Editorial: Many repercussions from war in Iraq

by Morton Sosland
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While it’s early to make even a preliminary assessment of the impact of the

war on Iraq on world trade in grain and flour — or of the effects of the huge task of rebuilding the country’s food production and distribution infrastructure — there is little question that the repercussions will be far-reaching. In simplest terms, Iraq, even before the swift military victory of American and allied forces, ranked as one of the world’s largest wheat importers, taking about 3 million tonnes annually. It was a trifle less important as a coarse grain market, relying in part on domestic production of barley and winter wheat. That this year’s harvest was getting under way in the northern provinces as the war began underscores the problems that will have to be faced in securing an adequate food supply.

Even as the U.S. government has promised the people of Iraq assistance in provisioning food, disagreements have arisen as to countries that should provide the aid and how it should be financed. American relief shipments, initially in the form of 50,000 tonnes of wheat flour bought from U.S. mills and 200,000 tonnes of wheat allocated from a humanitarian reserve, are being supplied under various aid programs. At the same time, Australia, which had become the main supplier to Iraq during the past decade, had wheat under shipment as the war began, which will be paid for through the United Nations oil-for-food program. The latter has been the principal source of imports in the pre-war years.

Australia took over as Iraq’s main supplier of wheat in the wake of the first Persian Gulf War in 1991. Prior to that, the U.S. had the lion’s share of the market, providing large quantities of both wheat and barley financed by credit programs of the Commodity Credit Corp. When the 1991 war ended, Iraq reneged on its obligations to the U.S., refusing to pay debt of $2 billion and accumulated interest of $1 billion. While focusing on Australia, Iraq also explored purchases from some of the "new" exporting countries that have recently gained market shares. Thus, in the wake of this year’s war, both Russia and India have come forward with offers to supply sizable quantities of wheat.

Assuring food adequacy for a nation whose people are heavily dependent on wheat-based products, particularly bread in many forms, is likely to face numerous challenges. First, Iraq’s ports have been badly damaged by military action, as have highways that provide truck access to foreign supplies. Many estimates have been made of the cost of rebuilding, and figures up to $100 billion are heard. Much of this cost will fall on the United States, which is asserting control over major projects. Also, revenues from Iraqi oil, estimated at around $20 billion per year, will in all likelihood be devoted to restoring internal infrastructure.

No data are yet available on what damage may have been sustained by Iraq’s flour milling industry, which has been one of the largest in the Near East. Estimates place the number of mills in the country at around 100, and these are located in major population centers, where the most intense fighting occurred. The height of a typical mill, and Iraq does have plants that grind as much as 600 tonnes of wheat in 24 hours, would seem to make mills vulnerable in a war that relied on artillery barrages and aerial bombardments. How milling will operate in the wake of the war is still unsettled.

One senses that even a conflict as confined as this war turned out to be will have many repercussions on how trade in wheat and flour are conducted. Iraq’s neighbors include nations that rely heavily on imports, but where the domestic milling industry has also been expanding. Peace and the start of large-scale reconstruction could restore this area to being the most active center of new mill building. There’s no doubt but that the Near East will continue to play a central role in the unfolding transformation of the world grain industry.


Morton I. Sosland