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Analysis: The cost of coalition building-I

By SAM VAKNIN, UPI Senior Business Correspondent

SKOPJE, Macedonia, Feb. 24 (UPI) -- Foreign aid, foreign trade and foreign direct investment have become weapons of mass persuasion, deployed in the building of both the pro-war, pro-American coalition of the willing and the French-led counter "coalition of the squealing."

By now it is clear that the United States will have to bear the bulk of the direct costs of the actual fighting, optimistically pegged at around $40 billion to $50 billion. The previous skirmish in Iraq in 1991 consumed $80 billion in 2002 terms, nine-tenths of which were shelled out by grateful allies, such as Saudi Arabia and Japan.

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Even so, the United States had to forgive $7 billion of Egyptian debt. According to the General Accounting Office, an additional $3 billion was parceled at the time among Turkey, Israel and other collaborators, partly in the form of donations of surplus materiel and partly in subsidized military sales.

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This time around, old and newfound friends -- such as Jordan, an erstwhile staunch supporter of Saddam Hussein -- are likely to carve up about $10 billion between them, says the Atlanta Journal-Constitution. Jordan alone is demanding $1 billion.

According to the Knight Ridder Newspapers, an Israeli delegation, currently in Washington, has requested an extra $4 billion to $5 billion in military aid over the next 2-3 years plus $8 billion in loan guarantees. Israel, the largest American foreign and military aid recipient, is already collecting about $3 billion annually. It is followed by Egypt with $1.3 billion a year -- another rumored beneficiary of $1 billion in new American largesse.

Turkey stands to receive around $6 billion for making itself available as staging grounds for the forces attacking Iraq. An additional $20 billion in loan guarantees and $1 billion in Saudi and Kuwaiti oil have been mooted. In the thick of the tough bargaining, the International Monetary Fund -- thought by many to be the long arm of U.S. foreign policy -- suddenly halted the disbursement of money under a 2-year-old standby arrangement with the impoverished country.

It implausibly claimed to have just unearthed breaches of the agreement by the Turkish authorities. This systemic non-compliance was being meticulously chronicled -- and scrupulously ignored by the IMF -- for well over a year now by both indigenous and foreign media alike.

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Days after a common statement in support of the American stance, the IMF clinched a standby arrangement with Macedonia, the first in two turbulent years. On the same day, Bulgaria received glowing -- and counterfactual -- reviews from yet another IMF mission, clearing the way for the release of a tranche of $36 million out of a loan of $330 million. Bulgaria has also received $130 million in direct U.S. aid since 2001, mainly through the Support for East European Democracy program.

But the IMF is only one tool in the administration's shed. President Bush seeks to increase America's foreign aid by an unprecedented 50 percent over the next three years to $15 billion. A similar amount will be made available in the forthcoming five years to tackle AIDS, mainly in Africa. Half this increase will be plowed into a Millennium Challenge Account. It will benefit countries committed to democracy, free trade, good governance, purging corruption and nurturing the private sector. By 2005, the account will contain up to $5 billion and will be replenished annually to maintain this level.

This expensive charm offensive is intended to lure and neutralize the natural constituencies of the pacifistic camp: non-governmental organizations, activists, development experts, developing countries and international organizations.

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The E10 -- the elected members of the Security Council -- are also cashing in their chips.

The United States has softened its position on trade tariffs in its negotiations of a free trade agreement with Chile. Immigration regulations will be relaxed to allow in more Mexican seasonal workers. Chile receives $2 million in military aid and Mexico $44 million in development finance. U.S. companies will cooperate with Angola on the development of offshore oilfields in the politically contentious exclave of Cabinda. Guinea and Cameroon will absorb dollops of development aid. Currently, Angola receives about $19 million in development assistance.

Cameroon already benefits from military training and surplus U.S. arms under the Excess Defense Articles program as well as enjoying trade benefits in the framework of the Africa Growth and Opportunity Act. Guinea gets about $26 million in economic aid annually plus $3 million in military grants and trade concessions.

The United States has also pledged to cause Iraq to pay its outstanding debts, mainly to countries in Central and East Europe, notably to Russia and Bulgaria. Iraq owes the Russian Federation alone close to $9 billion. Some of the Russian contracts with the Iraqi oil industry, thought to be worth dozens of billions of dollars, may even be honored by the victors.

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(Sam Vaknin advises governments in their negotiations with the IMF.)


(Part 2 of this analysis will appear Tuesday. Send your comments to: [email protected].)

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