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Kuwait RV and News Articles (archive)


IRAQ:
Dinar Falls Victim to Violence
Cam McGrath

CAIRO, Jun 15 (IPS) - Egyptian speculators who stashed away "Bremer dinars" earlier this year in the hope their value would skyrocket have suffered enormous losses as the official Iraqi currency plummets.

"Many people sold anything they could to buy Iraqi dinars," Mohammed al-Abyad, chairman of the Egyptian Foreign Exchange Association (EFEA) told IPS. "When the dinar went down these people lost a lot of money."

The Iraqi dinar was trading at one Egyptian pound (16 cents) per 50 dinars on the black market before its value dropped sharply earlier this year on news of escalating insurgency in Iraq. The pound is now worth 210 dinars on the black market.

"The black market has narrowed and the currency has no liquidity now," said Shady Sharaf, head of market research at al-Shorouk Brokerage. "The people cannot sell the dinars they bought, which presses on demand."

The new Iraqi dinar banknotes introduced by the U.S. command last October replaced old banknotes bearing images of deposed Iraqi leader Saddam Hussein. Speculators believed the value of the "Bremer dinar" named after the U.S. civilian administrator of Iraq L. Paul Bremer would rise as the economy of war-devastated Iraq recovered.

Thousands of Egyptians working in the Gulf region brought home bags stuffed with the new Iraqi dinars. They stashed away the currency or sold it for quick profits to other speculators on the black market.

"They remembered what happened in Kuwait, and believed the same thing would happen in Iraq," al-Abyad said.

The value of the Kuwaiti dinar fell to less than 10 cents during the country's occupation by Iraqi forces in 1990, but climbed steeply after its liberation by coalition forces the following year. It now trades at 3.50 dollars.

"The situation in Iraq and Kuwait is very different," said al-Abyad. "Kuwait recovered in little time because its (infrastructure) remained intact."

The speculation was based on credibility, says Alaa al-Shazly, economics professor at Cairo University. "The dinar is backed by the U.S. and people wouldn't have thought the U.S. would get into something that would turn out to be a failure."

Egyptian law does not explicitly prohibit the possession of Iraqi currency, but authorities have taken measures to limit rampant currency speculation. The Central Bank of Egypt has prohibited banks and foreign exchange offices from listing or trading the Iraqi currency. Customs authorities say they have received orders to confiscate Iraqi dinars from arriving passengers.

"The government is more informed simply because they know the political situation is unstable," said al-Shazly. "It understands that the currency doesn't carry any weight."

A currency trader told IPS he was lucky to sell all his dinars before the exchange rate began to sink. He said many people are still holding on to dinars hoping the currency will recover.

"If the situation improves in Iraq maybe the dinar will go up again," he said, "but I won't keep them any more. It is too risky."

Mohammed Aboul Eyein did not get out in time. The farmer sold livestock to purchase dinars when they were at their highest value only to watch his investment crumble.

"Everyone was saying the dinar would increase ten times in value," he said. "Now nobody wants them."

Local experts say that if trading in the Iraqi currency were allowed in Egypt, a pound would fetch 235 dinars.

"Until now, the government could not legalise dinars because in order to trade in any currency you need to be able to transfer the currency to and from its respective country," said al-Abyad.

He points out that the Iraqi dinar recently began trading on the international market. This could give the Egyptian government fresh incentive to legalise dinar trading at banks and foreign exchange offices.

"Legalising the dinar would be good for the people and even the government because the money is already in the market," he said. "This would also allow people to trade it and put their money back (into circulation)." (END/2004)



Most of the Kuwait Economy Is Still in Suspension

By JOHN H. CUSHMAN Jr.,
Published: July 23, 1991

KUWAIT CITY, July 19— At the Shamlan docks on the edge of Kuwait's business district, the traditional wooden dhows that Persian Gulf fishermen and merchants have sailed for centuries cram the piers every day, bringing fresh fruit, vegetables and fish to a market thronged with eager customers.

But across town, at the immense, modern commercial port of Shuwaik, the piers are empty, the cranes are still, and the harbor is desolate, awaiting the completion of dredging work to reopen the port. It was shut when the Iraqis sank vessels in the channel and wrecked the port's heavy machinery during the Persian Gulf war.

The striking contrast between the two ports is a telling one, for there are two views to be taken of the Kuwaiti economy five months after the end of the gulf war and nearly a year after the Iraqi invasion.

In ways the country is a beehive of activity, humming with the entrepreneurial opportunism of the street markets and witnessing a substantial boom in construction work as the Government tries to rebuild Kuwait's shattered physical structure.

But in other ways Kuwait is still in economic hibernation, its workforce depleted, its smaller enterprises looted and shuttered, and its commercial life in a state of suspended animation.

A Western Ambassador, asked what the country's biggest problem now is, answered: "The one that bothers me the most is the economy. If you have a stumbling, bumbling approach to the economy, I worry that you could have a lack of confidence."

A Kuwaiti businessman whose factory was destroyed by allied bombing but who now has products back on the market, said aimless government policies were the biggest obstacle he faced.

"It's a lack of decision making," said the businessman, who asked not to be identified. "You are on your own. You have to take risks and work without any shoulder to lean on. There is nobody to reassure us."

To revive consumer confidence, there is talk of the Government's making payments of up to $75,000 to each household, although no final decision on the size of the handout has been made.

The Government has already declared that it will forgive outstanding consumer loans worth a total of more than $4.5 billion, including money borrowed to buy homes, a boon to those who were deep in debt at the start of the war. But that did nothing for people who had paid cash for their property or paid back their mortgages, and it is still uncertain how much compensation will be paid for physical losses suffered by individuals and small businesses.

There are signs that commercial life is rebounding. For every shop that is still shuttered or looted on the main streets, another offers consumer goods like cameras, perfumes and clothing. And the big hotels are full of foreign business executives seeking deals to sell computers to schools or environmental expertise to the oil industry.

But much of the boom in the economy seems to be a temporary phenomenon made of two simple ingredients: the quick infusion of money and manpower dedicated to turning on the power and water, repairing damaged buildings and stopping the oil fires; and the rush of spending to replace goods stolen by the Iraqis, like automobiles for consumers and computers for businesses, schools and government.

Maj. Gen. Patrick J. Kelly, the American officer who has been leading the Defense Reconstruction Assistance Organization, an American project that organized the initial restoration of basic services like power and water to the city, said this work would be completed by the end of the year, by which time $400 million will have been spent. General Kelly's office, which is part of United States Army Corps of Engineers, has been hired by the Kuwaiti Government to manage several large reconstruction projects temporarily.

American engineering companies like Brown & Root International and Blount Inc. are playing a big role in this effort, as are large Saudi and Kuwaiti construction companies. All of them rely heavily on Filipino and other third world laborers.

But General Kelly added that turning the utilities back on and repairing the damage to public buildings like schools and government offices is only the first step in a task that the Kuwaitis will have to carry on for themselves. Industry Not Rebuilding

"Small industry has not begun to rebuild," the general said. "Large industry has not begun to rebuild. Private homes are not being rebuilt."

"That effort has not clicked. Because they are waiting for the fiscal and monetary policy," he said. "There is no borrowing going on, no investment going on."

In the small commercial sector, much of the resurgence of business seems to be a result of the efforts of opportunistic merchants who are putting little investment into the economy.

Some of them work in the huge open-air markets where peddlers are turning quick profits providing basic goods like carpets and furniture to Kuwaitis returning to their homes.

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A Saudi entrepreneur named Ghali Hamood al-Rashid, who is selling televisions, stereos, washing machines and the like in one such marketplace, said he sold five video players and televisions, an air conditioner and a tape recorder on Friday morning. He brings the goods by truck from Saudi Arabia, charging a 30 percent markup.

"At first, whatever you brought they would buy," he said. "Now, there are a lot of goods on the market, and it is slower."

Inflation is estimated to be at 50 percent or even 100 percent since the war, although nobody has an accurate measurement. Prices are distorted by government subsidies and by shortages. A 20-gallon tankful of gasoline, imported from abroad by the Government, sells for about $6. For the same price you can buy two Perriers in a downtown hotel.

At the same time, the Government faces a cash crunch until it brings oil production back.

On July 15, Kuwait said the Emir, Sheik Jaber al-Ahmed al-Sabah, had authorized the Government to borrow up to $30 billion on world markets to finance its operations. The loans are needed because the tax-free emirate used to get all its revenues from oil exports, which have barely resumed since the war. Banks Nearly Paralyzed

The Kuwaiti banking sector is in near paralysis. There is no lending between banks, and there is a severe credit squeeze for most businesses, which in turn have not been repaying their outstanding loans.

The banks were badly hurt because their biggest clients are unable to repay their debts with their businesses are destroyed, inventory unreplaced and customers out of the country.

When banks remove restrictions on how much money Kuwaitis may withdraw from savings accounts, the consumer economy may get a shot of financial adrenaline because consumers will have more to spend. On the other hand, bankers worry in private that the relaxation of rules limiting withdrawals to about $20,000 a month may lead to a sudden flight of capital.

And the future worth of the dinar, Kuwait's currency, is anybody's guess. Since the war, the currency has been propped up by extensive government intervention, and the absence of a black market in currency exchange shows that this intervention was effective. But the uncertainty over the dinar is another factor that restrains commerce in a society where almost everything on the market is imported.

Sheik Salem Abdulaziz al-Sabah, the governor of the Central Bank, urged Kuwaitis "not to rush to buy foreign currencies, as there should be no fear of a devaluation in the dinar."

Most people who want to buy cars must pay cash. Even so, Kuwaitis are lining up to buy new cars, and the automobile dealers expect to sell twice as many cars this year as they did in the year before the invasion. The Iraqis are said to have stolen or destroyed about 300,000 cars. Car Dealers Feel Pinch

But even the well-established car dealers, who have thousands of cars on the seas from the United States and Japan, face unexpected competition from smaller dealers who could move more quickly to import cars from inside the gulf region.

There is even a sort of black market for new cars, said Abdulhai al-Yaqoub, a car dealer who imports independently. But this kind of small enterprise does not impress many Kuwaiti economists, who are looking for a broader expansion before declaring the economy healthy.

A private Kuwaiti economist, Jassem al-Sadoon, head of Al Shall Economic Consultants, was quoted by Reuters as saying that as long as the economy is mainly based on government spending, paid for by state borrowing or by the dividends from the nation's $100 billion hoard of investment capital, its recovery is a mirage.

One of the biggest questions facing the country is how many people will come back to Kuwait and how soon.

The best estimate is that there are now about about 800,000 to one million people in the country, less than half its prewar population. Of these, some 350,000 to 500,000 are thought to be Kuwaiti citizens, meaning that about half the citizens are still out of the country. Expatriate Workers Gone

But Kuwaitis never accounted for more than a fifth of the labor force, and the economy is feeling the effects of the absence of hundreds of thousands of expatriates. Palestinians, who used to be the mainstay of the country's middle management and professional services, are being driven out of the country by the tens of thousands. There are also shortages of unskilled laborers, and it takes time to hire workers from Egypt, India, the Philippines and other traditional sources of labor.

Many owners of small businesses who have reopened their shops say they find it difficult to find customers.

Salama Ahmed, a Palestinian who runs the Grand Nurseries, a garden center, did just $700 of business one day last week, a third of his turnover on a typical day before the war. He brings in plants by air from the Netherlands, but customers are scarce.

"Most of them are still outside," he said. "The Kuwaitis are not here. No one is here."

Photo: Traditional dhows being unloaded at the Shamlan docks in Kuwait City, bringing fish and fresh produce to a market filled with eager customers. (John H. Cushman Jr./The New York Times) (pg. A6) Map of Kuwait showing location of Kuwait City. (pg. A6)




AFTER THE WAR; No Electricity but Kuwait Reopens Its Banks

By DONATELLA LORCH, Special to The New York Times
Published: March 25, 1991

It still has no water and little electricity or food, but Kuwait revived its banking system today, introducing a new currency.

Banks reopened for the first time since Iraqi occupation forces shut them down in December. Thousands of people lined up to exchange their old Kuwaiti dinars for crisp new ones and to withdraw a limited amount of money.

Without electricity, the banks services were slow, limited to money exchange and withdrawal. There was no telex, no electronic money transfer and no telephones. The computers were unusable, so all transactions had to be entered by hand.

"It's like going back 20 years," said Mohammed al-Yahya, the manager of the Commercial Bank of Kuwait, the nation's second-largest bank. Seized Dinars Canceled

The Central Bank is canceling the value of Kuwaiti dinars that were seized from the Central Bank and put into circulation by the Iraqis. The invalid serial numbers were posted today in front of all banks in the city.

All other old dinars can be exchanged for new ones on a one-to-one rate until May 7, when the old dinars become invalid. The new official exchange rate is 3.47 American dollars for one new Kuwaiti dinar.

Although it is severly handicapped without electricity, the Commercial Bank, like many other major banks, was able to open for business because its records had been saved from the Iraqis. Mr. Yahya hid the bank's balance sheets in his home and sent its computer records to London via Syria with an Indian employee, who packed the tapes into the back of a trailer.

The banks also face serious personnel shortages. Only 11 of the Commercial Bank's 35 branches opened today, with 137 out of 1,300 workers.

Before the Iraqi invasion, only 17 percent of the bank's staff was Kuwaiti. Many of the foreign workers -- Jordanians, Palestinians and Indians -- fled and now cannot re-enter the country.

For those exchanging money today, there was little they could buy in Kuwait. Many of those in line said they planned to use their money for vacations or for shopping trips to Saudi Arabia to buy generators and food.

"I need to get away from this pressure," said Abdul Mohammed Hussein, a computer engineer in his early 40's who said he was withdrawing 1,500 new dinars to take a vacation in the United Arab Emirates. "Everywhere you go you find lines. At the supermarket, you find lines. To get petrol for the car, you find lines."

Abdul Hamed al-Atar, a 50-year-old retired Interior Ministry official, said this was the first time he had set foot in a bank since September, and he seemed relieved. "Kuwaits always keep a lot of cash with them," he said as he was handed crisp new piles of money that he stuffed into a small bag. "It's a comfort to have money in my hands."


AFTER THE WAR

AFTER THE WAR; Quick Kuwaiti Recovery Is Seen, With the Cost Less Than Thought

By YOUSSEF M. IBRAHIM, Special to The New York Times
Published: March 18, 1991

KUWAIT CITY, March 17— Kuwait's economy, far and away the strongest among the oil-producing countries before the Iraqi invasion in August put it into a coma, is expected to revive and move back to boom times within two years, say many economic and financial experts on the region.

In scores of interviews here in the last week, Kuwaiti, American and Western financial specialists, including business executives and economic planners, estimated that the cost of reviving the emirate's economy, including the devastated oil industry, would be far less than earlier estimates.

With Kuwait holding about $80 billion in financial reserves abroad, it is more than capable of getting back on a sound economic development track, these specialists say. 'Catastophic but Not Fatal'

"There is no economy now," said Wynne Fuller, who heads the emergency operations division of the United States Army Corps of Engineers here. "We are looking to two to five years to re-establish an economy that resembles what the Kuwaitis used to have."

The Corps of Engineers is to evaluate the damage to the Kuwaiti economy and begin a repair program.

"When all is said and done," Mr. Fuller said, "what you have here is catastrophic but not fatal. The only way I can compare this is to Hurricane Hugo in the States, which cost $4 to $5 billion to repair. So you are looking here at $5 to $10 billion outside the oil sector."

Other officials, including the country's Finance Minister, Sheik Ali al-Khalifa al-Sabah, estimated the cost of reviving the oil industry, sabotaged by Iraqi occupation troops, at $10 billion to $20 billion. Fires Halt Oil Industry

These new and more authoritative estimates are far below others advanced over the last few weeks by a variety of foreign experts living outside Kuwait. Some had suggested that Kuwait's revival might cost as much as $100 billion.

The latest estimates also reflect the growing appreciation here that the damage to Kuwait's roads, power stations, stores, banks and hotels, while substantial, can be repaired through cleaning and patching on a huge scale rather than major reconstruction. Even that work will require skills and coordination that Kuwait cannot muster alone.

The oil industry, source of most of the country's revenue, has been brought to a halt by fires set in most oil wells and refineries. The country's commercial and business centers have been destroyed or looted, immobilizing what was once the Middle East's most active system of private enterprise.

There is no Kuwaiti currency: the Kuwaiti dinar has no fixed value and the Central Bank and other banks have yet to tell people what will happen to their savings or to find records of millions of accounts. Free Food and Gasoline

For now, people living here are getting free food and gasoline. But no salaries are being paid, and a large-scale review of employment records, with a view to eliminating foreign workers like the Palestinians, has yet to get under way.

A variety of currencies, including United States dollars and Saudi rials, are preferred to the Kuwaiti dinar, which is to be replaced with a new one whose exchange rate has yet to be established by the Central Bank.

Yet with the approximately $80 billion in financial reserves held outside the country and with the help of many foreign construction companies, there seems little doubt that the Kuwaiti economy will start rolling again.

"I am very confident about the fact that we will have a boom here," said Michel Shalhoub, a French businessman of Lebanese origin who operated a franchise business selling luxury items from Western companies like Du Pont, Chanel and Lacoste.

Mr. Shalhoub was directing workers repairing two of his shops in the lobbies of what used to be luxury hotels.

"My personal losses are typical," he said. "We had seven stores in Kuwait which were all looted. We salvaged some of the goods in storage facilities. Altogether, I would say our losses are about $6 million, or about 30 million French francs, which represents one-third of my assets here and the equivalent of five years of profits."

Mr. Shalhoub said Kuwaitis would need, and could afford, to buy millions of consumer goods to replace what they lost, including luxury items.

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"Before too long, people will be buying freezers, air-conditioners, furniture, carpeting," he said. "It will be even bigger than before because those people who kept much of their money outside Kuwait for fear of things just like the Iraqi invasion now know for sure that this country is 100 percent secure and that it will be protected by the West's best armies and a reliable defense alliance to preserve its integrity and freedom." Workers' Future Debated

Before anything that resembles a big economic takeoff can take place, however, the Government must get people back to their jobs, a task that is complicated by some political imperatives dictated by the Persian Gulf crisis.

On the 16th floor of the Industrial Bank here, the chairman, Saleh M. al-Youssef, met over the weekend with his top advisers to determine how they will call their employees back to work, given the Government's edict that expatriates from countries that sided with Iraq must be dismissed.

While the bank's officials have decided to call back their employees this week, other important offices, like the Ministries of Defense, Interior, Information, Oil and Finance, have not yet figured out how to resume operations without many of the foreigners.

"We will decide on a common policy," Mr. Youssef said in an interview. "There are employees we do not wish to keep. They include Palestinians, Yemenites and Sudanese. We will give them their due, of course, but their departure is a political decision. I think the idea is to put pressure on the Palestine Liberation Organization."

There is little doubt that ridding major institutions of thousands of Palestinians will be disruptive to the economic reconstruction of Kuwait. But there is also no doubt of the Government's determination to make sure they go. Change of Attitude Needed

The magnitude of the problem is evident in the makeup of the Kuwaiti population before the occupation. Of two million or so people living here, only 700,000 were Kuwaitis while the others were expatriates, including about 450,000 Palestinians. These did jobs like running hotels, keeping books, repairing cars and working the night shifts.

The country's Planning Minister, Suleiman al-Mutawa, said it was necessary for Kuwaitis to undergo a transformation in attitude, divorcing themselves of the notion that they work only as managers or state employees collecting large salaries with others doing the work.

In the process, Kuwait will have to do away with the whole structure of a sort of welfare state based on prosperity that it has become used to.

"I think there will be a review of all our policies based on what happened on Aug. 2," Mr. Mutawa said. "The questions that have been flushed to the surface are where we can keep expatriates and where we cannot."

"Many of these expatriates have no genuine interest in Kuwait and have, therefore, collaborated with the Iraqis," he continued. "In vital sectors, we may pick up some of the cost overruns to pay Kuwaitis to do those jobs they will not do for the same low salaries that expatriates accept. This is where Government subsidies should go into the private sector to encourage them to hire Kuwaitis instead of expatriates."

"The bottom line," Mr. Mutawa said, "is that the welfare state was mother and grandmother, and when you have that waiting for you at home, you tend to become very spoiled." Records Need to Be Found

Then there is the problem of activating the banks and circulating the new Kuwaiti currency. The Government says it has printed notes, but it is far from clear how the money will be distributed and on what basis.

Bankers said they understood that Government policy will be to consider that everything in Kuwait will revert to where it stood on Aug. 1, the day before the Iraqi invasion. That means that people who held bank accounts then will preserve the value of their money. But the problem is how to locate bank records and find enough employees to carry the policy out.

"What about all the Iraqi money we had to deal with?" asked a merchant who asked not to be identified. "I sold much of my stuff to Iraqis because I had no choice. Does this mean that when I go to give them the Iraqi money, they will not give me Kuwaiti money in return? What happens to the values of the goods I sold?"

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For the moment, the entrepreneurs of Kuwait have not yet returned from exile and there are still 400,000 Kuwaitis out of the country. Much of the repair work is being done by foreign companies contracted by the United States Army Corps of Engineers.

Mr. Fuller said the corps had already given out seven contracts totaling $46 million. The contracts are for repairs to buildings, roads, electric cables and sanitation. Where Contracts Go

They have gone to non-Kuwaiti companies, including Shand of Britain, al Harbi of Saudi Arabia and several United States companies, including Blount, American Dredging Company and Brown & Root.

In addition, contracts worth tens of millions of dollars have been given to firefighting companies, largely American, that are preparing to put out fires at an estimated 600 oil wells.

But to get the emirate's economy rolling, Government spending will have to be directed at Kuwaiti companies in the building and rehabilitation business and this cannot begin until the banks are back in business and the Kuwaitis start to return home.

Along with debt, there are fears of inflation. Before the invasion, the inflation rate in Kuwait was kept at low levels -- 1 to 2 percent. With reconstruction, there are fears that political pressure will force the Government to abandon caution and cause inflation to rise to unacceptable levels.

"Economically, we can do it," said Sheik Ali, the Finance Minister. "But how to do it in the most efficient way is the difficulty. There are political considerations that may blow away the spending plans which are cautiously structured." Un Unknown Quantity

Then there is the matter of political stability, an unknown quantity that could presumably influence economic recovery.

Last week, there was unhappiness here when the Government said it would not be able to restore electricity for three more weeks. Many people asked that the Government abandon its slow reconstruction plans and rush to import thousands of generators to supply homes.

"We need patience, but I can understand that people have suffered too much and do not have much patience to give," the Planning Minister, Mr. Mutawa, said. "The period of crossing from disaster to recovery is going to be a difficult one."

Photo: Although Kuwait's economy is virtually nonexistent now, experts expect it to revive and move back to the better times it enjoyed before the war within two years. A rare open business in a Palestinian neighborhood of Kuwait City did a booming carryout food business on Saturday. (Agence France-Presse) (pg. A9)


AFTER THE WAR: KUWAIT; At Home Among the Enemy, Kuwaitis Learned to Survive

By CHRIS HEDGES, Special to The New York Times
Published: March 5, 1991

KUWAIT CITY, March 4— When Iraqi troops overran Kuwait last August, the generally prosperous and easygoing citizens of this rich Persian Gulf emirate had their lives thrown into turmoil. Many suddenly faced choices of resistance, collaboration or something in between.

"All of a sudden our entire world collapsed," said Luwa al-Iwayed, a 30-year-old administrator in a travel agency, "We found ourselves waiting for anything to happen to us at any time. Life was not natural."

As pieced together from scores of interviews conducted in the days since the Iraqis fled, the occupation was characterized by an increasing harshness on the part of the Iraqis as they gravitated from policies of trying to win over the Kuwaitis to ones that tried to brutalize them into submission.

And coinciding with this process, a home-grown underground apparently stiffened and spread.

For the first few weeks of the occupation, Kuwaitis were for the most part allowed to go on with their lives and businesses -- unhindered except for the confiscation of some of their cars.

Kuwaitis interviewed said that for the first week they could make international phone calls, and for some weeks they were able to travel freely to Baghdad. The Iraqi secret police, which arrived with the first troops, kept in the background for the first month.

At the same time, as posters of a smiling Saddam Hussein were being erected on residential and office buildings, the Iraqis, with great fanfare, made available free food and gasoline.

Other attempts to gain sympathy included the importing of Kurdish workers from Iraq to take the place of the suddenly departed Pakistanis, Indians and Bangladeshis on garbage trucks. But soon the Kurds quit as well.

Another campaign intended to arouse friendly feelings involved the arrival of President Hussein's son, Uday, who as chief of Iraq's Olympic Committee, came to recruit Kuwaiti soccer stars for the Iraqi national team. He flew the young men to Baghdad, where televised reports of the visit were beamed back to Kuwait. In the end, the athletes spurned the offer.

In the first days, television showed scenes of what announcers described as a revolutionary government composed of Kuwaitis. But none of those interviewed later could say what happened to these people. They soon disappeared from public view, giving way to police, army and Baath Party officials from Baghdad.

In that initial period, as the Iraqis were hoping to legitimize their annexation of Kuwait, they sought to exploit the leadership vacuum that resulted when the Emir, Kuwait's ruler, and other prominent members of the ruling Sabah family fled to Saudi Arabia.

The Iraqis tried to solicit support among those who had criticized what they regarded as the Emir's autocratic rule, particularly those who opposed his 1986 decision to disband Parliament. Little Love for Fleeing Royalty

Some of these critics, nearly all young and Western-educated, recalled feelings akin to shame when they learned how the royal family had fled and the Kuwaiti Army had melted in the face of the Iraqi onslaught.

"We felt embarrassed and deceived when all our ministers left," said Abdul Aziz al-Mulah, a 29 year-old investment banker.

But the Kuwaitis' resolve hardened as the Iraqi occupiers tried to capitalize on these feelings by running newspaper articles that attacked the Sabah family for corruption and showed photographs of such people drinking and dancing in discotheques.

"All of us in the opposition realized when the Iraqis came in that we had to devote our energy to getting them out," said Ahmed Othman, one of the underground leaders who emerged from the group that had advocated greater democracy. "Our internal political struggles would have to come later."

Within days of the takeover, reports of some organized opposition activity began to circulate here and abroad. There were a few, largely symbolic, acts of defiance, like the hanging of a Kuwaiti flag or the scrawling of graffiti ridiculing Saddam Hussein. Some young Kuwaitis helped hide foreign residents at a time when the Iraqis were seeking to take them to Baghdad. Passive Resistance Employed

Then a pattern of passive but more widespread resistance developed. Kuwaitis refused to go to work, and their children stopped attending schools. Only the hospitals kept operating.

"When Iraq realized that it could not win us over, they turned to repression," said Saidi Othman, a banker, adding, "and to a certain extent it worked."

By September, the secret police made their presence increasingly felt. There were reports of people being shot to death, and many Kuwaitis said they knew of neighbors being detained and beaten.

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The Iraqi police installed themselves in Kuwaiti police stations and in many private houses, as well. They began searching for those suspected of hiding foreigners or forming underground networks, like the one that began producing a clandestine newspaper. Other targets of the Iraqi police were those suspected of black-market operations, or financing the growing opposition.

Michael Kand, an importer of perfume and a member of an underground group, said these Iraqi suspicions were justified.

"We had one million dinars a week coming through my house," he said, explaining an intricate arrangement in which a group of businessmen were able to turn over money to the underground. As Mr. Kand explained it somewhat cryptically, those involved in the operation supplied whatever receipts were necessary after the Iraqis moved to invalidate Kuwaiti currency and replace it with Iraqi dinars. Apparently, with these receipts, Iraqi money, used in all transactions, was not hard to obtain.

"The Iraqi currency was filthy and you could smell it from across the room," Mr. Kand said, adding that it was nonetheless becoming plentiful. "We finally had to get a counting machine just to keep up," he said.

A 75-year-old Kuwaiti businessman worked out an ingenious way to move the money. According to members of his family, the man, who was eventually arrested and is believed to still be in Iraq, used canning equipment in his factory to package money, distributing the cans to underground groups.

The money went to buy arms from Iraqi soldiers, bribe Iraqi officials to look the other way, release or visit those detained, and stockpile food and medicine in private homes. An AK-47 assault rifle could be bought from Iraqi troops for the equivalent of $100, Kuwaiti underground leaders said. Some Flee With Permission

In October, when Iraq announced that it would open its borders for those who wanted to leave, the numbers of refugees, both Kuwaitis and foreigners, surged, draining Kuwait City, the capital, of many of its people. Thise movement also weakened the opposition movement.

"It was a good tactic and it hurt," Saidi Othman said.

The departure of thousands of Kuwaitis, many to luxury hotels around the gulf, still rankles those who remain behind.

"My uncle left, although he and his family had no problems," said an opposition leader who asked to remain unidentified. "Our whole family feels he abandoned us and his country. We are very angry."

After October, the conflict and its cost became markedly heavier for both occupiers and their Kuwaiti opponents. The looting by the Iraqis became bolder. Where they had originally confined themesleves to stealing from vacant houses and stores, they were now driving up to occupied dwellings, emptying them of furniture and belongings at gunpoint. Lethal Tactics

More and more young men suspected of assisting the underground began to disappear. Their bodies were sometimes left in front of their houses several days later.

For its part, the opposition was also better supplied and better organized. It succeeded in setting off car bombs and began to ambush individual Iraqi soldiers.

Businessmen who once drove Mercedes-Benzes to work began to build homemade bombs and placed them in bus depots where Iraqi troops gathered. Or they booby-trapped videocassette recorders and television sets that they knew would be taken by Iraqi soldiers.

"We learned how to make homemade bombs from Iraqi television," Mohammed Jabi, one of those involved, said. "They broadcast instructions for Iraqis so they could attack the allied forces. These instructions abruptly went off the air after there was an increase in the bombings in Kuwait City."

Some people presumably involved in the opposition said the Iraqis moved quickly to clean up the carnage left by the car bombs and never allowed news of the attacks to be made public. They also ordered swift reprisals against the attackers. Learning to Bribe Soldiers

"After each bombing, they would round up a few Kuwaitis, usually men who had nothing to do with the attack, and shoot them," said Abdullah Balushi, who said he helped make and plant car bombs.

"We were often able to buy our safety with food," said Miss Iwayed, the travel-agency administrator.

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Other Kuwaitis told of how they befriended Iraqi soldiers assigned to their neighborhoods, giving them food and other supplies in exchange for their protection from other troops who would ride through the neighborhoods looking for places to ransack.

By November, many said, it had become unsafe, especially for young men and women, to go outside even in daylight. Several women told of being molested by Iraqi soldiers.

"They used to take women behind the Holiday Inn and rape them there," according to a woman who said she had been among the victims.

Several people described living virtually as prisoners in their own houses.

"We rarely left," one woman said. Others paid tribute to their foreign servants and to some of their Palestinian neighbors for coming to their aid.

"I survived because of my Indian servant," said Mohammed al-Thuwaini, a wealthy horse breeder, who saw more than 100 of his 500 champion horses shipped to Iraq, and whose opulent mansion and fleet of Rolls-Royces were stolen by the Iraqis.

"I never went out, and relied on him to get what I needed," he said.

Food became scarce, and many items like vegetables were available only at high prices and with payment in foreign currencies. Some recalled that they had to trade television sets for beets and turnips.

In this regard, the last 10 days before the Iraqi retreat were reportedly the most difficult. Many Kuwaitis saw their stocks of canned food dwindle, and the only water available was what they could gather in buckets. The Bad Becomes Desperate

It was then that the Iraqis undertook the systematic destruction of the city, apparently in preparation for withdrawal. Such electricity as there had been stopped. Gasoline stations no longer provided fuel for cars or generators. Piped water, which had been trickling in after the allied bombing began in January, halted altogether.

Fires set by Iraqi soldiers burned out parts of downtown Kuwait City. Public buildings and hotels were blown apart by Iraqi tanks and rocket fire. Looting became almost indiscriminate as Iraqis stripped everything from hospital equipment to baby clothes.

"In the end, it was just a free-for-all," Mr. Jabi said. "We stood by and watched these armed Iraqis do whatever they wanted to us. Every night, we would stand on our roofs to see the American planes bomb. We prayed that the American soldiers would come tomorrow and save what was left of our country."

Many, however, mentioned how the period of deprivation forced Kuwaitis to rely less on their wealth and more on each other.

"We are a small country," Miss Iwayed said. "We all know each other. If it wasn't our neighbor who needed help, it was our neighbor's uncle."

Some of the foreign workers who stayed in Kuwait after the August invasion noticed the difference in the behavior of the employers.

"Maybe some good can come out of this," a 29-year-old Philippine secretary said. "Before the invasion, the Kuwaitis treated those of us who work here like garbage. Many of us enjoyed watching the Kuwaitis humiliated, although we came to hate the Iraqis. The Kuwaitis could no longer treat us badly. Now we hope they will remember what it was like to live under an oppressive ruler."

Kuwaitis, too, are summing up their experiences of the last seven months. Mr. Kand, the perfume dealer, says he hopes that pains will be taken to keep what happened to Kuwait clear to all.

"We should not destroy all these pictures of Saddam Hussein," he said. "We should put them in a museum, like the Jews did with the pictures of Hitler, and tell our children over and over that they must never forget."

Photos: Kuwaiti resistance and Iraqi repression fed off each other as the occupation of Kuwait dragged on. On Sunday, after the Iraqi forces pulled out, Kuwaiti resistance members arrested men they believed to be Iraqi soldiers or Palestinian sympathizers. (Angel Franco/The New York Times) (pg. A12)



MARKET WATCH;
Enter the Dollar, Stage Left, Falling, Falling

By Floyd Norris
Published: October 14, 1990

LEAD: In the fall of 1990, there has been no shortage of crises, with great attention being paid to the Iraqi invasion of Kuwait, the budget deadlock, the plight of the banks and the plunging stock market.

In the fall of 1990, there has been no shortage of crises, with great attention being paid to the Iraqi invasion of Kuwait, the budget deadlock, the plight of the banks and the plunging stock market.

But the slide of the dollar has not been deemed of much note. There is no outcry, in Washington or Wall Street. Perhaps there should be.

There was far more attention paid Friday to the latest reported inflation figure, unsurprisingly showing that soaring oil costs pushed up producer prices last month. But if inflation is viewed as the declining value of a currency, it may be more relevant to note that the dollar last week lost 1.6 percent of its value against the West German mark, and is down 11.1 percent so far this year.

The lack of attention paid to the descending dollar can be traced in part to the fact that currencies have been volatile for years, creating an attitude that what goes down will bounce back. But this move may be more significant, with the drop coming despite a world crisis of the type that used to send flight capital to the safety of the United States. Now, that money seems to be more comfortable in Germany, or even in Japan, the scene of the greatest financial market carnage in 1990.

The message may be that the fiscal irresponsibility of the United States finally has scared investors around the world. The Government in the 80's served as the guarantor of debts for everything from trade school students to real estate promoters. Now, as those guarantees are called, the suspicion is that the Government may end up with little choice but to print more and more dollars to meet its obligations.

For foreign investors, the meaning is that asset values in this country are falling even faster than they appear to be from an American perspective. The Dow's fall of 112.62 points last week, to 2,398.02, was a 4.5 percent drop in dollars, but a 6.0 percent plunge in marks. By either measure, it was the market's worst week in a year. Falling asset values smack of deflation, but a collapsing currency would bring hyperinflation. The two results can occur simultaneously, as third world residents know. In local currencies, asset prices there are far higher than they ever were in the 70's. But in terms of hard currencies, those assets have fallen sharply.

Had Brazil been allowed to borrow cruzeiros instead of dollars in the 70's, there would be no anxious bankers now worrying about debt restructuring talks. They would already have suffered, as Brazil repaid its loans with a devalued currency. It is possible that, in the end, that is what the United States will do.

In Washington, the fears are of recession and of voters who will retaliate if asked to pay taxes to support cherished entitlements. Despite the dollar's woes, there is heavy pressure on the Federal Reserve to cut interest rates.

Harry S. Truman used to say ''the buck stops here.'' But with George Bush seeming to have no idea what he wants to do about the deficit, other than to find someone else to blame, chances are that the buck's decline will not stop here.

Graphs: Dow Jones Industrials average, Oct. 12-19, 1990; month-end value of dollar in German makrs, Jan. 1, 1989-Oct. 12, 1990; Annual highs, lows, closes of the N.Y.S.E. financial index, Jan. 1, Oct. 12, 1990 


CONFRONTATION IN THE GULF; A Month of Crisis in the Persian Gulf

Published: September 2, 1990

Aug. 2 Iraq invades Kuwait hours after talks broke down between the two nations over oil production and debt repayment. Iraqi troops seize vast petroleum reserves and Kuwait's capital, plunging the Persian Gulf region into crisis. Witnesses report hundreds of casualties. The Kuwaiti ruler flees. President Bush calls the invasion ''naked aggression.'' The United Nations Security Council votes overwhelmingly to condemn it and demand the Iraqis' immediate and total withdrawal.

Aug. 3 Iraqis move into position for a possible attack on Saudi Arabia. Baghdad announces that its troops will begin withdrawing Aug. 5 unless the security of Iraq or of occupied Kuwait is threatened.

Aug. 4 The Iraqi occupiers fortify positions in Kuwait. The 12 nations of the European Community impose an immediate embargo on oil imports from Iraq and Kuwait. Hasty plans for an Arab summit meeting fall apart.

Aug. 5 Mr. Bush, all but committing himself to use military force against the Iraqis if necessary, says their assault ''will not stand.'' Their withdrawal, he says, is the only acceptable outcome.

Aug. 6 The United Nations Security Council orders a sweeping trade and financial boycott on Iraq and occupied Kuwait.

Aug. 7 The United States says Iraqi forces, having overrun Kuwait, pose an imminent threat to Saudi Arabia. Washington orders American armor, jet fighters and paratroopers to the Saudi kingdom.

Aug. 8 Thousands of American troops are deployed on Saudi soil, which Mr. Bush vows to protect.

Aug. 9 United States and allied naval forces in the Red Sea, Indian Ocean, Mediterranean Sea and Persian Gulf will soon begin enforcing a blockade on Iraqi trade, Bush Administration officials say.

Aug. 10 The Arab League votes to send troops to Saudi Arabia. Of the league's members, only Libya and the Palestine Liberation Organization openly back the Iraqis as this watershed decision is reached.

Aug. 11 Egyptian and Moroccan troops begin to land in Saudi Arabia. Mr. Bush makes it clear that he will be pleased if the Iraqi President, Saddam Hussein, is overthrown.

Aug. 12 Mr. Bush orders American forces to block Iraqi oil exports and all imports to Iraq except some food shipments, Administration officials say.

Aug. 14 Pentagon officials disclose that the United States has deployed more than 20,000 troops in Saudi Arabia. The Administration is considering the partial mobilization of reserve forces to help deter an Iraqi attack there.

Aug. 15 Baghdad offers to meet almost all of Iran's terms for resolving key issues left from their eight-year war. The step is meant to counter Iraq's growing isolation.

Aug. 16 Mr. Bush and King Hussein of Jordan meet for two hours at Kennebunkport, Me., but fail to make progress toward easing the crisis.

Aug. 17 Administration officials say the President has decided to call up a limited number of reservists. The Pentagon commandeers commercial jetliners to carry cargo and troops to the gulf region.

Aug. 18 Saudi Arabia serves notice that it will raise its oil production by two million barrels a day with or without the support of other members of the Organization of Petroleum Exporting Countries. This would equal half the oil kept off the world market by the embargo.

Aug. 19 President Hussein says he will free foreigners being held hostage in Iraq and Kuwait in return for a complete military and political pullout by the United States from the gulf region.

Aug. 20 Iraq begins moving Americans and other non-Iraqis to industrial and military sites for use as human shields against attack. Mr. Bush, for the first time, says the people trapped in Iraq are hostages. He says America will not be intimidated.

Aug. 21 United States naval vessels that are shadowing two loaded Iraqi oil tankers, bound for Yemen, hold in abeyance a threat to halt the vessels forcibly after Yemen declares that it will not unload them.

Aug. 22 The United States announces that along with other countries, it is defying Iraqi orders to close its embassy in Kuwait by Aug. 24. Mr. Bush moves to put thousands of American reservists on active duty.

Aug. 23 Iraq warns the United States and other nations that if they try to keep their embassies open in Kuwait, the Iraqi Government will see that as ''an act of aggression.''

Aug. 24 President Mikhail S. Gorbachev of the Soviet Union warns Iraq that he is prepared to back further measures to tighten the embargo against its commerce. This is a long step forward in isolating Iraq.

Aug. 25 By a vote of 13 to 0, with 2 abstentions, the Security Council adopts a resolution that gives the United States and other nations the right to enforce the embargo by stopping vessels under way to or from Iraq.

Aug. 27 American officials say Iraq has reversed its orders to its merchant vessels and has told them not to offer resistance if United States or other naval forces, in carrying out the blockade, try to board the ships to inspect them.

Aug. 28 President Hussein announces that he will permit all foreign women and children to leave Iraq; he had earlier barred their departure. Mr. Bush obtains overwhelming support from over 170 members of Congress whom he briefs on the crisis.

Aug. 29 The Organization of Petroleum Exporting Countries authorizes its key oil producers immediately to start pumping all the petroleum they can. This forstalls a shortage, fears of which have made oil prices surge upward.

Aug. 30 Mr. Bush says he is requesting aid from other nations - including Saudi Arabia, West Germany and Japan - to help cover the enormous costs of economic sanctions and military operations in the gulf region.

Sept. 1 President Bush and President Mikhail S. Gorbachev of the Soviet Union announce that they will meet in Helsinki on Sept. 9, with the Middle East on the agenda. Iraq allows about 750 hostages to leave.

Photo: President Saddam Hussein of Iraq appearing on Iraqi television Aug. 23 with two British youngsters who had been held in Baghdad (Reuters)




IRAQ ARMY INVADES CAPITAL OF KUWAIT IN FIERCE FIGHTING

By MICHAEL R. GORDON, Special to The New York Times
Published: August 2, 1990

WASHINGTON, Thursday, Aug. 2— Iraqi troops crossed the Kuwait border today and penetrated deeply into the country and into Kuwait's capital city, senior Administration officials said late Wednesday.

Early reports were that casualties were extensive, an official at the Kuwaiti Embassy in Washington said.

An Administration official said that Iraqi forces had driven far into Kuwait, a neighboring oil-rich sheikdom, and were in Kuwait city, the seaport capital, as of 5 A.M.

Reports of a Coup

The Associated Press and Reuters, in a reports from Baghdad said that Saddam Hussein, the Iraqi President, claimed that the Kuwaiti Government had been overthrown by revolutionaries who asked Iraq for help.

Iraq, in a statement over Baghdad Radio, warned against any foreign intervention.

''Iraq has responded to the request from interim government of free Kuwait and decided to cooperate with it,'' the broadcast statement said.

A spokesman at the Kuwait Embassy here denied that the Government had been overthrown.

At the United Nations, the Security Council prepared to meet in an emergency session early today to consider a draft resolution condemning the invasion and calling for a withdrawal of Iraqi forces.

Tanks in the Streets

A Kuwaiti official, speaking by telephone, said that Iraqi troops had occupied the palace of the Emir of Kuwait, Jaber al-Ahmed al-Sabah, and that tanks were in the streets of the capital, Reuters reported from Cyprus.

In Kuwait, small-arms fire within a mile and a half of the United States Embassy was reported. Embassy personnel began destroying files as a precaution.

As blasts shook the capital, Kuwait radio appealed to citizens to help repel the attack, Reuters said. ''Your country is being subjected to a barbaric invasion,'' the broadcast said, ''It is time to defend it.''

The United States condemned the invasion. Roman Popadiuk, a White House spokesman, termed the attack a ''blatant use of military aggression'' and called for ''the immediate and unconditional withdrawal of all Iraqi forces.''

A White House spokesman said early today that the Administration was considering all options but declined to give any details.

Brent Scowcroft, President Bush's national security adviser, apparently informed President Bush at 9 P.M. of the military action. Top State Department officials were locked in late night meetings on the situation. Top military officials were monitoring the crisis at the Pentagon's command center.

The attack followed mounting concerns within the Administration over Iraq's intentions after Iraq broke off talks on Wednesday with Kuwait aimed at resolving a two-week border, oil and money crisis.

Earlier Wednesday, Bush Administration officials monitoring intelligence reports expressed growing concern that hostilities could break out along the border between Iraq and Kuwait.

Signs of Army Movement

The officials, who spoke on the condition of anonymity, said intelligence reports indicated that Iraqi tanks had left base camps and were moving south toward the border, where Administration officials now estimate that between 100,000 and 120,000 Iraqi troops have massed.

''We don't know exactly what they're doing,'' said one State Department official early Wednesday evening.

Ten days ago, Iraqi deployed two divisions of about 30,000 troops near the border with Kuwait, following a dispute over oil production and prices.

Iraq has also been demanding that Kuwait, which draws much of its oil from fields that straddle the disputed border, pay back billions of dollars in compensation for the revenues that Baghdad says have resulted from Kuwait forcing down the price of oil.

By the middle of last week, the Iraqi force had grown to about 100,000 men and six divisions, including armored units. A Pentagon official said earlier today that the force now appeared to near 120,000 men. The Iraqi force dwarfs Kuwait's Army of about 20,000 men.

Baker Reaction

Secretary of State James A. Baker 3d, told of the Kuwaiti invasion as he was completing talks with Soviet Foreign Minister Eduard A. Shevardnadze in Siberia, said he asked Mr. Shevardnadze ''that he halt any military or arms deliveries that they might have in the pipeline'' to Iraq.

Mr. Baker said Mr. Shevardnadze ''was not pleased to hear that Iraqi forces had moved into Kuwait.''

Despite its efforts to deter an attack on Kuwait, the Bush Administration never said precisely what the United States would do if Iraq launched a small scale or large-scale attack on Kuwait.

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The vagueness of the American pronouncements, which eschewed any explicit promise to come to Kuwait's assistance, disturbed some Kuwaiti officials, who hoped for a firmer statement of American intentions that would be backed up by a greater demonstration of military force.

''We remain strongly committed to supporting the individual and collective self-defense of our friends in the gulf, with whom we have deep and longstanding ties,'' the Bush Administration said in late July.

On Wednesday, the State Department summoned Iraq's Ambassador here in an effort of revitalize flagging reconciliation talks between Iraq and Kuwait.

Concern at State

A State Department spokesman, Richard A. Boucher, said that Assistant Secretary of State John Kelly told Ambassador Mohamed Sadiq al-Mashat in a half-hour meeting that ''disputes must be settled peacefully.''

''We're concerned that the talks in Jidda had stalled and hope they would be picked up again,'' said Mr. Boucher, referring to the peace talks hosted by Saudi Arabia in the port city on the Red Sea.

Mr. Boucher said the ambassador was summoned because the United States ''wants to keep the channel of communications open with Iraq.''

On Capitol Hill, the House Foreign Affairs Committee approved legislation that imposes trade sanctions against Iraq for items with civilian and military uses, like computers, communications equipment and some aircraft parts.

The sanctions are linked to Iraq's human rights record, as well as its alleged support of terrorism, and alleged efforts to acquire chemical, biological and nuclear weapons.

The White House has opposed the bill, which now advances to the House.

The Iraqi invasion is an abrupt challenge to the United States, which had urged Iraq not to threaten Kuwait and which had dispatched a small force to the gulf as a signal to Iraq.

In late July, the United States dispatched two aerial refueling planes to the United Arab Emirates and sent combat ships to sea in a rare exercise with the gulf nation after Iraqi threats to use military force against the Emirates and Kuwait.

A senior Administration official said then that the military deployments, while modest in scope, were intended to ''bolster a friend and lay down a marker for Saddam Hussein.''

The United States has long had a naval presence in the Persian Gulf. The current American naval presence involves six warships - four frigates, a destroyer and a command ship, the LaSalle.

Pentagon officials said last week that an American aircraft carrier was headed toward the Indian Ocean, according to a previously established schedule. Despite the tensions between Iraq and Kuwait, the prevailing view within the Bush Administration has been that Iraq was trying to intimidate Kuwait to get its way on oil prices and other disputes and did not plan a major attack on Kuwait. Only a small minority of specialists within the Administration argued that Iraq might launch an invasion against Kuwait.

Asked if the Government of Kuwait is seeking any assistance from the United States, Ali Alsabah, counselor of the Kuwaiti Embassy in Washington, said, ''We're talking at this moment with the Administration, but I cannot reveal any further details'' of those talks.

Kuwait is a former British colony that gained independence in 1961. It has 1.9 million residents. Iraq has a population of 17 million.

Map showing location of Kuwait (pg. A8)



Kuwaiti Dinar Seeks International Role; Kuwaiti Dinar Seeks a Bigger Role

By PAUL LEWIS Special to The New York Times ();
April 16, 1979,
, Section Business & Finance, Page D1, Column , words

KUWAIT--The banking community in this tiny sheikdom believes 1979 will be the year when the Kuwaiti dinar becomes the first oil-backed currency to play an international financial role.


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