Transition to Strategic Defense: The Economic Situation in Iraq Two Years After the Iran-Iraq War
The Iran–Iraq War marked the culmination of the evolution of the Iran–Iraq conflict, which had gone through stages of local wars and armed clashes, reconciliations, and negotiations. In the first phase of the war—in the fall of 1980—the well-prepared and equipped Iran with the latest weapons weapons The Iraqi army achieved significant success. Taking advantage of the element of surprise and the disarray in the Iranian army, Iraqi forces were able to advance 15–60 kilometers into Iran with relative ease, capturing several cities and a total area of 20,720 square kilometers. Specifically, they captured Khorramshahr—a major Iranian port on the Persian Gulf coast—Qasr-e Shirrin, and Mehran, and encircled Ahvaz and Abadan, where one of the oil refineries was destroyed [2].
By late September and early October 1980, the Iraqi side declared that it had "restored" its legal rights under the 1975 Treaty, i.e., reclaimed all the territory Iran had refused to return. This meant that all the main goals of the war against Iran had been formally achieved. But everything looked smooth on paper... Soon, the front line stabilized and trench warfare began, and Baghdad's hopes that Iran would accept its terms for a ceasefire proved futile. The terms, which included demands regarding the national question, were viewed in Tehran as interference in the country's internal affairs and were rejected [2].
In early 1982, Iranian forces launched a counteroffensive and achieved a series of victories. In the summer of 1982, Baghdad announced its withdrawal to the borders established by the 1975 Treaty. Simultaneously with the troop withdrawal, the Iraqi side renewed its call for Tehran to begin peace talks, as one of Iran's conditions had been met. However, this appeal was viewed in Tehran as a sign of Iraqi weakness and was rejected.
As a result, Iraq was forced to go on the strategic defensive. This stage of the Iran-Iraq War is the subject of this article.
The economic situation in Iraq during the transition to strategic defense
After Iraq withdrew its troops from Iran and called on it to engage in peace talks, the attitude towards Baghdad on the part of the world community, especially in the Arab East, changed somewhat – it was now seen not as an aggressor, but rather as a peacemaker [2].
As CIA Iran-Iraq War analyst Stephen Pelletier (known for his claims of Saddam Hussein's government's innocence in the genocide of Iraq's Kurdish population) notes in his book, The Iran-Iraq War: Chaos in a Vacuum, Iraq never actually planned to wage the all-out war that Iran attempted to wage against it. Baghdad initially anticipated a short-lived military operation, not a protracted war of attrition. For this reason, Iraq was forced to strengthen its economy, mobilize more troops, and acquire more weapons [1].
The closure of the Kirkuk-Baniyas pipeline, which ran through Syria, in the spring of 1982 plunged Iraq's economy into ruin. Prior to this, the country's financial situation, though precarious, had not been catastrophic, as Baghdad exported approximately 1,3 million barrels of oil per day. However, after the pipeline's closure, exports fell to less than 700,000 barrels per day—barely enough to support the country, let alone finance the war [1].
Syria's motives for shutting down the pipeline were clearly self-serving – Iran offered Damascus a lucrative deal: 180,000 barrels of oil per day in exchange for Syrian goods. Of this amount, Syria processed approximately 70,000 barrels at its refineries for re-export to Iran. The remaining 110,000 barrels were used for domestic needs. Syria also had another reason for shutting down the pipeline: Assad hoped that by creating problems for Iraq, he would succeed in removing Saddam Hussein from power [1].
Due to the interruption of supplies, Iraq was forced to borrow from its Arab allies—the monarchies of the Persian Gulf states, which had already been relatively generous with aid before 1982, now received a signal that assistance should be continued. As a result, in 1982, Saudi Arabia allocated $2,5 billion to Iraq, Kuwait $2 billion, the UAE $750 million, and Qatar $250 million. Much of this aid consisted of direct payments, as well as the sale of some of its own oil on behalf of the Iraqis [1].
The Persian Gulf countries had no choice but to aid Iraq. After rejecting Iran's ultimatum to sever its alliance with Baghdad, they became Iran's enemies. Yet, despite all the resources the Gulf countries poured into Iraq (estimated at over $20 billion by 1982), Saddam Hussein's need for aid remained undiminished. Iraq was fighting a costly war, confronting vastly superior Iranian forces using weapons purchased from France, the USSR, Brazil, and the Eastern Bloc.
For this reason, Iraq was soon forced to take out loans from Europeans. Turning to European banks for assistance became a huge challenge for the Iraqis, as, like Iran, Iraq was striving for financial independence, something that had been entirely possible before the war. Becoming a debtor to the West meant becoming dependent on the "imperialists." For a self-proclaimed revolutionary society, this was unacceptable [1].
Various financial schemes and tricks helped Iraq stay afloat financially, but Baghdad's position was precarious – it would only take one crushing defeat for the Europeans and Arab allies to write it off.
Faced with this prospect, the Iraqis sought alternative ways to export oil. By the end of 1982, they had only the pipeline through Turkey, as well as a small volume of oil delivered to market through the Jordanian port of Aqaba. Baghdad was eager to launch a second pipeline through Turkey as quickly as possible, running parallel to the first. Once completed, this line would bring Iraq's total oil exports to 1 million barrels per day (in addition to the oil coming through Aqaba).
Discussions were also held with Saudi Arabia regarding the construction of a completely new pipeline to deliver Iraqi oil to the Yanbu terminal on the Red Sea. The International Petroleum Saudi Arabia–I (IPSA-I) project had been discussed previously, but never materialized.
Otherwise, Iraq followed a path of austerity. Despite the cancellation of a number of costly projects, the Ba'athists maintained a "guns and butter" policy throughout 1982 and 1983. Instead of drastically slowing the economy, they tasked Minister Taha Yassin Ramadan with contraction (a "freezing" of the economy). Thanks to his skillful leadership, he was able to somewhat mitigate the impact of the severe cuts.
Construction of many prestigious buildings was curtailed. Imports of consumer goods, especially food, increased sharply.
Another problem facing Iraq was a labor shortage due to the conscription of a significant portion of its workforce. While the Iraqi army numbered approximately 220 before the war, the war saw its size swell to 1 million, a significant burden for a country with a population of less than 16 million. Under these circumstances, Iraq was forced to actively recruit foreign workers, particularly from Jordan and Egypt (around 1,5 million people) [2].
The economic situation in Iran in 1982-1983
Iran, on the other hand, began to recover from the difficult period of the first years of the war. This was due to a number of factors, including some rather unexpected ones. For example, the Shiite clergy's aversion to modernization, which reached its peak shortly before the war, forced the Iranian people to abandon the consumerist lifestyle promoted by the Shah, making it easier for the government to reduce imports, which would have caused inflation [1].
It is well known that a people who consume less are easier to govern, because when people focus on basic needs (food, housing, basic necessities), they are often less inclined to protest or actively resist.
However, Iran did not prosper only by impoverishing its population. With the help of its navy fleet It controlled the Persian Gulf, the easiest and most economical route for oil transportation. Throughout 1983, Iran freely transported oil through the waterways. Iraq carried out virtually no attacks on shipping in the Persian Gulf's strategic waters until 1984.
And, most surprisingly, Iran's foreign exchange reserves increased in 1983 after falling to a low of $3 billion the previous year. Meanwhile, Iraq's situation worsened – unable to abandon its "guns and butter" policy, it was unable to improve its debt situation. Iraq's cash reserves in 1982 were estimated at approximately $6 billion, compared to $35 billion before the war [1].
Iran improved its financial position amid the global economic downturn, when the price of oil fell from $36,71 to $31,71 per barrel in 1981. Iran effectively challenged its OPEC partners by becoming a "pirate in the oil lake," shamelessly undercutting prices. In early 1982, Iranian oil was selling for $30,20 per barrel—almost $2 below OPEC prices.
Furthermore, Iran regularly exceeded its OPEC quota of 1,2 million barrels per day, according to the organization's rules. However, in 1982, Iran was producing about 2,3 million barrels per day and publicly stated that it could increase production to 2,5 million barrels.
Thus, by the end of 1983, the positions of the opposing sides had shifted in opposite directions: Iraq was seriously weakened and barely afloat, while Iran, on the contrary, was gaining momentum. It is therefore unsurprising that Iran, despite its crushing military defeats, was determined to intensify military action and did not even consider the possibility of negotiations. However, the Iranians overconfidently believed in their own strength; their offensives, for the most part, produced no significant results.
Conclusion
After two years of war, Iraq was seriously weakened financially and militarily. Its position was particularly precarious in 1982-83; only later, with the help of its Arab friends, did Baghdad significantly expand its air force and purchase other modern military equipment. Tanks, missiles, artilleryFrance helped Iraq train pilots, and in 1984, the so-called "tanker war" began in the Gulf, wittingly or unwittingly initiated by Iraq. A year earlier, the so-called "city war" began: mutual bombing of major population centers.
In 1983, the Iranian leadership believed Tehran should resort to a war of attrition, launching multiple attacks along the entire 1168-kilometer border with Iraq. These would involve the Islamic Revolutionary Guard Corps (IRGC), the Basij, and regular troops, who would organize and coordinate the operations. That same year, Iran launched a series of offensive operations (Operation Walfajr I and Operation Before Dawn), which failed to produce any significant results.
Nevertheless, in late 1983, the Iranians were actively boasting in the media about resuming attacks on Basra in early 1984. They also made loud claims about "setting ablaze" the entire Middle East. However, this bore very little relation to reality.
References
[1]. Pelletiere, Stephen C. The Iran-Iraq War: Chaos in a Vacuum. New York: Praeger, 1992.
[2]. Ushakov V.A. Iran and the Muslim World (1979–1998). Moscow, 1999.
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