Economic crisis, threats of Jihad, and more violence in Iraq

Dahr Jamail, Electronic Iraq, 15 January 2004

The big news today is the plummeting value of the US dollar in Iraq. Here are some figures to give you an idea of the current financial crisis in Iraq:

2 months ago: $1 = 1,950 Iraqi Dinars (ID)

The value continued to drop, and 2 days ago the value was: $1 = 1,410 ID

Yesterday: $1 = 1,100 ID

Keep in mind that all Iraqis working for the CPA are paid in US dollars. In addition, all of the severance pay for Iraqi ex-Army personnel, unemployment payments, and a large percentage of Iraqis are paid in US dollars.

When an Iraqi ex-Army man was being paid $60 per month by the CPA, this translated to 120,000 IDs 2 months ago. Now he makes 60,000 IDs. At the same time the cost of basic food products has been rising, and continues to rise. How is this man going to make ends meet?

Imagine if your pay scale remained the same at your job, yet in two months time the value of the US dollar dropped by 50%, so it now took you twice as much money to buy food and pay your mortgage? Getting a second job would be impossible, because unemployment is 60% in your country and rising.

Khalil Abrahim works as a carpenter. He had a business agreement with a man to repair his home and make him some furniture. They agreed on an amount to be paid for the work at 1,100,000 Iraqi Dinars ($550 US), made a little over two months ago when the exchange rate was 2000 IDs per US dollar. Khalil was advanced 400,000 ID ($200), and used this money to buy his supplies.

He finished the job the day before yesterday, and went to collect his money. The man told Khalil he would pay him the remaining amount, ($350), at the rate of exchange that day, which was 1410 ID per US dollar. So both men lose money. If Khalil is paid at the rate of 1410 ID, he will lose $103.25 (205,500 ID). If the man who hired him pays him at the original exchange rate of 2,000 IDs per dollar, he will lose the same amount.

Unable to reach a compromise thus far, Khalil remains unpaid, and doesn't know how to resolve the situation.

This is but one example of a problem plaguing businesses, big and small, in Iraq on the day, ironically, that Iraqi currency with the face of Saddam Hussein on it is no longer valid.

Where will this lead? How will this be resolved?

Mr. Shuker is a Jordanian business man who does much work with the Iraqi government. He bought several containers of televisions to import to Iraq to sell, at $20,000 per container of TV's. If he sells these in Iraq, he will lose money on his merchandise now. He told me he cannot do any business now with the dollar so low. Any transaction he makes will lose him large amounts of money.

When the ID was over 2,000 per US dollar, businesses and the government of Kuwait bought heaps of them and took them out of the country. Now, because of the physical lack of IDs in Iraq, their value has risen strongly against the US dollar. Think about the disparity now caused that businesses in Iraq have to deal with.

If the CPA does not step in to resolve this economic crisis, the likelihood of crime increasing in an already abysmal security situation is very high.

Meanwhile, food costs continue to rise and there is no solution to the rampant unemployment problem.

All of this with the backdrop of tens of thousands of people (mostly Shia) demonstrating in Basra today, demanding democratic elections within the next 2 or 3 months. At the demonstrations Ali al-Hakim al-Safi, a senior Basra cleric, told the crowd that the Shia people would seek their goals by peaceful means at first, but were prepared for other measures if necessary. He stated,

"We do not need to use violence to get our rights while there are still peaceful ways we can work together, but if we find peaceful means are no longer available to us we will have to seek other methods."

Thus the specter of Jihad looms over Iraq.

At the same time, violence continues to the north of Baghdad. 14 people died in various attacks on US troops. 8 Iraqis were killed during an attack on US troops near Samarra. On a road between Samarra and Tikrit guerrillas attacked vehicles carrying KBR employees, killing three men as well as wounding a US soldier and US civilian.

Also last night, a soldier with the 101st Airborne Division died in a 'non-hostile incident' in Mosul.

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