Iraq entered the 21st century under a cloud of great uncertainty. Despite the large sums of money that have entered the government's coffers from the sale of oil in the last 50 years, Saddam Hussein's legacy of war, first with Iran and then as a result of the invasion of Kuwait, has left the economy in ruins. The country's economic and social achievements during the 1970s and 1980s have been completely lost. Despite the food-for-oil program approved by the United Nations in 1997, the Iraqi economy will continue to suffer as a result of the sanctions.
Further, the prospects for the lifting of the United Nations sanctions remain uncertain, given that their termination has been made conditional upon the removal of President Saddam Hussein from power. Even after the sanctions are lifted, it is estimated that Iraq will have to pay US$12 billion in debt-servicing annually and to pay for food imports, medicine, and reconstruction. The problem will be further aggravated by the massive reparations payments that Iraq will be forced to pay. Unless forgiven, Iraq's debts will continue to greatly hinder its ability to undertake large-scale reconstruction and repair needed to restore the civilian infrastructure.
Internally, the social and ethnic divisions that have long characterized Iraq are stronger than ever. Despite being greatly weakened by the Gulf War and the sanctions, the repressive Saddam Hussein regime continues to rule the country unchallenged. The country itself has been divided into 3 zones, with the center and the south remaining under the control of the Iraqi government. Meanwhile, the north, where the Kurdish minority is concentrated, has been granted, at least temporarily, the right to administer its own affairs. For the last 10 years, the Kurds have enjoyed the protection of U.S. and British forces against potential military attacks by the Iraqi government. However, it remains uncertain whether such an arrangement can be sustained after the U.N. sanctions are lifted.