Iraq Contracts Reveal Bush True Intentions, Critics Say

by Emad Mekay

U.S. allies like Canada, France and Germany, and its old foe Russia, will lose lucrative contracts because they opposed the U.S.-led war. The countries have objected, especially since the United States is simultaneously asking them to forgive Iraq's enormous foreign debts.

German Chancellor Gerhard Schroeder challenged the move Thursday, saying "international law must apply here."

Washington defended the policy, first revealed in a memo by Deputy Defense Secretary Paul Wolfowitz, as "appropriate and reasonable" since the U.S. is committing troops and taxpayers' money.

The directive signed by Wolfowitz states that "it is necessary for the protection of the essential security interests of the United States to limit competition for the prime contracts of these procurements to companies from the United States, Iraq, Coalition partners and force contributing nations."

The restrictions apply to $18.6 billion in reconstruction contracts.

However, some analysts here say the move raises doubts about whether the reconstruction of Iraq is the administration's main goal at all.

"Wolfowitz's decree forces us all to ask the question again: are these reconstruction contracts for the benefit of Iraq, or are they political rewards, handed out to 'friends?'" said Rania Masri of the U.S.-based Institute for Southern Studies.

Masri said the decision shows that "transforming the Iraqi economy for foreign ownership and foreign plunder is the main goal."

Masri referred to the quick move to privatize the Iraqi economy. Weeks into the occupation, while the Iraqi infrastructure was still in ruins, the U.S. civilian administrator in Iraq, Paul Bremer, removed all tariffs and trade restrictions. This devastated the Iraqi textile and poultry industries, she said.

Bremer has also imposed a 15 percent flat tax, and allowed 100 percent foreign ownership of almost all Iraqi industries, as well as the resulting removal of profits from the country.

Other experts say this is not what the United States, as the occupying power, should be doing.

"The reconstruction of Iraq should be for the benefit of Iraqis, not a reward for any corporations," said Phyllis Bennis, a fellow at the Washington-based Institute for Policy Studies. "Reconstruction funds from the U.S. should be used to build up the devastated Iraqi economy -- meaning that Iraqi firms and workers should be hired to rebuild the country, not U.S. or international firms."

William Hartung of the World Policy Institute said the decision could hurt both Iraqis and U.S. taxpayers.

"Keeping qualified French, German, Canadian and Russian firms out of the bidding on the next round of reconstruction contracts, worth 18.6 billion dollars, will make it that much harder to eliminate rampant price gouging by companies like Halliburton," he said.

On Friday, senior defense officials said a Pentagon audit found that Vice Pres. Dick Cheney's former company, Halliburton, one of the administration's favoured corporate partners in Iraq, may have overcharged the U.S. Army by $1.09 per gallon on a total of nearly 57 million gallons of gasoline that were delivered to Iraqi citizens under a no-bid contract.

The economic repercussions of the decision extend to other areas, analysts say. By excluding countries that have prior experience constructing Iraqi factories, electrical grids, hospitals and water pumping stations, Washington will likely end up rebuilding those facilities rather than simply repairing them -- a much more expensive endeavor.

The decision also strongly undermines U.S. rhetoric on free trade, according to Gayle Smith of the Washington-based Centre for American Progress. By ensuring that the Iraqi market is only accessible to Coalition members, the United States is restricting the space for Iraq's future trade ties, she said.

The White House decision has legitimised political interference in government procurement operations, setting the stage for future contracts to be subject to the whims of individual government agencies, Smith said.

"It has upended trade relations by using its status as occupying authority to monopolize a single market," she said. "And it has certainly lent credence to the view held by some that one of its aims is to secure the spoils of victory."

The exclusion policy even drew fire from some of the staunchest backers of the administration. Neo-conservative analysts William Kristol and Robert Kagan wrote in the right-wing Weekly Standard that the policy was "heavy-handed," "stupid" and "counter-productive."

One thing that almost all analysts agree on is that the decision will certainly hinder attempts to increase international involvement in Iraq.

"The Bush administration has poured another bucket of cold water on efforts to internationalize the stabilization of Iraq," Smith said. "The Pentagon has increased the cost to Americans, weakened the traditional alliances America needs to defeat terrorism, and undermined Iraq's long-term future."