Gulf listens for a different boom. As noise of war fades, businessmen are alert to signs of resurgence in regional economy

The Gulf Arab states hope an end to hostilities between Iran and Iraq will usher in a new era of prosperity after years of war and economic stagnation. Among the initial indications of growing confidence in the peace process this week have been the significant strengthening of Iran's currency, the riyal, and the lowering of war-risk insurance premiums for Gulf cargoes.

Businessmen, bankers, shipping officials, and diplomatic analysts say they expect the recently announced Aug. 20 Gulf war cease-fire to hold.

But many stress that a much anticipated postwar upsurge in business and investment is still months away.

They say that Gulf merchants and other potential investors will be closely watching United Nations-sponsored peace talks in the weeks ahead to ensure that Iran and Iraq are both sincere in their declared desire for comprehensive peace. This will be the green light for new economic activity, triggered in large part by expected massive reconstruction projects in Iran and Iraq, they say.

``At the moment they are waiting to see what is going to happen at the United Nations,'' says an Iranian banker based in Dubai.

He motions through his office window toward the deepwater creek that cuts through downtown Dubai. It is usually bustling with scores of dhows loading goods bound for Iran. But in the current period of uncertainty, even the dhow traffic has dropped significantly below the usual August slowdown.

``They are waiting. They are not sure [about business prospects], because Saddam Hussein is a volatile man, he may change his mind,'' the banker says, referring to the Iraqi President.

``I don't think they [investors and merchants] are quite convinced,'' says a local banker. ``The whole situation could change today.''

Another Dubai banker adds, ``The news has come suddenly. It is too soon for people to see what opportunities are open to them. But many people are excited.''

Iran and Iraq have pledged to begin direct peace talks in Geneva on Aug. 25. By that time a 350-member UN peacekeeping force should be in place along the 730-mile Iran-Iraq border to prevent cease-fire violations. It is hoped such efforts will help build momentum to enable Iran and Iraq to overcome eight years of war and bitter hatred to sign a comprehensive peace accord.

The discussions are expected eventually to include nationwide rebuilding efforts. The reconstruction will include refineries, pipelines, roads, power plants, ports, and housing. Some entire towns must be rebuilt. The efforts are expected to transform the northern Gulf into a massive, bustling construction site.

Saeed Juma Al-Naboodah, chairman of the Dubai Chamber of Commerce, estimates that reconstruction investments for both nations could top $100 billion.

Banking and shipping sources say Dubai is well positioned to participate in the rebuilding of both Iran and Iraq. They say that Iraq's lack of a working Gulf port and Iran's shortage of modern port facilities will mean that construction and other equipment will have to be offloaded at Dubai and then shuttled into Iran or Iraq via feeder ships to avoid massive shipping tie-ups.

While Dubai and nearby Jebel Ali ports are expected to serve as secondary ports for Iran, sources say, Kuwait will probably function at least initially as Iraq's primary port until the political dispute over the Shatt al Arab waterway that runs along the common border is settled and it is dredged and cleared of mines and sunken ships.

By some estimates that job may take more than two years. Though all eyes at present are on the UN and the expected peace talks, some Gulf analysts warn that there are other uncertainties that cloud the region's economic future.

Among them is the continuing volatility of oil prices. Analysts say it is in Iran's and Iraq's interest to avoid the urge to flood world markets with oil in an effort to earn as much revenue as possible to rebuild their economies quickly and begin rearming their armed forces.

This shared interest by Iran and Iraq in maintaining the price of oil at current levels could help reunite ranks in the Organization of Petroleum Exporting Countries and lend yet another boost to Gulf economies.

The danger, analysts say, is if Iran or Iraq decides that national interests necessitate a rapid increase in oil exports. Such a development would threaten to plunge oil prices to new lows and could spark an oil-production war between Iran and Iraq, further complicating peace talks.

In addition to uncertainties about oil, analysts say, political uncertainties may complicate efforts at economic revival.

One Arab analyst says some businessmen are waiting to see what results from the current internal power struggle within Iran's ruling clergy. ``Real peace will come only when the Iranian regime is ousted, only then,'' the source says. He stresses, ``A regime like this cannot stay in power during peacetime.''

Analysts say they expect Iran and Iraq to be preoccupied in the near term with peace and reconstruction efforts. They say Iran's setbacks on the war front and its need to tackle chronic economic problems - 30 percent unemployment, 50 percent inflation - will mean a lower priority for efforts by the ruling mullahs to export Iran's revolutionary brand of Islam to neighboring states.

Likewise, analysts are discounting the threat to the Gulf states of any lingering Iraqi ambitions to spread its Baath socialist influence in the Gulf. They say eight years of war has mellowed President Hussein, who has since forged alliances with moderate Arab states: Egypt, Jordan, and Saudi Arabia. Mr. Hussein is also initiating economic reforms, reducing state control in some areas and encouraging more private-sector participation in the Iraqi economy.