Nations likely to demand payment for war roles WAR IN THE GULF

WASHINGTON — WASHINGTON -- The coming months will bring "increasingly sour" and even "nasty" international money squabbles as a number of nations demand compensation for their role in, or suffering as a result of, the Persian Gulf war, a senior administration official says.

In trying to settle financial scores, nations and their politicians may overlook the central allied goal of restoring stability to the region, he said.


If the official's prediction proves true, the resulting dispute will complicate the Bush administration's goal of helping to rebuild Iraq into a prosperous but unthreatening regional power and seeking to ensure a stable balance of power.

Last week, Secretary of State James A. Baker III proposed a Middle East Bank for Reconstruction and Development to expand free trade, investment and growth-oriented policies in the region.


The aim of future regional stability also explains the administration's recent refusal to criticize Iran's bid to mediate the conflict, although it maintains that, given Iraq's refusal to withdraw from Kuwait, there is nothing to mediate.

Iran is seen as a key power in the rough balance the administration hopes to achieve among postwar Iraq, Iran and the gulf states. The latter would be strengthened by mutual security arrangements, a U.S. naval presence and prepositioned equipment for a bigger U.S. protective role, if necessary.

The Iranian initiative may turn out to require the kind of "linkage" -- demanding a simultaneous withdrawal of Iraqi and allied forces or moves to settle the Palestinian crisis -- that the United States would find unacceptable, a senior official said.

Nevertheless, "I think they ought to be encouraged to play a responsible role and be responsible in their actions," he said.

With the overriding goal of regional stability in mind, the administration has not discussed in any detail the issue of reparations, but it's one that may prove unavoidable, the senior official said.

"The money part of this is going to get nasty," he said. "There are countries who obviously will think in terms of reparations." Some may have in mind that "one way you can keep Iraq well-behaved for a very long time is to bleed it absolutely to the point of bankruptcy for years and years."

Already, the cost of the crisis has become an irritant between the United States and other countries and between the Bush administration and Congress.

Allied nations -- chiefly the wealthy gulf states, Japan and Germany -- have pledged 80 percent of the added cost to the U.S. taxpayer of, first, maintaining U.S. troops in the region before the war and, now, the expected $60 billion cost of the war for the first three months of 1991.


Congressional critics, including Maryland Democratic Sen. Paul S. Sarbanes, maintain that the allies far more dependent on Mideast oil than the United States should pay the full added costs of the war There has also been friction between the United States and Japan and controversy within Japan itself over its $9 billion contribution.

But these disputes may be just a mild foretaste of what's to come, the senior official suggested.

The United States has played a leading role in coordinating contributions to the "front-line states" of Egypt, Jordan and Turkey, and has encouraged European allies to contribute to Israel.

But the list of countries with a financial claim in the crisis is growing.

"The British are now suggesting that a lot of their expenses ought to be defrayed," he said. A number of other countries, less directly involved, "can calculate that this war effort in one way or another costs them money. And there is an idea around that they, therefore, ought to be compensated."

"If you actually do that, you're talking about billions and billions and billions of dollars. And who's supposed to pay for that?"


Besides paying billions to support U.S. forces in the gulf, the Saudis are also investing heavily in expanding their oil production capacity to be able to offset future shortages with constant supplies at stable prices, according to well-informed sources, and have had to resort to borrowing.

While Germany should recognize that its international responsibilities have expanded, "stability in Germany is a very important thing for us," the official said.

"They're going to get tired if every time an American, British, French, Italian or Canadian official comes by, [he] says, 'Please give me a check.' Not to mention the Czechs and the Poles . . . and the Soviets are shaking them down all the time anyway.

"It's going to get increasingly sour because, when the war is over, everybody's going to tot up what the costs are" and seek compensation, the official said. In doing so, he said, the allied aims may be overlooked.

"The objective here is to liberate Kuwait. The second objective, and it's amazing how quickly governments and politicians seem to forget this, is to create a stable environment."