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The scramble for spoils

War splits the world in two - detail from ST cover - Alan Hardman cartoonThe fate of Iraq as a US protectorate is already foreshadowed by emerging US plans for post-war reconstruction and the handing out of lucrative reconstruction contracts to a favoured handful of US corporations.

At the same time, leaks from the State Department reveal that Washington has already drawn up plans for the privatisation of Iraq’s state-owned national oil company, which will allow Big Oil to grab the country’s huge oil assets.

EVEN BEFORE US-BRITISH forces entered Iraq, USAID (US Agency for International Development) and USACE (US Army Corps of Engineers) awarded initial contracts worth up to $1 billion to several corporations closely connected to the right-wing leadership of the Republican Party. Only US firms were in the running and the usual competitive tendering process was bypassed on grounds of speed and security.

The contracts cover reconstruction or repairs to airports, railroads, schools, telephone exchanges, hospitals and irrigation systems. Successful contractors can expect to reap millions of dollars of profits from repairing the damage now being inflicted on Iraq by the US-British invasion force.

USAID awarded a $4.8 million contract to the Seattle-based Stevedoring Services of America to manage the Umm Qasr port, Iraq’s only seaport, long before it was taken by US-British forces. USACE awarded the contract for extinguishing oil field fires to KBR, a subsidiary of Houston-based Halliburton Co. The ties of vice-president Dick Cheney with Halliburton are well known. He was the company’s chief executive from 1995 to 2000 (irregularities during that period were later investigated by the Securities and Exchange Commission). Cheney severed his links when he ran for vice-president, but is still receiving up to $1 million a year in ‘deferred’ severance pay. Halliburton made political donations to Cheney, as well as contributing $17,677 to Bush’s 2000 presidential campaign. (Sunday Times, 30 March)

"Halliburton is the most prominent example", comments Charles Tiefer, a University of Baltimore expert on government contracting, "but the largely non-competitive nature of the bidding continues to favour companies politically connected to the administration through campaign donations and shut out competitive offers even from our fighting allies like Great Britain". (Washington Post, 31 March)

Facing a growing outcry against political corruption, USAID announced that KBR was no longer in the running for the first batch of post-war reconstruction contracts. Nevertheless, KBR will still continue to make huge profits from the US occupation of Iraq under a ten-year deal, made in December 2001, to provide logistical support to US forces. It has already collected $830 million from the US government for supporting operations in Afghanistan, Djibouti, Georgia, Jordan and Uzbekistan. Under the ‘cost-plus-award-fee’ terms of the contract, KBR rakes in guaranteed profits. (CorpWatch, 20 March 2003) Other companies with strong Republican connections, however, are still very much in the running. One is the giant Bechtel Group, whose directors include the former secretary of state, George Shultz, and other former Republican cabinet members. Bechtel is the main contractor for Boston’s notorious ‘Big Dig’, the downtown highway project which is years late and millions of dollars overspent. Bechtel’s record (and its relationship with the Port Authority, which has been shaken by several corruption scandals) is currently under scrutiny in public hearings in Boston. Bechtel was also one of the main contractors on London Underground’s notoriously unreliable Jubilee Line extension.

Another prominent bidder for Iraq reconstruction projects is the Fluor Corporation, which is currently facing a multi-billion dollar lawsuit claiming that it exploited and brutalised black workers in South Africa during the apartheid era.

The Center for Responsive Politics says that the five construction companies on the shortlist for the initial rebuilding contract donated $2.8 million to candidates during the last two election cycles. (Financial Times, 21 March)

Big business leaders in Europe, South Korea, and elsewhere are furious that they are being excluded from the Iraqi reconstruction contracts. This is especially true in Britain, where the big international contractors believe they should benefit from a ‘most favoured nation’ status for Britain on account of its contribution to the invasion force. About 80 British building contractors and engineering consultants called a meeting with the director of Trade Partners UK, a government agency, to put pressure on Blair to lobby the US for a share of the contracts. Stuart Doughty, chief executive of Costain, was blatant in calling for a big business payback for Britain’s military support for the US intervention. Doughty argues that the UN should be kept out of plans for post-war Iraq, to ensure that "those who have been violently against this conflict don’t share in the reconstruction". (Observer, 6 April) No wonder one unnamed business leader criticised the lobbyists’ meeting as "an ambulance chasers’ convention".

Up to now, the US government has only offered British firms the possible consolation prize of subcontracts from successful US contractors. Frances Cook, the former US ambassador to Oman and now a consultant to several Middle Eastern companies, has been lobbying the US to include companies from Egypt and Jordan to show appreciation for their cooperation in the war effort. "They are already screaming in the Middle East – you call us corrupt, look at you giving contracts to American companies and no one else". (New York Times, 19 March)

But Colin Powell, speaking to Congress on 26 March, bluntly spelt out the US position: "We didn’t take on this huge burden with our coalition partners not to be able to have a significant dominating control over how it unfolds". A determination to maintain tight economic control of Iraq suggests that the Bush regime will be very reluctant to concede any real control to the UN. Washington is more likely to assign a subordinate, ‘humanitarian’ role to the UN. EU leaders are clearly alarmed at this prospect. Christopher Patten, the EU foreign affairs commissioner, warned Washington that Europe would find it difficult to help finance reconstruction after the war without UN approval. "It will be that much more difficult for the European Union to cooperate fully and on a large scale also in the longer term reconstruction process if events unfold without proper UN cover…" Patten described the awarding of contracts exclusively to US companies as "exceptionally maladroit". (New York Times, 18 March)

The new US viceroy

IN ANOTHER UNDIPLOMATIC, not to say provocative move, Bush has appointed a prominent arms dealer as ‘civilian’ viceroy to front the US military occupation of Iraq. Jay Garner, who will head the so-called Office of Reconstruction and Humanitarian Assistance (ORHA), is a former general who is currently president of the Virginia-based SY Coleman, part of the defence electronics groups L-3 Communication. Garner has a long association with the Republican hawks, and has worked with Cheney, Rumsfeld, Wolfowitz and Perle both within the military and the arms industry.

Like other hawks, Garner is a supporter of right-wing Likud governments of the Israeli state – a record that is likely to arouse the deepest suspicions of the Arab world. In October 2000 Garner went on a ten-day expenses-paid visit to Israel, organised by the Jewish Institute for National Security Affairs (JINSA). This is one of the US think-tanks, funded by religious foundations and the arms industry, that form part of the neo-conservative hawks’ infrastructure during their long campaign for the military policy now being implemented in Iraq. After his Israel visit, Garner signed a JINSA statement praising the Israeli army for showing what it called "remarkable restraint" in suppressing the Palestinian uprising.

Garner supported Rumsfeld’s push for the missile defence project, the revival of Reagan’s Star Wars, and his company has profited from sales of the Patriot missiles (for which it makes the guidance systems) to Israel and US forces. SY Coleman was also awarded a $1.5 million contract to supply logistical services to US special operation forces in the war against Iraq (Observer, 30 March). Garner is currently facing legal action by a rival defence research contractor, DESE, who claim that as president of SY Technology Garner used his influence in the Pentagon to deny them a contract in return for a pay-off in the form of another lucrative contract. (Observer, 6 April)

Meanwhile, there has also been a conflict-of-interest scandal about Richard Perle, one of the prime architects, along with Cheney, Rumsfeld and Wolfowitz, of the aggressive military policy adopted after 11 September.

In the late 1990s, Perle worked for a major satellite maker, Loral Space and Communications, defending them against US government charges that they had illegally transferred advanced military technology to the Chinese government. In January 2002, Loral, without admitting any violation, agreed to pay a $20 million penalty. More recently, Perle has been lobbying the department of defence on behalf of Global Crossing, the bankrupt telecommunications giant, to persuade the defence department to drop its objections to a proposed sale of its fibre optics network to foreign buyers in Hong Kong and Singapore. Perle stands to make up to $725,000 for this work. (New York Times, Richard Perle’s Conflict, 25 March) He is also a partner in Trireme Partners who invest in Homeland Defense, and a director of the British-based Autonomy Corporation, which has a large US government security contract. Although his Pentagon position is unpaid, Perle is nevertheless considered a ‘special government employee’ subject to federal ethics rules. Following criticism of his business deals, Perle announced (28 March) that he would resign as chairman of the Defense Policy Board, but he nevertheless remains a member of the board. (New York Times, 29 March)

Garner will play a key role in the awarding and supervision of reconstruction contracts. Yet the Bush regime sees no ‘conflict of interest’ involved in Garner’s appointment as viceroy, despite his big-business connections with the armaments industry. After the first Gulf war, Garner was responsible for three months for feeding and protecting Kurdish refugees in Northern Iraq. He was reportedly very popular, which is not surprising given that the US, for its own reasons, was establishing an autonomous Kurdish region. In the present situation, however, his appointment as US ‘viceroy’ will arouse resentment and anger amongst Iraqis and Arab opinion throughout the Middle East.

Washington insists that Garner’s ‘Office’ will provide a ‘temporary’ government for Iraq, but it more and more appears to be an apparatus for US direct rule. The government will comprise 23 ministries, each headed by a US administrator (mainly ex-diplomats and business leaders who share the hawk outlook) assisted by Iraqi advisors. Leaders of both the Kurdistan Democratic Party and the Iraqi National Accord (INA) have denounced the US plans as unworkable. (Guardian, 2 April)

After a frosty meeting between Garner and senior UN officials in early March, one UN official commented: "It is clear that Rumsfeld, Cheney and the rest have the ascendancy and think, having gone it alone in the war, they should get the benefit of being seen as liberators. Garner is their man. He is a true believer". "It is common knowledge", he added, "that they want to go it alone without the UN".

The ‘true believer’, however, has become caught up in a bitter conflict between the Pentagon and the State Department over the composition of Garner’s interim government. Determined to keep direct control of ‘reconstruction’ of Iraq, Rumsfeld and company have vetoed the State Department’s nominees as, according to Rumsfeld, "too low profile and bureaucratic". They have put forward counter proposals, including the former CIA director, James Woolsey, as director of information. Even Bush, it seems, may balk at this. Wolfowitz is pushing for Hamed Chalabi, leader of the CIA-created Iraqi National Congress, and a number of his entourage to be given positions. Chalabi is apparently to be offered an advisory post in the finance ministry, despite the fact that he was previously convicted in his absence of a multi-million dollar banking fraud in Jordan. (Guardian, 2 April) Chalabi, however, who was ambitious to become Iraqi prime minister after the fall of Saddam, is far from pleased and is threatening to set up his own rival government.

The black-gold rush

US-DIRECTED RECONSTRUCTION, under Garner’s government, will be funded from Iraqi oil revenues. Powell recently said: "We’re going to use the assets of the people of Iraq, especially their oil assets, to benefit their people". (New York Times, 24 March) The distribution of initial reconstruction contracts, however, points to the way the Iraqi oil industry is likely to go under US domination. According to a recent study, "Iraq’s oil sector will sector will require $5 billion in investment over three years to return it to pre-1991 production levels… That would jump to $15 billion to achieve full production levels". (Companies Start Discreet Lobbying for a Tilt at Contracts, Financial Times, 21 March)

Who can doubt that US oil companies will be allowed to grab the lion’s share of Iraq’s oil wealth? James Woolsey, the former CIA director, blatantly stated last year that those supporting the US-led ‘coalition’ would get a share of the spoils while those who refuse would be shut out. The close connections between the Bush leadership, as well as the right-wing Texas Republican establishment, with the big oil and gas corporations is notorious.

Leaks from the State Department’s ‘Future of Iraq Office’ show Washington plans to privatise the Iraqi economy and particularly the state-owned national oil company. (Jonathan Steele, Read the Small Print: The US Wants to Privatise Iraq’s Oil, Guardian, 31 March) First they intend to privatise retail petrol stations, a quick way of raking in cash from Iraqi consumers. Then they aim to privatise exploration and development. Oil revenues would no doubt be used to fund reconstruction. But a huge share of the wealth would be channelled off into profits for private, mainly US companies.

The experience of energy privatisation in Russia after the collapse of the Soviet Union is a warning of the way things are likely to go. A new class of oil capitalists pumped huge profits from the oil and gas fields, depositing most of their gains in offshore bank accounts. Russia’s huge energy resources have contributed very little to the modernisation of the economy and have far from ‘reconstructed’ the living standards of a majority of people. Russia’s gross domestic product, writes Joseph Stiglitz, the ex-Chief Economist of the World Bank, "remains almost 30% below what it was in 1990. At 4% growth per annum, it will take Russia’s economy another decade to get back to where it was when communism collapsed". (Guardian, 9 April)

The Iraqi people have enjoyed minimal benefits from the country’s oil wealth, especially in the last 20 years. Before nationalisation, profits were creamed off by British and other Western oil companies. After nationalisation, proceeds were used by the Baathist state to create a huge military apparatus and support the prestige projects and luxurious lifestyle of Saddam and his ruling clique. For the last ten years the majority of Iraqis have struggled to survive on the meagre rations allowed by the Western powers under the UN’s food-for-oil programme.

Oil will only become an ‘asset for the Iraqi people’ as a nationalised industry run under democratic control. Through state control Saddam squandered the oil wealth. Privatisation, with takeover by US and other foreign oil companies, would be a return to the most blatant form of neo-colonial exploitation. Oil should be used as the foundation for the planned development of the whole economy under the democratic ownership and control of the Iraqi people. That is the only way in which energy will become (in Blair’s words at his Azores summit with Bush and Aznar) a "national asset of and for the Iraqi people".


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