And now for the really big guns
War is one thing, but can Iraq
survive full-on assault by Wall Street?
" Most of the US companies
contracted or bidding to open up those free markets happen to
enjoy direct or indirect connections to members of the Bush
administration."
Ed Vulliamy and Faisal Islam report
Sunday June 29, 2003
The Observer
After the war, the corporate invasion. Bechtel, the US
construction giant, now leads the rebuilding of Iraq's
infrastructure with the chutzpah of a twenty-first century East
India Company. Yet other invasions are planned for Iraq over the
coming months - in the shape of oil concessions, health
privatisation plans and even mobile phone licences.
Despite the worsening security situation, the White House and
Pentagon are marshalling these corporate battalions into Iraq -
insurance companies, construction firms, commercial health
managers and behemoth banks - in the name of free enterprise.
The project: to privatise Iraq, a country where 30 per cent of the
workforce is employed by the state, and the population is used
to food rations and cheap petrol.
Paul Bremer, the US civilian administrator in Iraq, spent most of
his time last week at theWorld Economic Forum in Amman,
Jordan, talking economics. Bremer is a veteran of Reagan-era
diplomacy. Critics wonder if he plans to bring Reaganomics to
the Middle East.
Amnesty International has warned that the 'occupying powers
must make an explicit commitment to involving Iraqis in
decision-making related to reconstruction. Iraqis themselves,
ideally through representative institutions, ought to make
decisions on rebuilding, on foreign investment, and on the selling
of state assets'.
The 'invasion' is an ideological as well as commercial enterprise.
George Bush has said that he envisions a 'US-Middle East
free-trade area' within 10 years, 'replacing corruption and self
dealing with free markets'. Most of the US companies
contracted or bidding to open up those free markets happen to
enjoy direct or indirect connections to members of the Bush
administration. The US has, meanwhile, drafted sweeping plans
to establish a free-market economy in Iraq, including
privatisation of state-owned industries and the formation of a
stock market.
In a leader article in the Wall Street Journal last month Defence
Secretary Donald Rumsfeld pledged the US's determination to
pursue policies that 'favour market systems' and 'encourage
moves to privatise state-owned enterprises'.
British officials are a little more circumspect, suggesting Iraqis
must decide for themselves.
The American government's development agency, USAID, has
said it will spend $1.7 billion (£1bn) on reconstruction in Iraq.
But the battered nation's damaged infrastructure will need,
according to US Treasury estimates, somewhere between
$25-$60bn. Some independent analysts have said that an
investment of $200bn would be needed to convert the former
state infrastucture, now largely dilapidated or destroyed, into a
market economy.
Washington is abuzz with corporate lobbyists and trade
lawyers, business consortia and US-approved Iraqi exiles,
preparing for the next phase: the all-private corporate scramble
for Iraq beyond even the Pentagon's system of contract
favouritism.
The US Treasury joined a group of companies at a forum on May
Day which was organised by the Centre for Strategic and
International Studies in Washington. John Taylor, Under
Secretary for International Affairs, assured his audience there
that it was 'very important to get a good system of rule [of] law,
and property rights, in a way very conducive to foreign
investment'. One of the first targets, added Taylor, would be the
oil-for-food programme.
Standing to the fore in the preparations of the economic ground
are the neo-conservatives, who have been planning the invasion
of Iraq for a decade. They are led by Richard Perle - who was
chairman of the powerful Defence Policy Board until recently
when he had to resign over a conflict of interest - and the former
CIA chief James Woolsey.
'We have a responsibility, a stewardship,' Perle told a forum of
the American Enterprise Institute, 'not to turn [Iraq] over to
institutions incapable of seeing this through to a successful
conclusion ... the last thing the Iraqis need is French statism or
German labour practices.'
Woolsey told a conference organised by the consulting firm
Booz Allen Hamilton: 'The United States is going to do this
alone.' In his audience were executives from Halliburton (of
which Vice President Dick Cheney was CEO until he took office
in 2001), as well as from Kellogg Brown Root (the Haliburton
subsidiary already handsomely contracted in Iraq), the
construction giant Babcock International, and Goldman Sachs.
The military contractor DynCorpa, also present, was already
signed up for a $50m contract to organise law enforcement in
Iraq.
Both Perle and Woolsey have a direct commercial interest in
America's 'war on terrorism'. Woolsey is a principal of the
Paladin Capital Group, which invests in companies specialising
in anti-terrorist equipment. Perle has many ties to firms that
consult on security issues. And, for all the shambles that is
present-day Iraq, America's banks are aggressively pursuing
what they see as a lucrative role in rebuilding Iraq's financial
system.
All the big guns in finance - Citigroup, JP Morgan Chase, and
the Bank of America Corporation - have been conferring with
Treasury department officials over the past month. The head of
the Office of the Coalition Provisional Authority, Paul Bremer,
has sent out what USAID calls 'requests for proposals' to most
large US banks on how to develop privatisation.
The rush for Iraqi contracts stands in sharp contrast to what
happened in post-conflict Afghanistan. Eighteen months on, only
one foreign bank, Standard Chartered, has opened up shop
there.
The lubricant is 112 billion barrels of crude oil that Iraq is known
to possess in its reserves, providing the certainty of hard
currency repayment that the Afghan economy, with its
dependence on the opium poppy, could never match.
Unsurprising, then, that influential Washington voices are
pushing for more certainty on the proceeds of oil sales. The US
government Export-Import Bank is pushing for a sale of Iraq's oil
production to fund the infrastructure payments. It is backed by
the Coalition for Employment Through Trade, a group that
lobbies on behalf of Halliburton, Bechtel and ChevronTexaco,
among other large corporates.
This securitisation of oil sales would help bridge the funding gap
and weaken the reliance of the US and UK on other funding
sources. It is being considered by the Pentagon and State
Department.
British officials point to the difficulty of Iraq taking on further
debts when it already owes at least $60bn to other countries.
The plan would also be deeply controversial, and likely to be
seen as a sell-off of Iraq's oil over the next decade to fund the
profits of a clutch of American corporations that have close links
to the Pentagon.
Although its brief is a military one, the Pentagon - which at
present governs Iraq and anyway plays an ever-more prevalent
role in US foreign and economic policy - has recruited its own
team of special advisers to brief on the speedy privatisation of
Iraq's nationalised industries.
Leading the team advising the US military is Martin Hoffman, a
former army secretary and general counsel to the Pentagon,
who is best known to Americans as Rumsfeld's former college
friend. Hoffman had urged the Defence Secretary to recruit
former executives of the disgraced Enron corporation to act as
consultants to the armed services. Hoffman is also now
chairman of the board of Miretek Systems, a firm that does
contract work for the Pentagon.
Backing him is the Ukrainian-American Michael Bleyzer, himself
a former Enron executive, who wrote an industrial manifesto in
the Wall Street Journal entitled Taking Iraq Private.
What the pair are in essence trying to do is prise the
management of Iraq's privatisation away from USAID and directly
into the private sector.
They have powerful allies. In April, former House speaker and a
close friend of Rumsfeld, Newt Gingrich, attacked USAID's
efforts in Afghanistan as 'an absolute failure of American
entrepreneurial efforts'.
Bleyzer said recently: 'What I'd like to see over the next 10
years is totally rebuilding Iraq, and that means a market
economy.'
Iraq, he added, 'would have a much better business environment
if BP or Exxon-Mobil or Shell could invest'. He said: 'We want to
set up a business environment where global companies like
Coca Cola and McDonald's could come in and create a
diversified economy not dependent on oil.'
He has a point about diversification. Black gold has been a
curse rather than a blessing for those countries that sit on
reserves. The presence of oil has invited relentless colonial
interference, funded dictatorships, and often promoted religious
obscurantism.
In economic terms, oil economy status plays havoc with
currencies and budgets. Reliance on crude can also stifle the
incentive to create other sorts of businesses, according to a
recent World Bank study of the Middle East and North Africa
region.
The existing US plans for Iraq's economic diversification appear
to owe more to corporate contractors than to the interests of the
country's people.
Kellogg Brown Root was awarded control of Iraq's oil fields
ahead of the war under a no-bid contract. After the war, the
Pentagon itself awarded the giant MCI a $45m deal to build a
mobile telecoms system - despite the involvement of MCI, as
WorldCom, in the biggest corporate fraud in business history.
Russia discovered in the 1990s that an enterprise economy
cannot just be created out of thin air. Free market 'shock
therapy' there led to mass unemployment, industrial collapse
and an oligarchy that pillaged its natural resources. Before free
markets and privatisations emerge, an economy requires the
setting up of strong judicial institutions.
Even the East India Company was aware of that.
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