How to Fund a War
On Aug. 1, 1990, Iraq invaded Kuwait, met with little resistance, and within 12 hours was in full control of the country. Kuwait’s rulers soon took asylum in Saudi Arabia.
Principal causes of the invasion were Kuwait’s refusal to give in to Iraq’s demands for: A large share of its oil revenues; Iraqi control of the Rumaila oil fields and the port island of Bubiyan; and Forgiveness of a $10 billion war debt (Iraq had borrowed money from Kuwait to fund its war against Iran).
President George H.W. Bush forcefully denounced the invasion. He viewed it as an urgent threat to vital U.S. interests. Within days, he placed dozens of calls and persuaded leaders and heads of state throughout the world – many of whom he knew personally – that the invasion should be condemned, and appropriate action taken to restore Kuwait’s sovereignty. The Soviet Union and China were among the supporters.
In an address from the Oval Office on Aug. 8, 1990, President Bush stated the principles that guided his policy: "First, we seek immediate, unconditional and complete withdrawal of all Iraqi forces from Kuwait. Second, Kuwait’s legitimate government must be restored to replace the puppet regime. And third, my administration, as has been the case with every president from President Roosevelt to President Reagan, is committed to the security and stability of the Persian Gulf. And fourth, I am determined to protect the lives of American citizens abroad."
President Bush also stressed that if war became necessary, it would not be another Vietnam. Troops would go in force. They would be well-supplied. And they would have only one acceptable conclusion: winning, defined as protecting Saudi Arabia (Operation Desert Shield) and pushing Iraq out of Kuwait (Operation Desert Storm).
The president expected more than political support from his allies; he expected military, financial and material support – and received it. Those nations that supported our military efforts but did not contribute troops of their own were, quite simply, billed for it.
The war was an overwhelming success. After nearly six months of preparation, military action was completed in six weeks. Kuwait was liberated with minimal casualties and costs. Not only did allied nations provide forces, but nearly 90 percent of U.S. incremental costs were reimbursed by our allies. This outcome was a tribute to both our military capabilities and to the superb diplomatic skills and stature of the administration.
We served on what was called the Deputies Committee, chaired by Deputy National Security Adviser and future Defense Secretary Robert Gates. The committee, which met frequently in the White House Situation Room, included deputies from agencies represented on the National Security Council. Funding was a major topic – namely, how to contact potential donor countries and what kind of contribution targets should be suggested. That led to many discussions and negotiation visits to selected countries by Secretary of State James Baker, Secretary of the Treasury Nicholas Brady and their colleagues. Some members of the administration jokingly labeled the whole enterprise "Operation Tin Cup."
Senior administration officials, especially Deputy Secretary of State Lawrence Eagleburger and Under Secretary of the Treasury David Mulford, played active and important roles in these negotiations, as did ambassadors to donor countries. The Deputies Committee coordinated efforts throughout the government in support of the war effort. Those activities included such initiatives as arranging civilian aircraft and maritime transport to position troops and supplies in theater. The group also worked on calculations that attached values to the benefits allied nations would receive from the U.S. military effort to stop Saddam Hussein.
After several telephone calls from Bush and a visit by Secretary of Defense Richard Cheney, King Fahd of Saudi Arabia gave permission for U.S. troops to deploy to his country. Thus began Operation Desert Shield, and hope that economic sanctions against Iraq would substitute for military action.
U.S. forces flowed into the region. The first reserve call-up was announced Aug. 21, 1990. By the end of the year, more than 280,000 active and 45,000 reserve forces were deployed, supplemented by allied forces, including troops from Egypt and Syria and ships from Britain, France, Italy, the Netherlands and Spain. With strong U.S. persuasion, the U.N. Security Council voted to impose economic sanctions on Iraq. A vote later in 1990 allowed forceful interdiction of Iraqi ships.
Eventually, it became clear, especially after Iraq’s announced annexation of Kuwait and its taking of hostages, that economic sanctions were not sufficient. On Nov. 29, the U.N. Security Council voted to allow the use of force to liberate Kuwait if Iraq did not withdraw by Jan. 15. On Jan. 12, 1991, after extended debate, Congress granted the president authority to initiate military action if Iraq did not withdraw. On Jan. 16, Operation Desert Storm began.
The war lasted 43 days. Kuwait was liberated after an extended period of air strikes and a final ground assault. The liberation itself lasted about four days and, by the war’s end, the United States had deployed 632,000 personnel. Allies deployed more than 200,000 troops, and international support was strong. It included early U.N. backing of the economic sanctions and, eventually, of military action.
Congress also strongly encouraged direct funding support from allies, especially those not able or willing to contribute troops. These allies included countries in the Middle East whose territory and assets were at risk (Saudi Arabia, the United Arab Republic, and liberated Kuwait), as well as countries that depended on Middle Eastern oil but whose internal policies prohibited troop deployments (Germany and Japan). The process of obtaining funding from allies began early in Desert Shield and continued well after the conflict’s end. As the war was being fought, the meter was running.
Every in-kind contribution by participating countries was recorded and valued. Congress was continually informed about commitments and receipts from other nations and projected U.S. costs. Richard Darman, director for the Office of Management and Budget (OMB), provided congressional testimony and consultations. In collaboration with the Defense Department, OMB prepared and updated reports submitted to Congress. Both agencies worked with Congress to establish procedures to collect receipts from stakeholder countries, and how to use those funds to offset the war’s financial burden.
In the end, the United States received contributions of $53.7 billion against an estimated total cost of $61.1 billion. Tables 2 and 3 list, respectively, final receipts by donor countries and costs to the United States by category. About 88 percent of the war’s cost was covered by countries that benefited. While some contributions were in the form of food, fuel, water, building materials, transportation and support equipment, about 90 percent was hard cash – and $9.7 billion of that was committed before Desert Storm even began.
The funding strategy for the Gulf War of 1990-1991 worked. Since that time, we have wondered if the model could be applied again. Several special features of the Gulf War promoted allied collaboration and allowed funding arrangements to succeed.
Among them, of course, were nearly universal opposition to an unprovoked action that threatened common global interests; clear objectives, like avoiding further Iraqi aggression and possible Iraqi hegemony in the Middle East; outstanding and coordinated U.S. diplomatic efforts with full use of American influence and leverage, along with a willingness of the United States to pursue these efforts at the highest level; and uniquely reliable U.S. military capabilities.
Could such a model work again? Could it have worked, or work yet, in Iraq, Afghanistan or elsewhere in the global war on terrorism? Probably, but only to the degree that certain features of the 1991 Gulf War, like worldwide opposition to the enemy, clear objectives, effective diplomacy and confidence in the U.S. military, are fully understood and appreciated by those nations with a stake – economic or otherwise – in our collective success. William M. Diefenderfer III served as deputy director in the Office of Management and Budget from 1989 to 1991. Robert Howard served as OMB associate director for national security and international affairs from 1990 to 1992.