Global Policy Forum

By Eric Leser

Iraqi oil production is supposed to start up again Sunday June 22. Iraqi reconstruction constitutes veritable manna from heaven for numerous American companies, in particular, Halliburton and Bechtel. Halliburton specializes in petroleum engineering, but one of its subsidiaries, KBR, is charged with logistics for American troops on overseas' missions. Halliburton has obtained more than $600 million in total in contracts, while the total sum approved by Congress for reconstruction and humanitarian aid in Iraq is $2.4 billion. This reconstruction under the American aegis has forced the United Nations to end its "oil against food" program, from which many companies, particularly Russian, French and Chinese ones, derived advantage.

March 8, the U.S. Army Corps of Engineers awarded Kellogg Brown & Root (KBR), a Halliburton subsidiary a contract for $ 71.3 million (61 million Euros) to put Iraqi oil installations back in working order. The decision provoked a hue and cry. Not only were the precise details of the contract not publicized, but, because of "urgency and the need to respect military secrecy" the Pentagon's procedure was discretionary, without bidding or competition.

The Bush administration was accused then, notably by Democratic members of Congress, of "favoritism" toward a company whose CEO from October 1995 to 2000 had been Dick Cheney, today Vice President of the United States. Over time, criticism has faded. However, it seems that the Halliburton contract is significantly larger than was announced three months ago: the group also has an exclusive supply contract for the 150,000 US soldiers in the Gulf.

First surprise, the cost of repairing the oil installations has already almost tripled. According to one Congressional source, it had reached $213.7 million dollars last week and is supposed to inflate still further.

The fields of Kirkuk in the north, and those surrounding Basra in the south, once considered among the best equipped in the world, are today in a piteous condition, according to specialists. The absence of maintenance since 1991, recent thefts and sabotage, have made the resumption of production more difficult than foreseen, even if it will occur Sunday June 22.

Another discovery, KBR's assigned mission goes well beyond the extinction of well fires and urgent repairs. In a May 2 letter, General Robert Flowers, Commander of the Corps of Engineers, indicated that the contract also consisted of assuring "the functioning of installations and distribution of product". The General added then, as Congress had demanded, that the contract will expire end August when the army will call for bids for the restoration to working order of oil infrastructures.

Apparently that's now out of the question. Gary Loew, responsible for the generation of Iraqi oil, has declared that time is too short to follow the procedure, bestow a new contract, and respect the timetable foreseen for the start-up of production again. The Corps specifies that it's not about an additional delay but that there will undoubtedly not be a new call for bids, notably if the Iraqis themselves decide on new arrangements. Statements which have provoked fury among Congressional Democrats. "It's a direct insult to the will of the United States Senate", declared Senator Barbara Boxer.

"UNLIMITED SUMS"

But Halliburton is not only busy with Iraqi oil. The last fourteen months the group has assured the provisioning of American troops in the Gulf. KBR, always the same subsidiary, has garnered $425 million assuring the supply of food, clothing, and equipment to the army in Kuwait, Qatar, Saudi Arabia and Iraq.

The Halliburton subsidiary carried off a Pentagon contract to general indifference in December 2001 three months after the September 11 attacks, at a time when the American army was preparing to lead several campaigns. This agreement is valid for ten years. It stipulates that the company must assure "a presence in a theater of operations within 72 hours of notification and the supply of service and logistical support for 25,000 men anywhere in the world within two weeks ", according to an official document Halliburton supplied to the American market authority, the SEC.

Rather than starting a new procedure to provide for the needs of the troops in Iraq, the government used this contract. "The related sums Halliburton may receive in the future are virtually unlimited", Democratic Representative Henry Waxman notes in revolt. "It appears, moreover, that most sub-contracts have been awarded without competition", he writes in a letter addressed to Lee Brownlee, the Secretary of the Army. "This type of arrangement presents great risks for the taxpayer" he adds.

QUESTIONS ABOUT EXPENSES

KBR was in competition with two other companies for a decade to become the American army's exclusive supplier all over the world. "Contracts of the United States government are not bestowed by politicians, but by bureaucrats as a function of precise and objective criteria", explains Wendy Hall, Halliburton spokesperson. "To privatize this sort of logistical services allows the military to concentrate on their mission. Any allegation that this contract exists to facilitate uncontrolled expenses is false and without foundation. The Vice President has nothing to do with Halliburton obtaining this transaction."

KBR got a similar contract between 1992 and 1999 to assure American troop support in the Balkans. It brought it $1.2 billion and was extended up to 2004. Overall, it was worth $1.8 billion.

The operations in Iraq are of an altogether different scope, given that since March 2002 the army has given KBR 24 orders for a total of $425 million and that the total orders for Halliburton therefore exceed $600 million out of a total of $2.4 billion devoted to reconstruction and humanitarian aid in Iraq. In Afghanistan, KBR had already obtained a contract worth $103 million. In January, an order for $60 million had been initiated to care for the eventual needs of troops in Turkey, but that contract was not concluded.

Today, KBR and its sub-contractors charter convoys of trucks that transport diverse supplies, hundreds of tons of food and bottled water from Kuwait to Iraq. Halliburton maintains a 150,000 man army. Representative Waxman has asked Lee Brownlee to detail the procedures in place to assure that expenses are justified. An inquiry by Congress' investigation service demonstrated that in Bosnia Kellogg Brown & Root had multiplied excessive invoices.

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