Frozen In Midstream

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At NEI Parsons, a subsidiary of Northern Engineering Industries in Newcastle-upon-Tyne, England, employees have abandoned work on what should have been one of their most lucrative projects in recent years, a $150 million contract to build four turbine generators for a power station at Al Shemal, 240 miles north of Baghdad. Playing its small part in the worldwide sanctions against Iraq, the firm has announced layoffs of 650 workers. Near Beasley, Texas, Jack Wendt, who farms 1,500 acres of rice and grain, calculates that he will earn $72,000 less than in 1989 because of the sudden disappearance of the U.S. rice industry's best customer, Iraq. In Paris, Airbus Industrie has put on hold a deal to sell five A310 wide-body jets to Iraqi Airways at about $70 million a plane.

The freeze on trade with Iraq and Kuwait is buffeting a lot of people, from U.S. manufacturers of oil-field equipment to Irish meat producers to Italian shipbuilders. If U.N. sanctions produced a cutoff in trade with Iraq, they also led Iraq to suspend payment on outstanding debts. The result is dislocation and even hardship among Iraq's erstwhile commercial partners.

Among the hardest hit are American rice growers. Iraq bought about $143 million worth of the staple from the U.S. in fiscal 1989 -- or 25% of the U.S. export total. The embargo came as painful news for producers, since world prices for rice had fallen 28% during the previous year. Nor are rice growers the only farmers feeling the pinch. Before the invasion, Baghdad was buying $350 million worth of other U.S. grains annually, including wheat, corn, barley and soybeans.

Moscow faces losses as well. Professor Alexander Arbatov of the U.S.S.R. Academy of Sciences estimates that the Soviet Union might be forfeiting a potential gain of as much as $1 billion by cutting off sales of arms and agricultural products to Iraq. Several East European countries with crumbling economies will be burdened by the chunks of uncollectible Iraqi debt they hold. Worst off are Bulgaria, which carries $1.2 billion, and Romania, which is owed $1.7 billion.

Japanese and German banks and trading firms are saddled with more than their share of Iraqi debt. Japanese trading companies hold about $5 billion in unpaid Iraqi bills, German banks about $2 billion. The embargo also leaves 40 German companies stuck with $2 billion in debt on business deals that have been partly completed but not paid for. Some of those losses will be covered by Hermes Kreditversicherung AG, the German state export-insurance program, but as much as $1.2 billion in trade with Iraq and Kuwait is not insured. Large diversified conglomerates like Daimler-Benz, Mannesmann and Ferrostaal can absorb such shortfalls, but smaller firms with proportionately larger exposure are talking about hardship and calling for a government bailout.

For Britain, exports to Baghdad might have matched last year's $732 million, which were supported by a $628 million government-guaranteed line of credit announced by the Department of Trade and Industry in November 1988. At the time, DTI Minister Tony Newton said the government was nearly doubling the export credit line because of the ministry's confidence in the "long-term strength of the Iraqi economy."