NationalJournal.com March 4, 2003 By Mark H. Rodeffer

As the battle against terrorism continues and an invasion of Iraq seems more likely, the war on drugs has received scant attention. NationalJournal.com's Mark H. Rodeffer talked with retired Army Gen. Barry McCaffrey, the Clinton administration director of the Office of National Drug Control Policy, about the connection between terrorism and illegal drugs, anti-drug efforts in South America and President Bush's plan to give federal dollars to faith-based drug treatment programs.

Q. In this year's recently released update of the National Drug Control Strategy, the White House Drug Office said it has seen "the first significant downturn in youth drug use in nearly a decade." The report cites a University of Michigan study to back up this claim. If this data is accurate, where does the proper credit belong for the downturn?

A. The claims that come out of the various pieces of the drug policy debate are always hard to sort out. Drug use among adolescents and Americans in general peaked in 1979, around 14 percent of the population. It's now around 6 percent. Drug use in America is down dramatically across the board. And almost every other indicator that goes along with that assertion has followed suit: crime rates, teenage pregnancy rates, recreational use of cocaine is down by 75 percent.

Starting in the late '80s there was a dramatic upturn. I think we took our eye off the ball in drug use by adolescents. It doubled among adolescents; it tripled among eighth graders. When I took the responsibility for drug policy in '96, I got in at the height of adolescent drug increase. And we organized ourselves; we got lots of resources flowing into it. We got the Drug Free Communities Act passed. We went from a dozen to more than 1,100 national drug courts. We started a billion-dollar media campaign. And it worked. It came down—drug use among adolescents was down 23 percent. So this year was not—not—the first year....

Basically I think what's happened is the enormous amount of resources and energy and engagement by the nation's leadership—parents, pediatricians, school teachers, law enforcement and the media—has resulted in bringing under control again the problem of adolescent gateway drug-taking behavior. And that ought to continue to work. So I applaud everyone involved in it.... Lots of people have really made a difference because they got horrified at the impact of drugs on our society.

Q. In your final report as the nation's drug czar, you said, "Although wars are expected to end, drug education—like all schooling—is a continuous process"—reminding people that the drug fight is always ongoing. Now the United States is involved in the war on terrorism, which is also seen by many as a never-ending fight. How concerned are you that the drug war will be forgotten by Americans as well as by those on Capitol Hill, and what's the risk if that does happen?

A. It's always a caution. I used to tell people, when you talk about the interagency process, at the highest levels—the principles, the deputies committees, the working groups in the interagency process—normally there's a thousand issues we're working, a hundred of them, we're keenly aware of and are under debate. And at any given time we're trying to solve about three of them.

It's a concern I have that we not forget that every year 100,000 people die of some aspect alcohol abuse. [As drug czar] I had a study done of all death certificates in the United States; 53,000 people a year die of some implication of illegal drug abuse. That is just a massive impact. If you look at our 2 million people behind bars in America, pick a study you believe in, but my personal judgment is 85 percent of those people have a significant drug or alcohol abuse problem.

The country's in great shape, notwithstanding the economic slowdown, notwithstanding the many problems we have. We're the wealthiest, most successful society in history. If you want to get worried about something, the abuse of illegal drugs and alcohol is one of them. So it's worth being concerned that we not forget about this problem. Now, having said that, there's no reason why there ought to be a competition between dealing with drug and alcohol abuse and dealing with al Qaida....

Q. In fact, the White House has worked to tie the two together. What do you think of their argument overall, and what do think about the TV ads saying that if you buy drugs, you're supporting terrorism?

A. I get asked the question all the time. I think, objectively, it's a correct statement.... [Americans] spend too much money on drugs, and we fuel a good bit of the international crime and the terrorism that feeds off that crime. I just wrote a chapter in a book called "Terrorism and Counterterrorism." It's 33 essays. The editors were Col. Russ Howard and Col. Reid Sawyer, brilliant young intel officers, and my chapter was on the convergence of terrorism, crime and drug money. Objectively, I think it's correct to say that when you spend $250 a day on heroin or $5,000 in a weekend on cocaine or you buy $20 bags of marijuana, you are feeding a criminal enterprise that has devastating consequences on foreign democracies and on U.S. law enforcement. So objectively, it's a correct idea.

I'm uneasy about one aspect of it. The media campaign had one purpose, which was to shape adolescent attitudes about drugs. To shape those attitudes, we said, let's get a message that resonates with the target audience. Half those ads were aimed at young people; half of them were aimed at young people's adult mentors. So if you were a parent or a pediatrician or a school teacher, we had a message for you that we thought would be appropriate. So that you, granddad, would feel educated and empowered to talk to your grandchildren about, "In this family, we don't use drugs." And if you were a pediatrician, we were in your medical journals trying to educate you on drugs. We did a lot of this.

I hope they study the effect of these linkage ads of terrorism and drugs, and that they see that the ads are favorably affecting adolescent attitudes toward drug use. If they are, then I'm supportive of them. If they're not, then I'm not supportive of them....

I'm less interested in a Super Bowl ad than I am in being on the Internet, or on rock radio or on rap radio and talking to high-risk youth in a message that's scientifically correct and that resonates with the population....

Q. On Feb. 13, when a plane with U.S. intelligence operatives aboard went down in Colombia and the Americans were kidnapped—and possibly killed—many called it a disaster waiting to happen. The United States has already invested $2.2 billion in an anti-drug campaign in Colombia, but it is widely believed to have been a failure. Do you agree? How can the program be reformed?

A. To some extent, all of us have got to struggle to be objective. I'm basically an engineer by training, so it's always people, dollars, machinery. What we are trying to achieve; what are the measures of effectiveness?

I always hear about the "controversial" Plan Colombia. If it's so controversial, then how come in nine months, I went to get a billion dollars and got $1.2 billion and then got two presidents to meet in Cartagena to sign the agreement and had [Sen.] Joe Biden [D-Del.] and [House Speaker] Denny Hastert [R-Ill.] both there? We have to be careful not to repeat ideological twaddle.

Plan Colombia went through, because [former Under Secretary of State for Political Affairs] Tom Pickering and I—both of whom had 30 years of public service, were real smart and knew a lot about the region—went to [President Clinton] and said: "Sir, this thing's going over the edge. It's going to collapse on the next guy's watch. You ought to be held responsible if it goes under." And we said: "These are wonderful people. They're beleaguered. They shouldn't be isolated. This should be an [Organization of American States] problem that involves the U.S., Panama, Ecuador, Peru, Brazil, Venezuela. These people are an operative democracy [but] there's violence and corruption at work here, and a lot it's fueled by drug money, and we're involved in it. Let's stand with them."

If it were 1943, would you say, it's widely believed to be a failure, the way we're dealing with Nazis, and we ought to give up and try something different? We're in a position where we're standing with an ally who's struggling against an incredible threat against their own democratic tradition.

Responding to your words, a plane went down, one American was killed, one Colombian, three were captured, this is a disaster—a disaster—waiting to happen. So what's the disaster? For God's sake, this is a three-hour flight from Miami. It's a democracy that deserves our support. We had 45,000 people in Balkans and had a bunch of people killed and wounded and spent billions of dollars trying to sustain democracy in Bosnia and Kosovo. We went into Afghanistan, and of course we've had incredible good fortune there too. So I don't know what's a disaster about three Americans who've been captured. My God, we've got 900 people down there standing with the Colombian allies struggling against drug cartels. What's the disaster?

Q. How would you respond to the argument that successful drug interdiction just increases crime because it reduces the drug supply, but the demand is inelastic, meaning addicts will do anything to get the money they need to buy drugs?

A. These are either—let me be blunt—these are either extremely good questions, sharp questions designed to fully explore the issue, for which I am grateful, or they are the set of questions of someone who is unalterably opposed to the international component of the struggle against drugs and is picking at the fissures of the issue. That latter question strikes me as illogical. The reason to be concerned about heroin has nothing to do with how much it costs or whether it's legal or illegal....

The price has no relationship because supply exceeds demand greatly, so it's a situational economic product. It's very strange. It's not Chilean wine, German Mercedes cars. There's no value added. It costs almost nothing to make cocaine. Any dummy can grow it. It's a product that destroys human life but produces enormous euphoria. So you don't have to have a big advertising budget, and if you give it away you'll create a market.

That's the reason to try and create prevention and education programs to create attitudes that are resistant to drug exposure. It's why you want to limit the tonnages of these drugs and their availability. We've got extremely good studies that say if they're not available in your school and you make it even slightly harder to get it, less people try it and less people get addicted. Which is why the most devastating impact of illegal drugs are in the areas where they are produced, where they're given away....

The notion that you're trying to spray them where they're grown and kill them, you're trying to take away the chemicals where they're produced, you're trying to catch them in transit, you're trying to arrest people who sell them to your students—that because of that you're making them more expensive, and so if you stop that, you'll be better off, is a nincompoop argument that nobody would make about any other product. And so most people who make that argument are either not very bright or are supportive of making drugs more widely available and don't believe they're as dangerous as some of us would assert.

It's counterintuitive to think that struggling back against evil. And people like me, who work with 5.1 million chronically addicted Americans, believe that drugs' impact on families and individuals and businesses and democratic institutions, are evil. We would say, no of course you have a responsibility to struggle back against that for God's sake.

Q. Part of President Bush's 2003 strategy on drugs is a $600 million voucher program over three years to encourage accountability in the treatment system while making funds available to all providers—including programs run by faith-based organizations. Any thoughts on that proposal?

A. I was glad to hear [President Bush's] intervention in the State of the Union speech. It made all of us very proud who are associated with the issue. I think one of the best things we did in the last administration was prevention education. We had a huge amount of resources and energy going to trying to talk about the dangers of drugs and reduce the exposure to gateway drug-taking behavior. I think the hardest thing we had to do was to educate people on a requirement for science-based drug and alcohol treatment....

Q. So you think it's a good idea because it's putting more money into drug treatment?

A. I sort of like the idea of a voucher program. I think that right now one of the problems is, literally, it's hard work and costs money to get a scientific drug treatment program put together. There ought to be a residential component, there are ought to be a follow-on.

Thank God for AA and NA, the magic of Alcoholics Anonymous and the 12-step process. But you also need cognitive therapy, you must have used a whole array of potentialities. We've got to have methadone, Buprenorphine. I like the idea of having vouchers where the guy doesn't have to say, "I need to be in jail before these guys will give me drug treatment."

I've been to a lot of drug treatment programs across the country, and some terrific ones were run by the Catholics, by ministers in Harlem, by the Baptist Church, so I'm all for the faith-based program. As you know, one of the 12-step processes is acknowledging a higher spiritual presence, and higher power in your life, that you lost control of.

The only concern I would have is I want to make sure that only organizations that are using certified approaches are eligible for vouchers. I want to make sure there's oversight. There's tremendous room for mischief in the drug and alcohol treatment regime. I want to know that they're certified by the state. We want to make sure there are science-based standards to all of this. That would be my one concern.

And then if you take federal dollars, we want to make sure you comply with all appropriate federal legislation. In other words, if I'm a nice little Catholic boy working in the drug treatment field, or a Catholic treatment organization, I want to make sure that if I take federal dollars it isn't restricted to Catholics being in my program. If you're going to take federal dollars, it ought to be equal opportunity. Those are the concerns I shoulder, but I think vouchers have a lot of potential.

March 27, 2003 By Sydney J. Freedberg Jr. and Corine Hegland, National Journal

A country called Iraq has existed only since 1919. But some cities in that land were already 16 centuries old when the nearby Egyptians built their pyramids.

Bureaucrats in Mesopotamia, as the land between the Tigris and Euphrates Rivers was known, began keeping written records in 3400 B.C. And despite three decades of political repression, economic mismanagement, and military disaster under Saddam Hussein's Baath Party, Iraq today—unlike Afghanistan in 2001, Yugoslavia in 1995, and Germany in 1945—is not a "failed state." From food-distribution systems to local police forces, essential institutions and infrastructures have survived Saddam, albeit barely, and they will survive a war that successfully ousts him.

So the good news is that Iraq will not have to start over from scratch. Unfortunately, the bad news is also that Iraq will not be able to start over from scratch. "This is not Afghanistan; this is a country that's functioning," said Phebe Marr, author of The Modern History of Iraq. "They can get the oil up, they can run the irrigation system, they can run the government," Marr said. "But that's very different from [running] a political system. The liberal strand you need ... tolerance, compromise ... it's just not there." Force and fear have long held Iraq's disparate parts together: the clannish, pastoral, and agricultural Kurdish north; urban, urbane, multiethnic Baghdad; and the marshy, impoverished Shiite (also called Shia) south. The modern era is bloodily bracketed by the Iraqi army's 1933 massacre of Assyrians, a tiny ethnic group of mostly Christians-just 11 months after Iraq gained independence-and by the slaughter of Kurds and Shiite Muslims in the uprisings against Saddam after the Persian Gulf War in 1991. The history of Iraq can be told as an intermittent war waged by the Sunni Arabs, who have dominated the government and the center of Iraq, against their ethnic rivals—the Sunni Kurds to the north and Shiite Arabs to the south. No wonder many international experts and officials, scarred by the peacekeeping failures of the 1990s, see Iraq as a new Yugoslavia waiting to explode. But many of those who know Iraq best—exiles and, more objectively, historians—see more nuance, and more hope. The violence has been real, but it never was simply about ethnicity. Shiite mobs lynched Shiite collaborators in 1991, and were shot down by units that included Shiite conscripts. Kurdish paramilitaries aided Saddam's genocide of other Kurds in the 1980s. And yet, in 1991, Kurdish rebels showed remarkable restraint, even toward Saddam's non-Kurdish soldiers they had taken prisoner. "We were quite afraid that the Kurdish people would take revenge," said Antonella Notari of the International Committee of the Red Cross, who was in northern Iraq in 1991. Instead, "Iraqi prisoners were treated with great respect by the Kurdish combatants, [who realized that the soldiers] didn't fight against the Kurds by choice." Such an understanding represents Iraq's best hope. Unlike Yugoslavia with its ethnic paramilitaries, or Afghanistan with its tribal warlords, or even democratic India with its Hindu-versus-Muslim riots, Iraq has seldom seen the violence of people who willingly took arms against their neighbors. In 1991, mobs burned government buildings, not ethnic neighborhoods, and with good reason. Precisely because the flat, fertile floodplain of Iraq has been so civilized for so long—unlike the barely governable highlands of Afghanistan or the Balkans—the state has traditionally been the worst killer. And there is a difference between entire communities that commit violence and a government that commits violence: Governments can be overthrown. But with so much blood on official hands, the robustness of Iraqi governmental institutions is a mixed blessing. "How do you reconcile a woman who has been raped, as a matter of state policy, by a civil servant?" asked Feisal Istrabadi, an Iraqi expatriate who has advised the State Department's "Future of Iraq" study. The wounds inflicted by Saddam run deep. So does complicity. Istrabadi estimates that the regime's hard-core supporters number 100,000. And nearly 2 million people—one Iraqi in 12—belong to the Baath party, less out of conviction than convenience; they need party membership to get promoted, to stay safe, even to get into college. "I understand why they joined," Istrabadi said. "I might have joined myself." So while many leaders in exile want the Baathists out of the bureaucracy, the tainted rank-and-file functionaries may be so numerous that it's impossible to govern Iraq without them. The dilemma then, for any U.S. occupation force, is that immediate and future goals often conflict. Flooding Iraq with aid eases short-term suffering but deepens long-term dependency. (Indeed, U.N.-supervised Oil-for-Food rations are now killing off Iraqi agriculture.) Keeping Baathists in official positions reduces the risk of anarchy today but increases the danger to democracy tomorrow. "What you do from day one sets the terms," said Ray Jennings, a veteran of Balkan reconstruction who is now at the U.S. Institute of Peace. "The traditional idea that you go in, provide relief, stabilize, and then you worry about rehabilitation and development ... has gotten us into trouble several times," he said. Most notably that was true, Jennings noted, in Bosnia and Kosovo, where gangster-politicians had time to entrench after NATO troops stopped the fighting and before U.N. civilian personnel could restore the rule of law. The need to keep both short-term and long-term goals simultaneously in sight has gained real traction in the U.S. government. Contracts to rebuild everything from oil fields to schools are being put up for bid, even as emergency rations are being stockpiled. Agency for International Development chief Andrew Natsios pledges that long-term reconstruction projects will follow humanitarian relief efforts within days. But many outside experts fear that the plan to win the peace is far less advanced than the plan to win the war. "The administration has given very little attention to this, the Congress has given essentially no attention to it, and the media has spent very little time on it," said Sen. Chuck Hagel, R-Neb., a Foreign Relations subcommittee chairman fuming over administration officials' refusal to even guess at the costs of rebuilding Iraq. And until the president forces Congress and the public to confront those costs, said Hagel, the American people will not commit for the long haul. And rebuilding may require a huge commitment: Unofficial estimates suggest tens of billions of dollars, and tens of thousands of troops, for years. The stakes are high, and time is short.

Security

Dictators don't fall softly. The 1991 Gulf War drove Saddam Hussein's troops from Kuwait but only shook his hold on power. Yet the failed uprisings afterward still took an estimated 60,000 lives—20 times as many Iraq civilians as were killed by the U.S.-led coalition. Some experts blame Saddam's security forces for most of the post-Desert Storm bloodshed, and they fear that tens of thousands of Baathist thugs could again lash out in despair if Saddam seems doomed. Other experts, attributing the 1991 carnage to vengeful mobs, worry that tens of thousands of ethnic militiamen will again settle old scores as soon as they are free to do so. Yet others simply fear the natural escalation of fear and violence in a country without a trusted, neutral arbiter. Who's right? Whether it's the old oppressors or the newly liberated who might run amuck is almost moot. The way to head off either kind of chaos is with several hundred thousand troops, as Army Chief of Staff Gen. Eric Shinseki has let slip. The administration quickly renounced his estimate, but it still plans to have 380,000 troops either in the Gulf or on call as potential reinforcements. Such numbers would be needed less to defeat the 400,000 demoralized and ill-equipped soldiers of the Iraqi army than to impose order on 23 million Iraqi civilians. And the Bush administration has explicitly given its regional commander, Gen. Tommy Franks, the task of administering what he liberates. But once again the short-term and the long-term concerns are at war. U.S. troops can keep most Iraqis from killing each other, but some Iraqis will soon try to kill them. At the end of World War I, the British liberated the Ottoman provinces of Baghdad, Basra, and Mosul from the Turks and united them in one entity called Iraq; in 1920, Iraq rose in revolt when it became clear that the British weren't going to leave. In 1996, the mere presence of U.S. troops in Saudi Arabia inspired a truck bombing in Dhahran that killed 19 Americans, and they were just sitting in barracks. The last time the United States tried to impose peace on an Arab city was in Beirut in 1983—and the response was one bomb that killed 241 Marines. Just imagine the reaction if a U.S. patrol in Baghdad were swarmed by rioters and had to open fire. "Some dirty work needs to be done," said Mustafa Malik, a journalist, scholar, and former Pakistani official. "Somebody has to do some shooting initially [to keep order]. If the shooting has to be done by the American military, I cannot imagine, after that, that we can have control." So although U.S. forces must be the final guarantor of order, on a day-to-day basis it will be best to have Iraqis policing—and if need be, killing—other Iraqis. And what happened in the Kurdish north in 1991 offers some hope. Kurdish rebel leaders forswore mass trials and mob violence against supporters of Saddam's regime; some were killed anyway, some fled, but most of the rank-and-file functionaries stayed—and most of the local cops kept walking their beats. Municipal police in Saddam's Iraq today are ill-trained, underpaid, and steeped in petty graft. But their very weakness has saved them from the worst corruption of all: The elite security forces shunted them aside to keep for themselves the work of repressing the regime's foes and the ample rewards from Saddam. Meticulous records captured by the Kurds on the torture and murder of dissidents show that the regular police were uninvolved. So if the invasion is not too disruptive, the United States could copy the Kurdish model, pay civil-service salaries—as the Bush administration has already pledged to do for a time—and leave the local cops in place. Heavily armed U.S. patrols can provide backup and a visible reminder of who is in charge, but U.S. forces could steadily draw down, as they have in Bosnia and Kosovo. In most towns, most of the time, the only armed foreigners might be a few discreet observers from Army civil affairs, military police, or Special Forces, and, later on, civilian police from Brooklyn or Berlin to retrain the locals. Some villages might never see an American soldier at all. Eventually, however, villagers will have to see an Iraqi one. Sharing the region with Al Qaeda and Iran, the new Iraq will need an army-which is one reason U.S. war planners don't want to blow up too much of Iraq's existing army. But once again, short- and long-term goals are in conflict. The Iraqi army staged its first coup in 1936, four years after independence, and then alternately dominated and ousted civilian governments for decades. After 1968, the Baathists weakened the army and built up new security forces loyal only to their party-but those thug elites will go out with the Baath, leaving the army once again the strongest player in Iraqi politics. How can the Iraqi military be taught the rules of a more democratic game? The U.S. has reformed authoritarian armies before, notably in the Eastern European nations now welcomed into NATO. But it took years of aid and constant pressure. Even if current commanders are retained and their units are kept intact, it will take months to sort through personnel records (assuming files are not destroyed) to find the worst actors. And many experts doubt that such half-measures will purge the dictatorial taint fouling the army. Kanan Makiya is considered the dean of Baghdad dissidents and is affiliated with the Iraqi National Congress. In an interview with National Journal, he said that U.S. occupiers should "completely restructure the army ... demobilize it and build it up again under new leadership, with new training." But in Afghanistan, it has taken foreign advisers more than a year to train just 3,000 troops for that war-torn country's new army. Protecting Iraq's borders and provinces might require a new army of 150,000 troops. And however retrained, those troops will have to be paid adequately to keep them anywhere near loyal, while demobilized soldiers will need jobs that keep them off the streets. All of that requires money. In the long run, Iraq itself must pay for sustainable reform—and that means using its oil.

Economic Reconstruction

America fought its most recent war in Afghanistan, a country already leveled by 20 years of fighting. Iraq starts off in far better shape and has never fallen as far. This makes the long-term task much easier—there is a base in Iraq on which to build. Iraq contains the apparatus of industrial society—water systems, electrical grids, food distribution. Now, the United States will wield the most precise weapons in history and follow a "humanitarian map" of what not to hit with its bombs. But human error, technical glitches, city fighting, and last-ditch malice by Saddam will take some toll on Iraq's infrastructure. And the fighting will inevitably result in fleeing refugees. How many refugees? In 1991, 2 million, mostly Kurds and Shiites, fled Iraq. Now, some leaked U.N. scenarios estimate that fighting will force up to 2.5 million Iraqis to leave their homes. But if the war is short, they can return home fast, as Kosovar refugees did in 1991, said Jan de Wilde of the U.N.-affiliated International Organization for Migration. And de Wilde doubts a U.S.-led war will displace as many people as the 1991 anti-Saddam uprisings did. The critical variable in these calculations is water. People without food take weeks to starve; people without water die in days. And all of Iraq is hot. Much of it is desert. But more dangerous to more people are the great rivers that gave Mesopotamia its wealth in ancient times, but that are now badly contaminated with sewage. The oil boom of the 1970s bought Iraq a sophisticated water and sanitation system to serve its burgeoning cities. In 20 years of war and sanctions, the infrastructure has decayed while the population grew. Despite real improvement since Oil-for-Food funds started buying repair parts in 1996, aid groups estimate that 5 million Iraqis still lack safe water, many of them right in Baghdad, and that half the sewage treatment plants aren't working. The plants and pumps that do work draw power from an electrical grid whose output is still 30 percent below 1990 levels and which is highly vulnerable to stray bombs. By contrast, the food supply in Iraq looks almost robust. Since Oil for Food began in 1996, the average Iraqi's caloric intake has doubled, though it is still below 1980 levels and the U.N.-recommended minimum. Malnutrition remains widespread, especially among children under 5, whose death rate is among the highest in the world-not from outright starvation so much as from weakened resistance to the bacteria in the water. Under Saddam's rule, 60 percent of Iraqis-some 14 million people-depend on a government rationing system that outside experts consider highly efficient, and which the United States has promised to get running again soon after the war. To bridge any gap, many families have stockpiled a six-week supply of food, thanks to extra rations Saddam has been issuing since July. And for those in need, aid agencies can deliver food far more easily than water; the U.N.-affiliated World Food Program alone has enough rations warehoused in the region to feed a million people for a month. But foreigners cannot provide basic services such as food and water, or police, to all of Iraq indefinitely. That is why even the emergency supplies U.S. and international agencies are now stockpiling include not only rations but also electrical generators, water-purification systems, and other equipment to get Iraq's infrastructure back in service. In the midterm, the reconstruction of Iraq will depend on getting both halves of Oil for Food running again-not just imports of food, medicine, and spare parts, but also exports of oil to pay for it all. The long-term paradox is that the Oil-for-Food program reinforces central planning, pervasive subsidies, and the kind of dependence on a single export-oil-that has doomed developing economies in the past. Said one U.S. government official, "Sooner or later, you'd want to wean people off of that." But global capitalism may come calling before the new Iraq is ready. The immediate potential danger to Iraqi oil fields is that Saddam may set them afire out of spite. He has, however, already done a subtler kind of damage to his nation's economy-piling up debt. Even today, a quarter of Oil-for-Food revenues go not to Iraq, but to Kuwait and others as reparations for the 1991 Gulf War, amounting to nearly $16 billion in payments over the past six years, with another $172 billion in claims awaiting adjudication. And the commercial loans Saddam took out before 1991, on which Iraq has a decade of unpaid interest, are estimated to total between $60 billion and $140 billion-up to twice Iraq's entire annual gross domestic product. No plausible aid program could outpace the annual interest payments. "All of our generosity will not match that number," said Rick Barton of the Center for Strategic and International Studies in Washington. The only solution, Barton said, is an international conference to renegotiate this crushing debt, and soon. If their creditors do not suck them dry, the Iraqis may prosper, because they have plenty of experience running a profitable, technically efficient oil industry on a daily basis. But strategically, Iraqi oil has been mismanaged for decades. The Baathists have spurned foreign investment, left oil fields unexplored, and squandered revenue. In areas Saddam controls, the gross domestic product is one-fifth of what it was before the Iran-Iraq war of the 1980s, literacy has dropped by a third since the mid-1980s, and the shriveled economy is less diversified and more dependent on oil than ever before. Since 1979 when Saddam became president, Iraq "hasn't been developing-it's been de-developing," said Paul Sullivan, a professor of economics at the National Defense University. Before 1979, peace and high oil prices made the 1970s a boom time for Iraq, fondly remembered even today. But even then, the golden age was hollow, and the country suffered from what could be called "the oil disease." Easy money propped up inefficiency and repression, and it fed economic dysfunction without building lasting gains. Although Iraq shows this syndrome at its warmongering worst, the oil disease has undermined democracy and development in countries around the globe, from Saudi Arabia to Nigeria to Venezuela. If Saddam's replacements are even half as corrupt, Iraqi oil will go to waste again, and with it, American hopes. Political repression is not completely incompatible with economic growth; look at the histories of South Korea and Taiwan. But openness gives young economies the chance to see and correct rising corruption before it chokes them. Even from a narrowly pragmatic point of view, the new Iraq will need some measure of democracy, if only to get it on its feet and off our back.

Prospects for Democracy

Who will rule Iraq after Saddam? The bitter debate usually focuses on who is to be on top—will it be a U.S. military administrator, a civilian, or an international figure linked to the United Nations? After years of feuding among themselves, the splinters of the Iraqi opposition came together in early March to name a six-member provisional council-and to denounce Washington's plans for an interim U.S. administration. But whether a transitional government has an American governor with an Iraqi advisory council, or an Iraqi council dominated by an American adviser, the final arbiter will be U.S. troops-and the day-to-day administrators will be Iraqi functionaries. Parliaments are important; however, for most Iraqis, most of the time, their local bureaucrats and courts already matter more, and will continue to matter more. How can Iraq reform its economy, let alone its politics, if citizens cannot even take the government to court? The Iraqi court system, of course, has also been corrupted by Saddam. Before the Baathists, "you could sue the state for breach of contract; you simply can't do that now," said the expatriate Istrabadi, a lawyer. Bribes and personal connections outweigh evidence, even in ordinary civil cases. And for dissidents, there is an entire body of secret laws known only to the security police, and a parallel system of secret courts-in which regular judges are often forced to serve, knowing in advance that the defendant has been tortured and that the verdict will be "guilty." Such forced complicity is as demoralizing as it is corrupting. The pervasive dishonesty of Saddam's police state taints even schoolteachers, who are so underpaid that many give good grades in return for a bribe. With 50 percent of Iraq's population unemployed, 60 percent living off government rations (some of which get sold for spare cash), and many families selling off furniture and books to make ends meet, any idea of normal economic life is lost in Iraq. "This is a society in shambles," said Sullivan. "Behavior that would have been completely unacceptable in the 1970s is now the norm." Some decency and honor do remain, however. "The corruption and all of those things are there; but it's much better than any [other] developing country in the world," said Rehan Mullick, a former staffer with the U.N. Oil-for-Food program who found Iraqi bureaucrats "definitely" superior to those in his native Pakistan. "Even my colleagues from Africa and other places really admired Iraqis for maintaining their integrity." While never up to Western standards, Iraq has traditions and institutions many countries would envy. Before 1958, during the rule of the British-installed Hashemite monarchy, Iraq had not only functioning courts but also a parliament, political parties, a free press, and elections. The elections were frequently rigged, the press was often censored, and "the politicians tended to be large landlords," said Juan Cole, a historian at the University of Michigan. With all its flaws, said Cole, Hashemite Iraq was "kind of like 18th-century Britain." Since 1958, when a military coup ended the monarchy, Iraq's proto-democratic institutions have been destroyed, and the landlord class that ran them has been exiled, killed, or simply dispossessed. Saddam has spent three decades eradicating any alternative leadership. But there are candidates, each with strengths and flaws. The exiles are the best-known and most derided. The Bush administration has rejected proposals to form a government-in-exile, and outsiders doubt the dissident Iraqi National Congress's claim to strong underground support inside Iraq. Some leading dissidents left the country decades ago. But that very isolation-besides keeping them alive-has kept the expatriates free of the pervasive corruption of the Baathist regime. And for all the bickering among expatriate politicians, the huge number of Iraqis living abroad-an estimated 4 million-includes the country's best-educated professionals, many of whom have years of experience living in Western democracies. Said Abbas Mehdi, a professor at St. Cloud State University in Minnesota and no fan of the INC, "If 20 percent of these people go back and act as an agent for change, Iraq will change." Inside Iraq itself, however, the Kurds have long provided the strongest leadership. The two main Kurdish parties date back decades and are led by men with famous family names. "People like me knew who Talabani and Barzani were before the uprising" of 1991, said Tara Aziz, now with the Washington Kurdish Institute. Such recognized leaders could both direct and restrain the revolt. Former U.S. Ambassador Peter Galbraith recalled being at a town hall meeting with Jalal Talabani at the height of 1991's postwar uprisings: "They were talking about independence; Talabani was explaining-again-why it couldn't happen." The two Kurdish groups fought bitterly in 1996, one even allying briefly with Saddam. But despite that internal divide, the 4 million Kurds under the groups' rule in northern Iraq have three times as many schools as in 1991; their income and nutrition levels are well above those in Saddam's part of Iraq; and they enjoy a fledgling civil society. And common fear of Turkish intervention, if nothing else, has forced the Kurdish factions to work together-and they function so much better than the rest of the opposition, said Galbraith, that "the Kurds basically ran the show" at a recent Iraqi opposition conference, where they got the other groups to agree in principle to a more decentralized Iraq. The Kurds' key partner at that meeting, Galbraith said, was the leading Shiite group, the ominously named Supreme Council for Islamic Revolution in Iraq. SCIRI has strong ties to Iran, where a half-million Iraqi Shiite refugees from the 1991 war still live, and from where an estimated 10,000 "Badr Brigade" guerrillas are infiltrating into Iraq. But "they have their own tensions with Iran," said Yitzhak Nakash of Brandeis University, the author of The Shi'is of Iraq. Historically, Iraqi Shiites fought loyally alongside the Sunni against the non-Arab (Persian) Shiites of Iran; Iraqi and Iranian clerics have been rivals for influence in the Shiite world as often as allies; and, anyway, most Iraqi Shiites pay far less heed to their clerics than do Iranians. The real problem in Iraq, Nakash argued, is not the strength of Shiite leaders but their weakness: "After 83 years of Sunni minority rule, the power of the Shiite religious establishment in Iraq has largely been broken." This power vacuum will slow recovery throughout the part of Iraq now under Saddam's control. "It will take a long time for that interior to be able to express itself politically," said Makiya, the Iraqi dissident. "The inside will take years to create leadership." The INC's short-term solution is governance by exiles like themselves. But in the long term, civil society must be grown, and must be grown from the grassroots up. "Most of the national-level talent has either been co-opted [by Saddam], or they've been killed or chased out of the country," Barton said. That means, Barton continued, that leadership will have to be built from the ground up in Iraq. "You want to work at the municipal level," he said. Reconstruction veterans advise that the moment a town is liberated, foreign troops and aid workers need to consult the community, not dictate to it, in order to give new leaders the chance to step forward, test themselves in manageable projects, and learn to work with their traditional rivals on obvious common interests such as irrigation. The downside of such a bottom-up approach is that it cedes control. In the short term, it is always easier to impose compliance from the center. From peace with Israel to war on Iraq, said University of Maryland professor Shibley Telhami, the United States asks "governments in the region to be allies of policies that are not popular; and they can only be allies of policies that are not popular by being less responsive to the public, which means more repressive." A genuinely democratic government would sometimes voice its people's wish that the Yankees go to hell-as the Turkish parliament did in early March when it voted against allowing U.S. ground troops to use Turkish bases to attack Iraq. The majority in the Ankara parliament belong to an Islamic party. Religious fervor has risen for a generation in the Middle East, even in famously secular Iraq. So removing Saddam may take the lid off some vehement Islamic—and anti-American-sentiments. But trying to clamp the lid back down has proved to be worse. When an Islamic party won the 1991 elections in Algeria, the government annulled them-and sparked a civil war that by some estimates has so far killed 150,000 civilians. In Turkey, when the military finally let Islamic politicians take power, the realities of running a country moderated the views of the Islamists. Indeed, it was the Turkish Islamic party's own leaders who pressed a pro-U.S. vote this year. So when Islamic politicians speak out in the new Iraq, the interim regime might do better to co-opt them, rather than to crack down on them. The best way to guarantee that Iraq will remain America's enemy is to try to force it to be America's friend. In the long run, if everything goes right—if security, prosperity, and democracy all take root in Iraq despite the odds—the result may still be a country that the U.S. does not particularly like, and that does not like us. Americans died to free France in World War II, and spent years afterward rebuilding Germany. Today, both countries oppose U.S. policy toward Iraq. In the end, the true measure of success will not be the creation of a compliant, repressive puppet, but the fostering of a defiant democracy: an Iraq that can say no.

<a href=www.ctv.ca>Canadian Press

CALGARY — The United States slurps up more oil and natural gas from Canada than any other foreign country on Earth.

And with war raging in the Middle East, civil uprisings in other oil producing countries and a recent decision not to drill in a sensitive U.S. Arctic wildlife refuge in Alaska, even greater demand for Canadian energy is expected.

The daily flow of Canadian oil to the U.S. has increased dramatically over the last few years and almost double the quantity from a decade ago.

Canada is now second only to Saudi Arabia as a source of imported oil for the United States, which imported 1.8 billions per day from the Saudis in January and 1.6 million barrels per day from its northern neighbour.

When imports of natural gas are included, the importance of Canada as an energy source for the United States becomes even more apparent. Canada supplied about 94 per cent of American gas imports last year.

Yet with all the volatility in global energy markets, talk of future U.S. energy supplies rarely focus on Canada.

"I don't think Canadian oil production comes first of mind to Americans when they think of where their gas, diesel and jet product comes from," said Rick George, president of oilsands giant Suncor Energy.

But a recent U.S. media attention to the massive energy reserves in the northern Alberta oilsands -- and the synthetic crude created from its bitumen -- suggests awareness is quickly growing, he said.

"My belief is it will be positive," said George.

For the first time, a recent report by the Oil and Gas Journal on global oil reserves included 177 billion barrels of reserves from the oilsands _ a number that dwarfs estimated reserves of Canadian conventional oil.

Greg Stringham, a vice-president of the Canadian Association of Petroleum Producers, says political stability is also a key ingredient for energy trade between the U.S. and Canada.

Despite a recent disagreement between the Bush administration and the Chretien government over the handling of the Iraqi crisis, the energy-trading business has been very open and free, Stringham said.

"They're a good market, we're a good supplier. (The United States) is close and it's connected by pipeline. So all of those things add to our attractiveness as a potential producer," Stringham said.

Meanwhile, recent political problems have made several of the world's other large energy producers less-than attractive as an energy source for the United States.

Vince Lauerman, a global energy strategist with the Canadian Energy Research Institute, says a "relatively long and brutal war" in Iraq would greatly enhance demand for Canadian energy.

"The worse the war goes, and the more the Middle East boils, the higher energy security becomes as an important issue to Washington," Lauerman said.

"And with that comes benefits to Canada."

But the Middle East is not the only trouble spot for global oil production.

About 40 per cent, or 800,000 barrels per day, of Nigeria's oil production was cut off this week as major energy companies evacuated staff amid tribal fighting that has killed at least 100 people in the African country in the past two weeks.

And Venezuela is still struggling to recover from a two-month strike that failed to oust President Hugo Chavez and paralysed the South American country's lifeblood oil industry, costing about $9 billion.

Venezuela is still only producing about two-thirds of its three million barrels per day total it had before the strike and the situation remains volatile as Chavez continues to seek revenge on strike leaders.

Still, geopolitical turmoil does not necessarily mean greater demand for Canadian oil, said one U.S. energy company spokesman who asked not to be identified "There's lots of sources out there and a well-developed oil infrastructure all over the world."

But a recent political decision in Washington -- overshadowed by Iraqi war coverage -- has the potential to increase U.S. demand for Canadian energy in future.

Last week, the U.S. Senate narrowly rejected a budget provision that would have allowed oil drilling in the 77,000-square kilometre Alaska National Wildlife Refuge.

Development of the refuge had been a key part of President George W. Bush's energy plan -- despite opposition from environmentalists who fear that drilling would jeopardize the delicate ecosystem and its wildlife.

Stringham said he doesn't believe attempts to drill in the wildlife refuge will go away. "The administration down there has been quite adamant in trying to put it forward and I'm not sure if they're ready to just drop it at this point in time."

Canada has long lobbied for a U.S. ban on drilling in the wildlife refuge and has taken a more prominent role recently in promoting Canadian energy to its larger neighbour to the south.

Some Canadian oil executives, however, say further lobbying efforts are not needed to increase U.S. demand for energy.

"I think what we've got to show is steady supply, good quality product and reliable outcomes," said Suncor's George. "And then the market will come."

<a href=www.upi.com>Source By Ian Campbell UPI Chief Economics Correspondent From the Business & Economics Desk Published 3/27/2003 6:09 PM

QUERETARO, Mexico, March 27 (UPI) -- What's in a name? Quite a bit.

"Pemex is the strength of Mexico. Pemex has Mexico in its name. Pemex is future for Mexico." Night after night, these phrases can be heard on Mexican television. The value of Pemex, the state-run oil company, is drummed into Mexicans with Goebbels-like repetition, and with about as much regard for the truth.

Pemex is big and does make a big contribution to the Mexican economy. But it ought to do much more. Mexico's oil wealth is being squandered in corruption and incompetence -- mainly corruption. As yet, President Vicente Fox, the president of change, has not been able to bring much of it to Pemex.

Oil is at the heart of the economy. Pemex is the world's fifth-biggest oil company, and Mexico, in 2002, was the world's fourth-largest producer of crude oil. And next door to Mexico is the world's biggest consumer of oil and natural gas; a country, moreover, that would love to get more of its energy from the Western Hemisphere and less of it from less than stable states in a certain other part of the world.

How convenient! What an opportunity! The fuel should flow out of the Mexico and the money should flow in, fueling Mexico's economy. But no. At present Mexico imports natural gas and gasoline from the United States. The opportunity is being squandered. For a poor country, that is criminal. And much of the reason has to do with criminality.

A key to earnings -- a country's, a company's, a person's -- is to add value. When Mexico sells unprocessed crude oil and imports gasoline it is throwing value-added, productive employment and profit away. Why does this happen? Because Pemex has not built the necessary refining capacity.

"Despite having sizable crude oil reserves," the U.S. government's Energy Information Agency writes, "Mexico's insufficient refining capacity compels the country to import petroleum products. In 2000, Mexico imported 448,000 barrels per day of petroleum products, accounting for approximately 22 percent of total consumption."

It is a staggering failure. Nor do Mexicans (like Venezuelans) enjoy access to cheap gasoline. On the contrary it costs more than twice as much as in the United States.

"Pemex is future for Mexico," as we wrote above, is one of the company's slogans yet it is not providing for the future. The company's latest estimate of proven reserves shows a big fall. It warns that there is a risk of output falling in coming years unless there is more investment.

It complains it lacks the funds to invest, saying it hands over too much to the government: funds that make up about one-third of government revenues. This contribution to government finances is extraordinarily high -- and vital to the government in a country that largely fails to collect income tax. But Pemex cannot blame all its financial problems on the government. There is also the question of the money lost within Pemex's less than pretty web.

According to the U.S. Department of Energy, "Pemex, with its workforce of 139,000, employs three and a half times as many people as does Venezuela's PdVSA, to produce only slightly more oil and gas."

What the overmanning points to is huge inefficiency, the waste of Mexico's oil wealth in unproductive employment.

And the problem is worse than that. The overmanning is a reflection of lax management and of excessive trade union power. According to George Philip of the London School of Economics, "The unions are too political and the accounting system is too weak." Philip says, "The result is corruption, as we can see from Pemexgate, for example."

Pemexgate is a corruption scandal that might be seen as an iceberg: a relatively small crime that is an indication of a vast body of crime hidden beneath the surface. The accusation being made is that Pemex's former top executives, some of them now on the run, and leaders of the oil workers' union -- some of whom, astonishingly, are also Partido Revolucionario Institucional politicians -- diverted funds from Pemex to the electoral campaign of Francisco Labastida, the PRI presidential candidate in 2000, who was beaten by Vicente Fox, now Mexico's president. Two weeks ago the Federal Electoral Institute fined the PRI $90 million for allegedly using these funds.

What is Fox, the president of change, doing about all these problems? So far, Pemexgate might be called his greatest success. Corruption was exposed and slow steps are being taken to punish those responsible. Accountability: It is vital, and is only beginning to be enforced, though at the top, which is where reform must begin. But other steps are proving hard to make. Mexico's vast inertia stands in their way.

According to Juan Rosellón of the CIDE research school in Mexico City, Fox "tried to create a new Pemex board that included several members of the private sector and tried to introduce more private participation in the natural gas sector. Both attempts were blocked by the Congress."

In the Congress, the PRI is still strong. It has also sought to shield the union members that the government would like to prosecute, labeling that effort a politically minded attack rather than an attempt to punish theft.

Fox's other big initiative is to involve the private sector more in oil production and distribution. The idea is that Pemex's ownership of oil fields is preserved but private companies compete to provide an enhanced range of services to the state company under Multiple Service Contracts. But in 2002 both the Mexican Congress and investors received the prototype MSC put forward by Fox less than warmly.

Progress, then, is slow. Was it a mistake ever to have nationalized the U.S. and U.K. oil companies in 1938, thereby creating the Pemex monolith? Both Rosellón and Philip feel the nationalization was right in its time. According to Philip, "It made excellent sense to nationalize the oil industry, but the main reason for doing so was political. The oil companies were clearly trying to play a part in Mexican politics."

Rosellón and Philip also share the view that privatization is impossible at present. Political opposition is too strong. President Lázaro Cárdenas's nationalizing coup of 1938 is still a landmark for Mexicans, an assertion of the nation's independence and identity. Pemex is not going to be swept away, it can only be reformed piece by piece.

For Rosellón, the privatization of Telmex, the dominant Mexican phone company, shows that privatization may not offer a quick solution. The key for him is less dramatic, more systematic: "regulatory reform, production incentives, efficient industrial organization, vertical desegregation of the industry."

Another area where progress may be possible is natural gas, which is vital for Mexico's own industrial development and might be a lucrative export to the United States where it has become the fuel of choice, particularly in homes, because of its clean-burning properties. Since 1995 the government has permitted some private participation downstream in the natural gas industry. This has helped to attract, according to Rosellón, about $1 billion into distribution projects. But it has not been successful, he says, "in promoting increments in production and more competition in marketing activities." This is a challenge that the government and its regulators must address, overcoming, if they can, the political obstacles.

The struggle goes on, less than briskly, less than noisily. The obstacles are such that Fox is pursuing his goals less than publicly. The oil workers' union is powerful and allied with the also-still-powerful PRI. And the resistance goes still deeper, down to the man on the street, and to that name itself: Pemex.

To most Mexicans it means the oil is theirs, not the gringos' -- even if, for decades, Pemex's wealth has been shared liberally among few hands.

-0-

(Inside Mexico is a weekly column in which our international economics correspondent reflects on the country in which he lives part of the time. Comments to icampbell@upi.com.)

Read Thursday, March 27, 2003 10:40AM EST By THE ASSOCIATED PRESS

CARACAS, Venezuela (AP) - Venezuela won't stop paying its foreign debt obligations despite a severe cash crunch stemming from a crippling two-month strike, the finance ministry said.

"Venezuela completely dismisses the possibility of moratorium, halt of payments or forced restructuring of public foreign debt," the ministry said in a statement released late Wednesday. The statement came after President Hugo Chavez announced in a speech to business owners that Venezuela may have to restructure its foreign debt. Chavez did not provide details.

The Finance Ministry said Venezuela planned to propose a voluntary bond swap, among other measures, to deal with the cash crunch. Venezuela's foreign debt amounts to about $23 billion, or 37 percent of its $63 billion economy. The country faces $5 billion in debt payments this year.

Last week, the government swapped maturing local debt worth more than 160 billion bolivars ($100 million) for new bonds with terms of up to two-and-a-half years. Since last year, the government has extended maturities on 3.8 trillion bolivars ($2.4 billion) in local debt, the finance ministry said.

The South American country lost $6 billion during a strike to force Chavez's resignation or early elections. The walkout hobbled the world's fifth-largest oil exporting industry and source of half of public revenue for Venezuela. Tax collection, the source of most of the rest of government income, also fell as thousands of businesses and the stock market closed.

The strike fizzled last month with Chavez solidly in power.

Ali Rodriguez, president of the government oil monopoly, said Thursday oil production reached 3.1 million barrels a day. Exports are 2.8 million barrels a day, Rodriguez told state news agency Venpres. Executives fired from Petroleos de Venezuela SA for leading the strike say output is 2.4 million barrels a day.

Private economists predict gross domestic product could shrink more than 20 percent this year. GDP contracted 9 percent in 2002.