Tacoma, Washington

TEXT OF TESTIMONY

My expertise is in the area of public policy, particularly international trade and finance law. I have both undergraduate and graduate degrees in Public Policy and I have served as a Legislative Assistant to two United States Members of Congress: Congressman John Conyers, Jr. and Elijah Cummings. I spent five years as the Project Director of the International Forum on Globalization and I am now a Visiting Scholar with the Institute for Policy Studies based in Washington, DC.

I come here today in support of Lt. Watada; the fourteen U.S. members of the military who have already gone to jail because of their refusal to fight in this illegal war; the several more waiting for judges to determine their fate; the tens of thousands who have gone AWOL – and I understand that just since the announcement of the “surge” an additional 150 have bravely gone AWOL to Canada; all of those who have returned from battle and have joined the ranks of Iraq Veterans Against the War; all the other soldiers and their family members whether they oppose the war or not; the hundreds of thousands of Iraqis who have died and the tens of millions who oppose this war; and all of us who struggle here and there against this war and this imperial administration.

I will begin my testimony with a quote from Michael Scheuer, the CIA’s senior expert on al-Qaeda until he quit in protest of the Iraq war:

“The U.S. invasion of Iraq was not preemption; it was—like our war on Mexico in 1846—an avaricious, premeditated, unprovoked war against a foe who posed no immediate threat but whose defeat did offer economic advantages.”

Previous testifiers have spoken to the fact that the United States invasion of Iraq was an illegal act of war. They have also testified to the fact that Lt. Ehren Watada is therefore fulfilling his duty as a U.S. military officer to refuse to participate in this war. I, of course, fully support these findings.

I will testify in response to question number four presented by the panel: that a pattern of war crimes has and is being committed by the United States in the execution of this on going war. I was also present evidence as to what at least some of the illegal objectives were for launching the war and for continuing the occupation. My testimony will specifically address the U.S. government’s ongoing economic invasion of Iraq. All of my testimony is drawn from, and therefore provided in far greater detail (including foot notes not found here), in my book, The Bush Agenda: Invading the World, One Economy at a Time, and particularly in chapter 6, “The Economic Invasion of Iraq.”

First, it is an absolute fallacy the Bush administration had no post-invasion plan for Iraq. It had a very clear plan, an economic plan. The plan was prepared prior to the invasion, implemented to the letter and in clear violation to both international and U.S. military law, continues to be enforced today, and, I believe, the Bush administration’s bull-headed intention to complete this plan is the reason why it refuses to end the Iraq war and why it is simultaneously pursuing a new war against Iran.

However, while the administration had both very clear goals for the Iraq war, and clear policies both drafted and implemented to the see those goals met, what the administration did NOT count on in its post-war planning was the resistance of both the Iraqis and the Americans (ultimately). The administration assumed that because the Iraqi people had not risen up and rebelled against the Dictator Saddam Hussein that they would also therefore not rise up in rebellion against the Dictator Paul Bremer nor any future ruler put in place by the administration. They were wrong.

But on to the plans. I’m going to fast-forward through a lot of information and material on post-war intentions and planning here and start in December 2002 with the first meeting of the U.S. State Department’s Future of Iraq Oil and Energy Working Group.

While most of the State Department’s Future of Iraq work was ultimately scrapped for not sharing the imperial zeal of the neoconservatives dominating the White House, the opposite is the case for the plans related to Iraq’s oil. The Oil and Energy Working Group prepared a post-invasion plan for Iraq’s oil system that would transform Iraq’s nationalized oil system to one that was all but privatized and opened to foreign corporate investment using contracts known as Production Sharing Agreements (PSAs).

Fast-forward again to two months prior to the invasion of Iraq when another set of plans was prepared. This time, not just for Iraq’s oil infrastructure, but for Iraq’s entire economy. Like so much in the Bush administration, the actual writing of this plan was contracted out to a private company, in this case, Bearing Point, Inc.

Bearing Point’s plan entitled “Economic Recovery, Reform and Sustained Growth in Iraq” draws straight from the economic playbooks of the International Monetary Fund, World Bank, World Trade Organization, North American Free Trade Agreement, etc. It transforms Iraq from a state-controlled economy to one that would function in support of – beyond all else – the presence of foreign multinational corporations. But, rather than deal with messy international negotiations or elected governments, the Bush administration implemented this component of its economic plans for Iraq with a military invasion.

The Bearing Point contract explains, “It should be clearly understood that the efforts undertaken will be designed to establish the basic legal framework for a functioning market economy; taking appropriate advantage of the unique opportunity for rapid progress in this area presented by the current configuration of political circumstances . . . . Reforms are envisioned in the areas of fiscal reform, financial sector reform, trade, legal and regulatory, and privatization.” It specifically emphasizes the need for “private-sector involvement in strategic sectors, including privatization, asset sales, concessions, leases and management contracts, especially those in the oil and supporting industries.”

THE COALITION PROVISIONAL AUTHORITY

Fast forward again. It is May Day 2003 and the “formal invasion” of Iraq is over and the President is declaring, “mission accomplished” in Iraq. Five days later, he names L. Paul Bremer III presidential envoy to Iraq and the administrator of the U.S.-led occupation government, the Coalition Provisional Authority (CPA).

The United States, on behalf of the Coalition forces, then laid out the framework for the occupation of Iraq, including the role of the CPA, in a letter submitted to the UN Security Council on May 8, 2003.

The letter stipulated that the CPA was to “exercise powers of government temporarily, and as necessary” in Iraq. As the occupation government, it would provide security, allow the delivery of humanitarian aid, and eliminate weapons of mass destruction.

On May 22, the Council passed Resolution 1438, formally acknowledging the occupation of Iraq and identifying the CPA as the occupation government. However, the Council added its own specifications for the CPA, including the promotion of the welfare of the Iraqi people through the effective administration of the country, and in particular the restoration of security and stability along with the conditions necessary to ensure that the Iraqi people can “freely determine their own political future.” The resolution also calls on the Coalition to “comply fully with their obligations under international law including in particular the Geneva Conventions of 1949 and the Hague Regulations of 1907.”

Article 43 of the Hague Regulations (ratified by the United States) requires that an occupying power “take all the measures in his power to restore, and ensure, as far as possible, public order and safety, while respecting, unless absolutely prevented, the laws in force in the country”

Provision#363 of the U.S. Army’s Law of Land Warfare repeats Article 43 word for word. The legal interpretation of these and related provisions is that an occupier is required to ensure that the lights are on, the water is flowing, the streets are safe, and the basic necessities of life are provided. However, the occupier is not permitted to make changes beyond those necessary to meet these obligations.

Not only would the Bush administration fail to meet the conditions of Article 43 and Provision 363 in Iraq, it would directly contradict them by radically altering Iraq’s laws.

In June 2005, two years after the occupation of Iraq began, the transitional Iraqi government pleaded to the world from the opening page of its National Development Strategy “we urgently need emergency/ humanitarian interventions to provide basic services such as water, electricity, hospitals and schools.”

The Bush administration failed to provide these necessities because it did not focus its efforts on the immediate provision of needs, but rather on the opening of Iraq to U.S. corporations and the advance of its own agenda. The administration’s failure to provide these basic necessities of life, therefore, was in violation of international law and the subsequent – and very avoidable – suffering by the Iraqi people that necessarily followed, constitute a crime against humanity.

Paul Bremer was administrator of the CPA from May 6, 2003, until June 28, 2004. This time is also considered the formal occupation period of Iraq. During this time, the CPA had full executive, legislative, and judicial authority over Iraq and its people, and Paul Bremer had full authority over the CPA. During his reign, Bremer implemented exactly 100 Orders, the vast majority of which remain in place today. The Orders have the full effect of law and they have fundamentally transformed Iraq’s economic and political structure.

Far from a blind mistake, therefore, the failure of the reconstruction in Iraq was something I could have warned the administration of if anyone had asked well before U.S. troops hit the ground. The Bremer orders have set in place conditions for the ongoing inadequate provision of basic services, unemployment, underdevelopment, economic inequality, and violence for the foreseeable future. They constitute both war crimes and crimes against humanity.

THE BREMER ORDERS

Order#1 (May16, 2003) provided for the “De-Ba’athification of Iraqi Society.” All Ba’ath party members holding any position “in the top three layers of management in every national government ministry, affiliated corporations and other government institutions (e.g., universities and
hospitals)” were removed from their jobs. With this Order, 120,000 of Iraq’s most experienced and highest ranking civil servants, including engineers, scientists, university professors, doctors, skilled laborers, and government administrators from every ministry, were fired. The apparent goal of the Order was to eliminate any remnants of Hussein’s regime, using Ba’ath party membership as an indicator of loyalty to Hussein and participation, or at least complicity, in his crimes. Under Hussein, however, Ba’ath party membership was a prerequisite for employment in the civil service. For many Iraqis, membership was simply the only route to a good job in the field of their choosing. It was in no way a direct indicator of support for the regime or criminal activity.

These were the Iraqis with the most knowledge of the country’s water, electricity, sewage, transportation, finance, healthcare, and education services, among others. And, in the first days of the U.S. occupation of Iraq, they were no longer allowed to work.

David Phillips, author of Losing Iraq: Inside the Postwar Reconstruction Fiasco and a former senior U.S. State Department Iraq expert who worked on post-invasion reconstruction planning for almost two years, argued that
Order #1 served to remove the “opponents to the liberalization of Iraq’s national economy.” By eliminating those few Iraqis who would be in a position to know about the Orders, understand their impact, and interfere with their implementation, Bremer locked in the economic fate of the nation.

More than five months later, after government services had slid to a state of total disarray and the failure of Order #1 had grown painfully apparent, Bremer was forced to amend it with CPA Memorandum #8, authorizing a case-by-case review of individuals seeking to return to work. While this amendment was welcome, much of the damage had already been done, and the review process itself was slow and tarnished by political favoritism.

Order#2 (May 23, 2003) dissolved Iraqi “entities,” including the Iraqi army and intelligence services. This order threw the entire Iraqi army— half a million men—out of work at a time when unemployment in Iraq was estimated at between 50 and 70 percent. With no jobs waiting for them and no way to provide for their families, many were believed to have taken their arms and joined the ranks of the insurgency.

The U.S. military had a very different plan for the Iraqis. As early as 2002, U.S. military planners spoke of removing the nine thousand military officers and members of Hussein’s various Special Forces, while retaining the four hundred thousand rank-and-file soldiers, the vast majority of whom were originally drafted under fear of death, unless they were charged with a crime and found guilty in public hearings. The Iraqi soldiers were to provide police and rebuilding services. In addition, all would continue to receive their pay, whether or not they were put to work.

Instead, Bremer disbanded the military and refused to continue to pay their salaries. He handed security and reconstruction work to private U.S. contractors and the U.S. military.

Phillips estimated that when one includes the families of the fired soldiers, Order #2 turned some 2.4 million Iraqis, roughly ten percent of the entire population, against the United States in the first month of the occupation.

Order #12 (June 7, 2003; replaced with Order #54, February 24, 2004) outlined the “Trade Liberalization Policy ”for Iraq. Among other things, it suspended “all tariffs, customs duties, import taxes, licensing fees and similar surcharges for goods entering or leaving Iraq.” Where existing Iraqi law sought to protect the local economy from foreign competition, the trade liberalization law eliminated all protective barriers in one fell swoop— leaving the market suddenly fully exposed. This led to an immediate inflow of cheap foreign consumer products, which, in turn, devastated local producers and sellers who were not prepared to meet the challenge of their global competitors.

Before the invasion, the Iraqi government heavily subsidized the farming sector. Farming “inputs” such as seeds, fertilizer, pesticides, sprinklers, and tractors were subsidized often at a third or even a fourth of the market price. The government leased land for one cent per donam, about six-tenths of an acre, a year. It bought the country’s main crops, wheat and barley, at a fixed price, whether they were usable or not. And it ground up the grain and provided it free as flour to the people each month as part of the guaranteed food program in which every family received a basket of flour, sugar, tea, and other necessities.

Bremer began changing these policies shortly after the occupation began. Trevor Flugge, the CPA’s senior civil administrator for agriculture, described the CPA’s changes by explaining that subsidizing farming supplies is “all wrong”; instead, the new government would provide assistance in the form of technology and education and “the market will take care of the rest.”

Iraq has not been self-sufficient in food production since the 1950s and has always relied on imports, much of these from the United States. The problem emerging today, however, is that without farming and price supports, Iraqis will no longer be able to compete with the imports and contribute their share to the Iraqi farming sector. In addition, Iraqis may no longer be able to afford the import of American products.

Abu Ahmed Al-Hadithi, an Iraqi vegetable seller at the Al-Adhamiyah market, described the impacts already being experienced in Iraq to Dahr Jamail, one of the only independent American journalists who remained in Iraq throughout the invasion and occupation: “The economic situation is so bad now. The costs of gas and food are going up so high; so even if we make more now, everything is costing more. . . . In Saddam’s days we grew all our own vegetables to sell . . . but now so many are coming from outside of Iraq and it is causing us to sell them for less. So I make less profit now, and I have nine people to take care of, and it has made my life very difficult.”

Order #14 (June 10,2003) defined “prohibited media activity” as that which, among other things, “incites violence against Coalition Forces or CPA personnel,” “advocates alternatives in Iraq’s borders by violent means,” or “advocates the return to power of the Iraqi Ba’ath party or makes statements that purport to be on behalf of the Iraqi Ba’ath party.”

Order #17 (revised on June 27, 2004) granted full immunity from Iraqi laws and the Iraqi legal system to Coalition military forces and all foreign contractors, including private security firms. Non-Iraqi members of the military, corporations, corporate subcontractors and their employees cannot be held subject to Iraq’s laws to this day. Thus, if in the course of his or her duties, a soldier or contractor commits murder, torture, rape, dumps toxic chemicals, poisons drinking water, starts an oil spill, rips off an Iraqi subcontractor, abuses an Iraqi employee, or the like, the injured Iraqi has no legal recourse other than to try to bring charges in foreign courts under foreign laws.

As Adam Price, a member of the British Parliament, commented, “How is anyone in Iraq expected to bring a case in the British courts? It is taking the idea of diplomatic immunity and applying it to 130,000 troops. There is a danger that you are actually going from immunity to
being able to act with impunity.”

Order #37 (September 19,2003; amended with Order #49, February 19, 2004) replaced Iraq’s progressive tax strategy (by which the more you earned, the more you paid in taxes) with a flat tax—that long-desired but never-achieved dream of the American right wing.The law dropped the existing tax rate on corporations from a high of 40 percent to the flat rate of 15 percent, which is now in effect for both individuals and corporations.

Order #39 (September 19, 2003) is the foreign investment Order. It includes the following provisions: (1) privatization of Iraq’s state-owned enterprises; (2) 100 percent foreign ownership of Iraqi businesses; (3) “national treatment”—which means no preferences for local over foreign businesses; (4) unrestricted, tax-free remittance of all profits and other funds;(5) forty-year ownership licenses; and (6) the right to take legal disputes out of Iraq’s courts and into international tribunals.

I’ll go into these provisions in more detail below.

Order #40 (September 19, 2003; replaced with Order #94, June 6, 2004), the “Bank Law,” opens the Iraqi banking sector to foreign ownership. Under Order #40, foreign banks were allowed to enter this previously closed sector and purchase up to 50 percent of an Iraqi bank. The total number of licenses for banks controlled by foreign companies was limited to six through December 31, 2008. One year later, Bremer expanded the Bank Law with Order #94, allowing foreign banks to purchase 100 percent of Iraqi banks and to open subsidiaries and branches without restriction. In addition, banks owned by Iraqis are not to be granted any legal preferences over foreign-owned banks (although the opposite is possible). The HSBC Bank of London was one of the first foreign banks authorized to operate in Iraq and to purchase majority ownership (70 percent) of a private Iraqi bank, the Dar Elsalam Investment Bank, with fourteen branches across Iraq. America’s JPMorgan Chase received an early contract to run the Trade Bank of Iraq, a consortium of thirteen banks.

Order #62 (February 26, 2004) enabled Bremer to determine which Iraqis could run for or hold public offices. “When determined necessary for security and public order within Iraq, the Administrator of the CPA may disqualify an individual from participating in an election as a candidate, and for accepting a nomination to, or holding public office, at any level, ”if that individual has, among other things, “publicly espoused political philosophies or legal doctrines contrary to the democratic order and rule of law being established in Iraq.”

Order #57 and Order #77 placed American representatives in key decision-making positions within each government ministry for terms that last five years—well after the permanent elected government of Iraq took office in 2006. Order #57 (February 5,2004) established an Inspector General—handpicked by Bremer—with five-year terms within every Iraqi Ministry. The Inspector Generals can, among other things, perform audits and investigations, promulgate policies and procedures, and have full access to all offices, employees, contracts, and all other materials of the Ministries. Order #77 (April 18, 2004) established the Board of Supreme Audit. Bremer appointed the board president and his two deputies, who are to serve five-year terms. The auditors can be removed only with a two-thirds vote of Iraq’s parliament. To date, no such vote has occurred. This Board oversees inspectors in every Ministry, with wide-ranging authority to review government contracts, audit classified programs, and prescribe regulations and procedures.

Order #80 (April 26, 2004), Order #81 (April 26, 2004), and Order #83 (May 1, 2004) rewrote Iraq’s patent, trademark, and copyright laws, just two months before the handover of authority from the CPA to the interim Iraqi government, to ensure guaranteed access and protections to the Iraqi market for foreign products and producers.

THE EFFECTS OF THE BREMER ORDERS ON THE GROUND

The provisions of Order #39 in particular meant that Iraqis could not be given any preference in the awarding of contracts in the reconstruction effort. However, the same was NOT true of foreign firms or workers – which could receive preference and, of course they did. The result is a U.S. corporate invasion of Iraq.

According to the U.S. General Services Administration’s Federal Procurement Data System and figures collected by the Center for Public Integrity, a Washington, DC-based think tank, by mid-2005, more than 150 U.S. companies had been awarded contracts totaling more than $50 billion—more than twice Iraq’s entire GDP at the time—to work on the Iraq War and reconstruction. The largest single recipient, Halliburton, has contracts worth more approximately $20 billion. Excluding Halliburton, the seven largest contracts, totaling nearly $23 billion, are for companies working almost exclusively on some form of construction—be it of buildings, highways, bridges, electricity, water, oil, or sanitation systems.

These companies are: Parsons Corporation of Pasadena, CA ($5.3 billion); Fluor Corporation of Aliso Viejo, CA ($3.75 billion); Washington Group International of Boise, ID ($3.1 billion); Shaw Group of Baton Rouge, LA ($3 billion); Bechtel Corporation of San Francisco, CA ($2.8 billion), Perini Corporation of Framingham, MA ($2.5 billion); and Contrack International, Inc. of Arlington,VA ($2.3 billion).

None of these companies have to reinvest a single penny of their billions of dollars of earnings back into the Iraqi economy.
They have the opportunity to purchase 100% of Iraqi businesses (as opposed to being required to partner with an Iraqi company) in any sector of the economy (excluding oil extraction which I’ll get to later). They do not have to use Iraqi products in their work nor hire Iraqi workers.

The provisions of Order #39 also allow for the full privatization of Iraqi economy (again, excluding oil). This is a crucial component of the Bush economic agenda in Iraq and helps explain to a considerable degree the failure of the reconstruction effort even though the privatizations have not taken place (except the telecommunications sector). The privatization has failed because of swift and successful opposition by the Iraqi public, with some good support back here from the American public.

First, the CPA set out immediately to conduct extensive assessments of all of Iraq’s state-owned enterprises to determine their potential for privatization. So, rather than focusing on how to rebuild these industries following the invasion, the focus was on which ones should be scrapped and which ones were the most marketable.

In addition, many of the U.S. companies had their sights set on privatization of industries in which they were working, such as water, electricity, or health care. Thus, many focused on major overhauls rather than simply getting the systems up and running. As Cliff Mumm, head of Bechtel’s Iraq operation has said, Iraq “has two rivers, it’s fertile, it’s sitting on an ocean of oil. Iraq ought to be a major player in the world. And we want to be working for them long term.”
Many companies were also eager to show off their skills in the Middle East as they lobbied back home for the Bush administration’s U.S.-Middle East Free Trade Area (much more about that in my book, no time for it here).
And, since many U.S. contracts guaranteed that all of the companies’ costs would be covered, plus a set rate of profit (known as cost-plus contracts), the companies took their time, built expensive new facilities that showcased their skills and would serve their own needs were they to run the systems one day.

The American companies were hired instead of the literally hundreds of both public and private Iraqi companies fully capable of performing the work at hand. These were the same companies that had rebuilt their own country after the previous U.S. invasion. And, because the Americans did not have to hire Iraqis, many imported foreign workers instead.

The Iraqis were, of course, well aware that American firms had received billions of dollars for reconstruction, that Iraqi companies and workers had been rejected, and that the country remained without basic services. The result was increasing hostility, acts of sabotage targeted directly at foreign contractors and their work, and a rising insurgency.

The net result was utter and complete failure by virtually all U.S. companies operating in Iraq to fulfill their reconstruction mission.

The failure to deliver a reliable electricity infrastructure in particular has been one of the worst consequences of the U.S. corporate blitz.

In Iraq, electricity controls water and sewage systems. Without the one, you cannot have the others. Throughout the occupation, when Iraqis have been polled, they point to the lack of electricity as the issue they most want the Iraqi government to deal with. For those who do not know, prior to the invasion, Baghdad had 24 hours a day of electricity. Today, even before the recent increase in fighting in Baghdad, Baghdad received just 8 hours a day of electricity on average.

Back in June 2004, UN special envoy to Iraq, Lakhdar Brahimi, warned that after security, the lack of reliable electricity was the number one problem facing Iraq and would continue to destabilize the nation if not adequately addressed. U.S. Air Force Colonel Sam Gardiner, author of a U.S. government study on the likely effect that U.S. bombardment would have on Iraq’s power system, said, “frankly, if we had just given the Iraqis some baling wire and a little bit of space to keep things running, it would have been better. But instead we’ve let big U.S. companies go in with plans for major overhauls.”

Again, electricity controls water and sewage, without one, you cannot have the others. Thus, according to the U.S. Agency for International Development (USAID), one year and a half after the U.S. occupation began and companies like Bechtel were on the ground and in charge of repairing these services, USAID reported that in Iraq, “water meant for consumption is pumped through the system largely untreated while raw waste flows untreated directly into city streets, rivers or marshlands. Many rural communities are not connected to main water or sewer lines, have no access to potable water and suffer from health problems related to poor sewage disposal.” Furthermore, “Baghdad’s three sewage treatment plants, which together comprise three-quarters of the nation’s sewage treatment capacity, are in operable, allowing the waste from 3.8 million people to flow untreated directly into the Tigris River. . . . Water that is pumped through the system is largely untreated, especially in the South.”

On January 27, 2005, one of the most important writers in Iraq, a young Iraqi woman who goes by the name “Riverbend” posted the following on her daily web log about her life in occupied Baghdad, “E. was the first to hear it. We were sitting in the living room and he suddenly jumped up, alert, “Do you hear that?” He asked. I strained my ears for either the sound of a plane or helicopter or gun shots. Nothing. . . except, wait. . . something. . . like a small stream of. . . water? Could it be? Was it back? We both ran into the bathroom where we had the faucets turned on for the last eight days in anticipation of water.

Sure enough, there it was—a little stream of water that kept coming and going as if undecided. E. and I did a little victory dance in front of the sink with some celebratory hoots and clapping. I almost didn’t sleep last night. I kept worrying the water would be cut off again. I actually crept downstairs at 4 A.M. to see if it was still there and found E. standing in the bathroom doorway doing the same. My mother is calling the syndrome “water anxiety.”

Mismanagement, waste, abuse and criminality have also characterized U.S. corporations in Iraq—leading to a series of U.S. contract cancellations. For example, a $243 million contract held by the Parsons Corporation for the construction of 150 health care centers was cancelled after more than two years of work and $186 million yielded just six centers, only two of which are serving patients. Parsons was also dropped from two different contracts to build prisons, one in Mosul and the other in Nasiriyah. The Bechtel Corporation was dropped from a $50 million contract for the construction of a children’s hospital in Basra after it went $90 million over budget and a year and a half behind schedule. These contracts have since been turned over to Iraqi companies.

Halliburton is currently being investigated by government agencies under dozens of charges. Most significantly, in 2006, the U.S. Army cancelled Halliburton’s largest government contract, the LOGCAP, which was for worldwide logistical support to U.S. troops. Halliburton will continue its current Iraq contract, but next year the LOGCAP will be broken into smaller parts and competitively bid out to other companies

The Special Inspector General for Iraq Reconstruction (SIGIR), a congressionally mandated independent auditing and oversight body, has opened 256 investigations into criminal fraud, four of which have resulted in convictions. SIGIR has proved critical oversight of the U.S. reconstruction and nearly fell prey to a GOP attempt last fall to shut down its activities well ahead of schedule.

SIGIR’s most recent report to Congress (October 2006) reveals the failure of U.S. corporations in Iraq. In the electricity sector, less than half of all planned projects in Iraq have been completed, while 21 percent have yet to even begin. The term “complete,” however, can be misleading as, for example, SIGIR finds that the electricity sector has been hampered by the failure of contractors to build transmission and distribution lines to connect new generators to homes and businesses. Thus, nationally, Iraqis have just 11 hours on average of electricity a day, and in Baghdad, the heart of instability in Iraq, there are between four and eight hours on average per day. Before the war, on the other hand, Baghdad averaged 24 hours per day of electricity.

While there has been greater success in completing water and sewage projects, the fact that 80 percent of potable water projects, for example, are reported complete does little good if there is no electricity to pump the water into homes, hospitals or businesses. Meanwhile, the healthcare sector is truly a tragedy, with just 36 percent of planned projects reported complete. Just 12 of 20 planned hospitals are complete, while only six of 150 planned public health centers are serving patients today.

Thus far, Iraq has not emerged as the wealthy free market haven these companies and others waiting on the horizon had hoped for. Therefore, several U.S. companies are preparing to follow Bechtel’s lead by packing up, heading home, and taking their billions of dollars with them, while leaving their work in Iraq undone.

OUR DEMANDS

We must make very specific demands now of the Congress and U.S. Corporations who are now or have operated in Iraq:
1) Existing contracts with U.S. companies must be immediately cancelled;
2) All misspent funds must be returned;
3) All this money, plus a lot more, will need to go immediately to Iraqi companies and Iraqi workers for work in Iraq. More “Provincial Reconstruction Teams” made of Americans who can not safely leave the Green Zone are absolutely not necessary.

WINNING IRAQ’S OIL PRIZE

Let’s step back a bit in time for a moment to look at Bush administration plans for Iraq’s oil.
On his tenth day as vice president, Dick Cheney established the National Energy Policy Development Group, widely referred to as “Cheney’s Energy Task Force,” to draft a proposal for a new energy strategy for the United States. The Task Force met throughout 2001 in closed meetings; its discussions and materials were not made public until the U.S. Supreme Court finally forced Cheney’s hand. The Task Force included representatives of the nation’s largest corporations, including ExxonMobil, Bechtel, Chevron, Halliburton, Chevron, and ConocoPhillips.

Two years after they were drawn up, the Bush White House was forced to reveal a series of lists and maps prepared by the Task Force that outlined Iraq’s entire oil productive capacity and the foreign countries and companies lined up for contracts. Compiled in March 2001, the documents include detailed descriptions of Iraq’s “super giant oilfields,” oil pipelines, refineries, and tanker terminals. Two lists, entitled “Foreign Suitors for Iraqi Oilfield Contracts as of 5 March 2001,” name more than 60 companies from some 30 countries with contracts in various stages of discussion for oil and gas projects across Iraq. None of those contracts were with American firms. However, because sanctions were imposed on Iraq at this time, none of the contracts could come into force.

But the writing was on the wall. Global public opinion had turned aggressively against the sanctions and the likelihood was increasing that they would be removed. If the sanctions were removed while Hussein remained in power, all of those oil contracts worth trillions of dollars would go to all of those foreign oil companies, while the U.S. oil industry would be shut out.

As the Bush administration stepped up its war planning, the State Department began planning for post-invasion Iraq. Meeting four times between December 2002 and April 2003, members of the State Department’s Oil and Energy Working Group mapped out Iraq’s oil future. They agreed that Iraq “should be opened to international oil companies as quickly as possible after the war” and that the best method for doing so was through Production Sharing Agreements (PSAs).

PSAs are considered “privatization light” in the oil business. Ownership ultimately rests with the government, but the most profitable aspects of the industry—exploration and production, are in the hands of the private companies and on highly favorable terms. As such, none of the top oil producers in the Middle East use PSAs because they favor private companies at the expense of the exporting governments. In fact, PSAs are only used in respect to about 12 percent of world oil reserves. PSAs are the favorite of international oil companies and the worst-case scenario for oil-rich states.

Two months after the invasion of Iraq, in May 2003, the U.S.-appointed senior adviser to the Iraqi Oil Ministry, Thamer al-Ghadban, announced that few, if any, of the dozens of contracts signed with foreign oil companies under the Hussein regime would be honored by the new Iraqi government.

At the same time, Bremer was laying the economic groundwork for a “U.S. corporate friendly” Iraq. When Bremer left Iraq in June 2004, he bequeathed the Bush economic agenda to two men, Ayad Allawi and Adel Abdul Mahdi, appointed by Bremer as interim Prime Minister and Finance Minister, respectively. Just two months later, Allawi (who was at one time on the CIA’s payroll) submitted guidelines for a new petroleum law to Iraq’s Supreme Council for Oil Policy. The guidelines declared “an end to the centrally planned and state dominated Iraqi economy” and advised the “Iraqi government to disengage from running the oil sector, including management of the planned Iraq National Oil Company (INOC), and that the INOC be partly privatized in the future.”

Allawi’s guidelines also turned all undeveloped oil and gas fields over to private international oil companies. Because just 17 of Iraq’s 80 known oil fields have been developed, Allawi’s proposal would put a full 64 percent of Iraq’s oil into the hands of foreign firms. However, if a further 100 billion barrels are found, as is widely predicted, foreign companies could control 81 percent of Iraq’s oil—or 87 percent if 200 billion are found, as the Oil Ministry predicts.

The plans for Iraq’s new petroleum law were made public at a press conference in Washington, D.C., hosted by the U.S. government. On December 22, 2004, Mahdi joined U.S. Undersecretary of State Alan Larson at the National Press Club and announced Iraq’s plans for a new petroleum law to open the oil sector to private foreign investment.

Mahdi explained, “So I think this is very promising to the American investors and to American enterprise, certainly to oil companies.” He described how, under the proposed law, foreign companies would gain access both to “downstream” and “maybe even upstream” oil investment in Iraq. (“Downstream” refers to refining, distribution, and marketing of oil. “Upstream” refers to exploration and production.) A few weeks later, Mahdi was appointed one of Iraq’s new deputy presidents, a position he still holds today.

The draft petroleum law adopted Allawi’s recommendation that currently producing oil fields are to be developed by Iraq’s National Oil Company, while all new fields are opened to private companies using PSAs.

The draft has been hotly debated within successive Iraqi governments for years now. But, on Thursday, January 18, the Bush administration’s dream came one step closer to reality when an Iraqi negotiating committee of “national and regional leaders” approved a new hydrocarbon (or oil) law. The committee chair, Deputy Prime Minister Barham Salih, told Reuters that the draft will go to the Iraqi cabinet next week and, if approved, to the Parliament immediately thereafter.

The good news is that the PSAs have apparently been removed. The PSAs in the previous draft of the law gave private companies (including foreign ones) control of Iraq’s oil production and 70 percent of the profits, specified that up to two thirds of Iraq’s known oil reserves would be developed by private companies, and locked the government into 30-year contracts.

Unfortunately, the bad news still outweighs the good.

First, the committee has debated the new law in near total secrecy: almost no one – both outside of within the Iraqi government, including the Parliament – has seen it.

It is clear, however, based on press reports that the law allows foreign investment in Iraq’s oil industry. It also grants foreign oil companies “national treatment,” which means that the Iraqi government cannot give preference to Iraqi oil companies (whether public or privately owned) over foreign owned companies when it chooses whom to sign contracts with. This provision alone will severely cripple the government’s ability to ensure that Iraqis gain as much economic benefit as possible from their oil.

The questions left to be answered are under what terms and to what extent will Iraq’s currently nationalized oil industry be turned over to foreign multinationals, how much of the revenue will stay in Iraq, and how much control will Iraqis themselves truly exercise over these decisions?

According to Reuters, the new law does not specifically include PSAs, but instead is vague as to what form of contract foreign oil companies will be able to sign in Iraq. In order to determine “the best model for its future contracts with international oil companies” the Iraqi government has arranged for fact-finding teams from the Iraqi Oil Ministry to visit the U.S., Britain, and Norway.

“Why?” you may ask, are the Iraqis turning North for answers rather than, say, next door? Next door they would find that Kuwait, Iran, and Saudi Arabia all maintain nationalized oil systems and have outlawed foreign control over oil development. None use PSAs, but rather hire foreign oil companies as contractors to provide specific services, as needed, for a limited duration, without giving the foreign company any direct interest in the oil produced.

Instead, the fact-finding tour is skipping its neighbors and heading straight to those nations whose governments and corporations are putting the most pressure on Iraq to adopt PSAs and have not been shy about the expectations for Iraq. As Peter Robertson, Chevron Vice Chairman said in 2003, “Although the final decision for inviting foreign investment ultimately rests with a representative Iraqi government, I believe in due course the invitation will come.”

Most Iraqis remain in the dark about the new oil law. Iraq’s oil workers had to travel to Jordan to learn details of the law from the London-based research organization Platform. As a result, in September, the nation’s five trade union_federations – between them representing hundreds of thousands of workers – released a public statement rejecting “the handing of control over oil to foreign companies, whose aim is to make big profits at the expense of the Iraqi people, and to rob the national wealth, according to long-term, unfair contracts, that undermine the sovereignty of the state and the dignity of the Iraqi people.” They demanded a delay in consideration of any law until all Iraqis could be included in the discussion.

At the same time, the Bush administration and U.S. oil companies have been increasing public pressure on Iraqis to pass the law. The Iraq Study Group Report specifically (and publicly) called on the Bush administration to “assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise” and to “encourage investment in Iraq’s oil sector by the international community and by international energy companies.” (See “Its Still About Oil in Iraq” ). While the rest of the report was ignored, the administration ran with the oil recommendations and President Bush made his first public demand of the Iraqi government to pass the oil law in December, followed by the same demand from U.S. Ambassador to Iraq Zalmay Khalilzad and General George W. Casey Jr., the senior American commander in Iraq. The call for a troop surge came next.

The Bush administration and U.S. oil companies (among others) are quite simply (and obscenely) taking advantage of an occupied, war-ravaged, and internally divided nation to get control over as much oil as possible, and on the best possible terms. They are holding our troops – and the Iraqi people – hostage in order to get it. But, the removal of the PSAs makes clear that the extensive (although unreported) popular opposition and organizing in Iraq, the U.S., Britain, and elsewhere against PSAs has succeeded, at least for now.

As Standard Oil Company’s John D. Rockefeller, is famously quoted as saying, “Own nothing, control everything.” He would be proud of U.S. oil companies and the Bush administration as they seem poised to get—at least on paper—exactly what they wanted out of the war in Iraq. We can be sure that the Bush administration will spend the next two years doing its utmost to ensure that the oil companies are successful.

WHAT WE CAN DO

1) Our elected officials must start talking about what’s really happening to Iraq’s oil.
2) U.S. government and corporate pressure must be removed from Iraq.
3) The occupation of Iraq – both in its military and corporate form – must be brought to an immediate end.

This is where we come in.

Thank you.

Additional Resources:

“Citizens’ Hearing to Put Iraq War “On Trial” Before Lt. Watada Court Martial.” Noemie Maxwell, Daily Kos. December 2006.

Report of the Citizens’ Hearing on the Legality of U.S. Actions in Iraq: The Case of Lt. Ehren Watada. January 2007.