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We talked some about Iraq's historical ties with Kuwait. What are their current grievances with Kuwait that led to the actual invasion? To Americans it looks like they just went in and took over a country that didn't belong to them. Does it look like something else to the Iraqis?
I think it does. To give you some background on this, let me just tell you about what was happening in Iraq between October 1988, when they signed the ceasefire with Iran, and the invasion of Kuwait. After the ceasefire, Iraq started a very substantial and far-reaching economic reorganization, which included the liberalization of trade and the privatization of agriculture, industry, and services. The Iraqi government implemented their plans in a way that hasn't been done anywhere in the world. The Egyptians have been trying to privatize their industry for fifteen years; [so far] they've managed to sell two factories to the private sector. The Poles have been struggling with this and so has the rest of Eastern Europe. In Iraq, since policy was dictated by fiat, the reforms were sudden and produced a real jolt to the economy and people. There was instability in prices, inflation, unemployment, just a large number of economic disruptions.
Despite the economic problems, the Iraqi government refused to stop its military spending. The government believed it had to become strong enough so that no neighboring country would threaten them. This meant that there were other needs in the areas of infrastructure, post-war reconstruction, private sector credits, investments in agriculture, and so on, that were not being met. Continued military spending created an enormous foreign exchange shortage. In some sense you can trace the immediate chronology that led to this crisis as Iraq's search for foreign exchange.
The first thing that the Iraqis tried to do was to have the rich Arab countries like Kuwait, the Emirates, Saudi Arabia, and so on, invest in Iraq itself. The Iraqi government decreed a very favorable foreign investment law which applied only to Arabs and not to Western investors, who were clamoring to get into Iraq. But nobody in the Arab world responded. Nobody wanted to invest in Iraq. The Saudis, the Kuwaitis, and the capital-surplus countries had very strong ties with Western banks and investment houses and they continued to invest in the West.
So the second thing that the Iraqis tried in their quest for foreign exchange was to try to raise the world price of oil and to prevent countries that were violating their [OPEC] oil quota from doing that any more. This took place in the July [OPEC] meetings in Geneva, when Iraq proposed that oil prices be raised to $21 a barrel up from, I believe, $18 at the time. Also they pressed other OPEC countries to stop violating their quotas. The main violator of the oil quota, as far as we know, was Kuwait. Kuwait was overproducing its quota by about 80 percent. It was not just overproducing; it was extracting oil from an oil field that is largely in Iraq but with a little segment in a disputed territory on the Iraqi-Kuwaiti border. There was a disputed border between Kuwait and Iraq that the colonial powers had never bothered to draw.
So there are spots where there's no border?
That's right. Kuwait and Iraq aren't the only countries like this. There's an undrawn border between Yemen and Saudi Arabia, too, under which there is an enormous oil field. There were clashes over that area in 1987. So this is yet another colonial legacy. The British and the French drew the borders so arbitrarily. Who knows? Maybe they just got tired and didn't finish the job.
So anyway, Iraq tried to raise oil prices. And in July, the OPEC countries agreed on $21 per barrel. Then there were remaining disputes, remaining problems in foreign exchange that Iraq felt it could solve by negotiation. They asked the Saudis and Kuwaitis (remember, these are the main countries that, for reasons of their own political stability, funded Iraq's war effort against Iran) to cancel Iraq's war debt - forgive it completely. Iraq also asked them to define their borders and to sign nonaggression treaties with Iraq because Iraq rightly suspected that, with all the changes going on in the globe, the United States would feel that it had to have some sort of a military presence in the area. If you go back and look at the media, you can see that the U.S. was participating in a lot of naval demonstrations and military exercises in the Gulf prior to the invasion of Kuwait. The Iraqis felt very threatened by this and made several public statements to that effect.
Saudi Arabia immediately agreed to all of Iraq's demands. It canceled the war debt; it defined its undefined northern border and signed a nonaggression treaty with the Iraqis. Iraq's differences with the Kuwaitis were much larger because they involved the Rumailah oil field and Iraq's attempts to buy or lease the Bubyan and Warba islands. The Iraqi-Kuwaiti negotiations broke down, and there are conflicting reports about how they broke down. The Kuwaitis claim that the negotiations didn't break down, that Iraq just suddenly attacked out of nowhere. But this is, I think, not true. The negotiations broke down on August 1, and it was the next morning that the Iraqis invaded Kuwait. The Iraqi army had been massing on the border for a long time, threatening Kuwait, because Saddam was trying to use a military threat to get Kuwait, which is small and powerless and so on, to conform to his economic territorial demands. Essentially, the Kuwaitis refused.