March 25, 1991|DAVID FREED | TIMES STAFF WRITER

KUWAIT CITY — It was business as unusual Sunday at the Alahli Bank of Kuwait.

Soldiers nervously cradled AK-47s at the door while normally serene managers dressed in spotless dishdashas scurried from one teller’s station to the next. Outside, under the giant oil-fire cloud, those who had come to deposit and withdraw funds waited not-so-patiently in a line that snaked around the corner of the gleaming high-rise building.

“A new start,” beamed a ranking bank officer, surveying the scene.

“A complete mess,” snapped one customer.

In truth, it was both.

For the first time since liberation nearly a month ago, Kuwait’s 10 commercial and specialized banks opened to the public Sunday, an event marked as much by confusion as self-congratulation.

The essential problem, many Kuwaitis and foreign nationals discovered, was that much of the money they had carefully socked away during the Iraqi occupation has been deemed worthless by the Kuwait government.

After Iraqi forces last year looted gold bullion and dinar bills worth more than $2 billion from the Central Bank–the emirate’s version of Ft. Knox–Kuwaiti banking officials who had escaped the country declared that the pilfered cash was no longer valid currency.

Nonetheless, millions of dinars–each worth about $3.48 at the current rate of exchange–ended up in circulation as Iraqi troops used the illegally obtained funds to purchase supplies and services from Kuwaiti merchants.

Some here even received pension benefits paid from stolen Central Bank assets during Iraqi occupation.

“We accept these money in good faith,” said one barber. “No one believe the government really cancel this money.”

But that is exactly what happened.

Bankers and merchants estimated Sunday that perhaps as much as 25% of Kuwaiti currency presently in circulation may not be worth the stock it is printed on.

After the Iraqis were kicked out Feb. 27, Kuwaiti officials decreed that all dinars presently in circulation would be retired and more than $2 billion in new currency issued after being printed in Britain and Germany. People were told to redeem old dinars for new as soon as the banks opened.

Serial numbers, meanwhile, of the dinars stolen from the Central Bank were posted throughout the emirate, alerting businesses, banks and individuals about which bills were to be rejected as worthless.

Still, many believed that they could trade in their bad dinars for good. They found otherwise after going to the banks on Sunday.

“They won’t even give you a box of matches for these,” said one man, fanning a stack of dinar bills with his thumb. “We suffer (because) of the Iraqi soldiers. Now we suffer over our money.”

Given the lines Sunday, simply getting access to funds on deposit presented difficulties for many cash-starved Kuwaitis who had not been able to visit a bank since the Aug. 2 invasion.

Contesar Hassan said she spent nearly four hours waiting in line Sunday at her bank and never did get in. Despite having no money, she drove her two children up Arabian Gulf Street to the Sultan Center, the only open supermarket in Kuwait city, and implored the manager to let her pay him later for the groceries she needed immediately. He consented, and she filled her cart with cooking oil, rice and bottles of Mr. Clean floor cleaner.

“Saddam (Hussein) make everything bad,” she said.

On the opulent 18th floor of the Alahli Bank, the deputy chairman, Abdul Salam Alawadi, remained matter-of-fact about the long lines and dinar debate.

“It’s not a matter of feel sorry or not feel sorry,” he said. “There are many problems during the aggression.”

A high-ranking official of the Central Bank disclosed Sunday that Kuwaiti officials are investigating the possibility that one of the bank’s three managers may have let the Iraqis into the main vault.

None of the main offices of Kuwait’s banks sustained any significant damage during Iraqi occupation, although a floor vault at the Alahli Bank does bear the scars of a failed attempt to break into it.

The bank’s security manager, Khalid Bashir, said that before Iraqi forces retreated last month, he watched while the Iraqi placed in charge of the bank tried for two hours to open the floor vault, hammering away with a chisel and pipe wrench. The Iraqi finally gave up and fled town just before U.S.-led forces arrived.

“He was in a hurry,” Bashir said.

The chisel and wrench were still resting on a nearby desk Sunday.

http://articles.latimes.com/1991-03-25/news/mn-594_1_central-bank

September 25, 1990|MARK FINEMAN | TIMES STAFF WRITER

BAGHDAD, Iraq — In a move designed to further demoralize Kuwait and strengthen Iraq’s hold on the occupied country, Iraqi authorities in Kuwait on Monday began enforcing a strict new order that outlaws Kuwait’s national currency.

The order, announced by Iraq’s economic commission in Baghdad, says Kuwaiti dinars must be exchanged for Iraqi dinars by Oct. 6, at the exchange rate of 1 to 1. Kuwaiti currency will be worthless.

Before Iraq’s Aug. 2 invasion of Kuwait, the Kuwaiti dinar, backed by huge oil reserves and billions of dollars in foreign investments, was the equivalent of 12 Iraqi dinars, which are now virtually worthless in the international market.

Several analysts said the move announced Monday is certain to fail because Kuwait’s wealthy government-in-exile is still buying Kuwaiti dinars at a rate of $3.50 to 1. But experts in Baghdad said the move is a key indicator of Iraqi President Saddam Hussein’s continuing strategy in occupied Kuwait.

“He wants to remove everything that is Kuwaiti,” said a Western diplomat who has traveled to Kuwait several times since the invasion. “The more you have there that is Kuwaiti, the harder it is to say it’s a part of Iraq.

“Certainly, this currency order is an important indicator of that overall strategy. As a symbol of nation and pride, currency is even more important than a national flag. Nothing is more humiliating than having worthless money.”

Another diplomat saw in Monday’s order an attempt by Hussein to keep all his options open.

“Even if Hussein is forced to pull out of Kuwait, he can always sell back all the Kuwaiti dinars he’s getting, for next to nothing, at the official exchange rate. And that alone is quite a profit.”

Most independent analysts in Baghdad said the currency order, the latest in a series of steps that began with the conquest, is another example of Hussein’s calculated approach to the situation.

“I think he knows he’s got to pull out eventually, but it will be at a big price,” the Western diplomat said. “He’ll leave, but he’s going to make it very expensive.”

The diplomat cited refugee accounts of how Kuwait is being looted and offered his own experience as further evidence.

“At the (Kuwait) airport we watched them load entire Rolls-Royce aircraft engines into the hold of an Iraqi Airways jet,” he said. “Brand-new cars were being flown up to Baghdad.

“At the hospitals they have removed CAT-scan equipment, X-ray machines and most of the medicines. Now, what is a hospital without medicine? A hotel?

“The whole approach is a systematic effort to remove Kuwait’s most valuable assets and bring them to Iraq, and the dinar-for-dinar order is just the most formal and sweeping. They’ve taken machines, furniture, entire stores of goods, so why not all the cash as well?”

Officially, Iraqi authorities insist that there is no looting, that looting is not possible now that Kuwait is a part of Iraq. The economic commission said the currency program is intended simply “to prevent duplication in exchanging both currencies (after) the merger of Iraq and Kuwait.”

But the order added that after Oct. 6, the Kuwaiti dinar “will be an illegal currency,” suggesting that anyone caught carrying Kuwaiti money out of the country will be subject to arrest and prosecution.

Kuwaitis fleeing into Saudi Arabia have said that Iraqi authorities were confiscating their passports and other documents in what they described as an effort to eliminate Kuwait’s identity. Kuwaiti jobs, they said, were being filled by Palestinians.

The Western diplomat said he saw many Iraqis “masquerading” as Kuwaitis, living in their abandoned houses and wearing traditional Kuwaiti clothing.

“They don’t know how to wear the robes properly,” he said, “and they wipe their faces with the kaffiyeh (headdress), which the Kuwaitis would not think of doing.

“There’s an increase in the number of Iraqis in Kuwait, on every level. Even the regular army has been replaced at nighttime checkpoints by civilians of the popular army.”

In the meantime, attacks on Iraqi troops by the tiny Kuwaiti resistance have reportedly all but stopped.

“It’s very quiet now,” a Westerner who left Kuwait last week said. “But the Kuwaitis are Bedouins, a quiet, dangerous people. They are said to be putting out contracts on high-ranking Iraqis, and the Iraqis are taking precautions, like not traveling alone.”

People coming out of Kuwait say the country’s infrastructure has been virtually destroyed. The telephone system has all but collapsed. Sewers are backing up and traffic lights are failing.

Western development experts who have emerged from Kuwait said that Iraqi crews are working feverishly on a steel pipeline that appears to be a water line.

“It’s about two feet in diameter,” one expert said. “Is it for oil? It’s a bit big for oil. I think it’s for water.”

Before the invasion, Iraq had proposed to Kuwait that the two undertake a water line as a joint project. Oil-rich Kuwait has spent billions of dollars on desalinating water from the Persian Gulf, and Iraq, which has abundant fresh water, was to satisfy Kuwait’s need–at a price.

The problem, according to one diplomatic source, “was that Kuwait wanted a quid pro quo. Why give all that money to Iraq when they could build a new desalination plant? In exchange for signing on the dotted line, what the Kuwaitis wanted was a border treaty, which of course is what triggered the invasion.

“Now, you see, the Iraqis are building the pipeline so that if they have to give Kuwait back, it’ll be a done deal. Like the currency order, it allows Hussein to keep all his options open, so that no matter what happens he’ll come out ahead of where he was before the whole thing started.”

http://articles.latimes.com/1990-09-25/news/mn-1116_1_kuwaiti-dinar