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U.S. DEPARTMENT OF STATE
IRAQ: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                               IRAQ

    In response to the Iraqi invasion of Kuwait on August 2,
1990, the President, acting under authority of the
International Emergency Economic Powers Act, issued Executive
Orders 12722 and 12724 which, respectively, froze Iraqi
government assets within the United States or in the possession
or control of U.S. persons, and barred virtually all unlicensed
transactions between U.S. persons and Iraq.  This embargo
remains in effect unaltered.

    U.S. sanctions against Iraq incorporate all the measures
contained in the numerous United Nations Security Council
Resolutions passed and still in effect since the invasion. 
These resolutions forbid member states, companies and
individuals from undertaking any economic intercourse with the
Iraqi government or with private Iraqi firms, except in regard
to goods deemed by the U.N. Sanctions Committee to be of a
humanitarian nature.

    Between January and August of this year, the UN Sanctions
Committee was notified of $2 billion worth of food planned for
shipment to Iraq, and $175 million worth of medicine.  During
the same period, the Committee approved shipments of $2 billion
worth of other items deemed to be for essential civilian needs.

    Iraq's Ba'athist regime engages in extensive central
planning and management of industrial production.  Small-scale
industry and services and most agriculture are in private
hands.  While the country has extensive arable land, it is
historically a net food importer.  The economy is dominated by
oil, which traditionally provided 95 percent of foreign
exchange earnings.

    The economy, already battered by the impact of three years
of sanctions, apparently took a drastic turn for the worse
during 1994.  Reliable statistics are not available, but
anecdotal evidence points to an increasingly desperate economic
situation.  The standard of living has been reduced to at least
half of its pre-war level.

    In late September, the government announced a 40 percent
cut in government-provided rations of basic foodstuffs such as
cooking oil, flour, and sugar.  These rations no longer provide
minimum daily caloric requirements.

    Rampant inflation has made it difficult for the average
Iraqi to turn to the open market to find the products now
restricted under rationing.  Again, reliable statistics are not
available, but it is reported that the cost of basic food items
has far outstripped salaries.  Government troop movements to
the Kuwaiti border in October led to a temporary doubling of
food prices.

    Trade unions independent of the government do not exist in
Iraq.  Workers in private and mixed enterprises -- but not
public employees --  have the right to join local union
committees, which are part of larger trade union federations. 
At the top of this pyramid is the Iraqi General Federation of
Trade Unions, linked to the ruling Ba'ath party and utilized to
promote party principles and policies.  The right to strike is
heavily circumscribed by the Labor Law of 1987, and no strike
has been reported over the past two decades. 

    The value of the Iraqi dinar has plunged against the dollar
in the past year.  In late 1993, the dinar traded on the black
market at a rate of approximately 100 dinar to the dollar.  In
late 1994 the official rate was approximately 500 dinar to the
dollar, and on the black market it traded as low as 650-750
dinar to the dollar after the October troop movements.  Many
consumer goods and basic necessities, including medicine, are
available on the black market at highly inflated prices.

    The seriousness of the economic situation is illustrated by
the increasing number and severity of punishments for economic
crimes.  Apparent hoarding of crops has led the government to
withhold seeds and fertilizer from farmers who fail to bring
their crop to market.  Farmers who fail to cultivate their land
altogether have their land confiscated.  Capital punishment has
been decreed for those smuggling cars and trucks from the
country and harsh penalties have been levied on currency
traders and "profiteers."  Merchants have been executed for
hoarding and fixing prices.

    Since the end of Desert Storm, it appears Iraq has been
able to rebuild most of its infrastructure in
telecommunications, transportation, and power, as well as oil
production.  This reconstruction has been concentrated in areas
which support the government and which are visible to
outsiders.  The depth and permanence of much of this
reconstruction is difficult to estimate, since it relied
heavily on cannibalization and the drawdown of spare parts. 
Shortages of inputs and spare parts have shut down much of the
country's industry.

    United Nations Security Council Resolutions 706 and 712
(1991) authorized the export of $1.6 billion of Iraqi petroleum
during a six-month period.  Proceeds of the sale would go to a
United Nations escrow account, which would be used to purchase
humanitarian supplies for the Iraqi population, as well as fund
other programs mandated by the U.N.  The government of Iraq has
refused to implement these resolutions.

    In summary:  1. UN resolutions preclude trade with Iraq
except approved exports to Iraq of humanitarian-related goods. 
2. Treasury Department regulations and licensing requirements
enforce U.S. compliance with the UN embargo.  3. Iraqi
implementation of UNSCR 706 and 712 would open the possibility
of a limited resumption of international oil trade for
humanitarian supplies.  4. Reliable economic statistics are
unavailable, and those produced by the Government of Iraq
cannot be considered accurate.


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