Inside Saddam's Iraq
              After a decade, sanctions take a terrible toll on Iraq's people but leave Baghdad's durable dictator as
              comfortable as ever

              By Kevin Whitelaw and Warren P. Strobel

              BAGHDAD–It hardly seems like the capital city of a country under siege. Posh Arasat Street is lined with
              designer perfume stores, brand-new art galleries, and chic interior decorating shops that would be at home
              on the Champs-Elysée. A massive wall of Korean televisions fills the plate-glass windows of an electronics
              store. Nearby, a drive-through takeout joint has recently opened, offering burgers and gyros, and
              entrepreneurs are building a large new restaurant in the shape of a castle, complete with a drawbridge.

              But Fortress Saddam is as impregnable as ever, despite a decade of U.S.-led sanctions. Saddam's vast
              security apparatus retains its vise grip over all aspects of Iraq's society. The Iraqi leader and a wealthy elite
              in Baghdad have not only escaped the effects of sanctions but are actually profiting
 
               from them. This year alone, Iraq's oil smuggling has nearly quadrupled,

              producing a massive financial windfall for Saddam to keep his several-thousand-strong circle of sycophants
              happy. Iraqi businessmen are flouting the sanctions by signing new deals with foreign companies as
              international support for sanctions erodes.

              Bold boasts. Ten years after Iraqi troops invaded Kuwait, it is tempting to wonder: Is Saddam winning?
              Yes, if winning means survival–and for Saddam, it does. "Today, we are breathing much better than
              yesterday. Tomorrow, we will be breathing much better than today," boasts A. K. Al-Hashimi, a veteran
              regime figure. "There is no limit to how long we can hold."

              Perhaps so for the privileged few. For most, though, the past decade brought little but misery. U.S. officials
              repeatedly insist that the sanctions are not targeted at ordinary Iraqis, but they are its only true victims.
              Away
 
               from the glamour of Arasat Street, the embargo is devastating the bulk of

              Iraq's 23 million citizens, who are shell-shocked by the daily grind of scraping by. The United Nations
              oil-for-food program, now in its fourth year, has eased the suffering by providing at least a minimum amount
              of food and medicine. But child mortality, while stabilized, remains high. One in four children is
              malnourished. Children are dropping out of school to help support their families. "There are no dreams
              anymore," says Jassan Abdul-Hassan, a 23-year-old shop clerk living in Saddam City, a seething slum of 2
              million people outside Baghdad. "We just work to get enough food for the next 24 hours."

              Iraq blames U.S.-led sanctions for the misery; American officials retort that Saddam is failing to spend his
              considerable resources on his people's basic needs. They are both right. Sanctions have destroyed Iraq's
              once-prosperous middle class, along with its formerly prestigious universities. A world-class health system
              has disintegrated to Third World levels. And while Saddam can find the money to construct ornate new
              buildings for government ministries and a giant palace complex in downtown Baghdad, he relies almost
              exclusively on UNICEF to rebuild his country's schools. Meanwhile, some $4.5 billion in revenues from the
              oil-for-food program lies unspent in Iraq's bank account in New York.

              Not everything is rosy for Saddam. The new U.N. weapons inspection agency is preparing to send teams
              back to Iraq to resume the search for chemical and biological weapons facilities halted at the end of 1998.
              Saddam is unlikely to permit their return, which could provoke another crisis with Washington. And while
              the 63-year-old Saddam's grip on power seems as sure as ever, the regime may be rotting from the inside.
              Increasingly reclusive, the man from Tikrit rarely appears in public. His inner circle is aging, enough of a
              worry that the ruling Baath party recently purged officials to make way for new blood.

              U.S. policy has succeeded in one key area: Saddam's military, while still formidable, is under severe strain,
              lacks spare parts, and is much less threatening to its neighbors. Its air defenses are bombed regularly by
              U.S. planes patrolling the no-fly zones in the south and north. Despite 10 years of daily patrols, the Iraqi
              military has never downed a U.S. plane. The no-fly zone in the north prevents Saddam from controlling large
              tracts of his country, effectively creating a booming Kurdish territory beyond his reach.

              Still, the sanctions have missed their target as badly as Iraqi antiaircraft fire. They haven't broken Saddam's
              regime but have beggared what was a pro-Western middle class. Anti-Western sentiment could last
              decades. "The sanctions created two classes. One is up and one is down," says Fuad Abdulridha, 60,
              whose Yaqoot auction house used to be the only one on a section of 14th Ramadan Street. Now there are
              20, he says. Cash-starved Baghdadis put their antiques, appliances, carpets–even house doors–up for bid
              almost nightly. The best merchandise is long gone: The goods now are often homely, and prices low.

              A four-person U.S. News team spent two weeks in Iraq, traveling throughout Saddam-controlled territory,
              in the company of Ministry of Information "minders," and Iraqi Kurdistan in the north, where rival Kurdish
              parties are the de facto rulers. Portraits of Saddam that adorn Baghdad corners and hang in every office and
              store disappear along the road north from the oil city of Kirkuk, replaced by the yellow flag of the Kurdistan
              Democratic Party. People there are quick to criticize Saddam, who has not ruled the region since 1991.
              Saddam "is the worst leader all over the Arab homeland," says Azad Youssef, sitting in his small PlayStation
              video arcade in the regional capital of Irbil. In the north, TV satellite dishes (which bring a six-month prison
              term in Baghdad) peek from the rooftops. Radio stations and newspapers flourish. And every major city has
              at least one Internet cafe, with open access to anybody (box, Page 56).

              Controlled society. The rest of Iraq is monitored by a network of secret police and informers. Dissent brings
              punishment, sometimes death. Domestic broadcasting is state controlled; Baghdad's Voice of Youth FM
              station attempts to draw young people away from outside alternatives, such as the Voice of America, with
              pop hits and country tunes such as "She Thinks My Tractor's Sexy (It Really Turns Her On)." Baghdad
              opened its first public Internet center in late July to help the business community communicate with foreign
              companies. But the wary regime bans access to unmonitored Web-based E-mail systems.

              The north, buffered from the full brunt of the sanctions, is clearly more prosperous. The U.N. is allowed to
              distribute food and medicine itself, in cooperation with local authorities. At a simple, but clean,
              UNICEF-funded health care center in Irbil, mothers hold children waiting to receive vaccinations and be
              checked for malnutrition. Of the 80 children examined on one recent day, only two were malnourished.
              "Now, we are seeing fewer cases," says nurse Najiba Hamed Amin.

              Blood and tears. In contrast, Baghdad insists on handing out food rations itself and still refuses to let most
              private aid groups operate in the area it controls. "They are spies," says Iraq's health minister, Umid Midhat
              Mubarak. "I won't let them in." Food has become more plentiful in the past year now that Iraq is allowed to
              sell as much oil as it can under the U.N. oil-for-food program.

              But supplies of medicine remain uneven and hospitals are suffering from a severe lack of blood bags for
              transfusions. Hospital wards in the south are still filled with cases of chronic malnutrition and serious diseases
              like leukemia. Abdul Kareem Subber, the deputy director of the Basra Pediatric Hospital, describes how on
              a typical day, he has enough antibiotics for only four of the six people he operates on. And sometimes, he
              must operate by flashlight, using the same rubber gloves for multiple patients.

              Life is perhaps toughest on the children. UNICEF estimates that up to half of the schools in the south are
              unfit for teaching. And enrollment is plunging. Only three of Suhilla Hattam's seven children are still in school.
              The rest work in the market every day selling nylon bags and other goods. She has sold all her furniture;
              only a stove and television remain in her crumbling house in the southern city of Basra. And fun is a
              particularly rare commodity. In one ramshackle amusement park, only two of the 24 bumper cars still
              function.

              Nature has added to the hardship, with much of southern Iraq suffering from the worst drought in memory.
              The land around the village of Zurfat on the Euphrates River that used to produce wheat, barley, vegetables,
              and six kinds of fruit is now largely barren, save for its famed date palms. The river level is 45 percent below
              normal, and farmers often have less than one hour a day of electricity for irrigation pumps. "Our children are
              slowly dying, like our plants," says Safi Abed-Salman, head of the village's tribe.

              The long-term effects of the sanctions on the Iraqi people are difficult to calculate. Western observers report
              that this year nearly double the number of children participated in the Saddam Hussein Fighting Cubs, a sort
              of summer camp for sports, recreation, and military and political training. "You should lift the embargo
              because you are creating a generation of people who hate America," says Nazar Ali, a father of four in
              Basra. But, a professor says, most Iraqis distinguish between the American people and the government. "So
              we treat you as a friend."

              Iraqis are turning more often to religion. Mosque attendance at prayers has risen sharply, partly as a result of
              a Faith Campaign led by Saddam. Iraq was formerly a proudly secular state, but Saddam needed the
              political support of the religious community after the embargo obliterated the middle class, the original base
              for his regime. The seven-year campaign has transformed Iraq with a ban on public drinking. Top
              government and Baath party officials take courses on Islam. And prisoners can get their sentences reduced
              by memorizing passages of the Koran.

              Saddam has also built at least four new mosques in each of Iraq's 18 provinces and some 30 in Baghdad
              alone. And in a ritzy Baghdad neighborhood, construction has begun on the mammoth Saddam Mosque,
              which will be one of the largest in the Middle East. But this campaign strikes even some of his own people
              as hypocrisy. "It is not by words; it is by actions that you are a believer," says Sheik Majid al-Hafeed. "If he
              was a real Muslim . . . you should not harm people. [Saddam] is harming 20 million people." Al-Hafeed can
              criticize–his mosque is in Sulaymaniyah, inside the Kurds' northern autonomous zone and, for now, beyond
              Saddam's wrath.

              Significantly, Iraq's oil industry is back on stream. Both pipelines and refineries were heavily damaged during
              the Gulf War. In recent weeks, Iraq's oil production neared pre-Gulf War levels, putting Iraq–whose oil
              reserves are second only to Saudi Arabia's–squarely back among the world's leading oil exporters. But a
              lack of spare parts means that much of the equipment has been patched together and is deteriorating. "They
              performed miracles," says Roger Diwan, a managing director at Petroleum Finance Co. in Washington,
              D.C. "But it's not sustainable."

              In many other ways, Iraq is not well prepared for the embargo to end. Most Iraqis depend entirely on the
              food ration provided through the U.N. program. Salaries range from $2 to $10 a month. And the financial
              system is woefully inadequate. The largest bill is a 250-dinar note, even though the exchange rate is 2,000
              dinars for each dollar. Moneychangers literally use balances to weigh wads of money bound together by
              rubber bands.

              And that's the way it may stay. "There are signs that the status quo suits a lot of people," says one diplomat.
              Iraqis are completely dependent on handouts from the government, which remains firmly in power. The
              oil-for-food program provides enough food and medicine to prevent starvation, leaving Saddam free to
              spend his oil-smuggling profits on his first priority–the survival of his regime. The Kurds in the north enjoy
              unprecedented political autonomy under the protection of U.S. fighter jets. And Washington is able to boast
              that Saddam is kept "in his box," without being drawn into repeated crises that erode the international
              resolve on maintaining the embargo.

              Handling hardship. Iraqis have little choice but to carry on. The women's federation in the southern city of
              Na- siriya runs a twice-weekly health clinic and offers self-help courses that teach women "how to make
              everything themselves, not buy it," says the group's president, Rabab Daib.

              In Baghdad's hard-luck Fadhwat Arab district, Lamy'a Abdul-Sattar shares a house with eight other
              families. She quit her nursing job, overwhelmed by the pain and death of cancer victims. Her husband,
              Mahmoud Abdullah, returns home with poison to kill the rats infesting their one-room dwelling. His auto
              body work brings in $15 to $17 a month; of that, $5 goes to rent. A second child (son Ra'ad is 7) is out of
              the question. Blame seems beside the point. Lamy'a looks toward a day when, one way or another, life will
              improve. "We are suffering 10 years," she says. "When is this day?"