Iraq: Of Dinars and Dollars

Something strange is happening on Kifah Street, home to the shuttered Baghdad stock market and hawkers of everything from cigarettes to fistfuls of dinars adorned with a young Saddam Hussein. The Saddam dinar is rising fast against the U.S. dollar--at the beginning of last week it was trading at 2,000 to the dollar; on Friday it was at 1,000--but why? Even the U.S. officials temporarily running Iraq see the rising dinar value as an odd vote of confidence in the soon-to-be-retired currency of a government that no longer exists. "For there to be confidence in the currency, you need a stable government, which there is not," says George Mullinax, a U.S. Treasury official now in Baghdad.

But the reasons are actually pretty simple: Iraqis are expecting a better currency soon, and they hope an efficient and wealthy government will quickly be in place. As Erbil businessman Sadiq Ismail puts it, the Iraqi people "think that Baghdad will not let them down."

It could, though, just as it has before. After the first gulf war, the Central Bank began printing large numbers of dinars with Saddam's image. In the north, angry Kurds refused the bills, sticking with the Swiss-printed dinar, which has held its value. In the south, inflation made small bills almost worthless.

Now merchants no longer accept 10,000-dinar notes, fearing the United States will cancel them due to bank looting. That leaves only the 250-dinar note in wide circulation. Thus dinar supply is falling at a time of rising demand from U.S. officials, journalists and even Iraqis shopping for looted bargains in Baghdad's black markets, says economist Mussab Al-Dubayli, who fears "disastrous" results for the Iraqi economy. Normally, a developing nation wants an underpriced currency so its goods sell competitively abroad.

To jump-start the economy, the United States is handing out $20 cash payments to all Iraqi state employees, who sniff that $20 will now buy food for only a few days. Foreign contractors working in Iraq say they are in danger of bankruptcy, due to the rising dollar cost of Iraqi labor. Prices of imports like cigarettes are gyrating wildly. For now, the United States plans to let the Saddam dinar move with the market, but is working with Iraqis to develop a new currency to be introduced sometime next year. They plan to remove Saddam and replace him with a less controversial image, says Mullinax. Perhaps a palm tree, maybe a pine. Something rooted and stable.

--Scott Johnson and Owen Matthews

Extravagance: New Old Russia

The motto of nouveau riche New Russia, "Spare no expense," is catching on in the Kremlin. In recent months an army of construction workers has been swarming over the site of the Konstantinovsky Palace, a 1,000-room complex on the outskirts of St. Petersburg. The plan: to transform the palace into a suitable venue for President Vladimir Putin to host multiple summits with 45 heads of state on May 31 and June 1. But it's one thing for a rich yuppie to spend so extravagantly. Russians are questioning Putin's right to do so.

Officially revamped in preparation for St. Petersburg's 300th anniversary this year, the palace operation is just one of many city projects underway, including the restoration of other historic monuments and fixing up a metro line. But in Old Russia style, most of the talk has centered around corruption, cronyism and sheer disregard for today's proletariat. The total bill will likely come to over $1 billion; locals fear that much of the money was funneled into private pockets, and that their city won't look all that much better in the end.

Then there's the matter of the ordinary man being allowed to take part in the festivities scheduled around the summits. Residents were told to stay out of town so as not to make traffic even worse. "The celebration should be for us," says cabbie Mark Krasner. Still, some don't mind money being spent on monuments. Says local writer and historian Daniil Granin: "If we lived in the time of Catherine the Great, we'd all be saying, 'Surely they could spend all that money on the people rather than putting it into the Winter Palace'." He has a point. But you could also argue that the current controversy shows how little has changed since Peter the Great founded the city back in 1703.

--Christian Caryl

Argentina: Kirchner Is Crowned

When flamboyant former Argentine president Carlos Menem dropped out of Argentina's presidential race last week, no one could have been happier than Peronist Nestor Kirchner. Kirchner, a virtual unknown just weeks ago, will now march unopposed into the presidency on May 25. But it won't be an easy job: Argentina's economic woes continue and the troubled nation has had six presidents in the past 18 months. To get an insight on the new president's chances of success, news-week's Joseph Contreras spoke with Argentine sociologist Torcuato Di Tella, who recently conducted a series of interviews with Kirchner for a new book:

What kinds of policies should we expect from Kirchner?

In economic policy, he'll continue what is going on now. You'll see an effort to give the state a greater role in the economy and more protectionism.

Is Kirchner popular enough to succeed?

Kirchner doesn't have much solid support of his own and he certainly is not going to have the support of Menem's people. He will be a weak president, and the big test will be whether he can form a coalition.

What's he like as a man?

He's more solid than he seems. He's said to have been a rather authoritarian sort of boss. But I'm not too concerned about that. We need a person with a certain authoritarianism.

How will his leadership affect Argentina's relations with the United States and international investors?

Kirchner will soon realize he will have to cooperate with the United States and foreign capital--if he hasn't realized it already. But he won't do anything the United States or the International Monetary Fund wants. Kirchner will be a bit more troublesome and the United States and international investors will [face] a rather hard interlocutor. But he won't be unmanageable.

Science: Gone Fish

You know that old uplifting adage: there are plenty more fish in the sea? It's a big lie. According to a recent study, industrial fishing over the past 50 years has reduced the population of the world's predatory swimmers by 90 percent. Sharks, tuna, swordfish and marlins are just some of the many species that have seen their numbers drop drastically, according to the study, first published in Nature on May 15. "This overfishing will eventually lead to the extinction of the larger animals," says Ransom A. Myers, the lead author of the study and a fisheries biologist based at Dalhousie University in Halifax, Canada.

The data was assembled over 10 years, using information gathered from research trawlers and commercial vessels from the Gulf of Thailand to the Arctic. According to Myers, what's happening to the oceans is comparable to what occurred on land 10,000 years ago when mankind invaded North America and Australia. Beasts like the woolly mammoth and the giant ground sloth went extinct once humans had the right tools to hunt effectively. So it is at sea, where technology, from satellites and sonar to long lines, have made extinction a reality: a fish like the hammerhead shark could be gone in a generation. The study does conclude that there might be hope: if the world heeds suggestions that came out of last year's Johannesburg summit--including reduced quotas, stronger regulations and the prevention of accidental catches--it's possible many fish stocks could be restored by 2015. But given the failure of some other recent U.N. efforts, Jaws and friends should probably start counting their days.

--Michael Hastings

The Euro: Will Sweden Suffer?

It's the worst-kept secret in London: on June 9, the British Treasury will say "not yet" to the common European currency, as the convergence criteria necessary for Britain to join have not been met. While pro-euro Britons may feel let down by Prime Minister Tony Blair, the most disappointed Blair ally may be Swedish Prime Minister Goran Persson. With a euro referendum scheduled for Sept. 14, Persson had been hoping against hope that the Blair government, perhaps emboldened by its joint military victory with the United States in Iraq, would take a stronger pro-euro position. The current London waffle will hurt Persson's case for "yes" and help Sweden's growing Euro-skeptic movement. Popular support for joining the single currency has sunk dramatically in recent months, and is now at 35 percent. Swedes, says a member of Parliament from Persson's party, "see few advantages [of joining] when the economy here is so much stronger than that in Euroland. The [euro] missionaries don't appear credible when they describe the blessings of joining a club that appears mediocre." Could it get any worse? Yes, apparently. Recently Persson and other senior party members have all but gagged leading Euro-skeptics. Some people are best seen and not heard, it would seem.

--Stryker Mcguire

The Wizardry of Oz

New York's Asia Society recently announced the winner of the first annual Osborn Elliott Prize for an outstanding journalist writing about Asia. We take note of it because the "Ozzie," as it is now called, is named after legendary NEWSWEEK Editor Elliott, who pioneered many of the techniques that have now become standard fare in weekly journalism. Elizabeth Rosenthal of The New York Times was this year's winner for her extraordinary and persistent coverage of the AIDS crisis in China. We congratulate her and salute our old chief Oz Elliott as well.

--Fareed Zakaria, Editor, NEWSWEEK INTERNATIONAL