Posted on 21-2-2003

Iraq War Cost One To Three Trillion Dollars
By Reuters, Thursday 20 February 2003

Note: No mention of human, social, environmental costs. Ed.

CANBERRA (Reuters) - A short war with Iraq could cost the world one percent
of its economic output over the next few years and more than $1 trillion by
2010, Australian researchers said in a report Thursday. A long war could
more than triple the costs, they said.

The compounding effects of rising oil prices, extra budget spending and
economic uncertainty could cut $173 billion from the world economy in 2003
alone, said the researchers, Reserve Bank of Australia board member Warwick
McKibbin and Center for International Economics executive director Andrew
Stoeckel.

Basing their projections on two scenarios -- a short war with a year or
two of rebuilding or a long war lasting five years with five years of
rebuilding -- the researchers said conflict would sideswipe private
investment and probably push equity prices even lower. ``The conclusion is
that even a short war will have a significant and noticeable impact on the
world economy, but on current projections of world growth would not lead to
recession,'' they said. ``Even a short war could cost the world one percent
of GDP per year over the next few years.''

While the United States was expected to bear the brunt of the war costs,
Britain, Australia and several European countries would have to boost
budget spending and Japan would probably be a large contributor to the
rebuilding phase, the report said. ``Iraq and some other Middle Eastern
countries are assumed to spend considerably on defense, represented by an
increase in defense spending by OPEC,'' it added.

Oil prices were projected to initially rise 90 percent above a baseline of
$25 per barrel. Under a short-war scenario, the price spike would quickly
dissipate and the world oil price would fall below $25 after the war was
over, the report said. It warned that the investors' uncertainty would
compound the rise in oil prices, even in a short-war case. ``Altogether,
there could be a drop of investment in the United States of over eight
percent below baseline in 2003 and 2004. The fall is less for Japan and
Europe, given the assumptions for their contribution to a war and
rebuilding.'