Iraqi 'gold rush' finances Gulf war

The sequence has been splashed repeatedly on Iraqi television, in major newspapers, and on government posters: Iraqi women, rich and poor, lining up to hand over gold bracelets, necklaces, or any other form of jewelry or gold possessions.

These ''donations'' are the latest byproduct of the Gulf war, a reflection of the dire state of the Iraqi economy as it approaches the third anniversary of the draining conflict with Iran.

In light of the Arab tradition of giving women gold to mark anniversaries, the birth of a child, and other occasions - even among peasant families - it is not surprising that the so-called ''gold campaign'' has brought in 50 tons of gold with a market value of more than $600 million in recent weeks, according to the Baghdad press.

That sum can hardly make a dent in Iraqi war costs, now estimated to run as high as $1.5 billion per month. But it does serve as an indication of how much the government of President Saddam Hussein overestimated the stamina of his oil-based economy for a protracted war - and what desperate measures must be taken to prevent the total collapse of the economy.

Since the outbreak of the war in September 1980, President Hussein has tried to keep up public morale with the semblance of continued prosperity, importing luxury goods and going ahead full-steam with development projects such as high-rise apartment buildings, conference centers, telecommunications systems, and a subway.

But last month, on the 14th anniversary of his rise to power, he admitted in a speech that Iraq would have to absorb new economic hardships through ''rationalization'' and an end to all ''nonessential spending.''

That may have been an understatement. Foreign diplomats and Iraqis are now hinting that the cost of the Gulf war may end up hurting the President politically more than the war itself, which is now in one of the more active stages of the sporadic fighting.

The crunch is being felt at all levels. There are reported shortages on shop shelves, including foodstuffs, as the government bans further import contracts. And finance officials are attempting to find terms to defer payment to foreign workers, particularly Asian manual laborers, who are vital, since the majority of Iraqi manpower is wrapped up in the war effort.

Diplomats from several Western, Asian, and East-bloc countries have reported pleas from the Iraqi government to foreign aid donors and contractors to reschedule payment on loans, military supplies, and development projects.

The pleas have been accompanied by some threats. In an interview in the Baghdad Observer last week, Iraqi First Deputy Premier Taha Yassin Ramadan warned that foreign companies and governments that do not cooperate with Iraq during the conflict would be treated harshly in return in the future.

He added that Iraq was ''a rich country at an early stage of development and still enjoying a sound and solid economy.'' He said the current economic problems were only temporary.

Yet diplomats confirm that peace is still a long way off, meaning a further drain in limited reserves. Baghdad would need a miracle to win the conflict, which first turned against Iraq with stunning Iranian offensives in the spring of 1982.

And the Iraqi President has agreed to meet almost every Iranian demand for a permanent truce, according to Algerian mediators, except the demand that he resign from office. But Tehran appears intent on continuing a war of attrition until its archenemy is gone, one way or another.

It is not just the Iraqi economy that threatens President Hussein. Since the crisis within the Organization of Petroleum Exporting Countries which evolved from a world oil glut, forcing a cutback in prices, Iraq's neighboring Gulf states have been forced to cut back on the estimated $20 billion a year in aid to Iraq. Both Mr. Hussein and the Iraqi foreign minister have grumbled in public about late payments of aid, and in some cases nonpayment, from Gulf states.

Diplomats in the region claim the only regular contributor remains Saudi Arabia, but with some alterations from cash and materiel to ''oil loans.'' Since Iraq's oil exporting quota under the new OPEC formula is higher than what it can ship out, due to a cutoff of use of a pipeline via Syria, Saudi Arabia reportedly sells its oil as part of Iraq's quota, then turns the revenue over to President Hussein.

Once one of the world's five largest oil exporters, Iraq is groping to find new ways to increase its shipments, down from 3.5 million barrels per day in the prewar era to 700,000 now. There are hopes for new pipelines via Saudi Arabia and Jordan, but both are still at least two years away.

In the meantime, there are few alternatives except appeals for public tolerance - and gold. Even President Hussein's wife joined the new gold rush, parting with heaps of valuables. The event was aired on Iraq television.

But rather than boost the standing of the ruling couple, the gesture underlined the precarious position politically of President Hussein. Since both are of humble origins, it led to widespread public questioning about how they managed to finance what was said to be a staggering amount of valuables.