www.stltoday.com By Chern Yeh Kwok Of the Post-Dispatch 02/15/2003 04:00 PM

Federal Reserve Chairman Alan Greenspan testifies before a Joint House Economic Committee hearing about the state of the economy in November (File photo)

Federal Reserve Chairman Alan Greenspan, in testimony to Congress last week, pointed to nervousness over Iraq as the major factor slowing growth in the U.S. economy. But some private economists warn that resolving the uncertainty isn't the cure-all.

Oil prices would dip, but with the continued threat of terrorism, prices might not fall so sharply as previously thought, they say. The economy still must adjust to the overinvestment of the late 1990s and the bursting of the equity bubble.

If Iraq were no longer an issue, the uncertainty could shift to North Korea, where tensions with the United States have escalated in recent weeks.

"Right now, everyone is expecting, post-Iraq, everything is going to be peace and tranquillity," said Patrick Fearon, an economist at A.G. Edwards & Sons in St. Louis. But "some time after the Iraq situation, the administration could then start putting military pressure on North Korea."

As the nation appears to inch closer to war, a shortage of spare capacity in the commercial oil markets also is worrying analysts and economists. "Oil-price shocks have been associated with at least three of the last five recessions," Yale economist William Nordhaus said in a recent study of the economic effects of an Iraq war.

For months, businesses, investors and consumers have weighed spending decisions against the potential for a U.S. invasion of Iraq. The uncertainty has cast a pall on the economy, analysts say.

Fear that a conflict could spread to top oil-producing Middle Eastern countries has led to a more than 35 percent spike in the cost of crude oil, to about $37 a barrel, in the last three months. Along with the likelihood of swooning consumer confidence from a war, that and other factors have depressed stock prices. The Standard & Poor's 500 index closed Friday at 834.89, down more than 8 percent this year.

Certainly, spending on weapons would boost some sectors of the economy. Yet, such spending would have a largely negative economic effect, analysts say.

"If you spend on infrastructure, you've made a capital investment," said Sherman Katz, a fellow at the Center for Strategic and International Studies, a Washington think tank. "When you've spent on weapons, it's a depleting asset."

Unlike the Persian Gulf War in 1991, when several allies helped to pay the costs, the United States likely would foot most of the bill for another war. Nordhaus, in his study released in December, estimated that the cost of war could range from $50 billion to $140 billion; the first Persian Gulf War cost $80 billion.

Post-war occupation and Iraq's reconstruction could cost even more, Nordhaus said. Factoring in those costs, Nordhaus estimates that total spending would range from $99 billion to $1.9 trillion, depending on the outcome of the conflict.

"The impact on budget deficits and interest rates could be high," Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis, wrote in a research report released Thursday. Sohn estimates the cost of a "drawn-out war" at $650 billion.

But those effects are dwarfed by the implications for oil prices and the global economy, analysts say.

Greenspan, in his testimony last week, said uncertainty about the war has blurred the economic outlook. Until there's a resolution, it's unclear if the economy could grow more rapidly - "our most probable expectation" - or if the economy's problems are deeper, he said.

Some economists and military analysts, however, have tried to quantify the effects of the potential outcomes. They assume four scenarios: no war, a quick and decisive U.S. victory, a war with moderate complications and a war that drags on for up to six months.

The favorable outcomes would be no war or a short, decisive conflict, according to their analyses. Most economists assume a short and decisive war would be most likely.

If war is averted, crude-oil prices could fall below $25 a barrel by June and move slightly upward in coming years, according to analyses. If the war is swift and decisive, oil prices could spike higher early in the conflict and then decline sharply.

But if the conflict is prolonged, rising oil prices easily could tip the U.S. economy back into recession, economists say.

A three-month war could result in crude oil spiking above $40 a barrel. A war that stretches up to six months could push crude-oil prices to $100 a barrel, a scenario that would be similar to the 1979 oil shock, according to economists at Morgan Stanley Dean Witter. "Oil prices would be so high that a global recession would be unavoidable," two Morgan Stanley economists, Eric Chaney and Richard Berner, wrote in December.

Rising oil prices could hurt consumer spending, raise business costs, lead to inflation and further slow the economy's growth.

During the Persian Gulf War, the price of crude oil topped out at $47 a barrel.

What's different this time is the lack of spare capacity in the global oil markets, said Larry Goldstein, president of the Petroleum Industry Research Foundation, a New York-based trade group.

Iraq exports about 1.5 million to 2 million barrels of oil a day; daily global demand is 75 million barrels. So, seemingly, Iraq exports an "irrelevant" amount, he said.

But strikes by oil workers in Venezuela have led to low global oil inventories, Goldstein said. The South American country is producing at only about 40 percent of its capacity.

"Even if all the oil producers produce at capacity, you'd be just barely short of having enough production" in case of war, he said. "There would be no cushion for the next surprise."

Reporter Chern Yeh Kwok: E-mail: cykwok@post-dispatch.com Phone: 314-340-8206

www.stltoday.com By Chern Yeh Kwok Of the Post-Dispatch 02/15/2003 04:00 PM

Federal Reserve Chairman Alan Greenspan testifies before a Joint House Economic Committee hearing about the state of the economy in November (File photo)

Federal Reserve Chairman Alan Greenspan, in testimony to Congress last week, pointed to nervousness over Iraq as the major factor slowing growth in the U.S. economy. But some private economists warn that resolving the uncertainty isn't the cure-all.

Oil prices would dip, but with the continued threat of terrorism, prices might not fall so sharply as previously thought, they say. The economy still must adjust to the overinvestment of the late 1990s and the bursting of the equity bubble.

If Iraq were no longer an issue, the uncertainty could shift to North Korea, where tensions with the United States have escalated in recent weeks.

"Right now, everyone is expecting, post-Iraq, everything is going to be peace and tranquillity," said Patrick Fearon, an economist at A.G. Edwards & Sons in St. Louis. But "some time after the Iraq situation, the administration could then start putting military pressure on North Korea."

As the nation appears to inch closer to war, a shortage of spare capacity in the commercial oil markets also is worrying analysts and economists. "Oil-price shocks have been associated with at least three of the last five recessions," Yale economist William Nordhaus said in a recent study of the economic effects of an Iraq war.

For months, businesses, investors and consumers have weighed spending decisions against the potential for a U.S. invasion of Iraq. The uncertainty has cast a pall on the economy, analysts say.

Fear that a conflict could spread to top oil-producing Middle Eastern countries has led to a more than 35 percent spike in the cost of crude oil, to about $37 a barrel, in the last three months. Along with the likelihood of swooning consumer confidence from a war, that and other factors have depressed stock prices. The Standard & Poor's 500 index closed Friday at 834.89, down more than 8 percent this year.

Certainly, spending on weapons would boost some sectors of the economy. Yet, such spending would have a largely negative economic effect, analysts say.

"If you spend on infrastructure, you've made a capital investment," said Sherman Katz, a fellow at the Center for Strategic and International Studies, a Washington think tank. "When you've spent on weapons, it's a depleting asset."

Unlike the Persian Gulf War in 1991, when several allies helped to pay the costs, the United States likely would foot most of the bill for another war. Nordhaus, in his study released in December, estimated that the cost of war could range from $50 billion to $140 billion; the first Persian Gulf War cost $80 billion.

Post-war occupation and Iraq's reconstruction could cost even more, Nordhaus said. Factoring in those costs, Nordhaus estimates that total spending would range from $99 billion to $1.9 trillion, depending on the outcome of the conflict.

"The impact on budget deficits and interest rates could be high," Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis, wrote in a research report released Thursday. Sohn estimates the cost of a "drawn-out war" at $650 billion.

But those effects are dwarfed by the implications for oil prices and the global economy, analysts say.

Greenspan, in his testimony last week, said uncertainty about the war has blurred the economic outlook. Until there's a resolution, it's unclear if the economy could grow more rapidly - "our most probable expectation" - or if the economy's problems are deeper, he said.

Some economists and military analysts, however, have tried to quantify the effects of the potential outcomes. They assume four scenarios: no war, a quick and decisive U.S. victory, a war with moderate complications and a war that drags on for up to six months.

The favorable outcomes would be no war or a short, decisive conflict, according to their analyses. Most economists assume a short and decisive war would be most likely.

If war is averted, crude-oil prices could fall below $25 a barrel by June and move slightly upward in coming years, according to analyses. If the war is swift and decisive, oil prices could spike higher early in the conflict and then decline sharply.

But if the conflict is prolonged, rising oil prices easily could tip the U.S. economy back into recession, economists say.

A three-month war could result in crude oil spiking above $40 a barrel. A war that stretches up to six months could push crude-oil prices to $100 a barrel, a scenario that would be similar to the 1979 oil shock, according to economists at Morgan Stanley Dean Witter. "Oil prices would be so high that a global recession would be unavoidable," two Morgan Stanley economists, Eric Chaney and Richard Berner, wrote in December.

Rising oil prices could hurt consumer spending, raise business costs, lead to inflation and further slow the economy's growth.

During the Persian Gulf War, the price of crude oil topped out at $47 a barrel.

What's different this time is the lack of spare capacity in the global oil markets, said Larry Goldstein, president of the Petroleum Industry Research Foundation, a New York-based trade group.

Iraq exports about 1.5 million to 2 million barrels of oil a day; daily global demand is 75 million barrels. So, seemingly, Iraq exports an "irrelevant" amount, he said.

But strikes by oil workers in Venezuela have led to low global oil inventories, Goldstein said. The South American country is producing at only about 40 percent of its capacity.

"Even if all the oil producers produce at capacity, you'd be just barely short of having enough production" in case of war, he said. "There would be no cushion for the next surprise."

Reporter Chern Yeh Kwok: E-mail: cykwok@post-dispatch.com Phone: 314-340-8206

cnews.canoe.ca

A South Korean child peacefully makes bubbles during an anti-war rally in Seoul, Saturday. (AP/Ahn Young-joon)

LONDON (CP) - Millions of protesters - many of them marching in the capitals of traditional allies of the United States - demonstrated Saturday against U.S. plans to attack Iraq.

In a global outpouring of anti-war sentiment, Rome claimed the biggest turnout - one million police estimated, while organizers claimed three times that figure. In London, at least 750,000 people joined the city's biggest demonstration ever, police said.

About 660,000 people protested in the Spanish capital Madrid, police said, while organizers said three times that number gathered.

Berlin had up to a half-million people on the streets and Paris was estimated to have had about 100,000.

Peace activists hoped to draw 100,000 demonstrators in New York City for a protest near the United Nations.

"Peace! Peace! Peace!" Archbishop Desmond Tutu of South Africa said while leading an ecumenical service near UN headquarters.

"Let America listen to the rest of the world - and the rest of the world is saying: 'Give the inspectors time."'

Bitter temperatures didn't cool the tempers of more than 100,000 peace activists in Montreal, who flocked to the city's core to get their message across.

The huge march wound from Dorchester Square to Complexe Guy Favreau, the city's main federal building.

In Toronto, about 10,000 people hit the pavement in a peaceful march that snarled Saturday afternoon traffic.

The call for peace was echoed in about 70 other Canadian cities.

In Ottawa, some demonstrators wore costumes and carried signs ranging from the curious to the comical. They started in Gatineau, marching across the Ottawa River to the capital.

Carrying signs with messages such as Morons Make War and Terrorists Wear Suits, the initial crowd of 2,000 began to swell as marchers chanted, drummed and danced their way through the downtown streets, stopping twice at the U.S. Embassy before making their way to Parliament Hill.

A march in Quebec City attracted approximately 3,000 people, police said.

In Halifax, where temperatures dipped to -30C with wind chill, about 1,000 people marched through the city's downtown, chanting "This war is not for missiles, it's for oil" as they stamped their feet to anti-globalization rap songs sung by a man on a makeshift bike cart.

London's marchers hoped - in the words of keynote speaker Rev. Jesse Jackson - to "turn up the heat" on Prime Minister Tony Blair, President George W. Bush's staunchest European ally for his tough Iraq policy.

Rome protesters showed their disagreement with Prime Minister Silvio Berlusconi's support for Bush, while demonstrators in Paris and Berlin backed the skeptical stances of their governments.

"What I would say to Mr. Blair is stop toadying up to the Americans and listen to your own people, us, for once," said Elsie Hinks, 77, who marched in London with her husband, Sidney, a retired Anglican priest.

Tommaso Palladini, 56, who travelled from Milan to Rome, said: "You don't fight terrorism with a preventive war. You fight terrorism by creating more justice in the world."

Several dozen marchers from Genoa held up pictures of Iraqi artists.

"We're carrying these photos to show the other face of the Iraqi people that the TV doesn't show," said Giovanna Marenzana, 38.

Some leaders in German Chancellor Gerhard Schroeder's government participated in the Berlin protest, which turned the tree-lined boulevard between the Brandenburg Gate and the 19th-century Victory Column into a sea of banners, balloons emblazoned with "No war in Iraq" and demonstrators swaying to live music. Police estimated the crowd at between 300,000 and 500,000.

"We Germans, in particular, have a duty to do everything to ensure that war - above all a war of aggression - never again becomes a legitimate means of policy," shouted Friedrich Schorlemmer, a Lutheran pastor and former East German pro-democracy activist.

In the Paris crowd at the Place Denfert-Rochereau, a large U.S. flag bore the black inscription: "Leave us alone."

Gerald Lenoir, 41, of Berkeley, Calif., went to Paris specifically to support the French demonstrators.

"I am here to protest my government's aggression against Iraq," he said.

"Iraq does not pose a security threat to the United States and there are no links with al-Qaida."

In southern France, about 10,000 people demonstrated in Toulouse against the United States, chanting: "They bomb, they exploit, they pollute, enough of this barbarity."

Police estimated 60,000 turned out in Oslo, capital of Norway; 50,000 in bitter cold in Brussels, Belgium and about 35,000 gathered peacefully in frigid Stockholm, Sweden.

About 80,000 marched in Dublin, Irish police said. More than 70,000 marched in Amsterdam in the largest demonstration in the Netherlands since the anti-nuclear movement of the 1980s.

Crowds were estimated at 60,000 in Seville, Spain; 40,000 in Bern, Switzerland; 30,000 in Glasgow, Scotland; 25,000 in Copenhagen, Denmark; 15,000 in Vienna, Austria; 5,000 in Cape Town and 4,000 in Johannesburg in South Africa; 5,000 in Tokyo; and 2,000 in Dhaka, Bangladesh.

"War is not a solution, war is a problem," Czech philosopher Erazim Kohak told about 500 people in Prague, the Czech Republic.

In Baghdad, tens of thousands of Iraqis, many carrying Kalashnikov assault rifles, demonstrated to support President Saddam Hussein and denounce the United States.

"Our swords are out of their sheaths, ready for battle," read one of hundreds of banners carried by marchers along Palestine Street, a broad Baghdad avenue.

In Damascus, the capital of neighbouring Syria, an estimated 200,000 protesters chanted anti-U.S. and anti-Israeli slogans while marching to the People's Assembly.

Najjah Attar, a former Syrian cabinet minister, accused Washington of attempting to change the region's map.

"The U.S. wants to encroach upon our own norms, concepts and principles," she said in Damascus.

"They are reminding us of the Nazi and fascist times."

An estimated 2,000 Israelis and Palestinians marched together against war in Tel Aviv on Saturday night.

In Ukraine, some 2,000 people rallied in snowy Kyiv's central square. Anti-globalists led a peaceful Rock Against War protest joined by communists, socialists, Kurds and pacifists.

In the Bosnian city Mostar, about 100 Muslims and Croats united for an anti-war protest - the first such cross-community action in seven years in a place where ethnic divisions remain tense despite a 1995 peace agreement.

"We want to say that war is evil and that we who survived one know that better than anyone," said Majda Hadzic, 54.

In divided Cyprus, about 500 Greeks and Turks braved heavy rain to briefly block a British air base runway.

Several thousand protesters in Athens, capital of Greece, unfurled a giant banner across the wall of the Acropolis - NATO, U.S. and EU Equals War - before heading toward the U.S. Embassy.

U.S. Ambassador Thomas Miller said the Greek protesters' indignation was misplaced.

"They should be demonstrating outside the Iraqi Embassy," he said before the march.

Police fired tear gas in clashes with several hundred anarchists wearing hoods and crash helmets, who smashed store windows and threw a gasoline bomb at a newspaper office. Thirteen youths were arrested, while five policemen and two protesters were injured.

About 900 Puerto Ricans chanted anti-war slogans against the possible invasion of Iraq. One man waved a U.S. flag on which the stars were replaced with skulls.

In Brazil, President Luiz Inacio Lula da Silva began efforts to unite South American countries against a possible U.S.-led attack on Iraq. Police estimated 1,500 marchers.

www.itv.com 11.36AM GMT, 25 Dec 2002   "...In the Middle East, to extinguish the ominous smouldering of a conflict which, with the joint efforts of all, can be avoided" - Pope John Paul II

Pope John Paul II has delivered his twice yearly "Urbi et Orbi" blessing and message to crowds in Rome's St Peter's Square and urged joint efforts to avoid war in the Middle East.

On a drizzly, grey morning, thousands of tourists and pilgrims streamed to St Peter's Square to hear the ailing pontiff, 82, give his Christmas Day address in Latin.

The pope said believers in all religions were called to build peace.

"...In the Middle East, to extinguish the ominous smouldering of a conflict which, with the joint efforts of all, can be avoided."

Earlier, the crowds screamed and clapped in delight when John Paul, wearing gold-coloured robes, was driven in a white, open-topped vehicle through the square.

In his speech, given in Latin, he reflected on the risk peace faces on the day celebrated as Christ's birthday in Bethlehem.

"From the cave of Bethlehem there rises today an urgent appeal to the world not to yield to mistrust, suspicion and discouragement, even though the tragic reality of terrorism feeds uncertainties and fears," the Pope said.

He called on believers of all religions as well as on all people of good will to build peace.

Without naming any countries, John Paul singled out two places in urgent need of peace-builders.

In the Holy Land, "to put an end once and for all to the senseless spiral of blind violence, and in the Middle East, to extinguish the ominous smouldering of a conflict which, with the joint efforts of all, can be avoided."

Although he didn't name Iraq, his remarks echoed comments in recent days about the country by top Vatican officials, who reiterated Church teaching that "preventative" war is not considered a justifiable cause to take up arms.

In apparent reference to the turmoil that over recent months and weeks have rocked Argentina and Venezuela, John Paul said that in Latin America, as well as in Asia, political, economic and social crises were disturbing the "serenity of many families and nations."

"May humanity accept the Christmas message of peace!" John Paul declared.

Africa's famines and "tragic internal conflicts," John Paul added, were also worrisome. He said that on that continent, "here and there signs of hope are present," although he did not elaborate.

Last night, in a packed St Peter's Basilica decorated with red poinsettias, the frail pontiff, 82, presided over Midnight Mass, ushering in one of the most joyous Christian holidays amid mounting tensions between Washington and Baghdad.

"Jesus is born for a humanity searching for freedom and peace," the Pope, celebrating the 25th Christmas season of his reign as head of the world's one billion Catholics, said.

Hours before, the Vatican newspaper, L'Osservatore Romano, headlined its Christmas editions: "Humanity can win the 'battle' of peace."

"While the clouds of war lengthen, the minds and hearts of men in all continents are drawn to Christmas," the newspaper wrote in a front-page article.

It is the latest in a chorus of Vatican voices coming out against a war in Iraq, which the US says is harbouring weapons of mass destruction.

In recent days, top Vatican officials have said a "preventive" war against Iraq had no legal justification and could spark an anti-Christian campaign in the Muslim world.

Archbishop Renato Martino, the prefect of the Council for Justice and Peace and the Vatican's former UN envoy, told journalists that a preventive war was a "war of aggression" and therefore not a "just war."

On Monday, the Vatican's foreign minister, Archbishop Jean-Louis Tauran, warned of the consequences a war on Iraq could ignite in the Islamic world.

"A type of anti-Christian, anti-Western crusade could be incited because some ignorant masses mix everything together," the Rome daily La Repubblica quoted Tauran as saying.

www.forbes.com Reuters, 02.13.03, 6:30 AM ET By Jonathan Leff

LONDON, Feb 13 (Reuters) - Iraq, under heavy pressure to comply with U.N. directives or face a military assault, is set to continue illicit pipeline crude oil exports to Syria next month, regional oil traders said on Thursday. Baghdad has allowed the return of U.N. weapons inspectors to stave off a potential attack from the United States, but has maintained its lucrative oil trade with Syria -- in violation of the U.N.'s sanctions programme -- for over two years. Despite the threat of an U.S.-led attack, Iraq shows no signs of slackening supply in March, traders say. Syria has scheduled a heavy export programme of some 450,000 barrels per day (bpd) in March, almost equal to the country's domestic production capacity, term customers say. This implies Iraqi imports of some 200,000 bpd, which Damascus is thought to be buying at a significant discount with the cash going directly to Baghdad, outside the U.N.'s oil-for-food programme account used for humanitarian purposes. Syria uses that crude -- pumped through a decades-old pipeline that was recommissioned in 2000 -- in its refineries, freeing up additional volumes of local production for export at international prices, now over $30 a barrel. Domestic production is estimated at 550,000 bpd and Syria's refineries use around 300,000 bpd, although demand sometimes dips in the spring due to seasonal maintenance. Iraqi officials have denied the pipeline is operating but Syria's oil minister said last year they were continually testing the pipe and importing oil for internal use. Baghdad has recently cut off another stream of illegal revenue, truck exports to neighbour Turkey that were running as much as 50,000 barrels per day (bpd), officials there said. Under the U.N. programme, Iraq is allowed to export small amounts of oil to neighbouring Jordan. Syria has said it would bring the pipeline -- which it plans to upgrade -- under the oil-for-food umbrella when it was fully operational.

SUPPLIES UNCERTAIN Syria's term oil customers have been warned this year that their contracts may have to be cut short due to unspecified events in the region, but supplies in March are higher even than in February by some 75,000 bpd, traders said. "It looks like a full programme to me," said one lifter. Syria has scheduled 15 full 80,000-tonne cargoes of Syrian Light, six of heavier Souedie and three that combine the two, according to a survey of regional traders. Iraq's pipeline exports have cut into the volume of crude it appears capable of supplying through the U.N.-authorised ports of Ceyhan, Turkey, and Mina al-Bakr, on the Gulf, where past capacity had been estimated at around 2.2 million bpd. Despite heavy demand for the sour crude due to a strike in Venezuela, Baghdad appears to be hard pressed to maintain exports at anywhere above two million bpd, traders say. U.N. weapons inspectors are due to give a key briefing on Iraqi compliance on Friday as the U.S. struggles against European opposition to an early war to unseat President Saddam Hussein, whom it accuses of hiding weapons of mass destruction. Some traders fear an attack as soon as March, which may prompt Saddam to cut off U.N. exports, although they said it was unclear how it could impact the Syrian business. The UK has repeatedly called on Syria -- currently on the U.N. Security Council -- to stop violating sanctions with the imports but the United States has been quieter on the issue.