Is This the Real Reason US Troops Can Leave Iraq?

[warrengz]

http://www.aolnews.com/world/article/the-price-of-the-iraqi-dinar-and-the-real-reason-us-combat-troops-can-withdraw-from-the-iraq-war/19611389

(Aug. 31) -- President Barack Obama will address the nation tonight to mark what his administration is calling the end of combat operations in Iraq. And already scholars are revisiting how a war once compared to the Vietnam quagmire reached this point of tentative success.

Ali Al-Saadi, AFP / Getty Images

An Iraqi man checks the authenticity of a 25,000-dinar bill before using it in a shop in central Baghdad.

The most intriguing theory comes from Peter Berck and Jonathan Lipow, academics at the University of California, Berkeley, and the Defense Resource Management Institute, respectively. In a recent paper, they argue that it was the Iraqi dinar, and its almost obscene appreciation, that played a crucial role in the decline of insurgent activity, ushering in the current period of relative peacefulness. "[The dinar] played perhaps as large a role as the Surge," Lipow tells AOL News.

Prior to the invasion, sanctions imposed against Iraq kept the dinar "unusually cheap," Lipow says -- so cheap that, during the first throes of the uprising against America's presence, foreign terrorists easily used their more lucrative foreign currencies as a way to recruit insurgents. Mercenaries in Iraq received as much as $5,000 (U.S.) per attack, the study says, the equivalent of three months' income for the average Iraqi family. Terror reigned.

But then the price of oil shot up. By July 2008, it had reached $134 a barrel, an increase of $107.33 from January 2004. This had an appreciative effect on the dinar. As did, frankly, the U.S.'s involvement in Iraq. The journal Military Review estimates that U.S. armed forces flooded the Iraqi economy with well over $20 billion in goods and services between 2003 and 2009. As a result, the dinar quadrupled in value, Berck and Lipow write.

This really hurt the Iraqi insurgency. When the dinar rose, the spending power of foreign currencies in Iraq declined; the Saudi riyal, for instance, buys today only a quarter of what it did in 2003 in Iraq, the study says. And so the insurgent groups in the country had to rely more and more on the dinar, which meant they had to find a way to keep their operations afloat using the domestic currency. The best way for the insurgents to do that was to "tax" the locals: basically, extorting and robbing them, and sometimes killing them for failing to pay up.

The locals didn't like that. And so, the authors argue, they quit supporting insurgent groups. Thereafter, the violence decreased: Average civilian fatalities declined from 72 per day in 2006 to 7.2 by the end of last year.

Berck's and Lipow's conclusions raise important questions for what happens next in the country. If Iraq got to this point because of oil prices and the economic benefits of heavy U.S. involvement, what happens when the price of oil is no longer $134 a barrel and less than 50,000 U.S. troops (and the money they represent) are in country?

Possibly nothing good. A depreciation in the dinar "seems almost inevitable," Berck and Lipow say in their paper, which was released in June. Indeed, it's already happened: The Wall Street Journal reported last year that Iranian imports are flooding the country, from bricks to buses to rice, because it is once more cheaper to import into Iraq. That means fewer jobs for Iraqis. The Journal quotes an Iraqi brick-factory owner predicting "bad things" will happen if he has to close his shop and lay off the young men who need to support their families. Berck and Lipow write, diplomatically, that what this means for Iraqi national security remains "unclear."

Filed under: Nation, World, Top Stories

Tagged: barack obama, counter insurgency, dinar, insurgents, iraq, iraq surge, iraq war, iraqi dinar, jonathan lipow, oil, oil prices, peter berck, terrorism, war on terror

[adontik]

Thanks for the post. Unfortunately it has already been posted a couple of times. It's caused some ruffled feathers, but I wouldn't pay it much attention. It's a personal opinion piece written by someone who is probably not all that well versed on our little venture. i'll take Scooters research based on "factual" documents over this anyday.

Go RV/RI

Peace