Is Uncle Sam Being Suckered?

By GEORGE J. CHURCH

On any listing of subjects likely to arouse passion, accounting ordinarily might come in dead last. But nothing about the Persian Gulf crisis is ordinary, and some angry national and international arguments are breaking out about what, at least in part, are questions of accounting: How much more will the Pentagon really have to spend on Operation Desert Shield? Are certain allies, notably Saudi Arabia, getting rich from the crisis or actually losing money? Are others, pre-eminently Germany and Japan, falling behind even on their relatively piddling pledges?

The Pentagon brought these questions to the fore last week by disclosing that it would shortly be asking Congress for a pile of new funds -- perhaps $20 billion -- to maintain the American forces confronting Iraq. Word promptly leaked that the total tab might be as high as $30 billion in fiscal 1991, which began on Oct. 1. That would be double the estimate of $15 billion made only two months ago.

The increased cost, of course, largely represents President Bush's decision to roughly double the size of the U.S. force in the gulf area. Nonetheless, the nonpartisan Congressional Budget Office has raised its estimate of the extra costs of Operation Desert Shield from an initial $7 billion to only $12 billion. Some legislators suspect the Pentagon of playing a numbers game in arriving at its own, far higher figure. Because Congress decided to finance the gulf operation outside the regular budget, they believe, the Defense Department is exaggerating Desert Shield's price tag by including many extraneous costs.

But suspicion of the Pentagon is minor compared with the growing anger at allies that are thought to be playing Uncle Sam for a sucker; many are far more dependent than the U.S. on oil from the gulf, yet they are contributing much less than they could to the anti-Iraqi cause. "My constituents are hopping mad," reports Illinois Democratic Senator Paul Simon. At town meetings back home, he says, "the most often asked question was why we are doing this alone." House Armed Services Committee chairman Les Aspin warns that "if President Bush were to ask for a declaration of war, it might be rejected on that basis alone."

Is this resentment justified? As always when accounting is involved, the answers can get murky. Senator Paul Sarbanes, a Maryland Democrat, angrily charges Saudi Arabia with "reaping a windfall gain of something on the order of $40 billion" from the crisis by stepping up oil production and selling crude at higher prices. Other estimates run up to $50 billion a year. Western diplomats in Riyadh assert, however, that such calculations assume a price of $30 per bbl. maintained for a full year and that current prices are well below that. They estimate the Saudi windfall at $8 billion to $10 billion during the first five months of the crisis, which would project to $19 billion to $24 billion a year.

Estimating how much of this windfall the Saudis have contributed to the anti-Saddam effort is tricky too. One problem, which also crops up with other allies, is how to figure contributions in kind. Riyadh has given the U.S. an open-ended commitment to supply all the fuel, water and electric needs of the U.S. forces operating there, but how should oil supplied to American troops be valued -- at the price it might fetch if sold on the world market or at Saudi production costs, which may be as low as 50 cents per bbl. of crude? By some estimates, Saudi crisis-related expenses in the first five months have totaled $22 billion, far more than the oil windfall. But these calculations include such items as forgiveness of $4.5 billion in Saudi loans to Egypt, a highly indirect crisis cost.

What is clear is that some of the most critical Americans seem satisfied with Saudi Arabia's contributions. Three other states have largely escaped criticism. Britain has committed 35,000 of its best troops, or about 11% of its total military personnel, to the multinational force facing Iraq. Turkey has risked Saddam Hussein's vengeance by turning over air bases to American planes that might bomb Iraq and by shutting off one of Iraq's most important oil pipelines, at great economic cost to itself. Egypt -- which is sending two mechanized divisions totaling 30,000 personnel to Saudi Arabia and which, in facing up to Saddam, has absorbed economic losses that President Hosni Mubarak estimates at $9 billion -- gets a grade of A+ from Congressman Aspin.

Many others, however, deserve a D- or an F. The State Department lists 54 countries that have made some kind of military or monetary contribution to the anti-Iraq coalition. But many of the donations are minuscule. Examples: one ship from Portugal, 20 soldiers from Czechoslovakia, $66 million from Canada.

The U.S. has drummed up financial aid in two forms. One is assistance from economic powers to nations that have incurred heavy losses by joining the embargo against Iraq -- primarily Egypt, Turkey and Jordan but also Syria, Morocco, Algeria and Poland. As of Nov. 30, according to Washington, allies had pledged $13.4 billion to this cause and so far actually paid $6 billion. America has also sought cash and in-kind contributions to defray U.S. military expenses by allied payments into a special Defense Cooperation account. In a manner befitting a computer age, no cash or even paper changes hands; countries merely make electronic transfers to that account of funds they hold in various U.S. banks. On Nov. 30, the account held $3.9 billion.

Pentagon spokesman Pete Williams stirred yet another accounting storm last week by declaring that as of Nov. 29, five allies that had agreed to kick in $6.7 billion in cash and kind by Dec. 31 had so far ponied up only $3.6 billion. Two-thirds of that came from Kuwait, which had promised $2.5 billion and paid exactly that much. (Critics nonetheless point out that the Kuwaiti financial empire is worth an estimated $100 billion.) By Williams' figures, Japan had pledged $2 billion but had paid only $476 million; Germany had paid a mere $337 million of a promised $1.07 billion. Germany protested that it had ! forked over at least $660 million, and Japan put its payments at $940 million. Williams later said he might have understated their contributions, partly by not counting material aid that was on the way but had not yet been received.

This controversy, however, masks a far more vital point. Even if the U.S. by New Year's Eve collects every last cent pledged by allies, that amount is grossly insufficient, particularly from two such economic powerhouses as Germany and Japan. Moreover, few allies have pledged any money beyond Jan. 1 (to be fair, most have not yet been asked). So U.S. officials will soon have to rerun the September begging trip that was dubbed Operation Tin Cup. But Bonn is complaining about the high costs of German unification, and the Japanese Finance Ministry is grumbling about the nation's heavy debt. The U.S. Administration has some fancy arm twisting to do -- and if it fails, some even fancier explaining to Congress and the public as to why the U.S. should bear so disproportionate a share of the cost, in money and maybe in lives, of defeating Iraq's aggression.

CHART: NOT AVAILABLE

CREDIT: TIME Chart by Joe Lertola

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With reporting by Dean Fischer/Riyadh and Bruce van Voorst/Washington