The Great Iraq Heist



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 unem- ployed. 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.