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    Middle East
     Jan 20, 2006
By David Isenberg and William Fisher

NEW YORK - With the billions of dollars appropriated by the United States for Iraqi reconstruction mostly spent, Japan, Australia and other nations in US President George W Bush's "coalition of the willing" are likely to be asked to shoulder much of the burden for funding the large number of unfinished projects.

Getting others to take up the slack is reportedly high on

Secretary of State Condoleezza Rice's agenda when she visits the Far East in March. Her trip, originally scheduled for this week, was postponed because of the current crisis in Israeli politics caused by Prime Minister Ariel Sharon's recent stroke.

White House spokesman Scott McClellan has also called on the international community to "reach out to Iraq as well" to help with its reconstruction.

And according to the US Agency for International Development, Iraq must also look to private investment, international lending and its own economy to finance future reconstruction.

Japan is due to pull out its 600 troops from Samawah in southern Iraq in May, and, according to a Kyodo News report, the US will ask Japan to become more involved in reconstruction efforts.

The United States' desire to stop the bleeding of funds for reconstruction comes along with a new report that suggests the eventual overall cost of the war in Iraq will not be $70 billion, as the administration first advertised, but at least US$1 trillion.

The new initiative comes barely a month after Bush appointed Rice to take over the lead role in supervising and coordinating the US reconstruction program in Iraq from the Pentagon. The administration has signaled that it will not seek further funding for these efforts and the Iraq Reconstruction Management Office (IRMO) will go out of business.

"The US never intended to completely rebuild Iraq," Brigadier-General William McCoy, the Army Corps of Engineers commander overseeing the work, said at a recent news conference. "This was just supposed to be a jump-start."

However, McCoy's assertion seems to be at odds with previous administration statements. For example, in a speech on August 8, 2003, Bush said: "In a lot of places, the infrastructure is as good as it was at prewar levels, which is satisfactory, but it's not the ultimate aim. The ultimate aim is for the infrastructure to be the best in the region."

Relatively little ($3.3 billion) of the $21 billion allocated for reconstruction since the invasion remains to be spent, and IRMO is scheduled to disband in June 2007. Thus the decision not to renew the reconstruction program leaves Iraq with tens of billions of dollars in unfinished projects and an oil industry and electrical grid that have yet to return to prewar production levels.

The US State Department has been given a mandate to provide a "focal point" for reconstruction efforts and to supervise and coordinate reconstruction programs not only in Iraq, but also in other countries emerging from civil strife. These include Afghanistan, but Bush administration officials have announced they will henceforth rely more on the Afghan government, the North Atlantic Treaty Organization and contractors from other countries.

Steven Aftergood, head of the government secrecy program of the Federation of American Scientists, told Inter Press Service that the switch from the Pentagon to the State Department was "a belated recognition that existing policy on reconstruction and stabilization has been woefully inadequate".

According to a study published last month by the US Army War College's Strategic Studies Institute:
Only $1 [billion] to $2 billion of the [initial] $18 billion authorized for reconstruction by Congress in late 2003 had been expended a year later, and Iraqis had yet to see much tangible improvement in employment or quality of life after a year and a half of occupation. A study by the Center for Strategic and International Studies in Washington, DC, argued that, in every area necessary for a successful reconstruction of Iraq, there had been not only lack of progress but an actual deterioration of conditions on the ground.
That switch of reconstruction responsibility to the State Department from the Pentagon came in a little-noticed December 7 presidential national-security directive that said, "The secretary of state shall coordinate and lead integrated United States government efforts, coordinating these efforts with the secretary of defense to ensure harmonization with any planned or ongoing US military operations across the spectrum of conflict."

The State Department will lead US government efforts to prevent countries at risk "from being used as a base of operations or safe haven for extremists, terrorists, organized crime groups or others who pose a threat to US foreign policy, security or economic interests", the Bush directive said.

Some administration observers say the switch was a product of increasing frustration with the pace of reconstruction work in Iraq. They also believe the cutoff in reconstruction funding is part of a new White House narrative that includes reduction in the number of US troops in Iraq before US mid-term elections next November, when the entire House of Representatives and a third of senators will stand for re-election.

The Army War College study, "Revisions in Need of Revising: What Went Wrong in the Iraq War", does note that while many of the criticisms of the Bush administration for the haphazard way it planned and prepared for the invasion of Iraq are valid, the result would have been much the same even if things had been done differently.

The authors write, "Nevertheless, strong reasons exist for believing that the most serious problems facing Iraq and its American occupiers - 'endemic violence, a shattered state, a non-functioning economy and a decimated society' - were virtually inevitable consequences that flowed from the breakage of the Iraqi state."

Unfinished business
According to the regularly updated Iraq Index run by the Brookings Institution in Washington, at the end of 2005 crude-oil production was 1.92 million barrels per day, lower than the prewar peak of 2.5 million. Crude oil exports were 1.071 million, down from an estimated 1.7 million to 2.5 million.

The shortfall in oil production, which, according to the Pentagon's prewar planning, was supposed to provide the funds for Iraqi reconstruction, has been attributed mainly to sabotage by insurgents.

The average amount of electricity generated nationwide in 2003 was 3,958 megawatts. Last month it was 3,800MW, with the average Iraqi receiving less than 12 hours of power a day. This is despite the $4 billion spent on restoring electricity supplies. Foul-ups such as new generators not being linked to the national grid have not helped matters.

The US Embassy said the reconstruction effort had restored sewage treatment to more than 7.7 million Iraqis, opened 21 berths at the Umm Qasr port, built nearly 1,000 kilometers of roads and developed three new international airports. It said 124,000 Iraqis were employed under reconstruction and military contracts.

But much of the reconstruction funding has been diverted to other projects. At least $2.5 billion earmarked for infrastructure and schools was diverted to building up a security force. Funds originally intended to repair the electricity grid and sewage and sanitation system were used to train special bomb-squad units and a hostage-rescue force.

The US has also shifted funds to build 10 new prisons to keep pace with the insurgency, and safe houses and armored cars for Iraqi judges.

Hundreds of millions of dollars from the reconstruction fund were also used to hold elections and for four changes of government, and to establish a criminal justice system, including $128 million to examine several mass graves of Saddam Hussein's alleged victims.

In addition to the diversion of funds to other types of projects, the reconstruction efforts have been plagued by substantial corruption and overcharging by contractors.

While 3,600 projects will be completed by the end of the year, the cost of security has eaten up as much as 25% of each project, according to the Office of the Special Inspector General for Iraq Reconstruction (IG).

A US congressional report in October forecast that many reconstruction projects were unlikely to get off the ground because of security costs. Iraqi authorities estimate that $10 billion would be needed for the health sector alone, to build or rehabilitate and provide equipment for hospitals and clinics.

Another problem hindering reconstruction is a familiar one - scandal. More than 18 months after the Pentagon disbanded the Coalition Provisional Authority that ran Iraq, neither the Justice Department nor a special inspector general has moved to recover large sums (in the region of $8 billion) suspected of disappearing through fraud and price gouging in reconstruction. Earlier audits by the IG found that oversight of contractors by the authority was so lax that widespread abuse was likely.

Running costs
The US is preparing to hand over billions of dollars' worth of infrastructure projects to the Iraqi government over the coming year, but US officials are increasingly concerned that the Iraqis lack sufficient funds to run the high-technology water and electric plants, among other projects, that have been built since 2003.

US officials say the costs of running the new facilities and training Iraqis to operate them will be borne by US taxpayers for years, barring significant improvement in the Iraqi economy.

An audit released in October by the IG estimated that annual costs could reach $550 million and that the additional expense of protecting those projects from insurgent attacks could push the total price tag to almost $1 billion per year.

Although details are still being hammered out, State Department officials said they were prepared to shoulder about $350 million out of the $550 million in the estimated operating costs in Iraq for 2006. The Iraqi government would be responsible for the remaining $200 million, and would be expected to pay a greater share of the operating costs in 2007.

The end of reconstruction funding appears to mark a change from a promise the president made in 2003 to provide Iraq with the best infrastructure in the region.

But just how far the US intended to go in that process has always been murky. While Bush gave the impression that Iraq was slated for a complete makeover, Defense Secretary Donald Rumsfeld appeared less certain.

He told the Senate Appropriations Committee in March 2003, "I don't believe that the United States has the responsibility for reconstruction, in a sense [reconstruction] funds can come from those various sources I mentioned: frozen assets, oil revenues and a variety of other things, including the [UN-administered] oil-for-food [program], which has a very substantial number of billions of dollars in it."

On the other hand, that view seems to contradict a report submitted the same year by the prime consulting contractor hired by the Pentagon to lay out the future of Iraq's economy. The company, BearingPoint Inc of McLean, Virginia, said: "The reconstruction of Iraq has begun. Not the reconstruction of vital public services such as water, electricity or public security, but rather the radical reconstruction of its entire economy."

Clearly, this has not happened. And the administration's recent funding decision suggests it is not likely to happen any time soon - unless with the help of some generous friends.

David Isenberg, a senior analyst with the Washington-based British American Security Information Council (BASIC), has a wide background in arms control and national security issues. The views expressed are his own.

William Fisher writes for Inter Press Service.

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(Jan 19, '06)

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