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Spoilers gatecrash the Iraq spoils
party
By Herbert Docena
MADRID - Despite new offers for broader
participation in Iraq's reconstruction bonanza, the
United States-convened donors' conference on Iraq ended
in stifled disappointment, with only US$13 billion
raised - a far cry from the $36 billion target. To
dampen expectations further, up to two-thirds of the
total pledges will take the form of loans, not grants.
And if the Afghanistan fundraising experience is any
indication, many of the pledges could still end up being
just more broken multi-million-dollar promises.
'A very successful conference'
Most of
the contributions came from those who were already
expected to give anyway: Japan handed over $5 billion,
Spain $300 million and Kuwait another $300 million. As
expected, France and Russia gave nothing. Germany
donated only $100 million, half of which was its share
in the European Union's contribution. The Philippines
pitched in a $1million it can hardly afford to give;
Vietnam offered rice; while Sri Lanka promised tea. Arab
nations, which the US was counting on to save the day,
turned out to be the biggest spoilers.
To
underscore just how seriously they thought of the
fund-raising event, many of the governments sent only
low ranking bureaucrats; others just assigned their
Madrid-based diplomats to drop by and say hello.
"Here we are and we've had a very successful
conference," US Secretary of State Colin Powell said at
the end of the two-day event on Friday, tying to put on
a brave front. Even before the conference could start,
however, Powell was already trying to lower expectations
saying, "I have never approached [the $36 billion
figure] as a goal that has to be reached," even as he
later on sternly urged the participants to give
"substantially".
So successful was the
conference that, in order to magnify the final figure,
the organizers had to keep repeating that they had
raised $33 billion - a total which includes the US's $20
billion pledge, even if this amount was never really
planned to be included as part of the money raised for
the meeting in the first place. (1)
Emotional
blackmail
The US's plea for money fell on many
deaf ears, despite a fundraising strategy that entailed
trying to convince the world that there's no other way
to rebuild Iraq but to continue the occupation. In
asking countries to donate, the US wanted the world to
resign itself to the fact that it will not be leaving
Iraq any time soon and that the only way to help the
devastated Iraqis would be to finance the occupation.
Such was the line of reasoning adopted by the
"international community" in the recent 15-0 United
Nations Security Council resolution that effectively
legitimizes the occupation and calls on countries to
lend a helping hand. Armed with this resolution, UN
Secretary General Kofi Annan opened the Madrid
conference urging other countries "to give and to give
generously".
"We all look forward to the
earliest possible establishment of a sovereign Iraqi
government, but a start to reconstruction cannot be
deferred until that day," Annan said, reinforcing the
argument of the occupation forces. (2)
The US
and the other governments that needed political cover to
convince their taxpayers to donate money hoped to use as
a bargaining weapon a kind of emotional blackmail, using
the misery and the suffering of the Iraqi people to hold
hostage anyone who professes to care about them.
Under this line of argument, those who call for
an end to the occupation and who object to funding it
are not only naive and unreasonable, but also heartless
and cold-hearted people who are not genuinely concerned
for the Iraqis. Those who will actively or passively
support the occupation, on the other hand, are to be
portrayed as helping the Iraqis out of the kindness of
their hearts.
Needing the money so bad
Aside from holding the world hostage to the plight
of the Iraqis, the US was forced to give up certain
concessions and dangle sweeteners in order to encourage
more generosity. Three days before the conference, the
US finally agreed to set up the Iraq International
Reconstruction Fund (IIRF) that will be independently
handled by the World Bank and the UN separately.
"I need the money so bad we have to move off our
principled opposition to the international community
being in charge," the US's chief administrator in Iraq,
L Paul Bremer, was quoted as saying. (3) If only it were
not as desperate for cash, the US would have chosen to
keep its grip on how all of the reconstruction money
would be spent and to whom contracts will be given.
This exclusive control had so far allowed the US
to corner most of the billion-dollar reconstruction
deals because federal laws require contracts to be
granted only to American corporations. US Treasury
Undersecretary John Taylor recently stressed that for as
long as the money comes from American taxpayers, the US
will reserve the right to prevent non-US companies from
securing contracts financed through bilateral aid. (4)
The selling point
With the creation
of the IIRF, however, the US has been compelled by its
liquidity problems to share the reconstruction bonanza
with non-US corporations. A crack at this lucrative
bonanza was then held up as the main incentive to induce
donor countries to part with their cash. "It's a way to
get in on the ground floor," one high-ranking US
official confided before the conference. "That's the
selling point." (5)
The US was willing to submit
to this compromise, however, only because it was assured
that such a concession would not undermine its political
and military control over occupied Iraq. In fact, by
possibly encouraging more external funding to offset the
US's current financial constraints, the arrangement
could even allow the US to spend less on relief and more
on pacification.
The US would have less money to
give to its corporations, but it could at least be
assured of having the resources to stay longer. After
all, one dollar not spent on water treatment plants -
because others will be paying for it - is one dollar
more to be spent on bullets and bombs. Hence, any
donation - even if coursed through an independent
channel - would still indirectly finance and prolong the
occupation.
What's significant with the IIRR,
however, is that it signals the move from unilateral to
multilateral reconstruction. With the IIRF, the bidding
process for contracts will now be a free-for-all. Donors
could now directly donate their taxpayers' money to Iraq
and specify at the same time that only their own
corporations would profit from each reconstruction deal.
As the usual practice in aid-giving goes,
Japan's $5 billion will most likely be tied up with a
Japanese contractor, and Spain's $300 million will go to
its own chosen corporation. Whether it takes the form of
a grant or a loan could make a lot of difference. If the
donation to rebuild a bridge, for example, takes the
form of a grant, then Iraq keeps the bridge, but the
Japanese or Spanish company keeps the cash. But if it
takes the form of a loan, as it most likely will, then
Iraq keeps the bridge, but it will also still have to
repay the Japanese or the Spanish government in the
future, at conditions which these governments get to set
today and without the Iraqis' consent.
Brighter future
Despite these
arrangements, the organizers strived to project the
conference as a gathering of the generous, not as the
multilateral division of spoils that it turned out to
be. "Madrid is today the symbol of our confidence in the
future of Iraq," Spanish Foreign Minister Ana Palacios
said. "If we can make the process succeed, Iraq should
have a brighter future after its nightmare," said
British Secretary for International Development Hilary
Benn. (6)
But as the wheeling and dealing
dragged on inside the meeting rooms, prospectors also
gathered in a parallel investors' conference elsewhere
in the complex to discuss their brighter future. Here,
members of the 100-strong Iraqi Governing Council (IGC)
delegation gave presentations on the many business
opportunities awaiting them in what is considered the
largest and most lucrative rebuilding spree since World
War II.
The conference attracted representatives
from organizations and corporations such as the US
Chamber of Commerce, the Spanish Employers' Association,
the giant carmaker Daimler Chrysler, the construction
equipment company Caterpillar, and even the French BNP
Paribas, which was forced to lobby for a seat with the
Spanish government since France had no interest
reserving it for them. (7)
The punishment
With an apparent flair for timing, the Iraqi interim
central bank governor used the occasion to announce that
six foreign banks will soon be given licenses to operate
in Iraq. (8) It had earlier been reported that JP Morgan
Chase, which has controlling stakes in some of the
world's largest corporations, such as ExxonMobil,
General Electric and General Motors, would head a
consortium of Western banks that will operate the new
Trade Bank of Iraq. (9) In an economy with booming
business opportunities but where capital is scarce and
interest rates consequently high, JP Morgan and the
chosen banks will secure for themselves a niche in what
promises to be one of the most profitable sectors in the
economy.
On the same day, just to remind the
donors in time, an opinion column in the
business-oriented London Financial Times hinted at where
the donations could ultimately go. "If their hard-earned
funds are to have the maximum benefit," wrote Kamal
Shair, "donors' attention must focus on helping build an
Iraq that will adopt an open, liberal economy." The
millions, Shair insisted, should not just be used for
financial assistance, but should "extend to encouraging
complementary private investment."(10) ie, as direct or
indirect transfers to corporations.
If there was
any doubt as to what was really being negotiated in
Madrid, the IGC representatives themselves made it very
explicit. Asked about France, Russia and others' refusal
to pledge anything, one IGC member ominously said, "The
new Iraqi government would remember." These countries,
IGC members were quoted as saying, would be "punished"
when the time for awarding more contracts comes. (11)
Absurd corruption
At the end of the
day, however, despite promises of a "brighter future",
few wanted to "get in on the ground floor".
In
part, this could be accounted for by the real economic
and political constraints of donor countries that face
growing budget deficits and widespread public opposition
to the war. Even if they might have wanted to, these
governments either did not have enough money or enough
political capital to sacrifice. But it could also have
been a conscious and deliberate decision not to prop up
and finance what many majorities still hold to be an
illegal occupation.
It certainly did not help
that on the very week of the conference, more explosive
accusations of corruption continued to be leveled
against the US and its contractors. Adding to mounting
charges, Representative Henry Waxman accused US company
Halliburton of importing oil to Iraq "using the Iraqis'
own money" at markedly inflated prices. A US Agency for
International Development (USAID) lawyer accused his own
agency of setting the size of a contract to "justify the
available funding" rather than basing it on actual
needs.
In addition, the US has also just imposed
a procurement policy which gives bidders only three days
to submit their tenders - an "absurd" policy that would
never be done in the US, says a procurement policy
expert, and that would only benefit the big corporations
who are already doing business in Iraq. (12)
Financial black hole
Most explosive
perhaps is what the British relief organization
Christian Aid revealed in Madrid on the morning of the
conference itself. According to its report, up to $4
billion of all the funds that have been transferred to
the Coalition Provisional Authority (CPA) after the war
"has effectively disappeared into a financial black
hole". (13)
In addition to the $1 billion left
over from the UN oil for food program before the war,
the CPA should have received $1.5 billion in post-war
oil revenues, as well as $2.5 billion in seized assets
from the Saddam Hussein regime. "Yet, incredibly, these
billions of dollars have never been publicly accounted
for," Christian Aid said.
The agency had been
chasing the CPA and the UN to account for the expenses,
but was not given any answers. They quoted one senior
diplomat as saying, "We have absolutely no idea how the
money has been spent. I wish I knew, but we just don't
know. We have absolutely no idea."
Dominic Nutt
of Christian Aid said CPA head Bremer, who's attended
the conference along with around 100 Iraqi delegates,
was very agitated by their revelations. "They were very
pissed off. Now they don't even want to answer
reporters' questions about our allegations," Nutt said.
The resistance
In the end, however,
Madrid failed because - in the face of a mounting
resistance that's no less determined than ever - there
might be no future awaiting anyone who dares get in on
the ground floor. It's a floor that anyone who still
wants to have a future would not want to enter.
Despite much upbeat talk, Lieutenant-General
Ricardo Sanchez, commander of US and allied forces in
Iraq, admitted last week, "The enemy has evolved: a
little bit more lethal, a little bit more complex, a
little bit more sophisticated. "(14) A recent report by
the CPA on the security situation was described as a
"sobering read". No less than US Defense Secretary
Donald Rumsfeld has directly contradicted his and
President George W Bush's more rosy public
pronouncements by privately questioning the US's
progress in Iraq.
As further proof of the Iraqi
resistance's success in foiling others' plans for their
country, an international conference for giant oil
corporations' executives to meet with Iraqi oil ministry
officials had been postponed indefinitely. Royal Dutch
Shell still prohibits its employees from stepping on
Iraqi territory. Instead of downgrading them, companies
are raising their "threat assessments" because of fresh
reports about plans to attack reconstruction
corporations. (15)
One of Bechtel's sites, for
example, was hit by a rocket-propelled grenade recently.
Bechtel employees, who had been forced to live in
trailers in camps protected by barbed wire, now have to
travel in armed convoy with at least one designated
"shooter" in every vehicle. That or they take a military
helicopter and fly. (16)
No blood for
profits
All these attacks sent one very clear
statement to those attending the donors' conference: no
one must profit from the occupation. The message was
well heard: a Spanish delegate to the investors'
conference said that with all the things he's been
hearing, he's not all that excited about Iraq. After
all, there's Eastern Europe.
The reports from
Iraq are certainly not the sort that will make the
country very popular among businessmen who have no
serious thrill issues. This insecurity ultimately
explains why, as the spoils got divided in Madrid, there
were few takers. With the continuing resistance, Iraq
will remain - as a Washington businessman who has
organized several investors' conferences puts it - a
"pending bonanza". (17)
Ironically then, those
on whose behalf funds were being raised, those who are
being made to borrow without their consent, and those
who will have no say over how these funds will be spent
- still managed to register their positions at the
donors' conference, even if they were not invited. In
the end, those who had no seat at the table - those who
had the most to lose - also had the most to say.
Herbert Docena works with the
Bangkok-based Focus on the Global South and
the Baghdad-based International Iraq Occupation Watch
Center. He was in Madrid for the donors'
conference. He can be reached at
herbert@focusphilippines.org.
Notes
(1)Steven Weisman, "$13
billion raised at Iraq aid talks," New York Times,
October 25-26, 2003.
(2) A Eatwell, "Donors'
conference heads for shortfall despite pleas for
"generosity for Iraq", El Pais, October 24,
2003.
(3)Steven R Weisman, "US to let donors set up
agency in Iraq," New York Times, October 21, 2003.
(4)Agence France Presse, "US grabs lion's share of
Iraq's deals," Business Day, October 23,
2003.
(5)Robin Wright, "US Dangles a Carrot:
Opportunities in Iraq," Los Angeles Times, September 10,
2003.
(6)Paul Reynolds, "Mixed Bag in Madrid," BBC
News, October 22, 2003.
(7)Joshua Levitt, "Business
chiefs sound out Iraqis on investment opportunities,"
Financial Times, October 24, 2003.
(8)Roula Khalaf,
"Iraq bank governor points to licenses for six foreign
financial institutions," Financial Times, October 24,
2003.
(9) Associated Press, August 29, 2003.
(10)
Kamal Shair, "Donors must build a market economy in
Iraq," Financial Times, October 24, 2003.
(11) Steven
Weisman, "$13 billion raised at Iraq aid talks," New
York Times, October 25-26, 2003.
(12)Edmund L Andrews
and Neela Banerjee, "Bidders for reconstruction are
racing the clock," New York Times, October 20, 2003.
(13)Christian Aid report, October 23,
2003.
(14)Michael Gordon, "Attacks on US forces gain
sophistication," New York Times, October 20, 2003.
(15)Carola Hoyos and Thomas Catan, "Security fears force
delay to oil conference," Financial Times, October 22,
2003.
(16)Steve Schifferes, "The challenge of
rebuilding Iraq," BBC News, October 21,
2003.
(17)Joshua Chaffin, "Reconstruction bonanza
proves elusive," Financial Times, October 23, 2003.
(Copyright 2003 Asia Times Online Co, Ltd. All
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