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Weapons of Mass Destruction (WMD)

Washington File

10 May 2003

Senior State Official Explains Iraq's Economic Status

(Briefing for media occurs May 10 on Powell's flight to Israel) (840)
A senior State Department official spoke briefly about Iraq's currency
situation and the U.N. Oil-for-Food Program with media traveling on
Secretary of State Colin Powell's plane May 10 on the way to Israel.
A transcript of the briefing follows:
U.S. Department of State
Press Statement
Washington, DC May 10, 2003
Background Briefing by a Senior State Department Official on Board
Plane En Route Tel Aviv/Jerusalem
SENIOR STATE DEPARTMENT OFFICIAL: (In progress) ... for palace tiles,
it ain't gonna go through. There is another roughly two-and-a-half
billion dollars in that escrow account that has contracts applied
against that money, but the contract hasn't been consummated, and no
money has been obligated against it. So there is two-and-a-half
billion dollars that belongs to the Iraqi people, when we figure out
how to get access to it and use it.
And then the coalitions are picking up money, I mean, a billion here
in a cellar, you know. And so there are other assets, and there are
frozen assets. So there's money there. We have sent in cash to start
paying civilians, for police functions, for the people working in the
waterworks. So we're starting to distribute greenbacks, as a way of
getting money flowing in the economy.
There is something of an economy. The Oil-for-Food Program provided a
basic ration. When you look at street scenes of Basra and elsewhere,
there are markets. I mean, there is trade. They had a pretty good
growing season, so food will be in the markets, and if people are
getting 20 bucks [$20] for being a cop for a month, that gets the
economy going.
Now when the oil starts, that money will come into accounts, and we'll
have to figure out how it can be spent and who has the authority to
write the checks -- doing it in a transparent way. And we hope that
ultimately, that will take up the beat from the Oil-for-Food Program
as it phases out, and get the thing back to the government of Iraq,
the people of Iraq, and the economy of Iraq starting to function
again, so people are not on the dole.
The biggest problem right now is with all the food they have been
receiving through these distribution centers has been in the form of a
ration card that they had. So in effect, they have been subsidized by
the government, and how do you get out of that subsidized system into
something that is a free market, free-standing. That's tricky. What's
interesting, and this surprised me, the currency that is on the
streets is still the Swiss dinar, and the Saddam Hussein dinar, and I
thought all of that would have been burned up right away. No. It's
currency. And if you look at what's happened to the currency, the
Saddam Hussein dinar, with his picture on it, initially went
"shapunk," and now it's appreciating and it's stabilized, and it's
even shown some stability, and you scratch your head. The Treasury
guys were talking to us about it yesterday, and I was thinking to
myself, OK, and there's even an exchange rate between the Swiss dinar
and the Saddam Hussein dinar, between dollars and Swiss dinars and
Saddam Hussein dinars. So we were all set to print new money. And we
said, why? Let's just wait a while, let them figure it out. And
somebody said, what's underneath it? Why would anybody use it? And the
answer is, because it works. I mean, it works. People make a judgment.
Does this have value? And it has some value. Because people think it
has some value, there is the basis of an economy. You now know
everything I learned in my MBA school.
QUESTION: You said there was no deadline, but you also described a
situation that was an effective deadline. Would you be willing to
consider letting the Oil-for-Food Program, which is already
experienced and up and running, continue for another month or so while
you work out the technical problems that you described?
SENIOR STATE DEPARTMENT OFFICIAL: That's an option. As you know, the
Oil-for-Food Program is good to the 3rd of June, and the new
resolution extends it for four more months as a phasing-out, but it
can stay as long as -- there are debates about this -- but my own
personal view is let it stay in place as long as it's serving a
purpose. Let's not theologically kill it just for the sake of killing
it. If it's serving a purpose, keep it, and it's serving a purpose
right now, certainly through the 3rd of June, and with the new
resolution for another four months. I hope we would have spent it out,
or transitioned it to something else in that four months, but as long
as it's there, you do have system that is functioning.
Thank you.
(The Washington File is a product of the Office of International
Information Programs, U.S. Department of State. Web site:
http://usinfo.state.gov)



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