Iraqi Military Industry

The Ministry of Industry and Military Industrialization, directed all Iraqi military production. The Government owned all major industries and controls most of the highly centralized economy, which was based largely on oil production. The economy was damaged by the Iran-Iraq and Gulf Wars, and Iraq had been under U.N. sanctions since its 1990 invasion of Kuwait. As a result, the economy had been stagnant. Sanctions ban all exports, except for oil sales under U.N. Security Council Resolution 986 and subsequent resolutions (the " oil-for-food" program). Under the program, Iraq also was permitted, under U.N. control, to import food, medicine, and other humanitarian goods for essential civilian needs, as well as spare parts for the oil sector.

Prior to the 1990-91 Gulf War, Iraq had developed significant ammunition, small and light arms, and gun barrel production facilities, although most industrial development efforts were focused on weapons of mass destruction. By 1987 Iraq was self-sufficient in small calibre ammunition, artillery shells, aircraft bombs, mortar rounds, rocket-propelled grenades, rockets, tube- launched rockets, mortars, propellant, fuses, and replacement barrels. Artillery research is conducted 25 kilometers South of Baghdad in the Al-Badr Factory in the town of Al-Yusufiyah.

With respect to conventional armaments, Iraq did not attempt to develop significant domestic capabilities, and even relied heavily on foreign technical support teams for servicing French and Russian aircraft. Iraq began to upgrade and maintain existing tanks and other armored vehicles. Facilities supporting these activities included Al/Ameen/Yusufiyah, Base West World, possibly Huteen, Taji, Samawa and the Al-Ameer portion of the Aqba bin Nafi State Establishment. The Taji factory complex had doubled in size by 1985, and included a forge capable of producing 1000 artillery barrels per year and armor maintenance and refit plants for the T-54, T-55, and T-62 tanks in the Iraqi inventory. The complex also included facilities for assembly of the T-72, and would eventually build armor and tank bodies. Iraq did import T-72 kits, which were intended to lead to a transition to production, though Iraq appears to lack the industrial base for such production [T-72 production resumed in 1993, assembling tanks from kits provided before the Gulf War]. Prior to 1991, production of defense articles was largely oriented on prototypes and prestige projects.

The long-term combat effectiveness of Iraq's large military forces depended on military production facilities and continued support from its logistical base. Destruction of repair facilities, spare parts supplies, and storage depots would degrade Iraq's combat capability and long-term threat to the region. During the Persian Gulf War, planners knew there were too many targets to be eliminated entirely. For instance, there were seven primary and 19 secondary ammunition storage facilities alone identified on target lists: each was composed of scores of individual storage bunkers. Consequently, Desert Storm planners first destroyed the most threatening production facilities and stored material, then methodically to proceed with attacks on other storage and production facilities as time and assets allowed.

Iraq had been largely cut off from major imports of parts and specialized equipment since 1990, though some dual use items, civilian electronics and computer equipment are not effectively controlled. Black market imports, substitution, and local manufactures provide limited substitute for imported resources.

The Ba'thist regime engaged in extensive central planning and management of industrial production and foreign trade while leaving some small-scale industry and services and most agriculture to private enterprise. The economy has been dominated by the oil sector, which had traditionally provided about 95% of foreign exchange earnings.

According to official Iraqi figures, the total industrial labor force in 1984 consisted of about 170,000 workers. State- operated factories employed slightly more than 80 percent of these workers, while 13 percent worked in the private sector. The remaining 7 percent worked in the mixed economy, which consisted of factories operated jointly by the state--which held a major share of the common stock--and the private sector. Men constituted 87 percent of the industrial work force. According to the Iraqi government, in 1984 there were 782 industrial establishments, ranging in size from small workshops employing 30 workers to large factories with more than 1,000 employees. Of these, 67 percent were privately owned. The private sector owned two-thirds of the factories, but employed only 13 percent of the industrial labor force. Privately owned industrial establishments were, therefore, relatively numerous, but they were also relatively small and more capital-intensive. Only three privately owned factories employed more than 250 workers; the great majority employed fewer than 100 people each. Private-sector plant ownership tended to be dispersed throughout industry and was not concentrated in any special trade, with the exception of the production of metal items such as tools and utensils. Although the private sector accounted for 40 percent of production in this area, the metal items sector itself constituted no more than a cottage industry. Figures published by the Iraqi Federation of Industries claimed that the private sector dominated the construction industry if measurement were based not on the number of employees or on the value of output, but on the amount of capital investment. In 1981, such private- sector capital investment in the construction industry was 57 percent of total investment. By this alternative measurement, private sector involvement in the textile and the food processing industries was above average. In contrast, about fourty-six state-owned factories employed more than 1,000 workers apiece, and several industrial sectors, such as mining and steel production, were entirely state-dominated.

In addition to the nonmetallic minerals industry, several other industries employed significant percentages of the work force. The chemical and petrochemical industry, concentrated at Khawr az Zubayr, was the second largest industrial employer, providing work for 17 percent of the industrial work force. Chemicals and petrochemicals accounted for a relatively high 30 percent of the total value of industrial output because of the high value of raw material inputs and the higher value added-- more than 150 percent.

By the mid-1980s, efforts to upgrade industrial capacity from the extracting and processing of natural resources to heavy industry, to the manufacturing of higher technology and to the production of consumer items were still not fully successful. An iron and steel works built in 1978 by the French company, Creusot-Loire, at Khawr az Zubayr, was expected to attain an annual production level of 1.2 million tons of smelted iron ore and 400,000 tons of steel. Other smelters, foundries, and form works were under construction in 1988. (In 1984 this sector of the economy accounted for less than 2 percent of total output.) Manufacture of machinery and transport equipment accounted for only 6 percent of output value, and value added was fairly low, suggesting that Iraq was assembling imported intermediate components to make finished products. A single factory established in the 1980s with Soviet assistance and located at Al Musayyib, produced tractors. In 1981, Iraq contracted with a company from the Federal Republic of Germany (West Germay) to develop the domestic capability to produce motor vehicles. Plans called for production of 120,000 passenger cars and 25,000 trucks per year, but the project's US$5 billion cost led to indefinite delays.

By the late 1980s, Iraq had had some success in establishing light industries to produce items such as spark plugs, batteries, locks, and household appliances. The electronics industry, concentrated in Baghdad, had grown to account for about 6 percent of output with the help of Thompson-CSF (that is, Compagnie sans fil) of France and the Soviet Union. Other more advanced industries just starting to develop in Iraq in the late 1980s were pharmaceuticals and plastics.

In the 1980s, financial problems caused by massive expenditures in the eight-year war with Iran and damage to oil export facilities by Iran led the government to implement austerity measures and to borrow heavily and later reschedule foreign debt payments; Iraq suffered economic losses of at least $100 billion from the war. After the end of hostilities in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities. Agricultural development remained hampered by labor shortages, salinization, and dislocations caused by previous land reform and collectivization programs. The industrial sector, although accorded high priority by the government, also was under financial constraints.

Iraq's seizure of Kuwait in August 1990, subsequent international economic embargoes, and military action by an international coalition beginning in January 1991 drastically changed the economic picture. The UN-sponsored economic embargo has reduced exports and imports and has contributed to the sharp rise in prices. The Iraqi Government has been unwilling to abide by UN resolutions so that the economic embargo could be removed.

The government's policies of supporting large military and internal security forces and of allocating resources to key supporters of the regime had exacerbated shortages. Industrial and transportation facilities, which suffered severe damage, have been partially restored. At current prices, oil exports are about one-third of their prewar level because of the implementation of UN Security Council Resolution 986 -- the UN's oil-for-goods program -- in December 1996. Shortages of spare parts continue. In accord with the oil-for-goods deal, Iraq was allowed to export $2 billion worth of oil in exchange for badly needed food and medicine. The first oil was pumped in December 1996, and the first supplies of food and medicine arrived in April 1997. Per capita output for 1995-97 and living standards are well below the 1989-90 level, but any estimates have a wide range of error.

On February 26, 2001, US Secretary of State Colin Powell proposed a modification of sanctions on Iraq, more carefully targeting them towards military items sought by the Iraqi government, while allowing freer movement of civilian goods. In early May, Powell stated that the United States wanted "to revise the sanctions policy so that it is directed exclusively at preventing Iraq from a military buildup and developing weapons of mass destruction." In early July 2001, facing an almost certain Russian veto, the UN Security Council agreed to postpone indefinitely a vote on the U.S. "smart sanctions" plan, and extended the oil-for-food program another 5 months. Following this, Iraq resumed oil exports, which it had halted on June 4 in protest of the plan. In late November 2001, the oil-for-food program was renewed again, but this time with an agreement to reform the program, more in line with the U.S. "smart sanctions" idea, when it came up for renewal again in late May 2002.