COLUMN ONE : Baghdad’s Scarred Psyche : U.N. sanctions have created much hardship, a bizarre economy, a crime wave and a ban on wedding cakes. But in this resilient place, ‘nothing is dead.’

BAGHDAD, Iraq —  Bus driver Abdul Karim still makes his daily runs between Baghdad and the northern Iraqi town of Tikrit these days, despite the international sanctions that have crippled his country’s economy and changed his society. But he takes a few precautions.

“We limit the number of passengers. We never drive in the afternoon--too hot, bad for tires. We check the air three times a day, and we never drive on bad road,” Karim explained. “We treat the tires like our babies.”

Understandable. At the official rate of exchange, a new tire would cost Karim $33,000.

And at the popular suburban amusement park called Playing City, a rare outlet for relaxation in war-battered Baghdad, technical director Jabbar Nasser Zohair slumped in his chair one recent evening and sighed.

“No spare parts. We’ve been cannibalizing one ride to repair another for months now,” he said, explaining why a park once visited by 10,000 Iraqis on an average day now sees just half that number.

“But now, let’s see, ‘Children’s Paradise’ is dead. Same with ‘The Dancing Animals,’ ‘Panic Subway,’ ‘Moon Shot,’ the horse-race machine and, of course, the small Ferris wheel. It’s very sad. If this park shuts down, well, there will be nowhere left for the children, for the young lovers, for fun.”

Welcome to postwar Baghdad, a city of little fun. The U.S.-led war that forced Iraqi President Saddam Hussein’s military out of occupied Kuwait early last year has left Iraq under harsh international sanctions and condemned by much of the world.

On the surface, this sprawling capital still teems with the street life of neighborhood volleyball games, traffic jams and crowded luncheonettes. But beneath the surface, the needs of simple human survival in this economic disaster zone have radically altered life’s routines and, increasingly, marked the psyches of most of Iraq’s 18 million men, women and children.

“The very fabric of this society is changing,” said one of the few foreign diplomats who remain in Baghdad, their numbers cut sharply by the international isolation of Iraq.

“You just cannot imagine how these people are surviving. If this were happening anywhere else on Earth, you would look at it and say, ‘That’s impossible.’ ”

Imagine, for example, a country that has the second-largest oil reserves on the globe beginning to look more like India each day; a country where a dollar can buy 100 gallons of gasoline but a set of spark plugs runs $3,960; where a hamburger costs $115.50 and a Pepsi $82.50; where weddings are now so expensive that many young couples forgo the ceremony and others have chosen not to marry at all; where wedding cakes are illegal because sugar and flour are so scarce; where, out of desperation, many women have turned to prostitution to support themselves; where a schoolteacher with four children recently whispered an offer to sell her newborn infant for the equivalent of $6,000 because she could not afford to buy him milk.

Those are among the images from a recent 10-day journey through postwar Baghdad, where it is clear that the international sanctions--which the United States and United Nations assert are designed to pressure Hussein’s regime into complying with a host of cease-fire demands--are taking an enormous toll on the Iraqi people while leaving the regime virtually unscathed.

Senior officers of the army that helps keep the president in power, for example, have received pay increases of up to 4,000% in the past two years. Similar raises for the secret police apparatus that protects Hussein also have kept pace with inflation--which is soaring at an annual rate of more than 3,000% in the free market, Trade Minister Mohammed Mehdi Saleh said in a recent interview. And a vast array of the imported luxury goods that are still affordable for top officials remain freely available in the Baghdad market, largely the result of unchecked illegal trade between Iraq and southern Turkey.

Clearly, part of the economic toll is the result of the radical policies of survival now being enforced by the regime itself.

One tactic is simply to print more money. To cover the pay raises and a remarkably efficient government rationing system that still manages to deliver at nominal prices $80 million worth of largely imported wheat, sugar, rice, tea and other essentials to every community each month, government presses have been printing Iraqi currency as fast as the regime can spend it, Saleh said.

Saleh also confirmed that with about $4 billion worth of its overseas assets frozen in banks by the United Nations, the regime has been forced to use some of the gold reserves that support its currency to buy the necessities of life it subsidizes and distributes to the masses. Experts estimate that Iraq has used as much as 30 tons of its gold for such purchases abroad since the war ended.

Although Saleh played down the importance of these transactions, insisting that the remaining value of the Iraqi currency is based not on its gold reserves but on its future potential from now-banned oil exports, he said the U.N. embargo on all Iraqi exports has left the nation with a currency that is, by any measure, nearly incomprehensible. The official rate remains $3.33 to one Iraqi dinar--the rate charged by government hotels, for example. But the value in the local markets fluctuates between 3 cents and 5 cents a dinar.

Saleh also cited the sanctions as the ultimate cause of his regime’s latest economic survival measure--a ban on the sale of 157 “nonessential luxury goods” scheduled to take effect Friday.

The policy’s goal is to redirect the private-sector merchants away from the importation of soft drinks, candy, luxury foods, beer and high-fashion clothing and toward basic staples like wheat, rice, tea and sugar--commodities that the government can supply at a level of only about half the people’s needs, officials admit.

But many Iraqi intellectuals said they fear that the new import bans will do the most damage to the merchant class, a vital sector that, until now, was the backbone of Iraq’s free economy and the only potential source of meaningful dissent. Some have suggested that the policy could destroy the middle class, creating a new class of hundreds of thousands of nouveau poor.

Saleh stressed that the middle class, which has dealt in “nonessential commodities,” must now focus on buying the more than 500 items that are still allowed.

“It is food that we need them to buy,” he said. “We need them to buy clothes for infants, not clothes for those young and old. My wife, for example, buys a dress for 2,000 Iraqi dinars and goes to visit her relatives . . . and the common people see her and feel there is a big gap between my wife and the wife of a neighbor.

“So the philosophy of the government is that all these nonessential and expensive commodities have to be totally eliminated and substituted with essential commodities . . . so that all people can afford to buy.”

On the streets of Baghdad, the looming ban on importing luxury goods has spawned a kind of window-shopping frenzy. Beginning every afternoon, tens of thousands of shoppers with little money in their pockets throng the old souks and new shopping centers. Most of them are waiting for the moment when the traders--fearing prosecution under the new law and rushing to sell off their stocks before Nov. 20--begin drastically cutting the prices of refrigerators, television sets, fine clothing, toys and other soon-to-be-banned goods.

The traders too are increasingly frenetic, most now standing outside their shops and hawking “mad new prices” through hand-held megaphones.

Elsewhere in the Iraqi marketplace, though, there have been sadder images, particularly at the weekly Friday auctions. In past years, the auction houses--descendants of Baghdad’s ancient tradition as the mercantile mecca of Mesopotamia--were a source of the finest antiques. Today they are the last resort of thousands of stricken middle-class families now selling off personal heirlooms, furniture, lamps and photo albums just to raise money for food.

At Al Sabbar Auction Market in Baghdad’s Andulus Square one recent Friday, a hefty auctioneer stood on a stepladder taking bids on a well-worn children’s game set, nicked bookshelves, an old cuckoo clock and even a handwoven rug bearing the portrait of the Iraqi president in military beret--the possessions of just one of many Baghdad families struggling to make ends meet.

With the economy out of kilter, there is another sign of deterioration in the fabric of society: crime and corruption.

Although its measures have been notoriously harsh, Hussein’s regime traditionally has based its broad popular support on control. In this complex and ethnically mixed society, where people have little personal freedom, there has normally been little crime, lots of punishment and a pervading sense of security for those who toe the line.

Today many middle-class Iraqis say they fear for their children’s safety. Some say they are afraid of being robbed. Most car owners have designed crude alarm systems to defend against growing auto theft. Entire families have been machine-gunned to death by burglars. One Iraqi intellectual said his son, who had beaten a security agent during a quarrel, was released from jail just 48 hours later when he surrendered $2,000 to the police.

The increasing crime rate has hardly gone unnoticed by the regime. In fact, the daily newspaper owned by the president’s eldest son, Uday, has launched something of an anti-crime crusade, pointing a finger at the ineffective and corrupt police force.

But it is not clear whether the government is taking steps to curb crime, and several Iraqi dissidents said they suspect that the newspaper’s crusade is more a reflection of tension between Uday Hussein and another presidential relative who is minister of the interior.

Despite the trials of life here, any visitor to this city--bombed, in the words of some commentators, back to the pre-industrial age by the Persian Gulf War allies less than two years ago--is struck by the way the Iraqis have repaired and rebuilt their nation, even while under the U.N. embargo.

Aside from the obvious reconstruction of scores of bridges, power stations, factories and highways, accomplished largely through stockpiles of spare parts and the seizure of heavy equipment that foreign companies left behind, there are many more subtle services that were restored, thanks to the Iraqis’ technical skills and their legendary genius for mechanical improvisation.

The trains run on time in Iraq these days. There are fewer cars per train than before the war. And while daily ridership between Baghdad and the cities of Basra and Mosul has been reduced from 18,000 to just over 11,000, that is still double what it was immediately after the allies finished bombing the rail system.

It is a result of the Iraqis’ creative jury-rigging. Iraqi engineers discovered, for example, that they could continue operating their fleet of French locomotives by substituting Iraqi-made wet-cell batteries for the high-tech French batteries provided as standard equipment. And they have been cannibalizing 10 bomb-damaged locomotives to keep the other 75 on the rails.

The spirit for survival runs deep in the Iraqi soul. That could be seen for a fleeting moment late one night at Baghdad’s Embassy Night Club, one of scores of dance clubs and music houses that have contributed heavily to the city’s veneer of normality.

A customer paying his bill accidentally tore in half one of the millions of 25-dinar notes the government has printed to meet the costs of inflation. The customer was about to throw it away when the waiter grabbed for it.

“But it’s dead,” the customer sadly protested.

“Ha!” the waiter replied, stuffing both halves of the bill in his pocket. “In Iraq, nothing is dead.”