(FORTUNE Magazine) – REBUILDING Kuwait's once thriving, Western-style capital of one million people and its immense oil drilling, refining, and petrochemical industry could spell years of prosperity for American engineering and construction firms. Says Richard Daerr, president of CRSS, a construction services company in Houston: ''The Middle East building boom of the 1970s may never be repeated. But Kuwait at least reminds me of those days. It will be a major market in the 1990s.'' Grateful to America, the Kuwaitis say they are reserving the bulk of the business for Americans. Companies from Britain, France, and other countries ; that sent troops also will get preference. Still, the Kuwaitis -- renowned for their business acumen -- are pressing hard to extract the lowest prices. Says one European looking for a deal: ''To the Kuwaitis, war is war and business is business.'' Total reconstruction costs won't be known until experts examine all the damage. A reasonable figure is the $45 billion forecast by Fawzi Al-Sultan, a Kuwaiti who is executive director of the World Bank, which advised the Kuwaiti government on the recovery plan. Though far short of some estimates reaching $100 billion, that's still a lot of money -- three times the cost of the Channel Tunnel linking France and Britain. Al-Sultan divides costs into two categories: replacing stolen goods and repairing damaged property as varied as hotels, bridges, and refineries. According to Al-Sultan, the Iraqis have wantonly looted $20 billion in everything from manhole covers to computers. Iraqi soldiers carted off $1 billion in gold bullion and another $1 billion in foreign currency from Kuwait's central bank, and took $2 billion in gold and precious stones held by Kuwaiti artisans for jewelry making, one of the emirate's leading industries. The Iraqis shipped or drove 500,000 cars and trucks to Iraq and hijacked 15 Kuwait Airways jetliners. A band of hungry Iraqi soldiers feasted on the antelope from the Kuwait City zoo. The Iraqi occupiers dealt a heavy blow to Kuwait's private businesses, many of which were run by Palestinians. Typical is what happened to Shoreline Maintenance Works & Contracting Co., a trucking, building materials, and oil- drilling firm part-owned by Shaw Dallal, a Palestinian-American who divides his time between homes in Kuwait and New Hartford, New York. In September and October, Iraqi soldiers took his fleet of 1,000 trailers and trucks. They also dismantled his cement block factory and shipped it back to Iraq. Says Dallal: ''They took everything down to the screws.'' Rebuilding Kuwait's oil industry could take another $10 billion. Almost half of Kuwait's 1,300 oil wells are ablaze. And the Iraqis systematically destroyed the Minagish Umm Gudair pipeline across western Kuwait by exploding one section at a time. Fixing battered infrastructure could absorb another $15 billion. Iraq wrecked Kuwait's highway system by digging deep trenches into one lane of most highways to be used as defensive positions for combat units. Iraqi mines severely damaged at least two of Kuwait's desalination plants. In the final frenzy of destruction, the Iraqis set fire to four of Kuwait City's luxury hotels. The Kuwaiti government is dividing the recovery program into two parts: a relief phase, covering the first 90 days, followed by a reconstruction phase of at least five years. In the relief phase Kuwait will spend up to $1 billion to bring food and medical aid to the 700,000 people still in Kuwait, restore electricity and other basic services, and start extinguishing the oil fires. The U.S. Army Corps of Engineers has a $46 million contract to assess the damage and make preliminary repairs to sewage plants and power stations. The Kuwaiti government has awarded, or is in the final stages of negotiating, 250 contracts worth $800 million, with 70% of the signed deals going to Americans. CSX/Sea-Land Logistics will coordinate the huge air and sea lift that will restock Kuwait with everything from medical equipment to cars. Motorola and AT&T each have contracts to supply emergency mobile- telephone equipment. The Corps of Engineers is paying Raytheon, maker of the Scud-busting Patriot missile, $5.7 million to install an air-traffic- control system at Kuwait International Airport. The U.S. is practically monopolizing the reconstruction that involves oil services and construction, sectors packed with strong American companies. Kuwait could spend up to $1 billion over the next several years to put out oil fires and redrill wells. The Kuwaitis have hired four firefighting companies, including Red Adair Inc. of Houston. Brian Krause, a senior firefighter with Red Adair, believes it could take up to five years to extinguish the 500-odd fires. Another Texas firm, O'Brien/Goins/Simpson Inc. of Midland, has a two- year, multimillion-dollar contract to help redrill some of the wells and run them once they are producing again. Bechtel, the San Francisco engineering and construction company, has signed an agreement to repair Kuwait's crude oil production facilities, including pipelines and storage tanks. Dresser Industries of Dallas expects to do a brisk business selling compressors, valves, and pumps for oil refineries. Says Chief Executive Jack Murphy: ''All the sophisticated equipment was stripped and sent to Iraq.'' Kuwait isn't the only Gulf state attracting an army of hardhats. Saudi Arabia expects to spend as much as $30 billion over the next five years to expand its oil output. Four of five major contracts have gone to a group of U.S. companies, including engineering and construction giant Fluor. The Saudis are going ahead with a second multibillion-dollar project to increase production of gasoline and petrochemicals. THE BIGGEST reconstruction of all could turn out to be in Iraq, though U.S. companies are not exactly rushing to open contracting offices in Baghdad's Al Rasheed Hotel. In the absence of a friendly successor to Saddam Hussein, Iraq will be hostile territory for U.S. companies. The destruction of Iraq dwarfs the damage done to Kuwait. In an interview with the U.S. trade newspaper Oil Daily, Sir Patrick Hine, chief of British air operations in Operation Desert Storm, estimated that bombing destroyed 80% of Iraq's oil refining capacity.

Traditionally Iraq has given its major refinery and petrochemical projects to Japanese companies such as Mitsubishi and Toyo Engineering. Though Japan contributed money to help destroy Iraq's plants, the Japanese presumably will be happy to dust off the plans and rebuild -- if Iraq can pay. Kuwait is in a far stronger position to finance its own reconstruction. Oil revenues should start flowing again in as little as six months, although it will take four to five years before production returns to prewar levels. Meanwhile, Kuwait can borrow against approximately $100 billion in foreign investments, a portfolio that is currently debt-free. In addition, companies such as Fluor and Bechtel may help out by providing project financing. And France, Britain, and other European countries are bound to provide generous export credits to win Kuwait's business. For Kuwait, rebuilding would be far less expensive if Iraq returned the stolen loot and paid reparations called for by the U.N. Saddam is unlikely to give back the pilfered property, much of which may have been damaged by allied bombs anyway. Kuwaitis aren't optimistic. The Iraqis gave Palestinian businessman Shaw Dallal's employees receipts for $40 million of confiscated property. He doesn't expect to see any of it again. If the U.N. pursues its demands for reparations -- as the U.S. insists -- the figure would come to well over $50 billion, including damage to Israel and Saudi Arabia. The U.N. could force Saddam to pay part of the money by taking a percentage of his oil revenues, which were $20 billion a year before the war. Iraq would have a hard time escaping the levy since most of the oil it exports passes by pipeline through Saudi Arabia and Turkey. But that approach could be counterproductive for two reasons. First, Saddam already owes Kuwait, Saudi Arabia, and Western banks $90 billion. It would be almost impossible for him to pay off his foreign debt and at the same time pay reparations -- especially with his oil industry in ruins. Second, siphoning off some of Iraq's oil income would delay the country's own reconstruction and reduce Iraqis to poverty, which could trigger a backlash of sympathy among other Arabs. The outlook for Iraq -- and the entire Middle East -- is still volatile and uncertain. But for businessmen milling around the gurgling fountain in the lobby of the Hotel Oberoi in Dammam, Saudi Arabia, or trekking up to bombed- out Kuwait City, the Gulf hasn't needed this much of what they have to sell since the 1970s.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: KUWAIT'S LOSSES