The Great Iraq Heist
The Iraqis are paying for
the war waged against them
by A.K. Gupta
Z magazine, January 2004
Forget for a moment about quagmire, the
growing heaps of U.S. and Iraqi dead, and the rebellious population.
George Bush, Paul Bremer, and gang have pulled off the biggest
heist in history. They and no one else own 100 billion barrels
of crude oil-a windfall of at least $3 trillion-along with the
entire assets and resources of Iraq.
Since March 2003, a series of executive
orders by Bush, UN documents, and regulations and orders issued
by Iraqi Proconsol Paul Bremer have put the U.S. in absolute control
of the state of Iraq, its oil industry and monies, all while lifting
barriers to repatriating profits.
In the name of reconstruction and security,
the Bush administration has essentially granted itself the power
to use the wealth of the Iraqi people as it sees fit. Never mind
that the new "fiscal matrix" in Iraq violates international
law: a fact of little concern to the White House when the war
was illegal to begin with.
The largest contracts have gone to corporations
like Halliburton, Bechtel, and Fluor, which are big contributors
to the Republicans and now enjoy oversight of their Iraq activities
by former executives who now sit in the Bush administration. Furthermore,
Bush has given the corporate victors the ultimate protection:
indemnifying them from liability for any and all activities related
to Iraqi oil.
To top it all off, the Coalition Provisional
Authority in Iraq is using money from oil sales to help pay for
the counterinsurgency campaign. So not only are U.S. corporations
reaping billions off the conflict in sweetheart deals with legal
impunity, but Iraqis are being forced to pay for the very war
being waged against them.
The story begins in February 2003 when
the U.S. Agency for International Development secretly asked six
companies to bid on a reconstruction contract worth, at minimum,
$900 million. The six-Bechtel, Fluor, Halliburton subsidiary Kellogg,
Brown & Root, Louis Berger Group, Parsons, and Washington
Group International-were all generous supporters of the Republicans,
having given them a combined $2.3 million between 1999 and 2002.
As the war was launched, Bush issued Executive
Order 13290 on March 20. It mandates the confiscation of "certain
property of the Government of Iraq and its agencies, instrumentalities,
or controlled entities, and that all right, title, and interest
in any property so confiscated should vest in the Department of
the Treasury." Practically, this means the Bush administration
seizes $1.7 billion in Iraqi funds.
On March 24, the Army Corps of Engineers
awarded a no-bid contract to Kellogg Brown & Root to fight
oil fires and assess and repair Iraq's oil infrastructure. Two
days after U.S. forces toppled Saddam Hussein's statue in Baghdad,
the Corps mentions KBR's contract has a ceiling of $7 billion.
To pay for the war, Congress passed a
$78.5 billion bill on April 14, setting aside $2.5 billion for
the creation of an Iraq Relief and Reconstruction Fund
On April 17, USAID awarded Bechtel a $680
million contract to rebuild everything in Iraq-power plants, water
and sewage systems, airports, seaports, hospitals, schools, government
buildings, irrigation structures, and transport links.
On May 8, one week after Bush's carrier
landing that marked the end of "combat operations,"
the UN ambassadors from the United Kingdom and United States sent
a letter to the Security Council establishing their governments'
authority over Iraq. They listed among their many tasks "deterring
hostilities [and] maintaining civil law and order."
The battered United Nations passed Resolution
1483 on May 22, endorsing the "specific authorities, responsibilities,
and obligations" of the United States and United Kingdom
as "occupying powers," and specifically citing the May
8 letter. The Resolution notes the "establishment of a Development
Fund for Iraq to be held by the Central Bank of Iraq" and
decides that 95 percent of "all export sales of petroleum,
petroleum products, and natural gas from Iraq... shall be deposited
into the Development Fund for Iraq." For start-up, the UN
bequeaths the Fund with $1 billion from the Oil-for-Food program.
As for the Fund, Resolution 1483 notes
the monies "shall be disbursed at the direction of the Authority,"
meaning Paul Bremer, who was appointed Administrator 16 days earlier.
Bremer for his part is perched in Baghdad's
Republican Palace issuing Regulations, "instruments that
define the institutions and authorities of the Coalition Provisional
Authority," and Orders, "binding instructions or directives
to the Iraqi people that create penal consequences or have a direct
bearing on the way Iraqis are regulated."
Regulation One established Bremer's absolute
authority in Iraq as CPA Administrator effective May 16, 2003.
Regulation Two concerns the Development Fund. It defined the Administrator
as the one who "Oversees and controls the establishment,
administration and control of the Fund for and on behalf of the
Iraqi people, and directs disbursements from the Fund. "
It cited Resolution 1483 in noting, "The
Development Fund for Iraq shall be used in a transparent manner
to meet the humanitarian needs of the Iraqi people, for the economic
reconstruction and repair of Iraq's infrastructure, for the continued
disarmament of Iraq, and for the costs of Iraqi civilian administration.
In direction violation of UN Resolution
1483, Bremer mandated that the Fund "shall be held in an
account...in the [U.S.] Federal Reserve Bank." The United
Nations had intended that the money go directly to the Central
Bank of Iraq.
Bremer signed Regulation Three into effect
on June 15 setting up the Program Review Board. It states: "The
Board shall be responsible for recommending expenditures of resources
from the Development Fund for Iraq" and all the other funds
provided to the CPA, such as the various monies from Iraq seized
by the Bush administration and funds provided for by Congress.
On the same day UN resolution 1483 passed,
May 22, Bush signed Executive Order 13303 granting blanket immunity
to any U. S. corporation dealing with Iraqi oil through 2007.
Researcher Jim Vallette, who stumbled across the order in the
Federal Register, says it "unilaterally declares Iraqi oil
to be the unassailable province of U.S. corporations.... In other
words, if ExxonMobil or ChevronTexaco touch Iraqi oil, it will
be immune from legal proceedings in the United States. "
On May 25 Bremer issued Order Four. After
"Recognizing that the assets and property of the Iraqi Baath
Party constitute State assets," Bremer ordered that Baath
Party assets and property "are subject to seizure by the
So in a little more than two months the
Bush administration staked claim to and received UN approval to
every significant asset and resource Iraq has in the world, established
sole power over how to spend Iraq's oil money, and indemnifies
its corporate cronies from liability.
But the work had just begun. During the
next few months, as the resistance heated up, Bremer fulfilled
the wildest dreams of every capitalist by eliminating virtually
all barriers to the flow of capital and throwing in a flat tax
The plan was actually outlined in a secret
USAID document issued February 21 and later leaked to the media.
Entitled, "Moving the Iraqi Economy from Recovery to Sustainable
Growth," it calls for "mass privatization" of state-owned
enterprises, trade liberalization, changing laws to favor the
"repatriation of capital" and foreign investment in
Iraq, and shifting the tax burden from business to consumers.
In a move that hardly bodes well for sustainable
growth, Bremer issued CPA Order 12 on June 8, which lifts "All
tariffs, custom duties, import taxes, licensing fees and similar
surcharges for goods entering or leaving Iraq. "
The order unleashed a flood of imported
goods that left Iraq's worn-out manufacturers unable to compete,
pushing them to the brink of insolvency. As for state-owned enterprises,
which employ about 100,000 workers, Bremer decided it was better
to pay the workers to sit around and do nothing than breed more
anti-American sentiment by eliminating their jobs. Even then,
in a guide for the 2004 budget, the CPA warned the enterprises
that their budgets "should be prepared on the basis that
the salaries of employees of SOEs will not be funded from January
1, 2004. "
On June 19 the Export-Import Bank of the
United States announced it is "prepared to immediately start
processing applications for exports to Iraq," including "subcontractors
providing goods and services to Iraq under USAID contracts."
The Ex-Im Bank (as it's called) went on to explain "support
may be available for transactions where...the primary source of
repayment is the Development Fund for Iraq, or another entity
established under the auspices of the Coalition Provisional Authority."
The sole purpose of the Ex-Im Bank is
to help "finance the sales of U.S. exports, primarily to
developing markets, by providing guarantees, export credit insurance,
and loans." Thus, in the case of Iraq, the Bank will provide
credit for purchases for goods and services authorized by Bremer-including
all of Bechtel and Halliburton's contracts.
This is amplified by CPA Order 20 from
July 17 establishing the Trade Bank of Iraq. Its purpose is to
provide "financial and related services to facilitate the
importation and exportation of goods and services to and from
Iraq." Money to support the trade bank comes from Iraq's
oil money, yet another instance of public monies being used unaccountably
for private profit.
In the same order Bremer bestowed upon
himself the power to "promulgate additional regulations,
orders, memoranda or other documentation that further define the
purpose of the DFI." This is legalese for Bremer saying he
can do whatever he wants with the fund.
Bush issued Executive Order 13315 on August
28, deeming "that it is in the interest of the United States
to confiscate certain additional property of the former Iraqi
regime, certain senior officials of the former regime, immediate
family members of those officials, and controlled entities."
Essentially this allows the Bush administration to nab whatever
Iraqi money it hasn't already laid its hands on.
Bremer gave corporations another gift
in Order 37 by instituting a flat tax. He decreed on September
15, "The highest individual and corporate income tax rates
for 2004 and subsequent years shall not exceed 15 percent."
This also implies that the tax could be set much lower as 15 percent
is just the ceiling.
On September 19 Bremer issued Order 39
on Foreign Investment. In a stroke, Bremer wrote, "This Order
replaces all existing foreign investment law." All sectors
of the economy apart from oil and gas are opened to foreigners
"on terms no less favorable than those applicable to an Iraqi
Iraq went from having one of the most
closed economies in the world to one of the most open. A press
release dated September 21 from Iraqi Minister of Finance Kamel
al-Gailani enthusiastically lists among the law's new provisions
the "full and immediate remittance of profits, dividends,
interest and royalties. "
The neoliberal wish list was now complete.
Even as U.S. forces struggle to establish a security matrix to
contain the growing Iraqi insurgency, Bush and Bremer have put
in place a fiscal matrix to extract Iraq's enormous riches unhindered.
Precisely what were Paul Bremer and the
Coalition Provisional Authority doing with all the money they've
been allocated? That's a $160 billion question (and counting).
Congress appropriated around $150 billion for the war and reconstruction
in Iraq. Of that, the CPA has received some $3 billion in two
separate funds-the Relief and Reconstruction Fund and a Natural
Resource Fund. Another $20 billion is on the way for 2004.
On its website, the CPA has released bits
of information on expenditures (and even less on how decisions
were made). This lack of transparency has led to widespread criticism.
In a scathing report dated October 23, British NGO Christian Aid
charged, "The billions of dollars of oil money that has already
been transferred to the U.S.-controlled Coalition Provisional
Authority has effectively disappeared into a financial black hole.
The CPA has so far received $5 billion
in Iraqi money and is expected to add another $4 billion by the
end of the year. Bremer released a budget on July 7 for July to
December 2003 that called for $6.1 billion in expenditures and
forecasted a $2.2 billion deficit. By October the deficit was
up to $3 billion due to the shortfall in oil revenues from resistance
attacks. But only $2.6 billion of the budget will be channeled
through the Iraqi ministries.
The budget lumps together the U.S. and
Iraqi funds as revenue sources. The CPA also subtracts out $1.2
billion for prior expenditures without ever explaining what they
were. It mentions in a footnote that some $900 million will be
funded off line. All told, $5.5 billion remains unaccounted for.
Nonetheless, revealing information can
be gleaned from official documents and media reports. An examination
of expenditures reveals Bremer is lavish to foreign contractors
while miserly to Iraqis. Since coming under fire, the CPA has
released some data on what it's doing with Iraq's oil money, but
it has refused to establish proper auditing oversight as mandated
in UN Resolution 1483, so it's still unknown how decisions are
* $120 million was spent on a new Iraqi
currency despite the fact that Iraq has a currency press. This
decision is typical of the CPA process.
Rather than repair the dilapidated and looted Baghdad mint so
the country can retain valuable infrastructure and jobs, the job
is outsourced to British security company De La Rue, which prints
the currency of 125 nations. It also happens to be one of the
largest owners of electronic voting machines in the United States
and is linked to the Carlyle Group, which is thick with former
officials from the Reagan and first Bush administration.
* $105 million has been given to U.S.
military commanders under the "Commanders Emergency Response
Program." Officially, the program is part of the "reconstruction"
effort, but it's being used as an integral component in the guerrilla
war. A commander in the volatile town of Ramadi says "Contracts
are our No. 1 method of control." Lt. Col. Hector Mirabile
explained to Newsweek that after a resistance attack, he'll pressure
local leaders to provide information or he'll reduce their contracts.
The commander of the 101st Airborne, echoes this sentiment, saying,
"Money is the most powerful ammunition we have." But
numerous criticisms are being raised. For one there is little
oversight and most of the contracts are no-bid. Second, few of
the military commanders have the technical skills to properly
evaluate bids. Third, it blurs the line between combat and humanitarian
aid, which many NGOs say put aid organizations at greater risk
of attack-something that has been devastatingly true in Iraq.
Most troubling, it seems U.S. forces are using Iraqis' own money
to pressure them into collaborating with the occupation.
* $51 million is approved for a program
called Toward a Cleaner & Brighter Iraq-a public works project
to employ 300,000 people at $3 a day to clean streets and haul
away debris. The money goes to local subcontractors, however,
who skim $1 off the top and fire those workers who complain.
* $51 million is approved to ship the
new currency to and distribute it within Iraq. It's unclear why
so much money is needed to distribute the bills to 250 "centers,"
mainly banks. Even though the media report heavily armed U.S.
troops guarding the exchanges, other security guards are also
present delivering the bills. It turns out millions are being
spent on foreign mercenaries, many of them former British and
American soldiers, to guard the money. The foreign guns in Iraq
cost up to $1,500 a day whereas Iraqi forces being trained by
the U.S. receive as little as $5 a day. Even the $51 million is
not enough; CPA officials approved another $9 million on October
21 to cover "additional transportation and support costs."
(Adding insult to irony, CPA officials decided on October 28 to
use Iraq's oil fund to pay the cost of shipping Iraq's money back
to Iraq after having deposited the oil money in the Federal Reserve
Bank of New York-in violation of UN Resolution 1483.)
* $2.4 million has been set aside for
new Kalishnakovs. U.S. forces have seized huge caches of assault
rifles, including tens of thousands of new AK-47s in Tikrit alone,
according to a report in the LA Times. But the CPA decided to
purchase 40,000 rifles anyway. It's suspected that the winner
is a Polish company as a way to reward Poland for leading a multinational
division in Iraq.
* $250 million a month is allocated to
import fuels into oil-rich Iraq. The failure of the CPA to reconstruct
Iraq has led to fuel shortages-gasoline, diesel, and cooking gas.
Congressperson Henry Waxman accused Halliburton with price gouging
for charging up to $2.62 a gallon whereas Iraqis pay less than
$.15 a gallon for the same gas.
* $23 million has been budgeted to rebuild
a cement factory. Instead, Iraqis did it for barely 1 percent
of the cost, about $250,000. The CPA also budgeted more than $1
million to rebuild another cement factory that was fixed by Iraqis
for just $80,000. (The interest in cement is for huge blast barriers
to ring occupation facilities. )
It's estimated there are 20,000 private
contractors in Iraq supporting the occupation, including thousands
of former Special Forces soldiers. Some are guarding Baghdad Airport
under a $17 million contract. Others from the British mercenary
company Erinys are training members of the Facilities Protection
Services to protect oil pipelines under a $45 million Contract.
The biggest mercenary contract was landed by DynCorp, worth $480
million for training a new police force. Even the moribund Iraqi
Governing Council was outraged when it was revealed that training
will occur in Jordan, ensuring Iraq receives no economic benefits
from the funds. Huge sums of money are also being spent to equip
new Iraqi militias:
* $8 million was approved just for emergency
equipment for the new border patrol by the CPA on October 18.
In the 2003 budget $81 million was allocated for "Security
equipment for operating new prisons." This doesn't include
tens of millions in "life support" or recruiting costs
for the militias as well as millions for the repair and reconstruction
of prison facilities, one of the few boom industries in the new
* $90 million has been set aside for police
equipment, including millions for 9mm Glocks. Yet the months-long
process in shipping and distributing goods in Iraq means that
many Iraqi police remain unarmed even as the country is awash
* $12 million was allotted to purchase
10,000 police radios at a princely $1,200 per unit approved by
the CPA on October 11.
As for projects that might truly benefit
Iraqis, the allocations are peanuts in many cases, such as $118,200
for housing and construction in Basrah, $3,500 to pay the stipends
for a Baghdad theater festival, or $400,000 for the Ministry of
Youth and Sports.
What makes Iraqis especially indignant
is that theirs is a nation of engineers and scientists who are
left to watch as the billions in reconstruction funds go outside
their country. During Iraq's heyday in the 1970s Iraqis were known
as the Germans of the Middle East for their technical prowess.
Bechtel, for example, has an omnibus contract
for reconstruction, but has only provided jobs for 40,000 Iraqis
through subcontractors. This doesn't even make the barest dent
in the 70 percent unemployment rate, which has left about 5 million
Iraqis unemployed. Rather than rebuild Iraq's infrastructure so
it can be independent (and likely an economic powerhouse in the
region), the Bush plan is to sell Iraq's assets off like a fire
Iraqis can see that their country is being
divided among the victors and that the only reconstruction taking
place is projects that serve U.S. security interests. That's what's
fueling the resistance, not Saddam loyalists or tribal codes of
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