Global Policy Forum

By Herbert Docena*

The US-led reconstruction business in Iraq is faltering because it is less about reconstruction than about business. Nine months after the invasion, deteriorating living conditions marked by constant lack of electricity, a severe petrol shortage, and massive unemployment highlight the failure of the US-led reconstruction of Iraq. While insecurity and incompetence are partly to blame, the problems could be more adequately explained by the US and its contractors' determination to hang on to as big a portion of the post-war bounty as possible.

Even if the occupation were working perfectly well, it would still be wrong. This has become trite commentary among Iraqis who bitterly want the occupation to fail but, at the same time, hope that the reconstruction of their country succeeds. Still, no matter how successful the occupiers try to make the reconstruction, the US and its corporations have no right staying here. What seems to be exasperating Iraqis more, however, is that they're not even trying.

No Lights, No Gas, No Paychecks

At night, most of downtown Baghdad is still clad in darkness, with only the blue and red police sirens lighting the streets and the sound of intermittent gunfire puncturing the silence -- definitely not a picture of a festive newly liberated capital. With most of Iraq suffering from power interruptions lasting an average of 16 hours daily, it's a little hard to party in the dark. How many US soldiers does it take to change a light bulb? About 130,000 so far but don't hold your breath.

South of the city, a double-columned queue of cars -- stretched up to three kilometers -- snake around street blocks, and cross a bridge over the Tigris, before finally ending at a petrol station surrounded by barbed wire and protected by a Humvee and an armored tank. Come closing time, so as not to abandon the queue and line up all over again the following day, most of the car owners decide to leave their vehicles parked overnight -- a nightly vigil for petrol in a country with the world's second largest reserves of oil.

During the day, some of Iraq's12 million unemployed hang out in front of Checkpoint 3 of the Green Zone, the heavily fortified headquarters of the Coalition Provisional Authority (CPA). The chances of an American coming out of their version of Saddam's spider hole and accepting resumes is next to nil but they come every day anyway. Others try their luck loitering at the hotel lobbies, besieging journalists or NGO workers in need of drivers and translators.

With many unemployed former university professors, engineers, and civil servants choosing to become cab drivers instead, Baghdad probably has the most educated taxi drivers per square kilometer in the world today. Strike up a conversation and the cabbies will most likely tell you what seems to have become the conventional wisdom today: Not even Saddam could have screwed up this badly.

Frustrated Beyond Belief

Not that they want him back but neither could they have expected the occupation forces to completely bungle up such simple tasks as switching back the light. The lack of power is the number one gripe for most Iraqis, but the list is long: uninstalled phone lines, shoddily repaired schools, clogged roads, uncollected garbage, defective sewage, a nonexistent bureaucracy, mass unemployment and widespread poverty -- the general unexpected chaos that Iraq still is today.

Iraqis are in broad agreement that life is deteriorating rather than improving. The prevailing sentiment is a complex mix of resentment and resignation, frustration and incredulity. On the one hand, Iraqis feel bitter about being occupied and yet many are resigned to entrusting their day-to-day survival to the Americans. On the other hand, they could not quite believe how -- despite all the time and money -- the world's sole superpower can't make the reconstruction process go right.

For its part, the US says the Iraqis are expecting too much too soon. "The bottleneck is sheer time," explained Ted Morse, the CPA's coordinator for the Baghdad region. "Wherever you have had a true conflict situation, there is an impatience in that people think it can be done immediately. It cannot."

But Iraqis themselves have showed that it can. In 1991, after the first Gulf War and despite the UN-imposed sanctions, it took Iraq's bureaucrats and engineers just three months to restore electricity back to pre-war capacity, boasted Janan Behman, manager of Baghdad's Daura power station. Now -- after almost nine months and despite the involvement of Bechtel, builders of the Hoover Dam and some of the world's biggest engineering works - Iraq's power sector is still producing less than 20% or 3,600 MW out of the 20,000 MW required.

It's The Stupidity, Stupid

The occupation forces would not admit this, of course, but much of the problem could be attributed to the successful efforts of the resistance to ensure that nothing works as long as an illegal occupation stays in place. The resistance has kept the authorities too busy dodging bombs to spare time for such trifling matters as providing Iraqis with jobs. With the resistance targeting not just combatants but also those profiting from the occupation, it's a little too much to expect contractors to go out of their tightly guarded bubbles and move around. Bechtel employees, for example, only travel in military helicopters or armed convoys with at least one designated "shooter" in every vehicle. [1]

A lot of the mess can also be attributed to the incompetence and lack of experience of the people running Iraq. Much has been said about how the administrators housed in the Green Zone have little or no experience in public administration. There have also been various reports about the confusion and lack of coordination among the different agencies involved. Moreover, as in previous colonial administrations, it is often difficult to entice the best and the brightest to pack up, leave everything behind, relocate to some far-flung hardship post only to be welcomed with guns.

Hiding The Moon

But insecurity and incompetence -- while part of the complete and complex picture -- do not go far enough in explaining why the reconstruction effort has so far been an evident failure. First, although only one per cent of those surveyed in a recent Gallup poll believe that the US came to establish democracy, the majority of the Iraqis are not actively fighting the occupation. While the resistance is growing, this is not an intifida -- yet. While a mere six per cent of those surveyed believed the US are here to help [2], Iraqis who are in the position to assist in the reconstruction effort actually want to make it work - not so much to prop up the occupying forces, they say, but to ensure that oil and electricity are kept available. Iraqis may not necessarily like the Americans but they would sure like some hot water in the morning this winter.

"If this is the system, then I have to follow," said Dathar al-Khshab, general director of the Daura oil refinery said. It's the only way to keep things moving then so be it, he said, echoing other utilities managers. Rank and file oil industry workers are likewise hesitant to shut down the refineries as a bargaining chip for negotiations and as a tactic to undermine the occupation. On the one hand, they know that this could paralyze the Americans. On the other, they are afraid of its effect on the Iraqi people. But asked whether they support the coalition forces, Hassan Jum¹a, leader of the Southern Oil Company union, was firm: "You can't hide the moon. Every honest Iraqi should refuse the occupation."

Like Dogs

However, the charge of incompetence is not completely convincing because, for all the allegations of unfair competition and shadowy connections, it would be difficult to accuse Bechtel or Halliburton of not knowing what it is doing. With projects scattered all over the globe, Bechtel is one of the world's biggest construction firms and it has achieved some of history's most awesome engineering feats. Halliburton, on the other hand, has been repairing oil wells and refineries around the world for decades. Even Iraqi officials readily acknowledge that, technically speaking, they should be in good hands with these American contractors. As the grudging respect gradually gives way to disappointment, Iraqis are even more baffled as to how these corporations could fail their expectations.

Another popular explanation making the rounds alleges that sabotaging the reconstruction is a conscious and deliberate effort on the part of the occupation forces to make the Iraqis completely dependent and subservient. Keeping a dog hungry not only keeps it from barking, it also makes the dog follow its master anywhere.

The problem with this theory is that due to the relatively decentralized reconstruction process involving dozens of contractors and subcontractors, an explicit order for deliberate failure would have been almost impossible to secretly enforce. Moreover, faced with a mounting resistance, this tactic could be extremely risky because it undermines the effort to "win hearts and minds." Keeping a dog hungry could also turn it desperate and rabid.

Made in the USA

A clue to why the reconstruction has been botched up so far lies at the Najibiya power station in Basrah, Iraq's second largest city located south of Baghdad. Sitting uninstalled between two decrepit turbines are massive brand new air-conditioning units shipped all the way from York Corporation in Oklahoma. Pasted on one side of each unit was a glittering sticker proudly displaying the "Made in USA" sign -- complete with the stars and stripes.

It's just what the Iraqis don't need at this time. Since May, Yaarub Jasim, general director for the southern region of Iraq's electricity ministry, has been pleading with Bechtel to deliver urgently needed spare parts for their antiquated turbines. "We asked Bechtel many times to please help us because the demand for power is very high and we should cover this demand," Jasim said. "We asked many times, many times."

Two weeks ago, Bechtel finally came. Before it could deliver any of Jasim's request, however, Bechtel transported the air-conditioners -- useless until the start of summer six months from now. But even if the air-con units eventually become useful, stressed plant manager Hamad Salem, other spare parts would have been much more important. The air-conditioners, Salem pointed out, were not even in the list of the equipment and machine components that they submitted to Bechtel.

No Stars And Stripes

Ideally, said Jasim, it would be best to get the spare parts from the companies that originally built the turbines because they would be more readily available and more suitable for their technology. Unfortunately, Jasim pointed out, Iraq's generators happened to have been provided by companies from France, Russia, and Germany -- the very countries banned last week by the Pentagon from getting contracts in Iraq -- as well as Japan. Upon inspection, it was clear that the turbines don't carry the stars and stripes logo. The dilapidated turbines in Najibiya, for example, still proudly wore "Made in USSR" plates.

Why then have the required components not been delivered? Jasim replied dismissively, as though the answer was self-evident: "Because no other company has been allowed by the US government, only Bechtel."

Unlike those of the other banned corporations, Bechtel carries the requisite brand. Since its founding, Bechtel's officials have had a long and very cozy relationship with and within the state now disbursing the billion-dollar contracts. For example, Bechtel board member George Schultz was former Treasury Secretary to Nixon, State Secretary to Reagan, and -- coincidentally -- chairman of the advisory board of the Committee for the Liberation of Iraq. Also once included in Bechtel's payroll were former Central Intelligence Agency chief John McCone, former Defense Secretary Casper Weinberger, and former NATO Supreme Allied Commander Jack Sheehan.

Grand Business Plans

Awaiting urgent rehabilitation, Iraq's French, Russian, German, and Japanese-made power infrastructure is slowly disintegrating. At the station, workers are trying to make full use of the turbines by cooking pots of rice on the surface of the rusting hot pipes. If the stations are not rehabilitated any time soon, repairs will no longer be enough to keep them running, warned Jasim.

To finally end Iraq's crippling power shortage and to ensure that the turbines are not completely degraded, Bechtel should either quickly manufacture the required spare parts itself (a very long and very costly process) buy the spare parts from the Russian company directly, or hire the Russian firm as a subcontractor. That or they just allow the crumbling turbines to turn completely useless. Then, they bid for building new billion-dollar power generators themselves.

Incidentally, part of Bechtel¹s contract includes making "roadmaps for future longer term needs and investments." In other words, Bechtel is currently being paid to determine what the Iraqis will "need" to buy in the future -- using the Iraqis and the US taxpayers' money. According to independent estimates, Bechtel stands to get up to $20 billion worth of reconstruction contracts in the next few years. [3]

If Bechtel has grander plans for Iraq's power sector, however, they¹re not telling the Iraqis. The utilities managers interviewed said they are not being consulted at all regarding Iraq's strategic energy plans. Bechtel officials don't even bother to explain what's taking them so long to deliver the parts they need. "They just collect papers," said Jasim.

An Incentive To Fail

Iraq's power sector problem is illustrative of the bigger pattern. Iraqis spend up to five hours lining up for gasoline not only because of the sabotage of pipelines but also because there's limited electricity to run oil refineries that are crying for quicker action from Kellog, Brown, and Root (KBR), the Halliburton subsidiary and contractor for rehabilitating the oil infrastructure. According to workers from the South Oil Company in Basrah, which KBR is obliged to rehabilitate, they are not aware of any repairs KBR has actually undertaken.

With Iraq's oil refineries still awaiting rehabilitation, Iraq cannot refine enough crude oil to meet domestic consumption. The US is instead exporting Iraq's crude oil and employing KBR under a no-bid cost-plus-fixed fee contract to import gasoline from neighboring Turkey and Kuwait.

In late December, an official Pentagon investigation revealed that KBR is charging the US government more than twice what others are paying for imported gasoline. What was left unsaid, however, is the conflict of interest inherent in hiring KBR for both the oil infrastructure reconstruction and the oil importation. If Iraq's pipelines and refineries were suddenly fully functional and Iraq is able to produce all the oil it needs, it would be the end of KBR's lucrative oil-importing business.

There has been no evidence that KBR is deliberately delaying the repair the refineries, only that there is an obvious disincentive to speed things up. There is a serious but overlooked clash of incentives when the same company tasked to revive the oil industry is simultaneously making money from a condition in which that industry stays in tatters.

No Money At All?

Just outside the CPA headquarters, a small unorganized group of employees of the former regime gathered and unfurled their banner: "We Need our Salaries Now." They were demanding 10 months worth of back-wages. "We thank you because you saved our lives from Saddam. But we want to live so you should help us," their unofficial spokesperson, Karim Hassin, said indignantly, addressing the unresponsive 10-foot high wall protecting the compound. "Paul Bremer promised us salaries. We heard it with our own ears. What happened to these promises?"

A day after that the Pentagon's investigation on KBR was publicized, 300 soldiers walked out of the US-created 700-member New Iraqi Army decrying unreasonably low wages. Most of the deserters were recruited from Saddam's former army but for only $50 a month, they had decided to transfer their allegiance to the occupation forces. Trained by the military contractor Vinnell Corporation, their only demand from their new masters was a raise in pay to $120 a month. That would have amounted to a mere monthly increase in spending of only $49,000 -- small change put beside the US' $4 billion monthly military spending in Iraq and a miniscule amount compared to the $61 million in overcharges by KBR.

Hearing about all these developments, it would appear as though the occupation forces have come to liberate Iraq on a really tight budget. The common refrain of the Iraqis who have chosen to work with the US-installed bureaucracy, is that there is no quid. Pressed to explain the failure of his ministry to significantly increase power, for example, Iraq's electricity chief, Ayhem Al-Samaraie, grudgingly admitted: "I have no money in my ministry at all."

Indeed, a quick visual survey of Baghdad -- from the unkempt streets, the aging machines, the raging workers to the unbelievably long lines for gasoline -- makes this explanation for Iraq's reconstruction problems sound almost convincing. That the reconstruction effort is in shambles because there is no money almost seems plausible.

None For Iraq, Billions For Bechtel

But it isn't. Last November, the US Congress eventually passed Bush's $87 billion request for Iraq with barely a dissenting voice. Before that, the US had already spent $79 billion for both Iraq and Afghanistan. On top of this, the US also has complete control of the UN-authorized Development Fund for Iraq (DFI) which contains all of the former government's assets as well as past and future revenues from Iraq's oil exports, including leftover from the UN Oil for Food Program.

By the end of the year, the DFI would have given the occupation forces access to a total of $10 billion in disposable funds. [4] Though control would be less direct, the occupation forces can also tap a few more billions from the estimated $13 billion grants and loans raised during the Madrid donors conference on Iraq last October. On paper, the amount that will be paid to contractors like Bechtel will come from US taxpayers' money. In practice, however, all that is being spent on Iraq's reconstruction is mixed in a pot containing the US and other coalition-member countries grants plus the Iraqis' own funds.

So there's money; it's just not going around. And here perhaps lies the solution to the mystery of how the world's superpower and the world's biggest corporations can't even begin to put Iraq together again after almost nine months: The reconstruction is less about reconstruction than about making the most money possible.

Firms like Raytheon, Boeing, and Northrop Gruman will get their fair share of the $4 billion that the US is spending monthly on military expenses in Iraq; but there will not be an extra dime for the New Iraqi Army recruits. Bechtel's useless Oklahoma-made air-conditioners will be paid for under the $680 million no-bid contract; but there will be no money for the desperately needed Russian-made components for Najibiya's turbines. Halliburton and its subcontractors creamed off $61 million dollars importing oil from Kuwait; but there will be no pay-raise for Iraq's oil refinery workers.

While the US finds it increasingly harder to raise funds for the occupation, there is still enough money for the most critical aspects of the reconstruction. Those profiting from it, however, are determined to keep the biggest share possible to themselves. The bottom-line of the reconstruction mess is the bottom-line.

The Business of Making Money

"The profit motive is what brings companies to dangerous locations. But that is what capitalism is all about," Richard Dowling, spokesperson of the US Army Corps of Engineers, the agency that contracted KBR, explained. "If it takes profit to motivate an organization to take on a tough job, we can live with that. Yes, there's a profit motive but the result is the job gets done."

The problem is, as evidenced most clearly by the case of Bechtel and KBR, the job is not even getting half-done. Profit-maximization has not resulted in the most efficient restoration of power and oil production possible. On the contrary, it gets in the way of doing things right. The power plants will eventually be built and the oil refineries will run again, but not after unnecessary deprivation on the part of Iraqis and not after Bechtel has made the most of the opportunity.

This war to liberate Iraq was never about liberating the Iraqis. Unsurprisingly then, that the reconstruction effort is also not about reconstruction. In this occupation, the US and its allies' primary goal is not to rebuild what they have destroyed; it's to make a fast buck. Contractors like Bechtel and KBR are assured of getting paid no matter what; that the power plants will eventually be constructed is just incidental. They will be built in order to justify the pretext for the profit-making: That a war had to be waged and that everything that was destroyed have to be rebuilt.

As Stephen Bechtel, the company's founder, once made clear, "We are not in the construction and engineering business. We are in the business of making money." Billed as the biggest rebuilding effort since World War II, the reconstruction of Iraq is expected to cost $100 billion -- some even say $200 billion -- depending on how long they stay. For the post-war contractors, this is not a reconstruction business; it is a hundred-billion-dollar bonanza.

As the reconstruction process continues to disillusion Iraqis, the myth that the US is here to help is also steadily collapsing. With no light, no gasoline, and no paychecks, more and more Iraqis are no longer just cursing the darkness. "If you want to live in peace, Americans, give us our salary," warned Hassim, the Iraqi protesting at the gates of the CPA. "If you do not, next time we'll come back with weapons."

*Herbert Docena is a research associate with Focus on the Global South. He was in Iraq in December.

NOTES:

[1] Steve Schifferes, "The challenge of rebuilding Iraq," BBC News Oct 21, 2003

[2] Walter Pincus, "Skepticism About U.S. Seek Deep, Iraq Poll Shows," Washington Post, November 12, 2003

[3] Elizabeth Becker, "Companies From All Over a Piece of Action Rebuilding Iraq," New York Times, May 21, 2003

[4]Christian Aid, "Iraq: The Missing Billions: Transition and Transparency in Post-War Iraq" Briefing Paper for the Madrid Donor¹s Conference, October 23-24, 2003

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