[news] Fwd: POSTWAR IRAQ: A SHOWCASE FOR PRIVATIZATION?

[Gordon Flett]

From: John <jfos at net-tech.com.au> 
============================================================

Corporate Research E-Letter EXTRA - April 3, 2003 

POSTWAR IRAQ: A SHOWCASE FOR PRIVATIZATION? 

By Philip Mattera 

Earlier this week, U.S. military officials came up with a solution to
the chaos surrounding the distribution of water to civilians in the
Iraqi port of Umm Qasr: They are providing water free to locals with
tanker trucks, who are being allowed to sell the precious liquid for a
"reasonable" fee. "This provides them with an incentive to hustle and to
work," an Army commander told a reporter for the New York Daily News. 

This transfer of a public good to private hands may be an initial small
step in what could be widespread privatization in Iraq after the war is
over. A number of conservative think tank denizens and other analysts
have been arguing for months that the post-Saddam Hussein economy should
be restructured according to the principles of Milton Friedman. 

Just last week, Robert McFarlane, National Security Adviser during the
Reagan Administration, and Michael Bleyzer, chief executive of an equity
fund management company, published an op-ed in the Wall Street Journal
headlined "Taking Iraq Private." The two men argued that "the U.S. and
its allies would be well advised to put together a team of private
sector business leaders as a 'steering committee' to supervise and
monitor" economic restructuring. 

An explicit call for privatization, rather than simply private
investment, was issued last fall at a conference convened by the
right-wing Heritage Foundation. In a paper presented at that conference
(and revised last month), Ariel Cohen and Gerald O'Driscoll wrote: "To
rehabilitate and modernize its economy, a post-Saddam government will
need to move simultaneously on a number of economic policy fronts,
utilizing the experience of privatization campaigns and structural
reform in other countries." The authors go on to assert what they call
Lesson No. 1: "Privatization Works Everywhere." 

Back in September, the U.S. State Department's Washington File website
gave a full account of the discussion at the Heritage meeting, quoting
Cohen as saying that at the top of his list of recommendations was "a
modern legal environment that recognizes property rights, which are now
non-existent in Iraq, and is conducive to privatization." 

As with other Iraq matters, the U.S. calls for privatization have been
echoed in Britain. Last month, the free market-loving Adam Smith
Institute issued a paper titled "Toward an Economic and Governance
Agenda for a New Iraq." One section of the document starts out with the
declaration: "Privatisation is a sine qua non for successful reform in
Iraq." The authors go on to say, "In Iraq there is much to privatise, as
a considerable portion of the economy is state-owned." Among the sectors
that should be up for grabs, they suggest, are mining, chemicals and
construction. 

PLAYING DOWN THE BUSINESS BOON 

Since the war began, the Bush Administration has avoided talking about
the business boon being created in Iraq for U.S. and other foreign
corporations. Yet it has taken steps such as awarding a contract to
operate the port in Umm Qasr to a private company, Stevedoring Services
of America. Another contract, for technical assistance to the
reconstruction effort, has been given to the International Resources
Group, which will share the work with U.K. subcontractor Crown Agents,
which is itself the product of the privatization of a British
development assistance agency. 

The U.S. Agency for International Development, which is coordinating the
reconstruction plans, gave about half a dozen large U.S.-based
engineering companies an exclusive right to bid on the main contract for
infrastructure work. According to various press reports, the leading
contenders for that contract are Bechtel Corp. and Parsons Corp. The
latter is said to have taken on Halliburton Co.'s Kellogg Brown & Root
unit as a subcontractor after Halliburton was eliminated as a primary
bidder, apparently because of controversy surrounding the company's ties
to Vice President Cheney. 

What's significant about Bechtel and Parsons is that both companies, in
addition to their main construction units, have operations engaged in
privatization activities in the United States and elsewhere. Bechtel is
a leading player in water system privatization, ranking just behind the
big three -- Suez, Vivendi Universal and RWE/ Thames Water -- in that
controversial business. A subsidiary of Bechtel was forced to abandon
its operations in Cochabamba, Bolivia, in the wake of a popular uprising
over massive water rate hikes. Bechtel is now suing Bolivia for $25
million in compensation through a secret World Bank tribunal. 

Parsons performs privatization feasibility studies and sometimes takes
on the projects itself. The most notorious instance of the latter is the
company's role in privatizing the auto inspection system in New Jersey.
That project, worth more than $500 million, has been marked by charges
of inefficiency and excessive costs. Parsons was the sole bidder on the
contract, which was awarded in the late 1990s by the administration of
Gov. Christie Whitman, who is now serving as head of the U.S.
Environmental Protection Agency. 

It's clear that there are a lot more business opportunities to be had in
Iraq. The Bush Administration is reported to have convened around ten
task forces to plan the transformation of everything from agriculture to
banking. U.S. companies are expected to receive contracts to restructure
and operate facilities such as airports, schools and hospitals. 

THE BIG PRIZE 

The big prize, of course, is oil. There's no doubt that foreign
companies will be called in to operate Iraq's petroleum system after the
war; the question is whether they will remain in place indefinitely and
perhaps even have an ownership interest. Some people seem to think that
should be the case. In December, the authors of the Heritage Foundation
report published an article in the online version of the
arch-conservative National Review that was headlined PRIVATIZE IRAQI
OIL. The Los Angeles Times reported in February that a State Department
advisory panel of exiled Iraqi petroleum professionals recommended
privatization of the country's oil resources, but only after U.S.
military administration has been replaced by a new sovereign government. 

The Bush Administration has tended to speak in platitudes about using
oil revenues to benefit the Iraqi people, but it is significant that the
person reported to have been chosen to oversee postwar oil production is
a former chief executive officer of Shell Oil Company. Philip Carroll
also worked as chief executive for Fluor Corp., one of the big
engineering companies that had been invited to bid on the main
reconstruction contract. 

Carroll's potential conflicts of interest are not the biggest problem
for the Bush Administration in its plans for postwar oil exploitation.
The Washington Post is reporting today that United Nations and British
officials are arguing that the U.S. would not have the legal authority
to take over Iraq's oil operations, even on an interim basis, without a
new Security Council mandate, given the fact that those operations have
been under the supervision of the U.N.'s oil-for-food program. 

In January, Platt's Oilgram News reported that a 1976 State Department
Memorandum of Law, written after Israel had taken control of Sinai oil
fields originally developed by Egypt, had concluded that international
law did not support the right of an occupying power to grant an oil
development concession. It would not be surprising to learn that the
State Department is now seeking a new legal opinion. 

To the victor go the spoils, it is said. In the case of this war, the
spoils will be going to the victor's business allies as they bring a
distinctly corporate form of liberation to the people of Iraq. 

------------------------------------
Philip Mattera 
Director of the Corporate Research Project Good Jobs First 
1311 L Street NW Washington, DC 20005 
(202) 626-3780 ext. 32   fax (202) 638-3486 pmattera at ctj.org
http://www.corp-research.org 


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