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 CPA."

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 to boot.

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 investor. "

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 being made.

* $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 Iraq.

* $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 with weapons.

* $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 sale.

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 honor.

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