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[casi-analysis] Excellent article

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Dear List,

Naomi Klein's article below should serve as a superb contribution to
understanding the US oocupation's economic policy. This is entirely different
from Klein's other good piece in the Guardian on 23 December, but repeats one
central argument: the occupation's policies are neither ideologically inspired
(as I myself have sometimes argued), nor originating from the realm of ideas
at all. Another point especially worth noting in this article is Klein's
suggestion that big time Iraqi crooks promoted by the occupation are small fry
in comparison with the American corruption involved.

Merry Christmas to all.

This article can be found on the web at

Risky Business
[from the January 5, 2004 issue]
It's 8:40 am and the Sheraton Hotel ballroom thunders with the sound of
plastic explosives pounding against metal. No, this is not the Sheraton in
Baghdad, it's the one in Arlington, Virginia. And it's not a real terrorist
attack, it's a hypothetical one. The screen at the front of the room is
playing an advertisement for "bomb resistant waste receptacles": This trash
can is so strong, we're told, it can contain a C4 blast. And its
manufacturer is convinced that given half a chance, these babies would sell
like hotcakes in Baghdad--at bus stations, Army barracks and, yes, upscale
hotels. Available in Hunter Green, Fortuneberry Purple and Windswept
Copper. This is ReBuilding Iraq 2, a gathering of 400 businesspeople itching
to get
a piece of the Iraqi reconstruction action. They are here to meet the
people doling out the cash, in particular the $18.6 billion in contracts to
be awarded in the next two months to companies from "coalition partner"
countries. The people to meet are from the Coalition Provisional Authority
(CPA), its new Program Management Office, the Army Corps of Engineers, the
US Agency for International Development, Halliburton, Bechtel and members
of Iraq's interim Governing Council. All these players are on the
conference program, and delegates have been promised that they'll get a
chance to corner them at regularly scheduled "networking breaks." By now there
have been dozens of similar trade shows on the business
opportunities created by Iraq's decimation, held in hotel ballrooms from
London to Amman. By all accounts, the early conferences throbbed with the
sort of cash-drunk euphoria not seen since the heady days before the
dot-coms crashed. But it soon becomes apparent that something is not right
at ReBuilding Iraq 2. Sure, the organizers do the requisite gushing about
how "nonmilitary rebuilding costs could near $500 billion" and that this is
"the largest government reconstruction effort since Americans helped to
rebuild Germany and Japan after the Second World War." But for the
undercaffeinated crowd staring uneasily at exploding garbage
cans, the mood is less gold rush than grim determination. Giddy talk of
"greenfield" market opportunities has been supplanted by sober discussion
of sudden-death insurance; excitement about easy government money has given
way to controversy about foreign firms being shut out of the bidding
process; exuberance about CPA chief Paul Bremer's ultraliberal investment
laws has been tempered by fears that those laws could be overturned by a
directly elected Iraqi government. At ReBuilding Iraq 2, held on December 3-4,
it seems finally to have dawned
on the investment community that Iraq is not only an "exciting emerging
market"; it's also a country on the verge of civil war. As Iraqis protest
layoffs at state agencies and make increasingly vocal demands for general
elections, it's becoming clear that the White House's prewar conviction
that Iraqis would welcome the transformation of their country into a
free-market dream state may have been just as off-target as its prediction
that US soldiers would be greeted with flowers and candy. I mention to one
delegate that fear seems to be dampening the capitalist
spirit. "The best time to invest is when there is still blood on the
ground," he assures me. "Will you be going to Iraq?" I ask. "Me? No, I
couldn't do that to my family." He was still shaken, it seemed, by the
afternoon's performance by ex-CIAer
John MacGaffin, who had harangued the crowd like a Hollywood drill
sergeant. "Soft targets are us!" he bellowed. "We are right in the
bull's-eye.... You must put security at the center of your operation!"
Lucky for us, MacGaffin's own company, AKE Group, offers complete
counterterrorism solutions, from body armor to emergency evacuations. Youssef
Sleiman, managing director of Iraq Initiatives for the Harris
Corporation, has a similarly entrepreneurial angle on the violence. Yes,
helicopters are falling, but "for every helicopter that falls there is
going to be replenishment." I begin to notice that many of the delegates at
ReBuilding Iraq 2 are
sporting a similar look: Army-issue brush cuts paired with dark business
suits. The guru of this gang is retired Maj. Gen. Robert Dees, freshly
hired out of the military to head Microsoft's "defense strategies"
division. Dees tells the crowd that rebuilding Iraq has special meaning for
him because, well, he was one of the people who broke it. "My heart and
soul is in this because I was one of the primary planners of the invasion,"
he says with pride. Microsoft is helping develop "e-government" in Iraq,
which Dees admits is a little ahead of the curve, since there is no
g-government in Iraq--not to mention functioning phones lines. No matter.
Microsoft is determined to get in on the ground floor. In fact,
the company is so tight with Iraq's Governing Council that one of its
executives, Haythum Auda, served as the official translator for the
council's Minister of Labor and Social Affairs, Sami Azara al-Ma'jun,
during the conference. "There is no hatred against the coalition forces at
all," al-Ma'jun says, via Auda. "The destructive forces are very minor and
these will end shortly.... Feel confident in rebuilding Iraq!" The speakers on
a panel about "Managing Risks" have a different message:
Feel afraid about rebuilding Iraq, very afraid. Unlike previous presenters,
their concern is not the obvious physical risks, but the potential economic
ones. These are the insurance brokers, the grim reapers of Iraq's gold
rush. It turns out that there is a rather significant hitch in Paul Bremer's
plan to auction off Iraq while it is still under occupation: The insurance
companies aren't going for it. Until recently, the question of who would
insure multinationals in Iraq has not been pressing. The major
reconstruction contractors like Bechtel are covered by USAID for "unusually
hazardous risks" encountered in the field. And Halliburton's pipeline work
is covered under a law passed by Bush on May 22 that indemnifies the entire
oil industry from "any attachment, judgment, decree, lien, execution,
garnishment, or other judicial process." But with bidding now starting on
Iraq's state-owned firms, and foreign
banks ready to open branches in Baghdad, the insurance issue is suddenly
urgent. Many of the speakers admit that the economic risks of going into
Iraq without coverage are huge: Privatized firms could be renationalized,
foreign ownership rules could be reinstated and contracts signed with the
CPA could be torn up. Normally, multinationals protect themselves against this
sort of thing by
purchasing "political risk" insurance. Before he got the top job in Iraq
this was Bremer's business--selling political risk, expropriation and
terrorism insurance at Marsh & McLennan Companies, the largest insurance
brokerage firm in the world. Yet in Iraq, Bremer has overseen the creation
of a business climate so volatile that private insurers--including his old
colleagues at Marsh & McLennan--are simply unwilling to take the risk.
Bremer's Iraq is, by all accounts, uninsurable. QUOT-The insurance industry
has never been up against this kind of exposure
before," R. Taylor Hoskins, vice president of Rutherford International
insurance company, tells the delegates apologetically. Steven Sadler,
managing director and chairman at Marsh Industry Practices, a division of
Bremer's old firm, is even more downbeat. "Don't look to Iraq to find an
insurance solution. Interest is very, very, very limited. There is very
limited capacity and interest in the region." It's clear that Bremer knew Iraq
wasn't ready to be insured: When he signed
Order 39, opening up much of Iraq's economy to 100 percent foreign
ownership, the insurance industry was specifically excluded. I ask Sadler,
a Bremer clone with slicked-back hair and bright red tie, whether he thinks
it's strange that a former Marsh & McLennan executive could have so
overlooked the need for investors to have insurance before they enter a war
zone. "Well," he says, "he's got a lot on his plate." Or maybe he just has
better information. Just when the mood at ReBuilding Iraq 2 couldn't sink any
lower, up to the
podium strides Michael Lempres, vice president of insurance at the Overseas
Private Investment Corporation (OPIC). With a cool confidence absent from
the shellshocked proceedings so far, he announces that investors can relax:
Uncle Sam will protect them. A US government agency, OPIC provides loans and
insurance to US companies
investing abroad. And while Lempres agrees with earlier speakers that the
risks in Iraq are "extraordinary and unusual," he also says that "OPIC is
different. We do not exist primarily to generate profit." Instead, OPIC
exists to "support US foreign policy." And since turning Iraq into a
free-trade zone is a top Bush policy goal, OPIC will be there to help out.
Earlier that same day, President Bush signed legislation providing "the
agency with enhancements to its political risk insurance program,"
according to an OPIC press release. Armed with this clear political mandate,
Lempres announces that the agency
is now "open for business" in Iraq, and is offering financing and
insurance--including the riskiest insurance of all: political risk. "This
is a priority for us," Lempres says. "We want to do everything we can to
encourage US investment in Iraq." The news, as yet unreported, appears to take
even the highest-level
delegates by complete surprise. After his presentation, Lempres is
approached by Julie Martin, a political risk specialist at Marsh &
McLennan. "Is it true?" she demands. Lempres nods. "Our lawyers are ready."
"I'm stunned," Martin says. "You're ready? No matter who the government
is?" "We're ready," Lempres replies. "If there's an expro[priation] on January
3, we're ready.... I don't know what we're going to do if someone sinks a
billion dollars into a pipeline and there's an expro." Lempres doesn't seem
too concerned about these possible "expros," but it's
a serious question. According to its official mandate, OPIC functions "on a
self-sustaining basis at no net cost to taxpayers." But Lempres admits that
the political risks in Iraq are "extraordinary." If a new Iraqi government
expropriates and re-regulates across the board, OPIC could be forced to
compensate dozens of US firms for billions of dollars in lost investments
and revenues, possibly tens of billions. What happens then? At the
Microsoft-sponsored cocktail reception in the Galaxy Ballroom that
evening, Robert Dees urges us "to network on behalf of the people of Iraq."
I follow orders and ask Lempres what happens if "the people of Iraq" decide
to seize back their economy from the US firms he has so generously insured.
Who bails out OPIC? "In theory," he says, "the US Treasury stands behind
us." That means the US taxpayer. Yes, them again: The same people who have
already paid Halliburton, Bechtel et al. to make a killing on Iraq's
reconstruction would have to pay these companies again, this time in
compensation for their losses. While the enormous profits being made in
Iraq are strictly private, it turns out that the entire risk is being
shouldered by the public. For the non-US firms in the room, OPIC's
announcement is anything but
reassuring: Since only US companies are eligible for its insurance, and the
private insurers are sitting it out, how can they compete? The answer is
that they likely cannot. Some countries may decide to match OPIC's Iraq
program. But in the short term, not only has the US government barred
companies from non-"coalition partners" from competing for contracts
against US firms, it has made sure that the foreign firms that are allowed
to compete will do so at a serious disadvantage. The reconstruction of Iraq
has emerged as a vast protectionist racket, a
neocon New Deal that transfers limitless public funds --in contracts, loans
and insurance--to private firms, and even gets rid of the foreign
competition to boot, under the guise of "national security." Ironically,
these firms are being handed this corporate welfare so they can take full
advantage of CPA-imposed laws that systematically strip Iraqi industry of
all its protections, from import tariffs to limits on foreign ownership.
Michael Fleisher, head of private-sector development for the CPA, recently
explained to a group of Iraqi businesspeople why these protections had to
be removed. "Protected businesses never, never become competitive," he
said. Quick, somebody tell OPIC and Paul Wolfowitz. The issue of US double
standards comes up again at the conference when a
CPA representative takes the podium. A legal adviser to Bremer, Carole
Basri has a simple message: Reconstruction is being sabotaged by Iraqi
corruption. "My fear is that corruption will be the downfall," she says
ominously, blaming the problem on "a thirty-five-year gap in knowledge" in
Iraq that has made Iraqis "not aware of current accounting standards and
ideas on anticorruption." Foreign investors, she said, must engage in
"education--bring people up to world-class standards." It's hard to imagine
what world-class standards she's referring to, or who,
exactly, will be doing this educating. Halliburton, with its accounting
scandals back home and its outrageous overbilling for gasoline in Iraq? The
CPA, with its two officers under investigation for bribetaking, and
nonexistent fiscal oversight? On the final day of ReBuilding Iraq 2, the
cover headline in our complimentary copies of the Financial Times (a
conference sponsor) is "Boeing linked to Perle investment fund." Perhaps
Richard Perle--who supported Boeing's $18 billion refueling-tanker deal and
extracted $20 million from Boeing for his investment fund--can teach Iraq's
politicians to stop soliciting "commissions" in exchange for contracts. For
the Iraqi expats in the audience Basri's is a tough lecture to sit
through. "To be honest," says Ed Kubba, a consultant and board member of
the American Iraqi Chamber of Commerce, "I don't know where the line is
between business and corruption." He points to US companies subcontracting
huge taxpayer-funded reconstruction jobs for a fraction of what they are
getting paid, then pocketing the difference. "If you take $10 million from
the US government and sub the job out to Iraqi businesses for a
quarter-million, is that business, or is that corruption?" These were the
sorts of uncomfortable questions faced by George Sigalos,
director of government relations for Halliburton KBR. In the hierarchy of
Iraqi reconstruction, Halliburton is king, and Sigalos sits onstage, heavy
with jeweled ring and gold cufflinks, playing the part. But the serfs are
getting restless, and the room quickly turns into a support group for
jilted would-be subcontractors. "Mr. Sigalos, what are we going to have to do
to get some sub-contracts?" "Mr. Sigalos, when are you going to hire some
Iraqis in management and
leadership?" "I have a question for Mr. Sigalos. I would like to ask what you
suggest when the Army says 'Go to Halliburton' and there's no response from
Halliburton?" Sigalos patiently instructs them all to register their companies
Halliburton's website. When the questioners respond that they have already
done so and still haven't heard back, Sigalos invites them to "approach me
afterward." The scene afterward is part celebrity autograph session, part
riot. Sigalos
is swarmed by at least fifty men, who elbow each other out of the way to
shower the Halliburton VP with CD-ROMs, business plans and résumés. When
Sigalos spots a badge from Volvo, he looks relieved. "Volvo! I know Volvo.
Send me something about what you can achieve in the region." But the small,
no-name players who have paid their $985 entrance fees, here to hawk
portable generators and electrical control paneling, are once again told to
"register with our procurement office." There are fortunes being made in
Iraq, but it seems they are out of reach to all but the chosen few. The next
session is starting and Sigalos has to run. The serfs wander off
through the displays of shatterproof glass and bomb-resistant trash cans,
caressing Sigalos's red-and-white business card and looking worried.

Dr Kamil Mahdi
University of Exeter

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