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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@focusphilippines.org
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