``by offering generous terms to companies and countries willing to do business with Iraq,'' Clawson says, noting the most fundamental dual-use components: ``Hospitals do need emergency generators ... so do Army camps.''

Iraqi readiness

Michael Eisenstadt, military affairs fellow at the Washington Institute for Near East Policy, who helped analyze Iraqi strategy for the US Air Force, says Saddam has wasted no time rebuilding Iraq's military capabilities. ``If sanctions and inspections were to cease,'' he asserts, Iraq could produce ``significant quantities of biological weapons within weeks [if it cannot already do so],'' restore its former chemical-weapons production within a year, and soon produce nuclear weapons if it were to find willing suppliers of fissile material abroad. This menacing development could cost as little as a ``few million to a billion dollars,'' Mr. Eisenstadt says.

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