According to American sources, the war in Iraq has cost the United States 20 billion US dollars in direct military expenditure. The reconstruction of Iraq will need at least 20 billion US dollars a year. Behind these direct financial losses, the indirect impact of the war can not be neglected.
A 20-year low of Tokyo's benchmark stock index, a world volatile oil market, and a huge drop in airline passenger volume and cut of airline employees, nothing can bring as much impact on our economic activities as war.
The control of oil production in Iraq, the second largest oil reserve in the world, is seen by many analysts as one of the main motives behind the war. The price of crude oil soared sharply to nearly 40 dollars from 25 dollars a barrel well before war broke out on March 20 because of uncertainty of its outcome. However, the speculative price did not last long as the war approached its end.
Shen Jiru, Professor of Institute of World Economics and Politics, CASS: The coalition army achieved military success in a comparatively short time. So generally speaking, the world oil market has not been affected too much by the war. On the contrary, the price for oil is decreasing now.
As the war did not win the majority support of the international community, people were uncertain about its outcome, and the confidence of world investors was once again dampened since September 11 terror attacks in 2001.
In Europe, though the Euro appreciated against the US dollar during the war, the European Commission has lowered its forecast for economic growth, from 1.8 percent to 1 percent as the economy is shaken by lackluster market demand.
Shen Jiru, Professor of Institute of World Economics and Politics, CASS: European countries depend highly on the Mid-east for energy. But the Mid-east is a turbulent place. The United States is the EU's largest trade and investment partner. But people are not optimistic about the US economy. That explains the expected low economic growth in Europe.
The aviation and tourism industries have been two of the worst hit sectors. Most countries cancelled their airlines to the Middle East for safety reasons.
In the US, travelers preferred not to fly for fear of new terrorists attacks. This sent another devastating blow to the already slumping airline industry. Companies such as American Airlines, Air Canada, and British Airways were forced to cut their handling capacity and the number of employees. Some of them have even been prepared for bankruptcy.
According to the International Aviation and Transportation Association (IATA), the war has caused at least 10 billion dollars loss in the aviation sector. The World Travel and Tourism Committee (WTTC) estimates the war destroyed more than 3 million jobs in the global tour and travel industry, and the sector lost more than 30 billion dollars in economic value.
The military attack in Iraq also brings unpredicted risks to the shipping industry. Insurance companies increased the so-called special war premium for shipping stationed around the gulf to as high as one percent per week. The fee is much higher if the ship is owned by the United States, as it is more likely to be a target for attack by terrorists.
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