Global Policy Forum

By Matthew Rothschild

Bad enough that the US military is occupying Iraq. Now the IMF is occupying the country.

In December, the International Monetary Fund, in exchange for giving a loan of $685 million to the Iraqi government, insisted that the Iraqis lift subsidies on the price of oil and open the economy to more private investment. As the IMF said in a press release of December 23, the Iraqi government must be committed to "controlling the wage and pensions bill, reducing subsidies on petroleum products, and expanding the participation of the private sector in the domestic market for petroleum products." The impact of the IMF extortion was swift and brutal.

"Since the Dec. 15 parliamentary election, fuel prices have increased five-fold, mostly because the outgoing government of Prime Minister Ibrahim Jafari has cut subsidies as part of a debt-forgiveness deal it signed with the International Monetary Fund," the Los Angeles Times reported on December 28. "The move has shocked Iraqis long accustomed to hefty subsidies of gasoline, kerosene, cooking gas, and other fuels."

Iraqis are getting a nasty taste of the IMF's medicine. "Over the summer, gas was selling for about five cents a gallon," the LA Times noted. "Now it's about 65 cents, and at the end of the price increases, gasoline will cost about the same in Iraq as it does in other countries in the Persian Gulf, about $1 per gallon. The prices of kerosene, diesel, and cooking gas have seen similar or steeper increases." The price of public transportation has also gone up significantly.

Not surprisingly, these enormous price hikes have led to riots around the country, with police firing on 3,000 protesters in Nassiryeh, according to an account on Daily Kos, Iraq's oil minister quit to protest the government's capitulation to the IMF. According to Daily Kos, Oil Minister Ibrahim Bahr al-Uloum asked, "Is this how we repay the Iraq citizens who risked their lives to participate in the elections, by raising fuel prices in this way?"

The indestructible Ahmad Chalabi, a longtime favorite of Donald Rumsfeld and Dick Cheney, replaced al-Uloum. The Bush Administration is four-square behind the IMF deal. "This arrangement will underpin economic stability and help lay the foundation for an open and prosperous economy in Iraq," said US Treasury Secretary John Snow. What it is actually underpinning is economic instability. "It's crazy, socially and politically," Robert Mabro, former chairman of the Oxford Institute of Energy Studies, told the LA Times.

Even the Pentagon's "National Strategy for Victory in Iraq" recognized the need for "balancing the need for economic reform - particularly of bloated fuel and food subsidies - with political realities." But "political realities" on the ground - such as inciting riots and increasing discontent - don't appear to concern Bush. For the Bush Administration, the endorsement of the IMF price increase represents a schizophrenia that's almost clinical. Bush is desperate to rescue his floundering Iraq policy, and yet backing the IMF plan is like throwing a drowning patient both ends of a lifeline.

The Iraqi people are sick and tired of the US occupation already, to put it mildly. Now that they are seeing their standard of living plummet, thanks to the IMF, they are going to be even more irate at the United States, which they know controls the IMF. Caught between deciding whether to try to win hearts and minds or whether to cling to free market fantasies, Bush has once again chosen to live in fantasyland.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.