On May 26, 2003, L. Paul Bremer declared Iraq “open for business.” Four years on, business is booming, albeit not as the former head of the Coalition Provisional Authority intended. Iraqis find themselves at the center of a regional political economy transformed by war. Instability has generated skyrocketing oil prices, and as US attitudes to Arab investment have hardened in the wake of the September 11 attacks, investors from the oil-producing Gulf countries are seeking opportunities closer to home. This money, together with the resources being pumped in to prop up the US occupation, is fueling an orgy of speculation and elite consumption in the countries surrounding Iraq. The sheer volume of loose change jingling around the Middle East would be potentially destabilizing even if fighting did not persist in Bremer’s erstwhile domain.

War and profit have always gone hand in hand. In Iraq, as well, a “war economy” is firmly rooted, yet it has gone largely unexamined in the stacks of books and articles dissecting Washington’s grandiose venture gone bad. Armed with ideological assumptions and economic quick fixes, US occupation officials pursued policies that, at a minimum, aggravated the severe social dislocation wrought by war, privatization and sanctions before 2003. Today, militias supporting or opposing the Iraq government—not the government itself—control import supply chains and, indeed, regulate whole sectors of the Iraqi economy. At the same time, the people who earned a living through the antecedent networks of the war economy are attacking the new US-sponsored political order. These insurgents include not only those “Iraqis who miss the privileged status they had under the regime of Saddam Hussein,” as President George W. Bush would have it, but also—indeed mostly—ordinary working people who are protecting livelihoods they built in the shadow of Baathist dictatorship. Countless other civilians are caught in the crossfire as the struggle to make ends meet has become deeply politicized.

Evidence of Iraq’s war economy is fragmentary. Amman—arguably the city where the business of occupied Baghdad is really done—is a veritable rumor mill. Leads are difficult to follow and confirm, as the individuals involved are wary of admitting to war profiteering and economic data are uneven. But the fragments start to form a recognizable pattern when set in a comparative frame. The Iraqi case fits well within the large scholarly literature on the economics of civil war. Not all civil conflicts are the same, of course; some end quickly, while others endure. When available evidence on Iraq is compared with the lengthy civil wars in Lebanon from 1975–1991 and in Algeria in the 1990s, ominous parallels come into view. During those civil wars, much of the money to fund militias and state-sanctioned violence alike came from the control of external trade and the taxation of regions under militia or state control. These dynamics did not simply emerge in the chaos of war, but were grounded in longer trajectories of international involvement, state atrophy and grassroots political economy.

The US project in Iraq, nothing less than a forced revolution, was more radical in its means than in its way of viewing the political world. And while today’s deepening war economy certainly owes a great deal to the early zeal with which US officials sought to remake Iraq as a free marketeer’s paradise, any eventual autopsy of the Bush administration’s imperial fiasco needs to cut deeper than the blunders of Bremer and his subordinates to reveal the fundamental failures of political imagination that lay beneath.

Iraq Beyond Saddam

“In Iraq, the US fights an enemy it hardly knows,” wrote the International Crisis Group in the executive summary of a 2006 report. “Its descriptions have relied on gross approximations and crude categories (Saddamists, Islamo-fascists and the like) that bear only passing resemblance to reality.” [1] Over a year later, US and British officials from Bush and Prime Minister Tony Blair on down continue to speak in stereotypes when describing the guerrillas’ motivations. Washing their hands of any responsibility for the violence that plagues Iraq, they present the insurgency as springing from a yearning for lost domination on the part of groups linked to the Saddam-era state. This is the statist narrative — the idea that Saddam’s regime controlled everything worth controlling before it was overthrown. More amorphously, mainstream analysts trace the insurgency’s origins to the aggrieved “thought world” of Iraq’s Sunni Arab community. [2] Suggesting that the insurgency is rooted in the “majoritarian mindset” of Iraq’s Sunni Arabs, Fouad Ajami further notices a Sunni Arab susceptibility to the “dark appeal” of revived histories that dredge up anti-Shi‘i prejudices and “the panic of a community that fears it could be left with a ‘realm of gravel and sand.’” [3]

To be sure, sectarian fears and religious extremism—as well as foreign occupation—are powerful causes of the ongoing violence, but the sectarian narrative renders invisible the everyday concerns and struggles of people trying to survive in conditions of war. It makes more sense to locate the roots of resistance and intra-Iraqi violence in structures of collective action and social regulation that took shape over the course of the 1980–1988 Iran-Iraq war, and were consolidated during the state’s economic opening in the 1980s and the early years of the UN sanctions. Clearly, and contrary to the assumptions of the statist narrative, the state retreated considerably from the economy over the last two decades of Baathist rule, a period that also witnessed plummeting standards of living for ordinary Iraqis. Yet the social reverberations of these economic upheavals are rarely considered.

Mainstream accounts of the 1980s and 1990s preserve the centrality of the state by charting the rise of what Charles Tripp has referred to as the “shadow state”—a web of informally regulated networks that leveraged statist agency (e.g., the ability to make and enforce internationally binding contracts or employ nominally legitimate coercion) to create domestic enclaves for the private accumulation of capital and power. [4] Even as the state’s formal regulatory powers began to shrink during the 1980s, the social impressions left by a legacy of rent-fueled state centralization and militarization remained to preserve the essence of Saddam’s power. This narrative is certainly persuasive as far as it goes. But the tendency to present the regime, however formally weakened, as the programmer of economic and social activity elides the agency of the Iraq—some 27 million Iraqis, in fact—beyond Saddam. As statist agency receded, it was replaced by conditions of multiple jurisdiction and sovereignty: Localized social structures, transnational trade networks and a globalized sanctions regime came together to create new economic opportunities and impose new constraints. Nevertheless, even if “the regime” as such controlled less than conventional analysis would suggest, central regime figures were elevated by their ability to mobilize the state’s remaining powers and control oil resources. In other words, the regime was able to dominate, but not necessarily in ways of its own choosing. Understanding the relationship between conflict and economy in contemporary Iraq requires a recounting of the rapid economic decline in the 1980s and 1990s.

In 1980, Iraq was a net creditor and considered home to one of the region’s most advanced economies. By early March 2003, as US and British forces amassed on its southern border, it had become one of the world’s poorest and most underdeveloped countries. Average annual income had fallen from between $3,600 and $4,000 in 1980 to between $500 and $600 by the end of 2003. [5] On the eve of the invasion, Time reported: “Industry has ceased to exist and unemployment may be as high as 50 percent. The agricultural sector is in complete disarray, leaving more than 60 percent of the population to rely on the UN Oil for Food program [for basic needs]. About 40 percent of the nation’s children are suffering from malnutrition.” [6]

This dramatic decline in living standards coincided with a long deterioration of Iraq’s major industries. In the first year of the Iran-Iraq war, oil production fell from 3.4 million barrels per day to just under a million. [7] Oil revenues continued to drop off for the duration of the conflict—totaling $11 billion, less than half the pre-war amount, in 1988—while military spending remained high. [8] The result was the increase of foreign debt to over $80 billion by 1988, the draining of foreign reserves and the abandonment of development projects. [9] The war also led to a wider militarization of Iraq’s economy, draining human and financial resources away from manufacturing and agriculture. By the time the war with Iran ended, more than 20 percent of the labor force—over one million people—were employed in Iraq’s armed forces. While Saddam claimed victory in the war, his adventure had left a heavily indebted state with a physical infrastructure in great need of repair.

Saddam responded to the crisis of state accumulation by implementing a sweeping program of economic liberalization (infitah). The program had its origins in efforts at reforming the agricultural sector in the early to mid-1980s, but its scope and intensity increased dramatically by late 1987 and into 1988. All industries deemed non-essential to the health of state coffers and military preparedness were jettisoned in a frenzy of privatization. As Kiren Chaudhry notes, “Whereas Egypt’s widely publicized infitah policy resulted in the privatization of exactly two factories over a period of 15 years, in a single year the Iraqi government sold 70 large factories in construction materials and mineral extraction, food processing and light manufacturing to the private sector.” The selloff was, if anything, more sudden in agriculture. By 1989, 99 percent of Iraq’s agricultural land—half of which had been state-owned since the 1960s—was either privately owned or leased from the government by private investors on favorable terms. The main beneficiaries of Saddam’s infitah were by and large the same people who, by virtue of their connections to government power brokers, had profited from the massive amounts of government spending on construction during the oil boom of the 1970s. Laws were changed to allow for large-scale, cross-sectoral investment, and the tax on corporate profits was reduced to 35 percent. In the end, most of the new captains of industry and agribusiness sacked 40–80 percent of their workers. [10] The end of the Iran-Iraq war also brought the decommissioning of over 200,000 soldiers, who were simply put out on the street amidst high unemployment and food shortages.

These moves had the knock-on effect of making many state regulatory agencies redundant, sparking massive layoffs in the public sector and precipitating the collapse of effective economic regulation by the state bureaucracy. Thus, while Saddam’s government remained in control of oil and other strategic industries, and remained the agency of necessity and choice with regard to large investment or trade contracts with large foreign firms, broad swathes of economic life were simply left to the vagaries of petty market action and struggle. Meanwhile, inflation began to skyrocket.

The international response to Saddam’s invasion of Kuwait—a devastating military campaign during the early months of 1991 and draconian sanctions in place for the next 13 years—pushed Iraq’s economy from bad to worse. More of Iraq’s economic infrastructure was destroyed in six weeks of allied bombing than in the eight years of war with Iran. [11] Sanctions further eroded the gross domestic product and wrought havoc upon the personal finances and life chances of untold numbers of Iraqis. Following the freezing of Iraqi banks’ foreign assets and the subsequent devaluation of the dinar, “savings of 2,000 dinars that once would have paid out $6,000 were suddenly worth only $2.” [12] Experienced technicians and professionals working in Iraq’s crumbling hospitals, laboratories and universities found themselves forced to emigrate or seek income-generating opportunities in the informal sector to make ends meet. The precipitous decline in the number of children attending school in the sanctions years may have caused the adult literacy rate to drop from 80 to 58 percent. [13] In 1996, the World Health Organization concluded that sanctions had set back Iraq’s health care system by 50 years.

Inevitably, as the ability and willingness of state officials to govern economic life through formal channels dissipated, new configurations of regulatory power arose to take their place. These configurations were not necessarily congruent with, or contained within, Iraq’s borders. Transnational tribal allegiances were mobilized to facilitate and regulate trade across international borders. Businessmen-politicians in neighboring countries cultivated links with members of Iraq’s Republican Guard (among others) in order to facilitate and protect networks of transport and distribution. And small-time trade networks emerged to profit from differentials between countries in prices for petroleum and other products. Major multinational corporations also took advantage of the multiple jurisdictions. Consider the case of RJ Reynolds, whose involvement in cigarette smuggling to Iraq was the subject of European Union legal action in 2002. Coordinating operations from Switzerland, home to congenial bank secrecy and business privacy laws, the company sent master cases containing 10,000 cigarettes each for loading and unloading at ports in Spain, from whence they were shipped onward through holding companies in Cyprus, before being redistributed through the free zone in Mersin, Turkey. They were then transported over the mountains between Turkey and Iraq via Silopi Pass, moving through the hands of agents operating in Kurdish-controlled regions of northern Iraq before ending up at one of the many smoke stands located along Iraq’s roads and highways. [14]

Cats of the Embargo

It is difficult to imagine any regime surviving intact — much less retaining statist agency in the economy—through turmoil such as that experienced by Iraq over the past three decades. Nevertheless, observers have been remarkably consistent in presenting capital formation and livelihood in Saddam’s Iraq as variables strongly determined by state intervention. As late as 2003, observers could note that the state sector accounted for 80 percent of Iraq’s GDP, [15] a figure which hardly measures state power or economic centralization. Nevertheless, it is typical for an author writing on the present day to first assert that transforming “a centrally planned economy to a market economy” is a primary challenge facing the engineers of change in Iraq, only to later note that “the United States found [in Iraq] an economy that essentially needed to be rebuilt from scratch, crushed by decades of wars, sanctions and atrophy due to Saddam’s neglect of the population’s needs.” [16] The contradiction apparent in these statements reflects the degree to which emphasis on the person of Saddam Hussein led mainstream observers to imagine the passivity, even emptiness, of the Iraq that lay beyond his extended circles.

Claims regarding state control over the economy tend to brush over key facts. For example, while over 75 percent of Iraq’s labor force remained employed in the public sector on the eve of the March 2003 invasion, the average salary of a civil servant was only $5 per month. [17] Similarly, while more than half of the population was dependent upon government-controlled food rationing during the early 1990s, these rations accounted for only 37 percent of per capita caloric intake in the pre-sanctions era. [18] Inadequate diets and purchasing power placed a premium upon plots of arable land and their crops. Local tribal sheikhs were given considerable scope in the regulation of the rural economy, and used their position and networks to expand and diversify their economic activities. In short, the kind of formal accounting upon which claims about the nature of economic transition in Iraq are made obscures the importance of gray and black markets to the simple tasks of eating and earning a living over the past two decades.

In a very real sense, the conditions that obtained in Iraq from the late 1980s onward resembled conditions of war. People accustomed to “a culture of laziness” sustained by enormous oil revenues were forced to take extraordinary measures to make ends meet. [19] Hyperinflation, massive public-sector layoffs and food shortages shaped Iraqi society as it moved from the dislocations of the infitah to the devastation of war to the ruin of sanctions.

Highly profitable transnational alliances between elite businessmen cum regime figures emerged in the 1980s and 1990s. But smaller-scale networks of trade flourished as well. In her 1999 study of sanctions-era Iraq, Sarah Graham-Brown noted:

The people who run the black market in both petrol and basic foodstuffs, and luxury items like whiskey and Western cigarettes, are actually members of the lower middle strata of Iraqi society, hardened war profiteers who managed to survive as soldiers and smugglers during the Iran-Iraq war as well as the Gulf war which followed. Many of these “new elements” in society have links with Iraq’s large and once powerful rural clans. Coming mostly from the lower echelons of these clans, the new merchants are both Shiites and Sunnis…. The goods they handle are mostly smuggled from Syria, Turkey and Iran. [20]

Proprietors of small retail businesses came to rely on the smugglers’ “taxi service” to stock their shelves. One Baghdad repair shop owner told Joseph Braude: “My supplier sends me products via Jordan in trucks. The driver charges you $100—but you are not paying any tax. As for the border guards, just give them a pack of cigarettes and a can of Coke—that’s more than enough. They will leave you alone.” [21] Even petroleum smuggling—typically seen as an activity requiring the resources of big players operating within the purview of the regime—was a source of livelihood for thousands of Iraqis operating beyond the control and surveillance of the state. Drivers equipped their cars and trucks with extra tanks that were filled with subsidized diesel and gasoline at filling stations on Iraq’s border with Jordan, and then simply driven over and sold to middlemen in Zarqa or Amman.

In between, one could find the qitat al‑hisar —the “cats of the embargo.” “Unlike high-ranking Baath Party hacks who lived mainly by leveraging their government influence,” writes Braude, “the cats engaged each other in rough-and-tumble competition in what became an underworld’s dark meritocracy. They spanned Iraq’s ethnic and sectarian rainbow, including many Shi‘a and Kurds. Cats hailing from disenfranchised communities maintained a businesslike rapport with the country’s political bosses, paying them with the bribes they demanded in exchange for autonomy in the black market.” [22] But outside this “dark meritocracy,” the system relied on regular working people to drive the trucks carrying oil and other goods, walk through the mountains from Turkey with backpacks full of cigarettes and look the other way as some aspect of state regulatory control was subverted. These activities were not simply individual acts of opportunism, but practices within a grassroots political economy of meaning. Today, many of these same people—people who can hardly be described as beneficiaries of the Baathist regime—ply their trade under threat from new agencies, technologies and infrastructures that have been introduced with US-sponsored “reconstruction.” While presented in the neutral language of development and modernization, these agents and infrastructures are hardly politically neutral. Those whose livelihood depended on the oil tanker trucks, for example, are now threatened by the repair and restoration of Iraq’s pipelines. Thus even resistance to foreign control over Iraqi oil is often motivated by something other than nationalism.

To date, observers have not fully taken into account how the project of reconstituting a market in Iraq has selectively criminalized certain socioeconomic actors and empowered others. [23] The imposition of new rules through the barrel of a gun has abruptly rendered petty trade networks constructed over decades untenable or even illegal. Moreover, sovereignty in Iraq is now even more fragmented than in the 1990s. The new Iraqi constitution allows for de jure autonomy for geographic regions—the majority-Kurdish provinces and several provinces in the south—that are already autonomous de facto. The current government’s would-be monopoly on coercive violence is distributed among US forces, Iraqi security forces and private security contractors who are becoming an increasingly institutionalized feature of the post-Saddam landscape. Furthermore, Iraqi security forces have clear and overlapping ties with local militias: Insofar as security force elements were active in the informal economy under sanctions, army decommissioning may have simply led to a privatization of coercive violence from below that ironically mirrors the Bush administration’s subcontracting of war- and occupation-related services to US firms.

On the Road

Whether cats of the embargo or regime fat cats involved in sanctions busting on a grander scale, informal traders were but one node in wider networks that were regional, even global in scope. It stands to reason that these networks survived the 2003 invasion, but the question of how the evolving war economy of Iraq is connected to regional political economies is a tricky one. By their very nature, such linkages are not well-advertised. Who is making the money? Who is deciding who makes the money? In many cases the complete answer lies outside Iraq, so one place to start is on the road.

In Iraq today, there are three major trade routes that are the loci of struggle between competing militias and the various agents of occupation as they seek to shape and regulate economic exchange. The first follows Highway 1, heading north from Baghdad through the oil refining and industrial town of Bayji. From Bayji, the route continues to Mosul and on toward the Syrian border. The second route is Highway 10, which heads west from Baghdad to Amman, passing through Falluja and Ramadi—the “Sunni heartland” of al‑Anbar province—before traversing the vast desert. Highway 6 is the main road from Baghdad to Basra, with way stations in Kut and ‘Amara—strongholds of Muqtada al‑Sadr’s Mahdi Army. Highway 8 offers a western passage to the south, leaving Baghdad and running through the town of Hilla—skirting the Shi‘i shrine cities of Najaf and Karbala’—before heading to Basra, where it meets up with Highway 6, which continues down to Umm Qasr and Kuwait. These towns are all noteworthy locales, as either frontier outposts along long-distance trade routes or nodes of oil infrastructure or centers of the rise of the Shi‘a. Bayji is also located close to the de facto border between central Iraq and the Kurdish-regulated areas, while Hilla and Kut are the gateways to southern Iraq. Not coincidentally, all of these cities have been flashpoints of conflict over the past four years.

The importance of these trade routes cannot be overstated. Like most Gulf countries, Iraq has been highly dependent on a full range of consumer and industrial imports since the 1950s. Control of those supply chains and roads facilitated the selective privatization begun in the late 1980s, and re-exporting neighbors utilized those same links for their own political ends. All of this trade was organized through bilateral protocols ensuring the political control to reward allies and punish rivals. Of course, these arrangements were not foolproof, and so smuggling networks concentrated in border areas thrived, especially as war and sanctions began to take their toll and Baathist officials lost control over whole sections of the country. In tandem—formal, state-regulated trade on top and tolerated local smuggling at the bottom—these arrangements tied Iraq to its neighbors in politically consequential ways. Powerful Baathist bureaucrats leveraged their political positions to cement connections to traders in neighboring states. Lower-level smuggling also involved cross-border connections, though these were more based on tribe and kinship than political power. Following Highway 10 to Jordan illuminates how these networks shaped post-2003 Iraq.

Though fears of Iranian influence, Turkish invasion and Syrian complicity seem to dominate discussion of the external players in Iraq’s violence, by far the most important country in political economy terms, to the Sunni insurgency (responsible for the vast majority of American causalities) is the Hashemite Kingdom of Jordan. The political and social histories of modern Iraq and Jordan are bound tightly together. The deep ties between families, tribes, political movements and economic actors across the borders of these two countries have a history that, by and large, has yet to be written. While far from transparent, linkages between the Jordanian establishment and the constituent elements of Baathist power—together with connections to the Sunni tribes of al‑Anbar—are less obscure.

The war with Iran ended operations of Iraq’s only port, Umm Qasr. By 1982, Jordan’s port of ‘Aqaba became the primary location receiving imports destined for Iraq and shipped by sea. A number of Iraqi-Jordanian trade agreements followed, to expand ‘Aqaba’s capacity, widen Highway 10 and establish a trucking firm to move goods from ‘Aqaba to Baghdad. Iraq quickly became Jordan’s largest trading partner. Officials agreed to a protocol whereby oil priced significantly below market value was supplied to the Jordanian government in order to fund exports back to Iraq. Estimates of that fund vary, but reasonable estimates suggest a value in the hundreds of millions of dollars each year. [24] Wild stories about side deals and the general graft of the protocol decades still make the rounds in Amman today.

Like their Baathist counterparts, Hashemite officials in Jordan chose the recipients of these lucrative deals. These cronies and their supporters helped keep the Hashemite regime afloat during its own financial storms in the 1980s and 1990s. This form of direct political patronage coexisted alongside extra-legal forms of trade that were also winked at. Over-invoicing of exports, false bills of lading at the port of ‘Aqaba and substandard goods were among the ways Jordanian and Iraqi traders increased their profits. In addition, the trade networks supported an increasingly important labor market in Jordan. Thus did gilded trade linkages within and between Iraq and Jordan tie the political future of each regime to the other.

Many but not all of the traders and industrialists connected to Iraq, then and now, are East Bank Jordanians (as opposed to Palestinians). Additionally, the transportation labor dependent upon Iraq trade is composed of lower-income, rural East Bankers located in the southern part of the country. The economic and political rationales that linked the Jordanian transportation labor, the Amman-based exporters and the Sunni importers in Iraq also overlapped with and animated tribal and religious sympathies. That some of the truckers and small-time traders might moonlight for the black market was to be expected. The imposition of sanctions after the invasion of Kuwait only forced this network to craft more durable and clandestine mechanisms of operation. Thus, it was hardly a secret that the failure of the 1990s sanctions to impoverish Baathist elites was due primarily to sanctions-busting trade routed through Jordan.

On the eve of the 2003 invasion, Highway 10 was both sinew and symbol. It was a mainstay of the Iraqi regime’s political economy of survival, yet also emblematic of how much its power had dissipated and been disfigured since the 1980s. If Highway 10 is the path to understanding Iraq before 2003, then Highway 8 heads south into the post-2003 period.

Same Truck, Different Driver

In 2003, Highway 8 from Kuwait carried US troops and the bureaucrats of the Coalition Provisional Authority (CPA) northward to Baghdad. It also served as the spinal cord of the political economy of Shi‘i militias and parties freed from Baathist control. CPA officials came primed to supply Iraq with “the most liberal investment regime in the entire region.” [25] What they provided instead was a regulatory vacuum in which local networks of trade found themselves arrayed against politically favored, well-armed agents of corporate America, backed by the US military.

While presenting their project as introducing universal values of free markets and good governance to Iraq, US policymakers, CPA officials and American firms were themselves deeply implicated in selecting the winners and losers of the new order, revealing the deep politicization of the supposedly neutral occupation regime. In any case, promise of access to the Iraqi market and reconstruction projects was central to Bush administration efforts to build a domestic and international coalition in advance of the war. By luring into Iraq commercial actors whose interests coincided with dominant perceptions of the US interest, policymakers no doubt sought to erect an edifice of indirect rule without the undue burden of direct US military, financial and diplomatic input. Indeed, in predicting $50–100 billion in oil revenues in the first two to three years after Saddam’s fall, ex-Deputy Defense Secretary Paul Wolfowitz drew a picture of a self-financing (and market-regulated) transformation, thus freeing US strategists to advance wider goals in the region. [26]

Bremer used this new mandate to justify implementation of a wide-ranging agenda of neo-liberal economic reforms. In the June 20, 2003 Wall Street Journal, he announced a “wholesale reallocation of resources and people from state control to private enterprise.” The makeover list included: revamping the banking system, modernizing the stock exchange, privatizing some 120 state-owned enterprises, tax reform and removal of all restrictions on foreign investment through suspension of all customs duties and tariffs. The idea that free trucking and bartering generate stable liberal politics has a spotty record in the developing world and is a uniform failure in the Middle East, [27] but this did not deter Bremer and his staff of experts. The viceroy himself was no stranger to political risk in the name of profit, having set up Crisis Consulting Practice in 2001, under the umbrella of insurance company Marsh and McLennan, to advise major corporations on investing in trouble spots. Anecdotes about how the CPA’s neat ideological ordering of the world eventually yielded to reality are now numerous. [28] US economic consultants arrived to find that “street-corner money-changers, some of whom the US suspects are linked to organized crime,” were setting the currency exchange rates. With “no data available to crunch,” experts found themselves reduced to “figuring out how best to stack money inside a truck.” [29] By the time of the handover in June 2004, CPA economic and development teams were doing little more than claiming progress on granting commerce licenses and visiting business delegations.

Given the pre-2003 roots of the war economy, how much responsibility do CPA policies shoulder for its maturation? The blunders of the CPA have become lore, allowing criticism of the project to focus on failures of execution. It is not hard to pick up the refrain that if only the US had done this or that, the US could have succeeded.

The failure was not in execution, however, but in the delivery itself. Occupation plans and security contingencies, good or bad, simply added to the maelstrom of political, social and economic dislocations that had already had most Iraqis feeling the pinch. Big cats and small cats, together with American corporations and the would-be empire builders among returning Iraqis, all saw CPA policies for what they were, ideological fantasies, and none were squeamish about using violence to shape the market in their favor. Just consider the words of an Iraqi businessman quoted in internal CPA documents: “It is nothing personal. I like you and believe you could be bringing us a better future, but I still sympathize with those who attack the coalition because it is not right for Iraq to be occupied by foreign military forces.” [30]

After the dissolution of the CPA, militias appear to have carved out or coopted their own areas of economic control and regulation. If the Algerian and Lebanese experiences are a guide, then these militias and underground economies are likely interdependent. Also, far from representing forces that are somehow excluded from or antithetical to globalization or market forces, they are firmly linked to big players in the global economy via connections in neighboring countries. Their trade was not simply in oil and alcohol, but also in food and consumer goods, and with the arrival of the CPA, they found themselves suddenly in competition with well-positioned big traders surfing atop a tidal wave of duty-free consumer goods and packaged meals.

Down Highway 8, the main Shi‘i militias and parties—under the nose of the occupying powers—have monopolistically carved up the economy in ways that resemble the practices of their Baathist predecessors. Media reports depict southern cities overrun with goods coming over the border from Iran and re-exported from Gulf ports, primarily Dubai. Control over the transportation and lodging of Shi‘i pilgrims has reportedly been centralized by ‘Ammar al‑Hakim, son of the powerful leader of the Supreme Islamic Iraqi Council, ‘Abd al-‘Aziz al‑Hakim. Al-Da‘wa and Sadrist elements can logically be assumed to be in the game as well. Below the major players, minor smugglers shuttle smaller amounts of goods across the Iranian border. Marshland oil smugglers amount to thousands of pinpricks that have cut southern Iraq’s oil production in half. [31] More sophisticated pipeline attacks underscore the links between post-2003 acts of sabotage and the legacy of a grassroots political economy beyond the state. For most of the past four years, such attacks have been interpreted as a tactic for undermining the occupation. More recently, however, observers have become aware of the economic motives for these attacks. Throughout the 1990s, most of Iraq’s oil was transported in relatively small tanker trucks—to Jordan and Turkey with dispensation from Washington and undercover to Syria and the Gulf. As the pipelines to Turkey and the Gulf were turned back on in 2003, most of these truckers—many of whom had close ties with, and indeed colleagues in, neighboring countries—were out of a job. Hence, it is not surprising to learn that pipeline attacks “are now orchestrated by [insurgents and criminal gangs] to force the government to import and distribute as much fuel as possible using thousands of tanker trucks.” The same news story continues: “Ibrahim Bahr al-‘Uloum, a former oil minister, said it was obvious that crude oil pipelines connecting the northern wells with refineries and power plants farther south, in the Baghdad area, had been repeatedly struck to force trucks to move the crude. Oil employees trying to fix the pipelines had sometimes been kidnapped and killed. Both the trucking companies and groups in the protection rackets were probably complicit in some way, he said. ‘This is a business for the people who are working in the trucks.’” [32]

Headed west on Highway 10 the same themes vary slightly. Thousands of Iraqi trading companies have relocated to Amman, drastically inflating real estate prices in the upscale neighborhoods of the Jordanian capital. The families and finances of former Baathist officials have followed. Re-exports from ‘Aqaba are up, as is cross-border truck traffic to Iraq. Jordan’s massive trade deficit is driven in large part by the increase in imports, which are re-exported to Iraq. Today, Amman is a bizarre menagerie of war profiteers, not so secret agents, gloomy security consultants and former Baathists all rubbing elbows in the same upscale bars and hotels. Interviews with businessmen in Jordan suggest that, after initial chaos along Highway 10 from Jordan, rural insurgent groups now protect and manage the trade through internal agreements and with the cooperation of their Jordanian counterparts. The city of Falluja is a notorious example of these arrangements.

Strategically located on Highway 10, Falluja is home to many people who have strong links with their tribal kin across the border in Jordan and Saudi Arabia. Also, the proportion of Fallujans in the Iraqi intelligence services is reported to have been the highest in the country. [33] This combination made Falluja a key node for underground trade during the 1990s, and a focal point for efforts to control trade in the post-2003 order. Against this backdrop, it is no coincidence that the overwhelming majority of foreigners kidnapped and held in Iraq have been truck drivers, mostly from Turkey, Egypt and the Philippines.

It seems most plausible that these various sources of revenue support the insurgents and local militias as much or more than the foreign funding vaguely claimed to exist by the US. Recently, US forces have nodded to the possibility that economic variables are behind some of the violence in Iraq, going so far as to present this as the basis for a tactical alliance with erstwhile insurgents. Following a recent visit to Iraq, Gen. James T. Conway, commandant of the Marine Corps, reported that Sunni tribal sheikhs in Anbar had decided to start cooperating in operations against al‑Qaeda jihadis. “Some commanders said the extremists’ key misstep was to interfere with the locals’ black market trading, which al‑Qaeda coopted in order to finance itself.… Cooperation by the sheiks also has quickly created a Sunni police force in areas where none existed before.” [34] On the surface, this would seem to be a practical application of the “Sunni buy-in” that was much discussed by US Embassy officials in late 2005 and early 2006. But this surprising acknowledgement of a war economy raises some important questions. One regards the link between jihadi involvement in trade and connections in neighboring countries: The largely unreported visit of around 200 tribal elders from the town of Ma‘an in southern Jordan—a town whose population is historically invested in long-distance overland trade between Jordan and Iraq—to pay condolences to the family of slain jihadi leader Abu Mus‘ab al‑Zarqawi takes on a different significance if we view it in this light. [35] Second, one might conclude that al‑Qaeda coopting local economic assets signals an increase, not a decrease, in the strength of America’s number one enemy in Iraq. Attacks on infrastructure and roads that were high in the first year and a half after the US invasion are generally down, not because the insurgents have retreated, but because they now control access to these assets. Taking sides among the actors in the war economy is unlikely to produce stability that will last beyond the departure of US forces.

There is no US military or even diplomatic solution to the problem of a war economy in Iraq. The reconstruction and development plans that have accompanied the “surge” resemble warmed-over CPA policies. Political economy changes do figure in civil conflict resolution, but the recent historical examples are not heartening. Luis Martinez has shown how a strong Algerian state selectively liberalized investment in the oil sector as a means of enticing business elements backing the Islamists to the government side. [36] In Lebanon, intra-Christian fighting, combined with the rise of Shi‘i and Sunni business interests in the 1980s, financially squeezed militias’ business interests, paving the path to the Ta’if agreement in 1989. In Iraq, by contrast, the strong state died in the early 1980s, and signs of militia financial fatigue do not appear.

In the first two years after the US invasion, business interests, groups and individuals who might have comprised a professional middle class on which to build a different Iraq fled. Some of the initial violence—the road attacks, assassinations and bombings of civilians—was designed precisely to push out those potential rivals to the war economy. Unintended effects of more mundane activity in protection rackets, monopolies and weapons smuggling probably propelled others to exit. Most of those without the means to leave lay low and do what it takes to get by. Much of what may be rebuilt by a weak Iraqi government or a weak US military, therefore, will eventually fall back into the hands of the guys with the guns and the money.

The Sorcerer’s Apprentice

Queried about the chaos that reigned immediately after the fall of Baghdad, then Defense Secretary Donald Rumsfeld rejoined, “Freedom is untidy. People have to make mistakes.” Four years on, there is little evidence that Bush administration officials have learned from theirs.

Faith in the capitalist firm as an agent of transition brought with it only unprecedented levels of graft, plunder and incompetence. Nevertheless, in the spring of 2007 US officials helped to fashion a new draft law that, if passed, would go a long way toward privatizing Iraq’s oil sector. The specter of sectarian logic—encouraged by US officials as they sought to manage the residual passions of a political world beyond the market through intermediaries of their own choosing—now haunts Iraqi political life with violent consequence. And yet, walls are being built around Baghdad neighborhoods cleansed of Sunnis or Shi‘a, partially imprisoning the remaining residents within sectarian cages. Recent “troop surges” correspond with an intensified campaign of bombings in civilian areas. As of mid-2007, more than two million Iraqis have left their country, one million have been internally displaced and one million have been killed or wounded. Many Iraqis who might have had the resources to resist the control of violent groups have departed. Like Goethe’s sorcerer’s apprentice, the architects of Iraq’s forced revolution find themselves flailing to contain the ghosts that they themselves called into existence.

To paraphrase de Certeau, tactics are for the poor, while strategy is for those who make and control boundaries. [37] Part of the predicament faced by policymakers lies in the very categories of analysis that made the project of forced revolution thinkable in the first place. By dividing the political world into dichotomous spheres of state and society, regime and market, endogenous and exogenous, and so on, transitions theory (and the invasion of Iraq was essentially transitions theory by other means) provided categories that only remotely corresponded with the lived experience of the Iraqis themselves. By designating the Iraqi state, the Iraqi economy and Iraqi society as discrete objects of transition, mainstream analysis obscured the extent to which state, economy and society were in fact linked to broader complexes of production and exchange that extended far beyond Iraq’s borders. For strategists in Washington and London, war was an instrument of reform: Actors, objects and meanings would be detached and isolated from their milieux, making it possible to establish new relations of power and value between them. Strategists imagined Iraq as an entity that defined the frontiers of global transition and newness, and they saw their project as one of opening those frontiers to the agents of a political world remade according to the “laws of the market.” Yet unlike the frontiers in the neatly staged Hollywood westerns that seemingly formed the neoconservative worldview, the frontier that they projected to contain their strategic vision did not hold, not least because they arrived to find that they were already there. Not only was Saddam’s Iraq made possible by a long history of engagement by great powers and global institutions, but the Iraq beyond Saddam was also shaped by complex entanglements with regional and global networks of authority and exchange. And corporate America itself proved ambivalent about the revolutionary role assigned to it by Pentagon planners, and did not hesitate to use US military force, political connections and graft in the pursuit of profit.

Nevertheless, supporters of the forced revolution project continue to present Anglo-American violence as a facilitator of historically inevitable transformations. The violence of the insurgent, by contrast, is presented as emanating from the recesses of a pre-market culture. Yet the war economy in Iraq does not pit the dark, essentialist world of the tribal smuggling networks against the agents of an enlightened and transparent global capitalism, nor can it be reduced to a conflict between global and local. Rather—heightened by a peculiarly American sense of manifest destiny—it provides an extreme example of the violence that underpins the wider project of neoliberalism, a project that actively seeks to transform the world in ways that make its assumptions appear as true. Resistance to such a project is thus likely to express itself through alternative ideological visions, thereby projecting the frontiers of conflict in terms of a clash of worldviews. In the face of the “creative destruction” wrought by invading forces, regular people articulate alternative paths of “creative destruction” that may express themselves with reference to alternative political and economic projects, or simply arise in the struggle to get by. Absent clear boundaries, strategy is reduced to tactics. The agents of a war economy thus do not necessarily fight to win as such: They are engaged within and act so as to reproduce an emergent, constantly shifting tactical environment. Meanwhile, there will be no single declaration of victory, no event signaling the end of one order and the beginning of a new one. Sadly, the one thing we can be sure of is that Bremer’s cohorts in the political risk business will be there to profit from his mistakes.


[1] International Crisis Group, In Their Own Words: Reading the Iraqi Insurgency (Brussels/Amman, February 2006).

[2] Michael Eisenstadt and Jeffrey White, Assessing Iraq’s Sunni Arab Insurgency (Washington, DC: Washington Institute for Near East Policy, 2005), p. 23.

[3] Fouad Ajami, “Heart of Darkness,” Wall Street Journal, September 28, 2005.

[4] Charles Tripp, “Iraq: National Power and Local Authority,” presentation at the British Society for Middle Eastern Studies, University of Exeter, July 15, 2003.

[5] BBC News, October 10, 2003. See also Abbas Alnasrawi, “Iraq: Economic Sanctions and Consequences, 1990–2000,” Third World Quarterly 22/2 (2001), p. 215. According to Alnasrawi, “GDP per capita in 1999 was estimated to be $883 in 1990 dollars compared with the $6,151 that obtained in 1980.”

[6] Time, April 18, 2003.

[7] Alnasrawi, p. 206.

[8] Tripp, p. 248.

[9] Charles Tripp, A History of Iraq (Cambridge: Cambridge University Press, 2002), p. 248; and Alnasrawi, p. 207.

[10] Kiren Chaudhry, “On the Way to Market: Economic Liberalization and Iraq’s Invasion of Kuwait,” Middle East Report 170 (May-June 1991).

[11] Tripp, p. 261.

[12] Braude, p. 106.

[13] Richard Garfield, “Changes in Health and Well-being in Iraq During the 1990s: What Do We Know and How Do We Know It”(Cambridge: Campaign Against Sanctions on Iraq, 2000), pp. 32–51, cited in Alnasrawi, p. 214.

[14] See “The Cigarette ‘Transit’ Road to the Islamic Republic of Iran and Iraq: Illicit Tobacco Trade in the Middle East,” WHO Tobacco Control Papers, University of California, San Francisco, 2004. See also Wall Street Journal, October 31, 2002.

[15] Kilian Balz, “Reconstruction of Iraq: Dealing with Legal Uncertainty,” International Bar News (June 2003).

[16] These quotes come from Bathsheba Crocker, “Reconstructing Iraq’s Economy,” Washington Quarterly 27/4 (2004), pp. 73, 75.

[17] Braude, p. 101.

[18] Food and Agriculture Organization statistics cited in Alnasrawi, p. 209.

[19] Braude, p. 115.

[20] Sarah Graham-Brown, Sanctioning Saddam: The Politics of Intervention in Iraq (London: I. B. Tauris, 1999), p. 172. Graham-Brown cites “Surviving Sanctions,” Middle East International, June 25, 1993.

[21] Braude, p. 119.

[22] Braude, pp. 120–121.

[23] See Christopher Parker, “Livelihood, Aggregation Problems and the Persistence of War: Reframing Iraq’s Insurgency,” Conflict in Focus 4 (December 2004), pp. 4–9.

[24] Coalition for International Justice, Sources of Revenue for Saddam and Sons: A Primer on the Financial Underpinnings of the Regime in Baghdad (Washington, DC, September 2002).

[25] Transcript of a January 18, 2004 speech by CPA Chief Policy Officer Richard Jones (former ambassador to Kuwait), posted at http://www.cpa-iraq.org/transcripts/jones_kuwait.html.

[26] See Christopher Parker, “From Forced Revolution to Failed Transition,” UNISCI Discussion Papers 12 (October 2006), especially pp. 84–90.

[27] See Pete W. Moore and Andrew Shrank, “Commerce and Conflict: US Effort to Counter Terror with Trade May Backfire,” Middle East Policy 10/3 (2003).

[28] See, for instance, Rajiv Chandrasekaran’s Imperial Life in the Emerald City (New York: Random House, 2006), which follows the few CPA officials who quickly realized the senselessness of US privatization programs.

[29] Fortune, July 7, 2003.

[30] See Pete Moore, “The Secret Iraq Documents My 8 Year-Old Found,” Salon.com, May 18, 2007.

[31] United Press International, December 15, 2006.

[32] New York Times, June 4, 2006.

[33] Nir Rosen, “Losing It,” Asia Times, July 15, 2004.

[34] Army Times, April 9, 2007.

[35] Our knowledge of this visit comes from André Bank, personal communication to Parker, November 2006.

[36] See Luis Martinez, The Algerian Civil War: 1990–1998 (London: C. Hurst and Company, 2000).

[37] See Michel de Certeau, The Practice of Everyday Life (Berkeley, CA: University of California Press, 2000).

How to cite this article:

Christopher Parker, Pete Moore "The War Economy of Iraq," Middle East Report 243 (Summer 2007).

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