[news] No money, no play: US on the brink in Iraq

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From: shniad at sfu.ca
To: shniad at sfu.ca
Subject: [pr-x] No money, no play: US on the brink in Iraq
Date: Fri, 10 Oct 2003 16:03:52 -0700

http://www.atimes.com/atimes/Middle_East/EJ10Ak01.html

Asia Times	October 10, 2003 

No money, no play: US on the brink in Iraq 

By Herbert Docena 

Bangkok - This coming October 23 to 24, the United States will be sitting
down with rich creditor countries, the International Monetary Fund (IMF) and
the World Bank (WB) during an international donors' conference on Iraq in
Madrid. The IMF, the World Bank and the UN have estimated that Iraq will
need US$36 billion for reconstruction within the next four years, in
addition to $19 billion for other nonmilitary needs calculated by the
American occupation regime. [1] With few options left, the US will be
passing the hat. 

This meeting could be a turning point in the occupation because whether the
hat goes back to the US full or not will determine whether the US can afford
to stay. The decision of donor countries to cough up cash will depend, in
turn, on whether this continues to be a unilateral or multilateral economic
takeover of an occupied country. 

'This has nothing to do with oil' 

The US is now forced to turn to the creditor countries, including war
opponents France and Germany, and international financial institutions
(IFIs) because it has nowhere else to go. The US initially had two options:
to turn to the Iraqis or to the American taxpayers. 

A few weeks after President George W Bush announced the end of "major
hostilities" in Iraq, the US managed to pass UN Resolution 1483, which
created the so-called UN Development Fund. Under this fund, all of Iraq's
past and future oil revenues, as well as all the assets of the former Iraqi
government located anywhere in the world, would be placed under the direct
control of the US, as overseen by the IMF and the WB - two institutions in
which the US has considerable voting power. 

The resolution passed the UN Security Council because the US assured Russia,
France and China that all contracts entered into by their firms under the UN
Oil-for-Food program during the sanctions regime would be honored by the
occupation authority and any subsequent interim government. [2] 

The development fund is intended to finance the rehabilitation of all that's
been damaged by the war. The choice of corporations to undertake this
reconstruction, however, has so far been a question reserved exclusively for
the US. And since most contracts are negotiated on a cost-plus basis, the
price of the "reconstruction" is all up to the chosen contractor. In other
words, what will be paid to Kellogg, Brown and Root to repair Iraq's oil
fields and machinery, for example, will be financed out of Iraqi oil
revenues at a price determined by Kellogg, Brown and Root itself. 

Paying to get robbed? 

Aside from financing reconstruction, the fund will be used by the US for
leveraging US government guaranteed loans, as well as for directly financing
corporate investments in Iraq. 

According to a press release by the US Export and Import Bank, which is
officially tasked to promote American business overseas, the fund will be
used for lending money to US companies wishing to do business in Iraq. Few
risk-averse private banks will willingly give money to any investor applying
for a loan to open business in war-torn Iraq. But with the development fund,
there'd be lots of money for the daring, adventurous, or simply
bargain-hunting types. [3] 

And in Iraq, there'd be lots of bargains around. The US handpicked Iraq
Governing Council's (GC) Finance Minister, Kamel al-Kelani, announced on
September 21 that all of Iraq's assets and state-owned corporations, except
the oil industry, will be sold off. As sweeteners, the buyers will be
entitled to 100 percent ownership of their purchase, full repatriation of
profits, and minimal taxation. [4] Given Iraq's present condition, the items
on the bidding block will come very cheap. But in a few more years, what was
bought at dirt-cheap prices - using the Iraqis' oil revenues - could then be
sold for a nice profit. 

Making use of the Iraqis' assets for reconstruction means that the Iraqis
themselves will be paying for rebuilding what the Americans destroyed. This
is a violation of the Geneva Convention, which unequivocally states that
humanitarian assistance, aid, reconstruction and other development expenses
are the legal and moral obligation of the occupying forces. The use of the
Iraqis' money to finance the massive privatization scheme of their economy
means that the Iraqis themselves will be paying US corporations to buy off
their own assets from them. 

Unreliable oil 

But Iraq's oil, though definitely plentiful, is not enough - at least for
now. To the war planners' chagrin, oil coming out of Iraq's spigots has only
been able to fill around 1 million barrels a day (mbd) - far less than on
what the US originally based their plans. [5] Analysts say it would take
another 18 months more before the output could even begin to hit the prewar
production level of 3 mbd, and even longer to surpass it. Add a couple more
years to that if the rate at which the pipelines are being sabotaged keeps
up. 

Worse news is that even the multinational oil giants are keeping their
distance. "There has to be a proper security, legitimate authority and a
legitimate process ... by which we will be able to negotiate agreements that
would be longstanding for decades," Sir Philip Watts, chair of Royal
Dutch/Shell, was quoted as saying. "When the legitimate authority is there
on behalf of Iraq, we will know and recognize it." [6] Whether Watts
considers as legitimate the US-installed GC, one of whose members has
already been killed by the resistance, remains to be seen from the oil
industry's actions. 

In an attempt to solve its liquidity problems, the US is considering
converting Iraq's expected future oil revenues into marketable securities
that could be sold at discounted rates in the present. [7] This promises to
be a controversial measure not only because it could indicate that the US
will be there to stay for the long haul, but also because, as with other
decisions, it raises the question of whether the US has the right to decide
on matters which should normally be reserved for legitimate and sovereign
governments. 

'The most consequential national security debate' 

If an invader cannot count on the invaded to fund its occupation, then
surely it could count on its own taxpayers on whose behalf the invasion was
waged in the first place. 

Not in this case. The Bush administration had just given its richest
taxpayers $1.8 trillion in tax cuts, but it cannot afford to spend $20
billion on the people it has just liberated. Just last week, Republicans
quashed Democrat efforts to fund the war by raising taxes from the
wealthiest Americans [8] - a number of whom will be profiting handsomely
from the post-invasion boom in Iraq. Vice President Dick Cheney, who
allegedly pushed intelligence agencies to exaggerate their Iraq findings,
still maintains financial interests in Halliburton, the Congressional
Research Service officially declared recently. [9] 

These tax cuts and soaring war costs should be put in the context of the
gaping and record-breaking budget and trade deficits currently facing the
weak US economy. The trade deficit is now hitting the perilous 5 percent
mark and still rising; the budget gap has been a quick turnaround from
previous years' promise of uninterrupted surpluses way into the future. At
$5 billion a month, the monthly cost of occupying Iraq, excluding
reconstruction, is already approaching that of Vietnam. [10] 

If Bush has not yet been politically broken by the still-to-be found weapons
of mass destruction or the issue of intelligence leaking, his hold over
legislators just might snap from this funding question. With what is turning
out to be a less than smooth ride for Bush's funding request, Democrats are
calling debates in Congress "the most consequential national security debate
in a generation". [11] It is a debate that Bush may not be winning. 

Touch their oil but not our taxes 

US politicians, especially those from the Republican party, are bristling at
the idea that the US should pay for restoring the very things it destroyed
in Iraq. Republicans are convinced that the US has no obligations to Iraqis
whatsoever and that any US funds used in reconstructing Iraq should be
treated as loans, not grants. 

Should this be approved, and chances are high that it will, Iraqis will in
effect be borrowing money from the US in order for them to pay back the US
corporations that will be rebuilding almost everything in their country -
from roads to schools to power generators. Using money borrowed from the US,
Iraqis will need to pay the very same corporations that would have had no
business in Iraq if there were no war. 

Senator Byron Dorgan, who may not have been adequately briefed on the oil
situation, insists that the US "should not shoulder the whole burden on its
own. Iraq has enough oil to pay for part of the reconstruction effort". [12]


Defense Secretary Donald Rumsfeld is more adamant. "I don't believe it's our
job to reconstruct that country after 30 years of centralized Stalinist-like
economic controls in that country," he said, as though the damage had
nothing to do with the cruise missiles and the decade-long embargo. "The
infrastructure of that country was not terribly damaged by that war at all,"
Rumsfeld maintains. [13] 

Taxpayers not footing the war bill, however, would be disastrous. Having
calculated the cost of war and occupation, Yale University economist William
Nordhaus warned long before the war, "If American taxpayers decline to pay
the bills for ensuring the long term health of Iraq, America may leave
behind mountains of rubble and mobs of angry people." [14] 

Paying for democracy 

But the US won't be leaving just yet. Having passed the hat to the liberated
Iraqis and to the supposed liberators, the American taxpayers, and still not
having enough, the US is now turning to the United Nations, the rich
creditor nations and IFIs for a fast buck. 

In a draft UN resolution that has been tabled at the Security Council but
which has been denounced by the usually pliant Secretary General Kofi Annan,
the US "appeals to member states and the IFIs to strengthen their efforts to
assist the people of Iraq in the reconstruction and development of their
economy". It also "calls upon member states and concerned organizations to
help meet the needs of the Iraqi people by providing resources necessary for
the rehabilitation and reconstruction of Iraq's economic infrastructure". 

The same resolution even asks the UN to finance Iraq's electoral process. It
"requests the secretary general to ensure that the resources of the United
Nations and associated organizations are available, if requested by the
Iraqi Governing Council, to help establish an electoral process in Iraq ..."
This war was waged in order to give the Iraqis the gift of democracy, Bush
said before. With this resolution, the US is now asking others to pay for
its present. 

A piece of cake 

The latest reports indicate, however, that the US has run into such
unbending opposition at the UN that it is abandoning the resolution
altogether. [15] That leaves the US with the Madrid option. 

In Madrid, the US will be trying to woo countries which opposed the invasion
as well IFIs like the World Bank, which has been boasting of its role in
financing the reconstruction of conflict areas such as Mozambique, Uganda,
East Timor and Palestine - and reaping profits in the form of interest
payments in the process. In passing the hat, the US only needs to convince
these countries and institutions that what they will be putting in will be
money well spent. 

So far, it doesn't look encouraging. As of early October, the European Union
was reported to be thinking of giving only a measly $250 million to the pot.
This is not even 1 percent of the required total, and US officials are
reportedly "shocked" at the amount. Canada, for its part, is willing to
share $200 million. [16] Only Japan has been reported to be willing to give
a relatively hefty sum of $5 billion, and Japanese officials have been very
frank about their reason: their reliance on Middle East oil. [17] Still,
when you add all these together, it's still quite a trifling sum compared to
the required $36 billion. 

All that could change, however, with a simple assurance. "You have to offer
them a piece of the cake," advised the French politician and former UN
special representative to Kosovo Bernard Kouchner. [18] With over $100
billion dollars or more at stake - said to be one of the most profitable
building programs in decades [19] - there will be a big cake to pass around.


Not a charity ball 

Germany, France and other potential donors, according to the Washington
Post, have long indicated that they will only be bringing money to the table
if their companies are given more opportunities to take part in the
multi-billion dollar post-war reconstruction bonanza in Iraq. They will be
more willing to cough up cash if they will be assured that their
corporations will not be shut out of Iraq by US corporations. [20] In other
words, the potential donors will only be signing checks in Madrid as long as
their corporations are assured of getting invitations during the slicing of
the cake. 

So far, they've had to settle for crumbs. US Federal Procurement laws decree
that government contracts for Iraq can only go to US corporations which, in
turn, are free to hire subcontractors as they deem fit. Halliburton and
Bechtel have been besieged by offers for subcontracting work at their
company headquarters, as well as at their offices in the Middle East, by
scores of companies and prospectors from all over the world. [21] This has
been how non-American companies have so far managed to catch some of the
action. 

This current division of spoils could change, however, depending on whether
some governments are able to wrangle for more concessions in exchange for
giving money to the occupation effort. Surely, creditor nations will insist
on a good bang for their buck. The meeting in Madrid will not be a charity
ball. 

Unilateral or multilateral? 

What the donor government negotiators will be bringing in their pockets to
Madrid, however, will not be their personal money nor that of the
corporations, but that of their country's taxpayers. The Madrid meeting is
an effort by the US to transfer the burden of Iraq from the Americans to,
say, French, Japanese and German taxpayers. Borrowing from the IMF and the
World Bank on behalf of the Iraqi people will pass the liability to future
Iraqi generations, who will then be indebted to the IFIs and subjected to
their conditions. For the burden they'll bear, others will be reaping the
profits. 

Whether the US would still consider it financially worthwhile to continue
occupying Iraq thus depends on the following: how quickly Iraq's oil wells
can rake in cash, the US taxpayers' willingness to part with their money,
and the readiness of the donor countries to infuse funds. The Iraqis seem
not to figure anywhere in the equation. Relying on oil is simply impossible
today. When the going gets really tough, the second could still be an
option, but not something Bush - as champion of tax cuts for the rich and
presiding over a weak and deficit-ridden economy - would really want to
push. The third then could be the only available option left. 

But the possibility of getting billions from donors, in turn, appears to be
solely dependent on whether the US will lock its firm grip on the business
opportunities in Iraq, or relax it. The question before Madrid, then, is
whether this will continue to be a unilateral corporate takeover or a
multilateral one. And since what the donor countries will be pledging will
be taxpayers' money, the question in Madrid will also be whether the world's
taxpayers would be willing - in the face of the liberators' reluctance - to
finance this multilateral corporate invasion. 

One thing is sure: the drive for money is now the only thing getting this
occupation going. This was a war of choice, not of necessity, and opinion
surveys are increasingly saying that more and more people think it was a
wrong choice. Without the assurance of funding and public backing, the US
troops and the Halliburton crew may have to pack up at some point. Without
money holding the occupation together, there is a real chance that the
US-led enterprise in Iraq could unravel - not in Baghdad, but in Madrid. 

References 
[1] New York Times, October 2, 2003 
[2] Michael Renner, "The Other Looting", Foreign Policy in Focus, July 2003 

[3] See Steve Kretzmann and Jim Vallete, "Operation Oily Immunity",
CommonDreams.org, July 23, 2003 
[4] The Independent, September 22, 2003 
[5] Houston Chronicle, September 23, 2003 
[6] Financial Times, July 24, 2003 
[7] Los Angeles Times, July 11, 2003 
[8] Washington Post, October 3, 2003 
[9] Washington Post, September 26 
[10] USA Today, September 8, 2003 
[11] Christian Science Monitor, October 7, 2003 
[12] Financial Times, October 3, 2003 
[13] Seattle Times, September 11, 2003 
[14] Yale Herald, November 15, 2002 
[15] New York Times, October 8, 2003 
[16] New York Times, October 2, 2003 
[17] Financial Times, October 6, 2003 
[18] International Herald Tribune, March 18, 2003 
[19] New York Times, April 11, 2003 
[20] Washington Post, June 26, 2003 
[21] New York Times, May 21 

Herbert Docena is with Focus on the Global South , a research and advocacy
organization based in Bangkok . He can be contacted at
herbert at focusphilippines.org




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