Did The UN Iraq Sanctions Affect Iraq’s Economy?
In 1990, the United Nations applied stringent economic sanctions against the government of Saddam Hussein. Although they were lifted in 2003, after a US-led military coalition ousted him from power, its residual effects still impact Iraq. In this article, we will discuss how these Iraq sanctions have slowed down the country’s economic recovery.
4 WAYS THE UN’S IRAQ SANCTIONS AFFECTED IRAQ’S ECONOMY
- Triggered an Economic Decline
- Collapsed the National Health Service
- Ruined the Educational System
- Resulted in a High Child Mortality Rate
A powerful nation or an international governing body may use economic sanctions as an instrument to curb the activities of one or more sanctioned countries. To understand the reasons for the UN sanctions against Iraq, we need to review the invasion of Kuwait and the Gulf War.
Iraq Invasion of Kuwait
On August 2nd, 1990, the Iraqi army invaded Kuwait in a two-day military operation and occupied the country for about seven months.
The UN Security Council considered the Iraqi invasion of Kuwait an internationally unacceptable occupation of a sovereign country and implemented United Nations Security Council Resolution 661 to enforce economic sanctions against Iraq.
WHAT SANCTIONS DID THE UN AND US PLACE AGAINST IRAQ?
The purpose of these economic sanctions was not only to help liberate Kuwait but also to destabilize the economy of Iraq enough to stir the people of Iraq to oppose Hussein’s government. However, the economic sanctions alone did not persuade the Iraqi army to withdraw from Iraq, nor did it result in a popular uprising in Iraq against Saddam Hussein.
Since Iraq refused to leave Kuwait by the UN’s mandated deadline, the UN Security Council agreed to mobilize a US-led coalition of military forces to liberate Kuwait. However, before retreating from Kuwait, Iraqi forces robbed the Central Bank of Kuwait, stealing cash ($1.2 billion) and about gold bullion ($950 million), and torched 600 Kuwaiti oil wells.
In 1991, after the Gulf War defeated the Iraqi army, the UN Security Council passed more sweeping economic sanctions to punish Iraq. Resolution 687 expanded on the earlier economic sanctions. This new sanction also sought Iraqi payment for the cost of removing weapons of mass destruction. However, the United States could not find any evidence that Hussein had embarked on a nuclear deal to build secret nuclear weapons.
The sanctions barred trade in any non-essential goods and financial resources. It only allowed Iraq to get commodities related to humanitarian supplies like food and medicine.
Severe UN Iraq Sanctions
The economic sanctions were so severe that it had a worse effect on the Iraqi people than it did on the government of Iraq.
When UNICEF and WHO revealed how the sanctions were destroying Iraqi socioeconomic conditions, many UN members, human rights groups, and civil organizations called for an end to the economic sanctions because the severity of these sanctions was disrupting the welfare of the Iraqi people. The people of Iraq experienced record-high unemployment, the lowest level of personal income in the world, runaway inflation, epidemic diseases, and mass starvation.
The humanitarian crisis sparked by the sanctions resulted in two top UN officials resigning. First, Hans von Sponeck, the humanitarian program coordinator, resigned. Then a day later, Jutta Purghart, the head of the UN World Food Program in Iraq, also resigned. They wanted to protest against the inhuman conditions imposed on the civilian population by the economic sanctions.
The economic sanctions continued for many years, ruined the economy, and devastated the lives of ordinary Iraqis, particularly the lives of the most vulnerable population — children and the impoverished masses. It also resulted in the collapse of many Iraqi institutions, like education and National Health Service, because it included everything related to education or administration, such as pen, ink, and paper.
Since the US enforced the trade embargo against Iraq, some journalists mistakenly referred to these military-backed operations as US sanctions on Iraq. The occupying US forces only enforced United Nations Security Council Resolution 665 through a US-led Multinational Interception Force. This special military unit inspected all crews and cargoes coming into Iraq through the Strait of Hormuz. They imposed punishment on any ships breaking the embargo by seizing their freight and impounding their vessels.
In 1997, in response to international criticism, the UN created an Oil for Food Program but the humanitarian crisis in Iraq were now at such an acute state that statistics showed the program came too late to rectify the havoc created by the economic sanctions.
On May 22, 2003, UN Security Council Resolution 1483 lifted economic sanctions against Iraq, except for certain provisions in paragraph 10 related to oil revenues. The United Nations removed these remaining sanctions in December 2012.
However, Chapter VII sanctions also lifted a development policy that protected Iraq from paying 5% of its oil revenues to Kuwait for war damages. This suddenly resulted in the financially challenged Baghdad administration defaulting reparations to the Kuwaiti government by $11 billion for all the damage caused by the invasion of Kuwait.
4 WAYS THE UN’S IRAQ SANCTIONS AFFECTED IRAQ’S ECONOMY
The United Nations sanctions against Iraq negatively impacted the lives of the people of Iraq. Here are some ways it destabilized Iraq’s economy.
1. Triggered an Economic Decline
The United Nations sanctions disrupted the Iraqi economy, causing inflation to skyrocket and unemployment numbers to hit record levels. According to the UN Department of Humanitarian Affairs, 20% of the population, or about 4 million people, experienced prolonged suffering and extreme poverty.
In 1990, the exchange rate of the Iraqi dinar began its free fall. In 1990, the Iraqi Dinar was a powerful currency: 1 Iraqi Dinar equaled 3 United States Dollar. But by 1997, 1, 500 Iraqi Dinar equaled 1 United States Dollar.
The Iraqi economy was in shambles for several reasons. Since the war with the US-led coalition had destroyed the country’s infrastructure, Iraq did not have a foundation to rebuild its economy. The GDP per capita plummeted from $3,500 to $600. Before 1990, the average worker was earning about $100 a month. After the US occupation, the average worker’s earnings fell to $5 a month.
The ever-rising price of food made it difficult for most of the population to buy food. Low wages and high costs forced the Iraqi people to spend 80% of family income on food. Although food rations became available, this only provided a minimal amount of nutrition and calories. Since many Iraqi people were starving by 1995, the United Nations created the Oil for Food (OIP) program. Under UN Security Council Resolution 986, Iraq could sell its oil to the world market for humanitarian supplies like food and medicine. The resolution banned the government of Iraq from using any revenue to strengthen its military.
2. Collapsed the National Health Service
Before the Iraqi invasion of Kuwait, Iraq had an excellent National Health Service. This declined after the US occupation of Iraq because the UN economic sanctions reduced Iraq’s ability to organize, manage, and fund sanitation projects.
By 2001, thousands of Iraqi citizens died because of a shortage of necessary medication, the spread of infectious diseases, poor sanitation, lack of clean drinking water, and malnutrition. Many factors created a high death rate. The war had contaminated the environment with depleted uranium. Health authorities attributed the high death rate of children from cancer to radiation.
Iraq abandoned maintaining sanitation standards after water treatment plants could no longer clean water because of a lack of equipment, a lack of spare parts to fix broken equipment, a lack of water treatment chemicals to decontaminate the water, and a lack of trained staff to maintain the facilities. These plants stopped treating water and merely pumped it out. However, the water rarely reached faucets because of broken or leaking pipes. The war had also destroyed many pipes.
Although public rations were now available, the food often lacked adequate nutrition, and children and the elderly people began to die from malnourishment.
3. Ruined the Educational System
Since UN sanctions prohibited the importation of non-essential commodities, teachers found it difficult to teach without blackboards, chalks, pens, pencils, ink, paper, and other essential school supplies. Enrollment in school declined because teaching became ineffective and about 84% of the schools needed extensive building repairs.
Although the UN sanctions allowed hospitals to get medication, Iraqi doctors did not have any writing materials to keep patient records nor have any access to reference medical journals or textbooks. It was also difficult for premed students to go to universities abroad or for doctors to attend international medical conferences.
4. Resulted in a High Child Mortality Rate
Initially, surveys of Iraq sanctions death toll reported that about 500,000 children had died because of the Iraq sanctions. Since researchers based this figure on reports created by Iraq government officials during the regime of Saddam Hussein, many researchers questioned the veracity of such a high number. However, a report by Lancet in 1995 placed the number at 567,000 deaths, and a report by UNICEF re-established the figure of 500,000.
Other researchers later stated that the high death rate was incorrect because it added stillbirths and miscarriages to the number of deaths. Comprehensive surveys and interviews after 2003 now place the number at a rate of 40 deaths per 1,000 children. Many children under five years of age died because of malnutrition, pneumonia, and diarrhea. Researchers estimated the mortality rate at 40,000 children a year. By 1997, about 1 million children under five years of age starved to death.
Children over five years of age died because of kidney disease, liver disease, cancer, diabetes, heart attacks, and hypertension. Researchers estimated the mortality rate at 50,000 children a year.
Malnutrition after 1991 increased the death rate of children, and this became a public health emergency after the embargo. According to a 1996 UNICEF report on the humanitarian crisis, 31% of children died from stunting caused by chronic malnutrition, 9-26% from underweight malnutrition, and 3-11% wasting away caused by acute malnutrition.
HOW IS IRAQ’S ECONOMY TODAY?
Although Iraq’s economy began to recover after the UN lifted its sanctions, the country is still struggling with the aftereffects of the Iraq sanctions. We can see economic struggle reflected in the exchange rate of the Iraqi Dinar. Currently, 1,193.25 Iraqi Dinar equals 1 United States Dollar.
Still, the situation is not hopeless. Should Iraqi Prime Minister Adil Abdul-Mahdi be able to restore the country’s oil fields back to where they were before the invasion of Kuwait and the Gulf war, Iraq could generate as much as $24 billion in revenue. Long-term, continuous improvement of the oil and natural gas facilities would help Iraq become one of the world’s largest oil-producing nations because export revenues could double within ten years.
However, the prime minister is unlikely to improve the agricultural base because poor farming practices in the 1990s resulted in salinization destroying much of the arable land but will probably focus on reconstructing the oil industry to rebuild the country. As revenues grow, Iraq will focus on improving urbanization and developing manufacturing industries.
However, Iraq is also heavily in debt, shielded for years from claimants by a Security Council resolution established on May 22, 2003, to make the reconstruction of Iraq easier. The Baghdad administration must deal with these outstanding debts before it can normalize its foreign policy and renew its international financial and trade relationships.
Financial analysts Iraq’s debts to range between $42 to $78 billion. These debts include war damage reparation claims by the Teheran administration from the Iran-Iraq war and claims by Kuwait City from the Iraq-Kuwait war, loans from other middle east nations before 1990 to fund infrastructure projects, industrial development, and social services.
Since Iraq must rebuild its economy by reconstructing its oil industry, pay attention to dinar recaps that talk about how Iraq is rebuilding its oil and natural gas industry rather than ask questions like, “Did Donald Trump buy Iraqi dinar?”
While it may be more fun to speculate on the assets in Trump’s portfolio, it’s not as relevant as many currency investors think. Instead, a Central Bank of Iraq dinar revaluation will depend on how well the country can restore its oil industry.
HOW UN IRAQ SANCTIONS AFFECT IRAQ’S ECONOMY
Although the UN sanctions initially aimed at restricting the growth of the military-industrial complex in Ba’athist Iraq, they expanded in scope after the US-led military coalition ousted Hussein from power.
These more elaborate sanctions were sometimes mistakenly referred to as US sanctions in the media because they included a demand that the Iraqi government must disclose weapons of mass destruction. US Intelligence believed that Iraq had a secret nuclear deal and possessed nuclear weapons. However, these were UN sanctions, and they included many other demands, including the demand that Iraq pay war reparations to Kuwait.
It is these later sanctions that stipulated the onerous trade embargo that disrupted the Iraqi economy, as well as Iraq’s governance, national health, and educational system. It ended up punishing the people of Iraq far more than the government of Iraq. The aftermath of the United Nations sanctions continues to hold Iraq back from rebuilding efforts.