Issues: Iraq

October 31, 2002

In 1990, as Iraqi tanks massed at the Kuwait-Saudi Arabian border, President George H. W. Bush said the United States could not let Saddam Hussein gain control over the oil reserves of the Persian Gulf. When the American public didn't buy that line as a reason for war, the rationale quickly changed to upholding international law by rolling back Iraqi forces and freeing Kuwait. When war finally began in January 1991, world (and U.S.) oil prices spiked but then quickly fell back to "normal" levels as the war progressed.

In 2002, President George W. Bush is leading the United States toward another war against Iraq. The numbers of U.S. ground troops in Kuwait, both Army and Marines, are at elevated levels. A flight of 20 Apache attack helicopters with supporting troops and equipment is being shifted from Germany to Kuwait. Planning headquarters from U.S. Central Command and its Army and Marine Corps components are en route to the Gulf region. (Navy and Air Force planners are already in Bahrain and Saudi Arabia, respectively.) Armor previously in Qatar has been moved to Kuwait, and the Pentagon has chartered additional ships to move other equipment to the Gulf or to holding locations near the British-controlled island of Diego Garcia in the Indian Ocean. Meanwhile, the Air Force is attempting to forward base B-2 bombers on Diego Garcia, and the Navy has accelerated the maintenance schedule for three aircraft carriers.

All the above, and more that has probably escaped the attention of the media, ostensibly is being done to divest Saddam Hussein of any chemical and biological weapons and long-range missiles he might have, plus prevent him from developing nuclear weapons.

But this war, like the last, is also about oil. Overtly, the administration says the terms of the UN-administered oil-for-food program have to be enforced, which for Washington means cutting off the estimated 200,000 barrels-a-day smuggling operations through Jordan, Syria, Turkey, and the Kurdish-controlled parts of northern Iraq. Meanwhile, the administration wants to open more land for drilling at home and is expanding the U.S. Strategic Petroleum Reserve. Abroad, it is lending support to authoritarian governments in the oil-rich Caspian Sea region-- as well as to the monarchies in the Persian Gulf. All this suggests a covert oil agenda in 2002, one whose end result anticipates greater U.S. influence over world oil supplies and hence costs to the U.S. economy.

One question that is almost never asked is how much does "cheap oil" really cost U.S. consumers/taxpayers? Honest accounting would seem to require including money spent by the U.S. military to ensure the continued flow of "cheap oil."

For example, the 1990-91 Gulf War should be included in the costs for that era. As it turned out, that war didn't cost U.S. consumers/taxpayers much. Of the estimated $61.1 billion total war-fighting bill, only $2.1 billion ($79.9 billion and $4 billion, respectively, in 2002 dollars) hit the U.S. treasury and thus the consumer/taxpayer. Allies paid the rest.

But this time, allies (if any) will not be as amenable to picking up the tab as they were in 1991. Thus the real cost of any war will be much higher.

Unfortunately, getting rough estimates, let alone precise figures, is extremely difficult. But there are some figures available that can give citizens a feel for some of the costs.

One cost is preparing for and performing "contingencies" or operations that require extra steaming and flying hours or special training for deployments. For example, routine annual operating costs of a naval battle group (in 2003 dollars) are about $1.3 billion. This increases (primarily for naval air operations) when a battle group is assigned to conduct patrols in or near the Persian Gulf -- and frequently there are two battle groups in the vicinity. (If one adds in the cost of building the ships, on the premise that without this mission the Navy could get by with one less battle group, the annualized 2003 cost for acquisition, operation and support is $2.2 billion).

The Air Force patrols no-fly zones -- Operations Northern and Southern Watch -- over Iraq, and the Army is continually rotating forces into Kuwait for "exercises." The General Accounting Office (GAO), in July 2001, estimated costs of all contingency operations in Southwest Asia at $1.05 billion for Fiscal Year (FY)2001.

The Army considers exercises conducted to prepare for operations such as those in the Balkans to be "contingency" costs. In 2000, the average cost per unit rotation was $9-11 million for Bosnia and $14-15 million for Kosovo. GAO put the cost of operations associated with Bosnia and Kosovo deployments in 2001 at $3.1 billion.

In all cases, these amounts would be reduced by the cost of "routine training" that would have occurred had the unit not been engaged in preparing for or participating in a contingency.

Costs of a new war with Iraq would have to be added to the above. One baseline for these costs is the $100-$200 billion estimate given Sept. 16 by Lawrence Lindsey, President Bush's top economic advisor -- an estimate subsequently disavowed by Mitchell Daniels, who heads the Office of Management and Budget.

A second baseline is the $48-$93 billion estimate of the House Budget Committee's Democratic Staff, an estimate that covers only the cost of initial military operations for 30-60 days for a force numbering between 125,00-250,000 troops (one quarter to one half the size of the 1990-91 force), occupation at full strength for about two months after cessation of hostilities, plus the associated interest charges on the increased deficit for a ten year period. It does not include costs of subsequent peacekeeping, reconstruction, and humanitarian operations, inducements (e.g., debt forgiveness) to attract allies, or costs to the U.S. economy from higher oil prices. The staff's estimate does assume a war with low U.S. casualties, no employment by Iraq of chemical or biological weapons, and full access to Turkish and Persian Gulf bases, as in the 1990-1991 effort.

A third baseline is a September 2002 report by the Congressional Budget Office (CBO). Assuming a 370,000 member U.S. contingent, CBO said the cost of deploying, fighting for two months, and redeploying would be at least $37 billion. Each additional month of combat would add $8 billion. For a 250,000 strong force (more air power and fewer ground troops), the minimum cost would be $28 billion, with each additional combat month costing $6 billion. Every month occupying a defeated Iraq tacks on $1-4 billion. This latter does not include any money for reconstruction or foreign aid.

An incalculable wild card is the inevitable increase in world oil prices once war begins -- and for how long any spike in prices lasts. Partly, this will depend on how determined Iraqi resistance might be as well as the extent of damage to oil fields throughout the region -- especially in Iraq and potentially Saudi Arabia if Iraq targets Saudi oil facilities. As it is, the U.S. Department of Energy (DOE) estimates that 2002 will see the start of higher oil prices out through 2020 because of increased world demand. In just the last year, DOE raised its estimate of the cost of a barrel of oil in 2020 by $1.76 to $24.68. War in the Gulf would affect not only retail gasoline prices at the pump but also oil products for heating homes, industrial uses, and electricity generation.

And then there is the cost of petroleum products for the U.S. military machine. In Fiscal Year 1999, the Pentagon bought 142.6 million barrels; in 2000, 104.2 million barrels; and in 2001, 134 million barrels. (By comparison, U.S. petroleum consumption in 2000 was 19.7 million barrels per day, which totals over 7 billion barrels for all of 2000.) If war comes again to the Persian Gulf, the military's consumption rate will spike, as it did in 1990-91 for Operation Desert Shield/Desert Storm. Then the Pentagon consumed 1,882,670,174 gallons of petroleum. At the industry standard of 42 gallons of crude oil per barrel, that is the equivalent of 44.85 million barrels.

Washington under the Bush administration consciously set out to model itself after big business. Recent corporate scandals, many involving the energy sector, have led stockholders to demand honest accounting from officials running various corporations. If stockholders/taxpayers can hold corporate officials accountable, then voters/consumers/taxpayers have an equal right to hold administration officials accountable. So far, only congressional watchdogs have raised the alarm. It's time -- before the missiles start flying -- for the administration to speak about the real costs of the war it is contemplating.

Daniel Smith, a West Point graduate and Vietnam veteran, is Senior Fellow on Military Affairs at the Friends Committee on National Legislation.

Reviewed: 09/06/2005

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