A Saddam Stock Market III Jude Wanniski October 3, 2002

The Wall Street Journal market column and Bloomberg’s commentary at least mention “concerns about Iraq” when there is a sharp decline. As far as Jonathan Fuerbringer of The New York Times is concerned, there is no connection between the dramatic ups and downs on Wall Street and the Bush administration’s ups and downs on whether or not to go to war with Iraq. When the DJIA climbed 350 points Tuesday, the reason was clearly the announced agreement in Vienna between Hans Blix, the chief United Nations weapons inspector, and the Iraqi diplomatic team. Bloomberg said the deal permitting inspectors to return as early as October 15 contributed to the rally that began in the morning. Indeed, it was the reason for the entire rally, as the market kept waiting for the Bush administration to denounce the agreement and it did not. Secretary of State Colin Powell waited until trading had closed before he insisted inspections cannot begin until a new Security Council resolution is passed, one that will provide for a tougher inspections regime. 

When the market opened yesterday, Wednesday, it held steady on the news that President Bush was willing to compromise on the tough language in the resolution he was asking for. The DJIA was up around 50 points at 12:57 pm, when Bloomberg ran the text of the resolution. It even climbed a few points before Bush appeared with House members including Minority Leader Richard Gephardt at 1:15 pm, as market participants who had not read the resolution believed it really had been softened. However, it was when the President began to speak that the market turned south, as it has so often whenever he has a press conference these days. The 180-point decline – 200 points from its peak – knocked only half the previous day’s optimism out of the market. That is because the Senate has yet to act and also because the Tuesday agreement at the United Nations was a breakthrough that will be very difficult for the Pentagon warriors to reverse. 

The old inspections regime, UNSCOM, had compromised itself by permitting its American agents to be used as spies. Consequently, the UN Security Council dissolved it in 1999 and passed a NEW, TOUGHER RESOLUTION, #1284*, which both the United States and Great Britain supported. Iraq, of course, would not permit the weapons inspectors to return under the old resolution. It was plain even to the Clinton Administration and UK Prime Minister Tony Blair that it was unreasonable to expect the UN to demand a return of the corrupted regime, after it became clear the UNSCOM report was used to justify five days of bombing. The Security Council replaced it with the United Nations Monitoring, Verification and Inspection Commission (UNMOVIC), which can hardly be called a relaxation of UNSCOM in terms of access. The difference is that the Vienna discussions which led to Tuesday’s agreement by Iraq to permit UNMOVIC inspections will guarantee honest inspecting. 

The last thing the GOP War Party wishes is to have the inspectors return, knowing Baghdad is prepared to not only allow unfettered access by Blix and his team, but also that in 60 days Blix is most certain to report back to the Security Council with an announcement that Iraq is clean of any weapons of mass destruction. Because Iraq will agree to sustained inspections and a program of sensors to detect violations from the ground in support of the satellite observations, the way will be open for UN proposals to lift the economic sanctions. Saddam Hussein wins! Seeing this likely path is of course driving the Washington warriors crazy, which is why we can expect more ups and downs as the chess game continues. The Senate debate will not be as slick as the resolution agreed to in the House without any debate at all. And if UN General Secretary Kofi Annan agrees that it would not be possible to replace #1284 with the kind of resolution the White House demands, UNMOVIC may be on its way by October 15, with nothing the Bush administration could do but complain. How much complaining can it do when it is staring at the November elections? There are now persistent reports of movement on the hustings away from the GOP toward the Democrats. The political marketplace has surely been following the ups and downs of the stock market as the two markets really are coincident. As long as Hans Blix is allowed to look anywhere he wishes, including the presidential palaces if he wishes, it is unreasonable for the White House to expect the electorate will support a $200 billion program to send 250,000 American troops into Baghdad, guns blazing. 

The Senate race in New Jersey adds yet another element to the chess game. It had been increasingly clear that incumbent Democratic Senator Bob Torricelli would lose to an unknown Republican, Doug Forrester, in November, with Iraq playing no part in the contest. Now that Torricelli has dropped out under the weight of his petty grafting, former Sen. Frank Lautenberg will represent the Democrats and Iraq may be the only issue separating him from Forrester. I am a New Jersey voter and have no idea where either Forrester or Lautenberg will stand on Iraq as they face the voters. As much as President Bush wants a war and a regime change in Baghdad, he must be careful of playing his commander-in-chief card as long as inspectors are inspecting, or wind up losing the House and the Senate to the Democrats. (God forbid, I might have to vote for Lautenberg.)

 * UNSCR #1284 Reaffirms its resolutions 687 (1991), 699 (1991), 707 (1991), 715 (1991), 1051 (1996), 1154 (1998) and all other relevant resolutions and statements of its President, which establish the criteria for Iraqi compliance, affirms that the obligations of Iraq referred to in those resolutions and statements with regard to cooperation with the Special Commission, unrestricted access and provision of information will apply in respect of UNMOVIC, and decides in particular that Iraq shall allow UNMOVIC teams immediate, unconditional and unrestricted access to any and all areas, facilities, equipment, records and means of transport which they wish to inspect in accordance with the mandate of UNMOVIC, as well as to all officials and other persons under the authority of the Iraqi Government whom UNMOVIC wishes to interview so that UNMOVIC may fully discharge its mandate...