CONTENTS
AGHDAD'S MOTIVATIONS AND. 1EAQ-KUKAU: IS BAGHDAD BLUFFING?'
IBJKAII BELIEVES UJAfi IS ONLY BLUFFING.
THE KUWAITIS PROBABLY ARE MISTAKEN; IRAQI PROPAGANDA IS ATTACKIKG THE US FOR EXERCISES WITH THE UAE AND ADDITIONAL IRAQI TROOPS "yjIPHENT. AND SUPPLIES CONTINUE TO POUR INTO THE AL BASRAH REGION.
EHMAll APPARENTLY IS TRYING TO REDUCE TENSION WITH LBAQEGYPT TO MEDIATE. THE KUWAITI STRATEGY IS TO DEFUSETHROCGH CONSULTATIONS AND MEDIATION UNTIL THE OPEC
PLATING UP EGYPTIAN PRESIDENT MUBARAK'S VISITS TO BAGHDAD, KUWAIT, AND SAUDI ARABIA YESTERDAY AND STRESSING KUWAIT'S INTEREST IN EASING TENSION. THE RULING FAHILY HAS AVOIDED DIRECTLY CRITICIZING IRAQI PRESS ATTACKS ON FOREIGN MINISTER SABAH, ONE OF ITS MEMBERS. 1
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IRAQI REPUBLICAN GUARD ARTILLERY AND MULTIPLE ROCKET LAUNCHERSKUWAITI BORDER. LARGE STOCKS OF AMMUNITION AND SUPPLIESAMASSED AT DEPOTS IN THE AZ ZUBAYR AREA. IRAQ HASBATTERIES NEAR ITS ARMOR ANDAN ADDITIONAL ARMORED BRIGADE HAS ARRIVED AT AZARMORED
VEHICLES ON TRANSPORTERS WERE SEEN NEAR AL BASRAH HOVING SOUTH.
EMO TO THE ARAB LEAGUE YESTERDAY, IRAQI FOREIGN MINISTER AZIZ REPEATED ACCUSATIONS THATOOK ADVANTAGE OF IRAQ'S DISTRACTION DURING THE WAR WITH IRAN TO ENCROACH ON IRAQI TERRITORY. IRAQI DEPUTY PRIME MINISTER HAHMADI COMPLAINED OF KUWAITI INTRANSIGENCE OH THE LONGSTANDING BORDER DISPUTE, AND THE IRAQI PRESS DENOUNCED THE UAE FOR CONDUCTING MILITARY EXERCISES WITH THE US.
IRAQ PROBABLY IS NOT BLUFFING; TO ACCEPT LESS THAN SATISFACTION OF ITS DEMANDS FOR REDUCED OIL PRODUCTION AND CASH IN THE FORM OF AN ARAB RECONSTRUCTION FUND WOULDUMILIATING RETREAT. THE STRIDENCY OF IRAQ'S RHETORIC AND THE COST OF MAINTAININGARGE MILITARY FORCE ALONG THE KUWAITI BORDER ALSO SUGGEST SADDAM HUSAYN WILL NOT WAIT LONGAVORABLE RESPONSE. UNLESS KUWAIT MOVES TO MEET IRAQ'S_ DEMANDS QUICKLY. SADDAM IS LIKELY TO TURN UP THE PRESSURE .r
THESE APPARENTLY OPPOSITE COURSES INCREASE PROSPECTSILITARY CLASH. AN INITIAL IRAQI MILITARY MOVE AGAINST HMAII IS LIKELY TOIMITED OPERATION TO INCREASE THE PRESSURE ON KUWAIT TO ACCEDE TO BAGHDAD'SHE FORCE IRAQ IS BUILDING ALONG THE
EGINNING OF
KUWAITI BORDER, HOWEVER, WILL BE ABLE TO CARRY OUT ANY MILITARY OPERATION SADDAM DECIDES TON INVITING TARGET?
BAGHDAD HAS DEMANDED THAT KUWAIT CEASE ITS OIL-EXPLOITATION ACTIVITY JUST SOUTH OF THE IRAQI-KUWAITI BORDER. KUWAITRILLING RIG IN OPERATIONILOMETER FROM THE BORDER AND IS PRODUCING OIL FROM WELLSM FROM THE BORDER. THE
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IRAQIS CLAIM KUWAIT HAS ILLEGALLY* BILLION WORTH OF OIL OVER THE PASTEARS FROH IRAQ'SILFIELD. WHICH. SOUTH INTO
,THETWO GATHERING CENTERSIELD SEPARATIONBEEN IN PRODUCTION SINCE THE LATE
PRESIDENT SADDAM BUSAYN WANTS HIS CURRENT BULLYING TO YIELD LASTING POLITICAL HEGEMONY OVER KUWAITAJOR VOICE IN OPEC.
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BAGHDAD IS PRESSING HARD SPECIFICALLY FOR AN END TO
OVERPRODUCTION AND FOR KASSIVE ARAB UNDERWRITING OF ITS POSTWAR
LIMITED 0UTCRYTHE ARAB SlTST ELSEWHERE OVER HIS TACTICS WILL ENCOURAGE HIM TOOUCH "IT1CJL AND MILITARY STANCE WELL BEYOND ThVs mTSSc hSJSnV
EXT0RT CASHPOLITICAL
1 AND
! THREATENED FORCE ONLY TO BE REBUFFED BYAND ARAB PRESSURE.
low oil prices ihpede postwar recovery
moreCES BETVEEN JAHVm june costySJr?TI,Lto8eicn exchanger?5JJiI,l'LLL several billion dollars shorts expectation. it has been forced to reduce spendingsqueeze discontents consumers.
AND DEVELOPMENT PROJECTS HAVE BEEN
A:, j ^ SECTOR. GROWTH IN NONOIL SECTORS
SERIOUStEHS HAVE PREVENTED IMPROVEMENT IN IIVIMT
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r^rSIMPR0VE WWmONSUMER GOODS AND SZDUCEPERCENT ANNUAL ISrUTlOS RAPE HAVE BEEN LARGELY INEFFECTIVE. SADDAM'8 CONTINUED SPENDING ON WHAT MANY IRAQIS VIEW AS
ii SELEBRATEOF AL FAW. PROBABLY HAS CONTRIBUTED TOAND RUMORS OP COUP
BAGHDAD'S OPTIONS
HANTS'RECENTLY HAVEL1 ST CHANGE HIS CUSS-AND-BUTTER POLICY
; ViIS UNWILLING TO REDUCF^HHSfTeT^
iwinSJS ISSff8 5pENTT0 MODERNIZE THE ARMED FORCES AND DEVELOP IRAQ'S MILITARY INDOSTRIES. HE IS ALSO RELUCTANT TO COT WamUB ON THE OIL SECTOR OR ON INDUSTRIAL PROJECTS THAT PROMISE
MILITARY INDUSTRIALIZATION..BAGHDAD CANNOT INCREASE OIL
ING TO TRIM SPENDING" AND UNABLE TO EXPAND OIL PRODUCTION
R,CES BYWIDESPREAD SENTIMENT IN OPEC TO REIN IN OVERPRODUCERS. IRAQ HAS DEMANDED THAT
start?
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KUWAIT AND THE UAE STOP PRODUCING ABOVE THEIR OPEC QUOTAS. BAGHDAD HAS ALSO DEMANDED COMPENSATION FOR LOSSES INCURRED BECAUSE OF KUWAIT'S PERCEIVED ECONOMIC "AGGRESSION" AGAINST IRAQ. SUCH COMPENSATION WOULD INCLUDE THE ESTABLISHMENT OF AN ARAB RECONSTRUCTION FUND FOR IRAQ.j
THE GENERALLY MILD ARAB AND INTERNATIONAL REACTIONS TO SADDAM'S SABER RATTLING ALONG THE BORDER PROBABLY HAVE ENCOURAGED HIM TO INCREASE PRESSURE ON BfllAlI- THE GULF COOPERATIONWHICH KUtfAU AND THE UAE ARETHUS FAR HAS REFRAINED FROM ACTIVELY SUPPORTING EITHER COUNTRY. IRAN SUPPORTS IRAQ'S EFFORT TO CURB OPEC OVERPRODUCTION, ACCORDING TO PRESSUTLOOK
SADDAH IS LIKELY TO CONTINUE PRESSING HIS DEMANDS FOR HIGH OIL PRICES AND SUBSTANTIAL FINANCIAL ASSISTANCE. TO DO LESS NOW WOULDUMILIATING RETREAT. EVEN IF THE ARABS OFFER CONCESSIONS, BAGHDAD IS LIKELY TO KEEP TROOPS ALONG THE BORDER TO ENSURE KUJfAII KEEPS ITS END OF THE
BAGHDAD PROBABLY BELIEVES ITS AGGRESSIVE PROPAGANDA, WHICH HAS INCLUDED PERSONAL ATTACKS ON KUWAITI OFFICIALS AND MEMBERS OF THE ROYAL FAMILY, WILL PROVIDERETEXT FOR SOME FORM OF MILITARY ACTION. IRAQ ALMOST CERTAINLY WOULD USE ANY SEIZED TERRITORY TO FORCE KUWAITI COMPLIANCE WITH PRODUCTION CEILINGS, EXTORT FINANCIAL ASSISTANCE, AND PRESSETTLEMENT OF THE BORDER DISPUTE. IRAQ HAS LONG DEMANDED CONTROL OF BUBIYAN AND WARBAH ISLANDS TO ENHANCE ITS ACCESS TO THE SEA. SADDAM PROBABLY BELIEVES HE HAS LITTLE TO LOSEIMITED INCURSION, BUT HE ALHOST CERTAINLY FEARS THAT BROADER MILITARY ACTION WOULD BRING THE US INTO THE FRAY AND UNDERMINE HIS REGIONAL LEADERSHIP ASPIRATIONS. HIS LONG-TERM GOAL IS TO ACHIEVE POLITICAL AND ECONOMIC DOMINATION OF SiWAlT.. IN OPEC, HE WANTS TO SUPPLANT SAUDI ARABIA AS THE KEY
KUWAIT DRAWS ENVY AND EXTORTION
Bffl/Ul'S INVESTMENT POLICY HAS MADE IT THE WEALTHIEST GOVERNMENT IN THE REGION AND THE ENVYESS SUCCESSFUL NEIGHBORS I
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