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Iraq Economy + Infrastructure = BASKET CASE.

Many observers believe the economic situation is direr than the Bush administration has been willing to tell anyone. Iraq is, after all, a country with a debt load larger than Argentina's, a wobbly currency, rising inflation and rampant looting. Add to that an infrastructure that has been pounded by three major wars in the last two decades and millions of people who find themselves suddenly without work.

"Iraq is clearly a basket case," Dean Baker, the co-director of the Washington-based Centre for Economic and Policy Research, recently told a meeting of economists.
Reversals of fortune

REVERSALS OF FORTUNE. When Saddam Hussein's sons died this week, many predicted a warming between Iraqis and U.S. soldiers. But as MARK MacKINNON reports from Baghdad, resistance there may need no leadership, if the U.S. can't calm tempers and assure basic needs

From Saturday's Globe and Mail
POSTED AT 3:55 AM EDT Saturday, Jul. 26, 2003

It's a bad day at Camp Cancer. The angry crowd is pushing forward in the hot sun. The crush of bodies between the curled barbed wire on both sides adds to the oppressive 47-degree heat. The American GIs holding the crowd back are visibly sweating, the black antiglare paint on their faces smudging until they look like heavily armed pandas.
"Get back! Get back!" one yells, pointing his M16 menacingly at the mass of humanity in front of him. It's mostly anger in his voice, but there's an undertone of panic.

Outside Camp Cancer -- a cigarette factory in eastern Baghdad that the U.S. army has turned into its local headquarters -- the natives are definitely restless. Three months after American soldiers entered the Iraqi capital, the situation has become unbearable for many citizens. While the deaths of Saddam Hussein's sons Uday and Qusay this week led many in the U.S. to make optimistic forecasts of improved relations, fear of a Baath-regime comeback is not the main thing preying on these Iraqis' minds.

"No food!" shouts one man, his white, button-down shirt sticking to his back, although it's not yet 8 a.m.

"No fruit!" yells another.

The burly GI at the head of the line has clearly heard all this before, and isn't moved by their pleas. "Get away!" he shouts at the man in white, who has pushed his way near the front. "I don't want to hear your voice!"

The crowd tells the soldiers barring their way that they need jobs.

"I don't care!" the GI responds at full volume. "Go find jobs then. In the city. Away from here."

To emphasize his point, he unlatches the safety on his assault rifle. The crowd takes a step back. A few start to drift away, and eventually the crowd dissipates, returning to the streets and souks of nearby Sadr City. Few hearts and minds were won this morning.

It's a scene that's repeated itself time and time again since the fall of Saddam Hussein's regime on April 9. That day, most of the Iraqis who hadn't fled Baghdad stayed in their homes, peering nervously out the windows as if unsure what to make of their new rulers. The Americans who rolled into the centre of the city seemed supremely confident, sure their job in Iraq was all but finished.

Since then, the roles have reversed. The average Iraqi is no longer in awe of the American military machine. They walk right up to soldiers, sometimes to chat, more often to complain. Occasionally to shoot or lob a grenade. There have been 44 recorded American deaths in Iraq since U.S. President George W. Bush declared the war here over on May 1, including five since the Hussein brothers were killed. The Americans are now the nervous ones.

They are gambling that their victories over the Husseins will help quell the attacks. But they are unclear on the actual origins of the hostilities, or if there is any central command at all. Most important, they haven't yet figured out how to simultaneously make friends and occupy people.

Unable to separate ally from foe, they do much of their talking with the local population with bulletproof vests on and guns raised. That in turn has led to a hardening of feelings toward the troops. Mostly welcomed as a liberation on April 9, the American presence is regarded by Iraqis across the spectrum with rising suspicion.

"People at first were comparing the Americans to Saddam, which is like being compared to the devil. Compared to the devil anything is better," said Salaam Talib al-Onaibi, editor of al-Muajaha, one of Baghdad's many fledgling newspapers.

"Now people are starting to compare the Americans to others. To the promises they made when they came here."

Allowing Iraqis to choose their own government as soon as possible, says political activist Dr. Walid al-Hilli, would be the best demonstration that the United States came only to liberate Iraq and has no ill intentions toward its people. In fact, Dr. al-Hilli loves the idea of a free and fair election in Iraq: He believes his party, the Shiite movement al-Dawa ("the Call"), would sweep to power easily.

The problem, from an American point of view, is that he is right. Al-Dawa almost certainly would win an election held tomorrow, next week or even in a year's time. It has millions of supporters. It has a charismatic leader in Muhammed Bakr al-Nasri, a Shiite Muslim cleric who just returned from 24 years in exile. And it has credibility as one of the few organizations that remained in Iraq and openly opposed Saddam Hussein's rule (the party says records show that 80 per cent of those put to death by Mr. Hussein's regime were alleged members of al-Dawa).

It's also a party with ties to Iran's ayatollahs, one that would like to set up a similar fundamentalist regime here. Dr. al-Hilli says one of the first things the party would do is ask the Americans to leave. That's hardly the sort of outcome planners at the Pentagon and State Department have in mind.

"The Americans said they were coming to liberate the country, not to occupy it," Dr. al-Hilli said in an interview at the party's sprawling Baghdad headquarters, where two men with Kalashnikovs guard the door. "Now they are occupying Iraq and refusing to allow Iraqis to form their own government. This is unfortunate for the Iraqi people, and unfortunate for the coalition forces."

He ticks off the failures so far, a list most Iraqis could spiel off by rote: There are no jobs. The electricity cuts out frequently, sometimes for days. Most people have limited access to clean drinking water.

But the root problem, Dr. al-Hilli says, is that U.S. politicians and soldiers do not have even a basic understanding of the Iraqi people. The soldiers are scared of the country around them, and often overreact with unnecessary force.

Religious groups were among the first to assert themselves in postwar Iraq. They stepped almost immediately to fill the power vacuum in the Shiite holy cities of Kerbala and Najaf, setting up city councils and volunteer police forces, quickly bringing order to those cities at a time when the rest of Iraq was sinking deep into looting and chaos.

In Baghdad and Basra, too, their influence can be felt. Liquor stores, which were permitted under the Baathist regime, have all but disappeared, with owners saying they feel threatened and are better off selling booze quietly on street corners or out of the back of vehicles.

A movie-theatre owner in Baghdad says he's been receiving letters reminding him Iraq is an Islamic country.

The Americans aren't the only ones worried about the potential rise of Islamic fundamentalism. Standing in a semicircle in the shade of a tree in front of Baghdad University, five young women all say their worst nightmare would be for a religious government to take the place of the Baathists, who for all their ills, at least provided equal opportunities for women and men.

"No, no, no, no, no," says Dalia, a 22-year-old chemistry student at the university, shaking her head underneath a white headscarf. "We can't have that. That would be the worst."

Their futures do sometimes seem brighter now, they say. But the rampant crime and ongoing fighting make it hard for them to look too far ahead. Often, they stay home and miss classes out of fear they'll be attacked on the streets.

Manar, a shy English student clutching a red Mickey Mouse binder to her chest, mostly lets her more gregarious friends do the talking. But she interrupts to say she's come up with the English word that best describes Iraq's situation.

"Right now, everything is ambiguous," she says, as though trying the word on for size. She decides it fits. "Ambiguous," she repeats softly.

It's 8 a.m., and as he patrols the dusty streets of Sadr City, Second Lieutenant Gregory Kypta keeps his M-16 trained out the window of the Humvee, his finger on the trigger.

He is wondering about home in St. Louis. He's far less comfortable talking about the American presence in Iraq. He admits he and his fellow soldiers are having a hard time getting their message across in this neighbourhood. Though Sadr City (once known as Saddam City, now renamed after a Shiite cleric put to death by Mr. Hussein) is almost entirely Shiite, and therefore happy to see the end of the Sunni-dominated Baathists, the initial warm welcome is definitely wearing off.

"There's been some misunderstandings," Lt. Kypta says, without elaborating. "Actually, a lot of misunderstandings."

American soldiers on patrol are as jumpy now as they were the day after the regime fell, when a suicide bomber at a U.S. checkpoint set the tone for the chaos to follow. The attacks have also been on the rise in Sadr City.

"We've been shot at four or five times," said Sergeant Ryan McGee, swiveling the machine gun on top of the Humvee as the vehicle bounces along the broken streets. "Last night between 4 a.m. and 6 a.m., there was a pretty good fight, like one of those old-school ones from when we first got here."

The neighbourhood kids still seem to love the American soldiers, mostly. They run jubilantly alongside the Humvees, keeping pace for what seems like kilometres at a time. They yell the cheers they learned early on would get them a thumbs-up from the soldiers: "Yes, yes, Bush! Down, down, Saddam!" There are smiles all around.

Every now and then, though, one mischievously inverts the cheer: "Down, Bush! Yes, Saddam!" And more than once during the two-hour patrol, some kid would stop cheering and start hurling rocks.

"Yeah, the rocks get to you after a while," Lt. Kypta says. "We feel safe enough out here, but we don't let our guard down. Our guns are all loaded and ready to fire."

A week later, someone attacks a patrol driving along the very same route, killing one American soldier and wounding four.

George W. Bush's man in Iraq says the problems are not as serious as they look.

L. Paul Bremer III, the man appointed by the Bush administration to run postwar Iraq, says repeatedly that the electricity and water will take time, but they will come on. The troubles in places like Fallujah and Ramadi are not a mass uprising, but rather the death rattles of the Baath party, now deprived of two of its heads. Nothing to see here. Just an ordinary occupied country.

Even where his regime has stumbled hardest -- in restoring basic services -- Mr. Bremer finds silver linings. The semipermanent traffic gridlock on Baghdad's streets, he has said, is actually "good news," since it means people have money and are getting about. Many Iraqis would counter that the irritating jams happen because the traffic lights don't work and the police are too few.

Standing in the converted cultural centre that now serves as the army's Baghdad press centre, Mr. Bremer cuts an odd figure. If it's possible to identify oneself as part of Mr. Bush's Iraq team solely by style of dress, Mr. Bremer has done so, with his black business suit hovering over combat boots. But it's what comes out of his mouth that provides the clearest reminder that he was chosen by the Republican administration, not the Iraqi people.

In the middle of a week when attacks on American soldiers and targets were escalating by the day, Mr. Bremer downplayed security, water and power, and said nothing was more important for Iraq right now than restoring the confidence of foreign investors.

"I was a businessman for 14 years and I did business in a lot of emerging markets," he told the press. "The most important question will not be related to security, but to the conditions under which foreign investment is invited in."

Everything in Iraq, of course, is about oil. It is oil that once made this country the richest in the Arab world (its standard of living roughly equal to that of Greece). It's oil that cynics believe brought the American soldiers here. And certainly, it is oil -- the estimated 112 billion barrels buried beneath the desert sand -- that will save Iraq, if anything can.

But in the short term, there's not enough of it. Production was ground to a standstill by the start of the war in March, and even optimists say it will be years before it's returned to the level it was at before the 1991 Gulf War. Opponents of American and British forces in the country seem determined to set back the schedule even further, with a spate of attacks against pipelines.

Many observers believe the economic situation is direr than the Bush administration has been willing to tell anyone. While Donald Rumsfeld and Ari Fleischer have reassured a nervous American public that Iraq's reconstruction can be paid for with Iraqi oil money, few others agree.

Iraq is, after all, a country with a debt load larger than Argentina's, a wobbly currency, rising inflation and rampant looting. Add to that an infrastructure that has been pounded by three major wars in the last two decades and millions of people who find themselves suddenly without work.

"Iraq is clearly a basket case," Dean Baker, the co-director of the Washington-based Centre for Economic and Policy Research, recently told a meeting of economists.

"Once you start talking about the situation in the country, you see what an impossible task it is. I don't think the Bush administration is anxious to talk about the subject of costs openly."

It's a Saturday morning in the southern city of Basra, and there's an anxious feeling on the streets. Word has spread almost overnight that the city's central bank will reopen today and distribute the first pension payments since the war began.

Outside the bank, a group of perhaps 200 old men is waiting patiently in the sun for the doors to open. Hussein, a 60-year-old former employee of the state oil company, with a proud but weathered air about him, says he desperately needs the promised $40 to buy food for himself and his family.

"For three months we've had no money, and the people of Basra were already very poor," he says. "Iraq is the king of oil, but we have nothing.

"Still, we are encouraged by this," he adds, after a pause.

A few minutes later, though, a ripple goes through the crowd, and the nearby British soldiers tense just a little. A few minutes later, the rumour is confirmed. There will be no payments. "We are too busy today," a voice says over the loudspeaker in Arabic. "Please come tomorrow for your pensions." Hussein shakes his head in disgust and walks off without saying a word.

The delay turned out to be a short one -- the central bank is now open, and pensions are being paid -- but it's the sort of thing that people here have grown quickly to expect: Promises from the Americans and British (who control Basra and much of southern Iraq) that go unfulfilled.

People believed two months ago that their lives would rapidly get better. Instead, many feel the situation is worse than ever.

Sipping tea outside his kebab restaurant on al-Kuwait street in downtown Basra, 47-year-old Shahab Ahmed says he believes things will only get worse as long as U.S. and British soldiers remain in Iraq.

A Shiite and no fan of Mr. Hussein, Mr. Ahmed is nonetheless beginning to feel a little nostalgic for the order of the old regime. To him, a homegrown tyrant was certainly no worse than foreign occupiers.

"Everybody feels the same," he says with a sad shrug. "When the Americans and the British first came, everybody was cheering. Now, even the children whisper, 'Long live Saddam.' "

Like many Iraqis, he is angriest about the fact that he has no electricity or water. And he has dire predictions about what will happen if the situation doesn't improve: "I will go to my home and pick up my gun and fight the Americans and the British," he says. "And I won't be alone. It's starting already."

Mark MacKinnon is a Globe reporter based in Moscow.

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