DECEMBER 5, 1990, WEDNESDAY
SECTION: CAPITOL HILL HEARING ABOUT THE MIDDLE-EAST
LENGTH: 2541 words
HEADLINE: HEARING OF THE HOUSE ARMED SERVICES COMMITTEE
SUBJECT: PERSIAN GULF CRISIS
CHAIRED BY: REPRESENTATIVE LES ASPIN (D-WI)
WITNESS: WILLIAM WEBSTER, DIRECTOR, CIA
2118 RAYBURN HOUSE OFFICE BUILDING

On 5 December 1990 the director of the CIA briefed the US House Armed Services Committee on his understanding of the likely effects of sanctions on Iraq. This document is a transcript of the open part of that meeting. It was received as a text file from the Federal Information Systems Corporation Federal News Service. The bold and font size formatting has been added by CASI for legibility.

REP. HAMILTON: Today we're very pleased to welcome Judge William Webster, the Director of the Central Intelligence Agency. On behalf of the committee, I would like to thank Judge Webster for agreeing to testify on sanctions in open session.

His views will be very helpful to the Congress and the public as we grapple with the Persian Gulf crisis. What Judge Webster will do will be to give his opening statement in public and then we will go into closed right after for questions.

One reason the committee is holding hearings is to help the Congress and the nation come together on how to deal with the crisis. We are generally agreed on our goals but not on the means to achieve them. We hope our hearings will provide a forum for identifying the ways we can achieve our goals at a price we are willing to pay.

Judge Webster will be discussing sanctions -- one of the three means available to resolve the crisis. The committee is spending this week exploring sanctions, costs, risks and opportunities. We are also asking which of our goals sanctions can accomplish and how they can be made to work. Over the next two weeks we will make similar examinations of war and diplomacy -- the other two options available to us in the Gulf.

Throughout this process we must strive to reach a consensus, whatever the cost of action we choose -- (correcting himself) -- whatever the course of action we choose, we must be secure in the knowledge that Congress, the country and the nation support it.

Let me at this time recognize the Ranking Republican, Bill Dickinson, for an opening statement.

REP. BILL DICKINSON (R-AL): Thank you, Mr. Chairman. Judge Webster, I want to welcome you back to the committee, and I look forward to your testimony on how sanctions are working and whether or not Iraq can be persuaded to withdraw from Kuwait short of war -- at least the CIA assessment on this subject. We heard testimony yesterday that sanctions by themselves would not force Saddam Hussein out of Kuwait. Rather, witnesses were generally agreed that only the combination of sanctions, credible military threat, and diplomacy stood some chance of forcing Hussein to withdraw, but would take as long as a year, and perhaps longer.

Of course, none of the witnesses could speak with any certainty that a strategy -- such a strategy would work, and only one would hazard a guess as to the position of the United States at the end of a year if Iraq still refused to get out of Kuwait. In that case, the witness believed the United States and our allies would find it difficult to exercise a military option. Since part of this hearing process is to help us weigh alternatives, I'd like to paint -- I'd like you to paint a picture of the risks and viable -- viable options for the United States and our allies in the Mideast and Persian Gulf if a year from now Saddam -- Saddam Hussein is still in -- in Kuwait.

I'm also interested in your views as to the implications of the United States and the Persian Gulf region if Hussein does withdraw from Kuwait with his military power intact. So without further preamble, I would say we are looking forward to your remarks and, as we spoke prior to the opening, I said I hoped that you have some good news for us today, and you said that all depends on my definition of good -- good news. So we are delighted to have you and I will apologize for having to leave early, but we are organizing our Committee on Committees and making committee assignments this morning, and it's sort of important for some of our people who want to be on Armed Services Committee that I be over and -- and represent them there, too. So thank you and welcome. Mr. Chairman.

REP. ASPIN: Mr. Webster, the floor is yours.

MR. WEBSTER: Thank you, Mr. Chairman. I appreciate the opportunity to address this Committee on what the intelligence community --

REP. ASPIN: Pull that -- be sure you pull that mike very close to you.

MR. WEBSTER: All right.

REP. ASPIN: It doesn't work unless you really have got it close to you.

MR. WEBSTER: All right. Thank you. Is that better, Mr. Chairman?

REP. ASPIN: That's better. Go ahead.

MR. WEBSTER: Now, I appreciate the opportunity to address this Committee on what the intelligence community believes the sanctions have already accomplished and what we believe the sanctions are likely to accomplish over time. Of course, sanctions are only one type of pressure being applied on Iraq, and their impact cannot be completely distinguished from the combined impact of military, diplomatic and economic initiatives in Iraq. At the technical level, economic sanctions and the embargo against Iraq have put Saddam Hussein on notice that he is isolated from the world community and have dealt a serious blow to the Iraq economy.

More than 100 countries are supporting the UN resolutions that impose economic sanctions on Iraq. Coupled with the US government's increased ability to detect and follow-up attempts to circumvent the blockade, the sanctions have all but shut off Iraq's exports and reduced imports to less than 10 percent of their pre-invasion level. All sectors of the Iraq economy are feeling the pinch of sanctions and many industries have largely shut down. Most importantly, the blockade has eliminated any hope Baghdad had of cashing in on higher oil prices or its seizure of Kuwaiti oil fields.

Despite mounting disruptions and hardships resulting from sanctions, Saddam apparently believes that he can outlast international resolve to maintain those sanctions. We see no indication that Saddam is concerned at this point that domestic discontent is growing to levels that may threaten his regime or that problems resulting from the sanctions are causing him to rethink his policy on Kuwait. The Iraqi people have experienced considerable deprivation in the past. Given the brutal nature of the Iraqi security services, the population is not likely to oppose Saddam openly. Our judgment has been and continues to be that there is no assurance or guarantee that economic hardships will compel Saddam to change his policies or lead to internal unrest that would threaten his regime. Now, let me take a few minutes to review briefly with you some of the information that led us to these conclusions as well as to present our assessment of the likely impact of sanctions over the coming months.

The blockade and embargo have worked more effectively than Saddam probably expected. More than 90 percent of imports and 90 percent of exports have been shut off. Although there is smuggling across Iraq's borders, it is extremely small relative to Iraq's pre-crisis trade. Iraqi efforts to break sanctions have thus far been largely unsuccessful. What little leakage has occurred is due largely to a relatively small number of private firms acting independently. And we believe that most countries are actively enforcing the sanctions and plan to continue doing so. Industry appears to be the hardest hit so far. Many firms are finding it difficult to cope with the departure of foreign workers and with the cutoff of imported industrial inputs, which comprised nearly 60 percent of Iraq's total imports prior to the invasion. These shortages have either shut down or severely curtailed production by a variety of industries, including many light industrial and assembly plants as well as the country's only tire manufacturing plant.

Despite these shut downs, the most vital industries, including electric power generation and refining, do not yet appear to be threatened. We believe they will be able to function for some time because domestic consumption has been reduced, because Iraqi and Kuwaiti facilities have been cannibalized, and because some stockpiles and surpluses already existed. The cutoff of Iraq's oil exports and the success of sanctions have also choked off Baghdad's financial resources. This too has been more effective and more complete than Saddam probably expected. In fact, we believe that a lack of foreign exchange will in time be Iraq's greatest economic difficulty. The embargo has deprived Baghdad of roughly $1.5 billion of foreign exchange earnings monthly. We have no evidence that Iraq has significantly augmented the limited foreign exchange reserves to which it still has access. And as a result, Baghdad is working to conserve foreign exchange, and to devise alternative methods to finance imports.

We believe Baghdad's actions to forestall shortages of food stocks, including rationing, encouraging smuggling and promoting agricultural production are adequate for the next several months. The fall harvest of fruits and vegetables is injecting new supplies into the market, and will provide a psychological as well as tangible respite for mounting pressures. The Iraqi population in general has access to sufficient staple foods. Other food stocks, still not rationed, also remain available. However, the variety is diminishing and prices are sharply inflated. For example, sugar purchased on the open market at the official exchange rate went from $32 per 50 kilogram bag in August, to $580 per bag last month. Baghdad remains concerned about its foodstocks, and continues to try to extend stocks and increasingly to divert supplies to the military.

In late November, Baghdad cut civilian rations for the second time since the rationing program began while announcing increases in rations for military personnel and their families. So on balance, the embargo has increased the economic hardships facing the average Iraqi. In order to supplement their rations, Iraqis must turn to the black market where most goods can be purchased but at highly inflated prices. They are forced to spend considerable amounts of time searching for reasonably priced food, or waiting in lines for bread and other rationed items. In addition, services ranging from medical care to sanitation have been curtailed. But these hardships are easier for Iraqis to endure than the combination of economic distress, high casualty rates and repeated missile and air attacks that Iraqis lived with during the eight year Iran-Iran War.

During this war incidentally there was not a single significant public disturbance, even though casualties hit 2.3 percent of the total Iraqi population. About the same as the percentage of US casualties during the Civil War.

Looking ahead, the economic picture changes somewhat. We expect Baghdad's foreign exchange reserves to become extremely tight, leaving it little cash left with which to entice potential sanctions' busters. At current rates of depletion we estimate Iraq will have nearly depleted its available foreign exchange reserves by next spring.

Able to obtain even a few key imports, Iraq's economic problems will begin to multiply as Baghdad is forced to gradually shut down growing numbers of facilities in order to keep critical activities functioning as long as possible. Economic conditions will be noticeably worse and Baghdad will find allocating scarce resources a significantly more difficult task. Probably only energy related and some military industries will still be functioning by next spring. This will almost certainly be the case by next summer. Baghdad will try to keep basic services such as electric power from deteriorating.

The regime will also try to insulate critical military industries to prevent an erosion of military preparedness. Nonetheless, reduced rations coupled with rapid inflation and little additional support from the government will compound the economic pressures facing most Iraqis.

By next spring Iraqis will have made major changes in their diets. Poultry, which is a staple of the Iraqi diet, will not be available. Unless Iraq receives humanitarian food aid or unless smuggling increases, some critical commodities such as sugar and edible oils will be in short supply. Distribution problems are likely to create localized shortages. But, we expect that Baghdad will be able to maintain grain consumption, mainly wheat, barley, and rice, at about two-thirds of last year's level until the next harvest in May.

The spring grain and vegetable harvest will again augment food stocks, although only temporarily. To boost next year's food production, Baghdad has raised prices, paid the farmers for their produce, and decreed that farmers must cultivate all available land. Nonetheless, Iraq does not have the capability to become self-sufficient in food production by next year.

Weather is the critical variable in grain production, and even if it is good, Iraqis will be able to produce less than half the grain they need. In addition, Iraq's vegetable production next year may be less than normal because of its inability to obtain seed stock from abroad. Iraq had obtained seed from the United States, the Netherlands, and France.

Although sanctions are hurting Iraq's civilian economy, they are affecting the Iraqi military only at the margins. Iraq's fairly static defensive posture will reduce wear and tear on the military equipment and, as a result, extend the life of its inventory of spare parts and maintenance items.

Under non-combat conditions, Iraq ground and air forces can probably maintain near-current levels of readiness for as long as nine months. We expect the Iraqi air force to feel the effects of sanctions more quickly and to a greater degree than the Iraqi ground forces because of its greater reliance on high technology and foreign equipment and technicians. Major repairs to sophisticated aircraft like the F-1 will be achieved with significant difficulty, if at all, because of the exodus of foreign technicians. Iraqi technicians, however, should be able to maintain current levels of aircraft sorties for three to six months.

The Iraqi ground forces are more immune to sanctions. Before the invasion, Baghdad maintained large inventories of basic military supplies, such as ammunition, and supplies probably remain adequate. The embargo will eventually hurt Iraqi armor by preventing the replacement of old fire control systems and creating shortages of additives for various critical lubricants. Shortages will also affect Iraqi cargo trucks over time. Mr. Chairman, while we can look ahead several months and predict the gradual deterioration of the Iraqi economy, it is more difficult to assess how or when these conditions will cause Saddam to modify his behavior. At present, Saddam almost certainly assumes that he is coping effectively with the sanctions. He appears confident in the ability of his security services to contain potential discontent, and we do not believe he is troubled by the hardships Iraqis will be forced to endure. Saddam's willingness to sit tight and try to outlast the sanctions, or in the alternative, to avoid war by withdrawing from Kuwait, will be determined by his total assessment of the political, economic and military pressures arrayed against him. Thank you, Mr. Chairman.

REP. ASPIN: Judge Webster, thank you very much. And we will now adjourn the meeting temporarily while we clear the room and continue the hearing in closed session. Thank you very much.