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[casi] FW: The Pentagon and Halliburton

May 14, 2003

Secret November Deal for Iraq's Oil
The Pentagon and Halliburton

Months before the United States military showered Iraq
with bombs and missiles, the Department of Defense was
secretly working with Vice President Dick Cheney's old
company, Halliburton Corp., on a deal that would give
the world's second largest oil services company total
control over Iraq's oil fields, according to
interviews with Halliburton's most senior executives.

Moreover, classified Halliburton documents obtained by
CounterPunch over the past month prove that the war in
Iraq was as much about controlling the world's second
largest oil reserves as it did about overthrowing the
regime of Iraq's President Saddam Hussein.

The deal between the Department of Defense and
Halliburton unit Kellogg, Brown & Root to operate
Iraq's oil industry, which was hatched as early as
October 2002, according to the documents, and could
ultimately be worth $7 billion, couldn't have come at
a better time for Halliburton.

Back in October of last year, Halliburton was saddled
with a multibillion-dollar asbestos liability and the
company was also suffering through a slowdown in
domestic oil production. Halliburton's stock price
responded swiftly, plummeting to $12.62 in October
2002, from a high of $22 the year beforee, and rumors
began to swirl that the company would be forced to
file for bankruptcy.

But news of a pending war in Iraq meant that
Halliburton's financial troubles would, like Saddam
Hussein's regime, be history. Classified documents
from November 2002 show that the Department of Defense
recommended that The Army Corps of Engineers award a
contract to Brown & Root to extinguish Iraqi oil well
fires in addition to "assessing the condition of
oil-related infrastructure; cleaning up oil spills or
other environmental damage at oil facilities;
engineering design and repair or reconstruction of
damaged infrastructure; assisting in making facilities
operational; distribution of petroleum products; and
assisting the Iraqis in resuming Iraqi oil company

"The fact that the Department was planning for the
possibility that it would need to repair and provide
for continuity of operations of the Iraqi oil
infrastructure was classified until March 2003," the
agency said on its web site. "This prevented earlier
acknowledgement or announcement of potential
requirements to the business community."

The Army Corps of Engineers has declassified portions
of some documents related to its deal with Brown &
Root. The deal memo can be viewed at

Since October, when Halliburton was awarded the
contract to repair Iraq's oil industry, the company's
stock has nearly doubled. On Tuesday, the stock closed
at $23.90.

Publicly, when the Army Corps of Engineers was
criticized by Washington lawmakers earlier this year
for awarding the no-bid contract to Brown & Root
because of the company's strong ties to Cheney, the
agency said Brown & Root would do nothing more than
extinguish oil well fires. Brown & Root was chosen,
according to the Army Corps of Engineers, because
Brown & Root could be "deployed" on short notice.

However, according to interviews with Halliburton
executives, company employees were working out of a
hotel room in Kuwait City as far back as November
assessing the Iraq's oil infrastructure and mapping
out plans for operating Iraq's oil industry.

A report in the magazine Business 2.0 from April 2003
makes this point clear.

"From behind the obsidian mirrors of his wraparound
sunglasses, Ray Rodon surveys the vast desert
landscape of southern Iraq's Rumailah oilfield. A
project manager with Halliburton's engineering and
construction division, Kellogg Brown & Root, Rodon has
spent months preparing for the daunting task of
repairing Iraq's oil industry. Working first at
headquarters in Houston and then out of a hotel room
in Kuwait City, he has studied the intricacies of the
Iraqi national oil company, even reviewing the firm's
organizational charts so that Halliburton and the Army
can ascertain which Iraqis are reliable technocrats
and which are Saddam loyalists," the story says.

Halliburton, in a March news release, said it first
began working on a plan to repair Iraq's oil
infrastructure at the request of the Defense

"The DoD, through its US Army Logistics Civil
Augmentation Program (LOGCAP) III contract with KBR,
tapped the company in November 2002 to develop the
contingency plan. Implementation of the plan is being
executed through a separate contract KBR now holds
with the US Army Corps of Engineers," the news release

A half-dozen Halliburton employees said that they
don't believe Cheney played any role in the company
securing the lucrative contract from the government,
but they noted that the Army Corps of Engineers
purposely downplayed the company's role in repairing
Iraq's infrastructure because of Halliburton's ties to
Cheney and the criticism that would likely come from
Congressional Democrats who claim the government is
playing favorites.

"Halliburton has been working with the United States
government since the 1940s," said one executive who
supplied CounterPunch with documents and requested
anonymity. "But because Vice President Dick Cheney
used to run the firm everyone automatically assumes
that he had something to do with the government
contracts we now get."

Since 9-11, Halliburton's Brown & Root division is the
only company that has profited from the so-called war
on terror.

Based on its performance providing U.S. troops in the
Balkans with housing, food, water, mail, laundry, and
heavy equipment (a job for which Halliburton has been
paid $3 billion so far), the company won an
unprecedented ten-year deal in December 2001 to supply
similar logistical support to U.S. military operations
around the world.

"The Pentagon's Logistics Civil Augmentation Program
pays Halliburton through what's called a cost-plus
arrangement, meaning that KBR is guaranteed to recover
its expenses, plus receive a set profit, provided the
contract terms are met. To date, KBR has received $830
million from the program. The company is also helping
to run Incirlik Air Base and other U.S. military
facilities in Turkey (where an initial contract, set
to expire in September, was worth $118 million) and
received $65 million to support bases in Afghanistan
and Uzbekistan. What's more, it earned $33 million
building cells for suspected al Qaeda members at
Guantanamo Bay, Cuba. Overall, Halliburton's backlog
of government revenue expanded 40% in the last three
months of 2002 alone," Business 2.0 reported. .

What is most troubling about the sweet deals Brown &
Root has been awarded and what has lawmakers like
Congressman Henry Waxman, D-California, up in arms is
how the company ripped off the government to the tune
of $2 million on several occasions while Cheney was
chief executive of Halliburton and the company's long
history of supporting terrorist regimes-including
Iraq, Iran and Libya-despite U.S. sanctions on such

Last year, KBR agreed to pay the U.S. government $2
million to settle allegations it defrauded the
military while Cheney was chief executive of parent
company Halliburton. KBR was accused of inflating
contract prices for maintenance and repairs at Fort
Ord, a now-shuttered military installation near
Monterey, Calif. The lawsuit, filed in Sacramento,
alleged KBR submitted false claims and made false
statements in connection with 224 delivery orders
between April 1994 and September 1998. KBR and
Halliburton has also paid out settlements to end
investigations and lawsuits on half-a-dozen other

In 1978, a grand jury indicted KBR on charges that it
colluded with a competitor on marine construction
work. KBR paid a $1 million fine to settle the
charges. In 1995, the U.S. fined Halliburton $3.8
million for violating a ban on exports to Libya. Four
years later, a Halliburton subsidiary opens an office
in Iran, despite a U.S. ban on doing business in that
country. In 2001, Halliburton shareholders lash out at
company executives for its pipeline project in Burma,
citing that country's human-rights abuses. Also in
2001, watchdog groups blast Cheney for placing 44
Halliburton subsidiaries in foreign tax havens.

Halliburton's dealings in six countries - Azerbaijan,
Indonesia, Iran, Iraq, Libya and Nigeria - show that
the company's willingness to do business where human
rights are not respected is a pattern that goes beyond
its involvement in Burma..

So how does the company continue to win such lucrative
contracts with the government, as in the case of Iraq,
in spite of its shady record?

"KBR was selected for the award based on the fact that
KBR is the only contractor that could commence
implementing the complex contingency plan on extremely
short notice," Halliburton said in a March news

Despite Waxman's criticism of the government awarding
the bulk of the work in Iraq to Halliburton unit Brown
& Root, it appears that the company's role in the
country is getting bigger by the second. And plans to
open up the bidding to other companies appear to be a
dead issue.

On Monday, the Army Corps of Engineers said it awarded
Brown & Root another $24 million contract, this time
to distribute gasoline and cooking fuel in Iraq.

The Army Corps of Engineers said the delivery order
was awarded to Halliburton subsidiary on May 4 as part
of the $7 billion umbrella contract awarded to the
company in March for fire fighting services in Iraq.

The Army Corps last week said the Halliburton
subsidiary had received about $75 million in orders so
far, and the total amount would likely reach about
$600 million, far less than the worst-case figure of
$7 billion estimated before the Iraq war.

Corps spokeswoman Carol Sanders said the new order
fell under the broad terms of the original contract
and rejected criticism from Waxman, who said
Halliburton now appeared to have a more lucrative and
direct role in rebuilding Iraq's oil industry.

She said Iraqi people urgently needed cooking oil and
gasoline as they began rebuilding their country. Given
the need to boil water to prevent disease, it was not
feasible to competitively bid the work.

"We made the contract broad enough so we could handle
issues just like this," she said.

Specifically, Sanders said KBR was bringing supplies
of liquefied national gas and gasoline to regional
storage centers, where Iraqis were managing its

KBR spokeswoman Wendy Hall said the latest contract
was part of the broader contract, which aimed to
maintain "the continuity of operations of the Iraqi
oil infrastructure."

Jason Leopold can be reached at:

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