Iraq: We Win. Then What?
The real battle will begin only after Saddam is gone and the shooting has stopped. If all
goes well, oil will flow freely and the world economy will get a boost. But if it doesn't,
Sunday, November 10, 2002
By Bill Powell
The victors gathered on the northwestern coast of the Italian Riviera in a town called San
Remo, then as now a place of respite for Europe's wealthy. It was April 1920, a moment
that in the argot of the 21st century we would call an inflection point. They were there to
divide up the world. The Great War was over, and its merciful end brought a halt not only
to killing on a historic scale but to a world order. The Ottoman Empire was finished. The
conquering imperial powers of the war, France and Britain, convened at San Remo to
conclude a peace treaty with Turkey and to parcel out the spoils of what was supposed to
be the War to End All Wars. And those spoils, they knew very well, included oil--lots and
lots of oil.
For that reason San Remo was to be a private affair, a matter between those countries,
Britain and France, with rich histories in colonial intrigue. Shut out was the nation for
which the first world war represented the end of isolationist innocence. A relative novice
at the imperial game, the U.S. would have lost the war's most valuable prize were it not
for a man named A.C. Bedford. He was neither diplomat nor politician, but the chairman
of what was then known as Standard Oil of New Jersey. And when the British and French
concluded the deal at San Remo that divided between them the entire future output of
Middle Eastern oil, Bedford intervened. He got a copy of the agreement from a friend in
the French delegation and passed it on to the State Department in Washington. Alarmed
at what had happened, the U.S. quickly became a player in the Middle East.
Among the biggest prizes divvied up was Mesopotamia, the chunk of geologically rich
territory where the Tigris and Euphrates rivers flow. Bedford knew hydrocarbons were in
the ground there. And the State Department wanted the U.S. to get its fair share. "It is
economically essential," a State Department economic officer wrote at the time, "to
obtain foreign supplies of petroleum in order ... to assure supplies of bunker fuel [for the
Navy] and in order to perpetuate the United States' position as the world's leading oil and
oil products supplier."
But Bedford and the other businessmen also knew that beyond oil, something else very
likely awaited them in Mesopotamia. And that was trouble. They wanted to explore for
oil only in areas that were politically stable, and unless one of the conquering powers was
willing to step in and rule the area with a very firm hand, Mesopotamia would be
anything but stable. It was, Bedford wrote the State Department, "a collection of warring
tribes." So daunting was the part of the world that would eventually be known as Iraq that
Colonel Ernest Mercier, the head of the newly formed French national oil company, had
trouble raising the money he needed to look for the oil everyone knew was there.
"Mesopotamia," he wrote ruefully to a friend, "was so full of international difficulties."
On Friday, Nov. 8, President George W. Bush got what he wanted from the United
Nations, just as he had, more than a month earlier, gotten what he wanted from the U.S.
Congress. After weeks of dickering, the UN agreed to insist that Saddam Hussein, the
brutal dictator of modern-day Mesopotamia, disarm or face the consequences. And the
consequences, as far as the U.S. was concerned, were clear: the end of Saddam's regime,
courtesy of the U.S. and British military and whoever else might be willing to help do the
It is no exaggeration to say that the next two to three months could be among the most
fateful of any period since the end of World War II. They are months that quite literally
could change the world. More than 80 years after San Remo, history again beckons, as the
world decides the fate of Iraq. The consequences of the choices that both George W. Bush
and his sworn enemy, Saddam Hussein, must now make are breathtaking to behold. At
stake are nothing less than U.S. security in the age of terror, the future of millions of
people in Iraq and its neighboring countries, and the fate of the global economy and the
financial markets that gauge its health.
What Morgan Stanley economist Stephen Roach calls a "clean war" and then a smooth
aftermath could send oil prices tumbling, kick-start a long-awaited global economic
recovery, and finally put the bear market in equities into hibernation. As warm and fuzzy
as all that sounds, an awful lot has to go right for it to happen. And an awful lot could go
wrong. Indeed, so fraught with possible dangers is round two with Saddam that there are
those within the U.S. national-security establishment who still can't quite bring
themselves to believe that Bush will actually make the decision to go to war.
Yet for months war, and its maddeningly unpredictable consequences, have seemed
inevitable. The U.S. has been steadily moving military equipment and personnel to the
Gulf. The Air Force has expanded the number of targets in the so-called no-fly zones in
northern and southern Iraq, taking out radar and command and control centers. The U.S.
military has also begun training 5,000 Iraqi exiles to fight along with allied troops should
an invasion finally occur. And according to Zaab Sethna, a senior member of the Iraqi
National Congress, the political leadership of the Iraqi opposition abroad, a second
tranche of 10,000 will begin training in a matter of weeks.
Despite all this, administration officials were at pains, in the wake of the UN resolution,
to say that war was not yet a foregone conclusion. If Saddam allows inspectors over the
next few months to go anywhere they want, without obstruction or argument, war could
perhaps be avoided, they insisted. One former senior Defense Department official
believes administration spokesmen are being truthful when they say that the President has
not yet, either in his gut or in his mind, made the decision to go to war. Nonetheless, there
is no question that if Saddam fails to disarm, post haste, the game will be over. And
former UN weapons inspectors are gloomily unanimous in believing that little in
Saddam's past behavior suggests that he will ever be serious about abiding by UN
demands that he rid himself of weapons of mass destruction. "I would assume he thinks if
he can get inspectors in again, then the games can begin anew," says one inspector. "I bet
he thinks the U.S. won't go to war over whether he refuses to unlock some door in one of
his palaces. But if this is what he's thinking, he has probably miscalculated, and that
means the end."
If war is somehow averted, Saddam's now frantic neighbors, oil traders, and plenty of
investors the world over will finally exhale. The fog of uncertainty that plagues business
decision-making in executive suites everywhere will dissipate at least a little. But if the
current Washington consensus is correct--that the U.S. will be marching on Baghdad by
February, if not sooner--it will be, as oil economist Philip K. Verleger says, a "historic
roll of the dice."
The issue is not whether the U.S. and its coalition will prevail militarily. As Donald
Rumsfeld, the Secretary of Defense, told FORTUNE in a recent interview, of that there is
no question. The real battle for Iraq will be won or lost only after Saddam is gone and
most of the shooting has stopped. It is not unthinkable that a military victory could turn
into a strategic defeat for the U.S. Anything other than a quick, decisive campaign could
mean trouble. Civilian casualties in Baghdad and elsewhere could easily trigger regional
turmoil, spurred by an anti-Americanism that is, alas, all too real in the Islamic world.
Saddam on the way out may well opt for what Amatzia Baram, a historian of Iraq at the
University of Haifa, calls the "Sampson option"--that he will use the weapons of mass
destruction he now possesses as well as sabotage Iraq's oil fields. A prolonged, expensive,
American-led occupation is also plausible, one that could turn U.S. troops into sitting
ducks for Islamic terrorists, a la Lebanon in the 1980s. All of that could have immediate
and decidedly negative consequences for the global economy; an aftermath that does not
proceed relatively smoothly would almost certainly short-circuit what everyone
hopes--and assumes--will be stronger economic growth worldwide in 2003. http://www.fortune.com/fortune/articles/0