Iraq: Money for Nothing
January 14, 2004

Maria Tomchick

One of the most important news stories in 2004 is where the $18.6 billion in US taxpayer money that Congress voted to spend on Iraqi reconstruction is to be spent and how. Already some of the details are available, and the trend is disturbing.

The Bush administration opened up bidding on January 7 for $5 billion worth of major construction contracts, after delaying the process twice. The work will include everything from restoring electricity and water supplies to rebuilding hospitals to fixing roads and bridges.

The rest of the $18.6 billion will be parceled out later. Another $6 billion will be bid out for "non-construction work," most of which will go to train a new Iraqi army and supply the desperately under-supplied, ill-trained, and trigger-happy Iraqi police forces, which recently made headlines by fatally shooting Iraqi demonstrators. Another $2 billion will fund more repairs for Iraqi oil infrastructure, which is currently being repaired by Halliburton subsidiary Kellogg Brown & Root on a no-bid contract awarded by the Pentagon early last year.

Of the remaining funds, the Bush administration decided last month to defer spending $4 billion in reconstruction funds until after June 2004, when a new Iraqi government is scheduled to take over the reins from the US. US officials claim the delay is necessary to help the US government maintain leverage over the new Iraqi government, a form of benevolence that the Iraqis will certainly resent, but which fits nicely with how the US government conducts business and doles out aid money throughout the rest of world.

In the meantime, the Bush administration has announced a new $1.8 billion contract with Bechtel Corp. to continue its work fixing power plants and water infrastructure in Iraq. This comes on top of a contract the US government awarded to Bechtel last year to begin repair on electrical and water plants. In the selection process for the first contract, the US Agency for International Development secretly solicited bids from four pre-selected companies and awarded the contract to Bechtel, over the objections of smaller companies that were not even invited to bid. This gave the company a distinct advantage in competing for the second contract. USAID even used a Bechtel infrastructure study to put together the second contract; as expected, even though the bid process was "open" this time, only two other companies bothered to submit a bid. When the Bush administration eventually parcels out the $2 billion to replace the current Halliburton contract, we can expect the same result.

A useful question to ask is "How much are the Iraqis getting for all the US taxpayer money being spent?" The answer so far is alarming. Nearly $1.5 billion was paid to Bechtel in 2003, much of it for upgrades to Iraq's electrical supply system. Yet evidence on the ground suggests that the electricity supply is as bad or worse now than under Saddam Hussein's regime. In November, Baghdad suffered a two-day blackout and continues to experience daily rolling blackouts of several hours at a stretch. Outside of the cities it is much worse: in many rural towns and villages, the power is off for longer periods than it is on, making it impossible to refrigerate food and heat homes.

Bechtel lays the blame on the Pentagon for poor planning and on Saddam Hussein for not somehow finding a way to import necessary parts in spite of 12 years of US-led sanctions. But the new Iraqi government's Electricity Ministry knows who is really to blame. Its officials complain that power plant managers gave Bechtel a list of the spare parts last summer and fall, but so far they've "gotten absolutely nothing" and have been forced to operate the systems exactly as they did under Saddam Hussein.

Such corporate profiteering and mismanagement has real, drastic effects on the ground, and not just for Iraqi citizens. Col. Kurt Fuller, commander of the Second Brigade of the 82nd Airborne Division told the New York Times, regarding an increase in guerrilla attacks near the town of Abu Desheer: "We went to the neighborhood council and said, 'You were totally peaceful. What happened?' They said, 'No power.' Saddam used to cut off power to punish them. So they thought the coalition was punishing them."

Another such punishment is the shortage of gasoline and kerosene in Baghdad. While Democratic Congressmen in Washington DC are investigating allegations that Halliburton overcharged the US government to import fuel into Iraq, residents of Baghdad are spending hours and sometimes days in line at the gas pump. And most Baghdad residents heat their homes with kerosene, and that fuel is also in short supply.

Halliburton blames sabotage to Iraq's northern oil pipelines, which have been bombed at least 85 times since May 1, 2003; however, the southern oil pipelines and infrastructure remain largely secure. A more pressing problem is the shocking state of the oil infrastructure after 12 years of US-led sanctions. This has forced the Bush administration to import gasoline and kerosene into a country with the world's second largest oil reserves, hence Halliburton's role in shipping gasoline into Iraq from Kuwait.

Iraqis blame the shortages on smugglers who divert gas as it's being trucked to gas stations and then sell it back over the border in Kuwait and Jordan. The problem is clearly one of security. Neither the US army nor Halliburton is adequately monitoring the supply system to make sure the gas and kerosene is actually delivered to its specified endpoint. As long as the fuel is purchased, the trucks sent on their way, and the money paid into Halliburton's pocket, whatever happens to the fuel en route appears to be no one's business or concern--except the Iraqis who suffer and the US troops on the ground who continue to be bombed and strafed by disgruntled Iraqis.

In the meantime, the Pentagon is scrambling to clear Halliburton's name on the pricing scandal. The Defense Contract Audit Agency has limited its investigation to reviewing Halliburton's in-house records and invoices for fuel purchases. They are not conducting a review of average prices charged for fuel by companies in the Gulf region, nor how Halliburton chose its subcontractors, nor the Kuwaiti government's suspected involvement in limiting Halliburton's access to only one subcontractor, which effectively jacked up the price of fuel. And they certainly aren't looking at why the fuel isn't reaching its intended destination.

So far, the audit has turned up the shocking revelation that Pentagon officials signed an emergency waiver allowing Halliburton to overcharge for fuel imports. Instead of screaming for blood and seeking some kind of accountability for this egregious theft of taxpayer funds, US legislators and the media have merely accepted the Pentagon's explanation as a valid excuse for highway robbery.

The picture is clear: US taxpayer funds spent on Iraqi reconstruction are lining the pockets of George Bush's corporate associates, while US taxpayers, who should expect that money to be spent for a good purpose, are being cheated. Meanwhile, Iraqi citizens, who've been promised help but not received any, are left to twist in the wind, while US and coalition troops in Iraq are forced to manage an increasingly dangerous situation.

--Maria Tomchick

Sources for this article: "US Opens Up Bidding for New Iraq Contracts," Sue Pleming, Reuters, 1/7/04; "Bush to Defer Some Iraq Work Until After Transfer of Power," Neil King Jr. and Yochi Dreazen, Wall Street Journal, 12/31/04, p. A2; "Bechtel's new Iraq job: Engineering giant adds on $1.8 billion US contract," David R. Baker, San Francisco Chronicle, 1/7/04; "In an Oil-Rich Land, Power Shortages Defy Solution," Neela Banerjee, The New York Times, 1/7/04; and "Pentagon Auditors Set to Clear Halliburton," Sue Pleming, Reuturs, 1/7/04.