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Can Iraq’s militias be starved of cash?

Marketplace Staff Jan 11, 2007

KAI RYSSDAL: Everybody in Washington had an opinion about President Bush’s new Iraq strategy. Most Democrats, and some Republicans, are skeptical that he can stop the insurgency.

Iraqi militias are flush with cash. And some say no amount of troops or economic assistance can really change that. But if the militias are the cause of so much instability, can they be starved of that cash?

Keith Crane’s got some ideas on that score. He’s an economist at the Rand Corporation. He was an advisor to the Iraq Study Group, too. Mr. Crane, welcome to the program.

CRANE: Well thank you for having me.

RYSSDAL: Seems to me before we can understand how to cut off the funding for the militias, as you say, we need to figure out where that money is coming from. Could you lay that out for us?

CRANE: Most of the money for the Shiia militia are actually coming form government payrolls. As you know, the ministers in Iraq have actually divvied up all these different ministries and they’ve been putting their supporters on the payroll so the militias are getting paid by government funds. The insurgents don’t have that opportunity, but they’re busy skimming monies off of gasoline and diesel that have been smuggled out of Iraq, where you can buy it for 44 cents a gallon to sell it for well over three bucks, sometimes five bucks a gallon in Jordan or Turkey.

RYSSDAL: So where do you start? Where do you begin to squeeze off the money to the militias in Iraq so that they feel the pain and eventually aren’t able to do what they’ve been doing?

CRANE: You start with the militias is to city-shop this process, to convert payrolls to single government register. And you know even the Romans are able to do that, this is not, you know, modern technology. And secondly, transfer payroll responsibilities solely to the ministry of finance. Because if you don’t have the money it’s a lot more difficult for you to take a chunk of it before you give me my paycheck. That can be done — I think as part of that you would have to push through a government consensus that people get to veto who gets hired by their buddies in the other ministries. As long as everybody has a veto power over everybody else’s appointments, that should not be impossible to implement.

RYSSDAL: Where’s the incentive though, for any of these people to do this?

CRANE: The big incentive is that although each of the ministers feels his militia is out there to protect him, he also knows that the other guys are out to get him. And I think there’s been some movement in Iraq to recognize that the level of violence has to come down. And so we should be at a juncture where people, at least in the government, start to make some concessions in terms of trying to protect themselves by some compromise.

RYSSDAL: One of the things you write about is raising prices on gasoline, and thus eliminating the incentive for the black market to flourish, and according to your logic, getting rid of one of the incentives for smuggling to happen. How do you do any of this — raise the price on gasoline or kerosene — without inflicting more pain on the Iraqi population?

CRANE: Well when you look at diesel and gasoline, where most of the smuggling takes place, first, the people in cars in Iraq tend to be very much in the upper income, and the people really making money on diesel tend to be truckers who come across Iraq. Secondly, the money doesn’t disappear — the money actually ends up going into government coffers, and in fact the Amaliki government has actually announced a new program to really target assistance for the poorest Iraqis, who almost invariably don’t own cars.

RYSSDAL: Shouldn’t be impossible, but I’d imagine it’s pretty far down on the list of things to do when you have the violence and the chaos that’s in Baghdad today.

CRANE: I think that the core of the chaos right now is really being triggered by this tit-for-tat killing sprees between the death squads and then the Sunni insurgents. And on the Shiia side, really stopping those death squads, or at least starting to pull them back, is probably, it should be the number one policy goal of the U.S. government, at the same time as trying to quell the Sunnis. So I would argue that it should probably be at the top, not the bottom.

RYSSDAL: Keith Crane is the Senior Economist at the Rand Corporation. He worked for the Coalition Provisional Authority in Baghdad in 2003. Mr. Crane, thanks for your time.

CRANE: Thanks for calling.

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