On September 17,
the White House sent to Congress a request for $87 billion in
supplemental funding for military operations and reconstruction
efforts in Iraq and Afghanistan. In the supplemental request, $65.6
billion is earmarked for the Department of Defense to fund the war
on terrorism, including ongoing operations in Afghanistan and
Members of Congress are questioning the remaining $20.3 billion,
which is targeted for economic reconstruction and development in
Iraq. Some have proposed that the Administration's aid package be
extended as a loan instead of as a grant, to be paid with future
Iraqi oil revenues. But adding $20 billion to the existing Iraqi
debt of more than $127 billion would burden future generations of
Iraqis with a formidable debt repayment schedule that could stifle
economic development. Moreover, heavy debt repayments would become
a destabilizing political issue in postwar Iraq that could easily
be exploited by anti-American factions.
If Congress delays
or slashes the funds committed to Iraqi reconstruction, it will
jeopardize Iraq's fragile political reform process. And while $87
billion is a substantial amount of money, squandering the
opportunity to secure a free and prosperous Iraq would be the
Q: Why is the Iraq
supplemental funding important?
$20.3 billion supplemental request will provide the Iraqi Governing
Council and the Coalition Provisional Authority with the necessary
reconstruction aid to secure Iraq's borders; train and recruit
police and security forces in both the civilian and military
sectors; rebuild crucial public works and infrastructure; restore
essential utilities (e.g., water, sanitation, and electricity);
increase education and employment opportunities; and reconstruct
transportation and oil infrastructure vital to Iraq's future
economic prosperity. Essentially, it will provide the Iraqi
Governing Council with the means to build popular support for the
formation of an elected government that is committed to fighting
portion of the supplemental request that is earmarked for economic
reconstruction and development in Iraq should not be viewed merely
as foreign aid. Rather, it is a vital component of the war against
terrorism, in which Iraq is a crucial front.
Moreover, as an
occupying power, the United States has a moral and legal obligation
to rebuild Iraq, restore order, establish a legitimate government,
and provide a safe and secure environment for the population before
exiting the country. Failure to meet this obligation will ensure
America's involvement in a protracted conflict/struggle to secure a
free and prosperous Iraq and tarnish America's reputation and
Should the funds be tied to a tracking mechanism or regulatory
controls to ensure that they are allocated
should closely monitor how the monies are dispersed in order to
measure the effectiveness of the spending plan. However, placing
too many financial restrictions could impair the ability of the
Coalitional Provisional Authority and its officers to administer
the funds in the most effective manner. Responsible officials will
need to retain the maximum flexibility to ensure that funds are
available as issues and crises arise.
Q: Should the $20.3
billion be provided as an unconditional grant or as a loan?
A: It is
important that Congress administer the $20.3 billion supplemental
request in the form of a grant. Providing reconstruction monies as
a loan would overburden an already ailing Iraqi economy. Modest
estimates place the Iraqi debt burden at $127 billion; however,
Iraq faces an additional $100 billion in foreign debts owed to
countries such as Russia, France, Germany, Kuwait, and Iran.
changing the aid package from a grant to a loan would likely send
the wrong message to the Iraqi people and others in the region that
the United States is interested only in Iraq's oil resources. It
would be a windfall for the propaganda efforts of the Baathist
remnants and Islamic radicals opposed to the Governing Council and
obscure America's real purpose of helping Iraq establish a stable
and legitimate government.
repayments could also become a destabilizing political issue in
postwar Iraq, easily exploited by anti-American factions, just as
the Nazis exploited the heavy war reparations imposed on Germany
after World War I to build popular support. Finally, international
law precludes Congress from providing the money as a loan because
Iraq does not yet have an established representative government
with the authority to accept such a heavy debt burden.
would be the impact of delaying or cutting the supplemental
A: It is
imperative that Congress consider the funding of the
Administration's supplemental request on a timely basis. If
Congress delays or slashes the funds committed to Iraqi
reconstruction, it will undermine the legitimacy of the Iraqi
Governing Council and jeopardize Iraq's fragile political reform
process, which could come unglued unless various Iraqi factions are
given strong incentive to cooperate in building a stable Iraq.
the U.S. fails to build a stable government in postwar Iraq, there
is a real danger that Iraq could become a failed state infested
with lethal terrorist networks, as Afghanistan was before the
Taliban regime was removed. This would require U.S. armed forces to
mount a long-term containment operation that would cost billions of
dollars annually. In the long run, cutting the aid package could
therefore be "penny wise and pound foolish."
Q: If Iraq is such
an oil-rich state, why can't the Iraqis rely on oil revenues to pay
off their debt burden and rebuild infrastructure?
A: While it
is true that Iraq has the world's second largest oil reserves after
Saudi Arabia, its oil fields, pipelines, and refineries are in
serious disrepair and require a major influx of capital investment
to restore oil exports to their pre-war level. Iraq is currently
pumping 900,000 barrels per day-considerably less than the pre-war
production level of 2.2 million-2.4 million barrels per day. The
cost of rebuilding essential infrastructure will be high; the
Administration estimates that Iraq will need an additional $50
billion to $75 billion over and above its oil income to rebuild its
defective infrastructure over the next few years.
reconstruction work can begin, however, the physical security of
the infrastructure and workers must be guaranteed. Without adequate
security, Iraqi oil will not reach vital markets and investors will
be reluctant to invest in Iraq's oil industry. The Administration's
budget request addresses the security problem by providing Iraq
with the funds to recruit and train security and police officials,
which will create an environment conducive to attracting the
foreign investment needed to rebuild Iraq's oil industry.
is the possibility of sharing post-conflict costs with other
countries and allies?
A: By fully
funding the $20.3 billion budget request, Congress would
demonstrate to America's allies that Washington is committed to
rebuilding a stable Iraq. This would enhance American diplomatic
leverage in requesting further aid commitments at the October 23-24
international donors conference to be convened in Madrid, Spain. It
could also encourage countries (e.g., France, Russia, and Germany)
to forgive or reduce the debt owed to them by Iraq.
Congress is in a
position to lead by example. Failure to approve the budget request
before the international donors conference will likely mean fewer
funds for Iraqi reconstruction and an increased financial burden on
the United States.
Carrie Satterlee is
a Research Associate in the Kathryn and Shelby Cullom Davis
Institute for International Studies at The Heritage Foundation.