In early February, the Bush administration announced plans for an Office of Reconstruction and Humanitarian Assistance to oversee three agencies involved in the reconstruction of post-war Iraq: humanitarian relief, reconstruction and civil administration. Directed from the Pentagon, the head of the new office was to be Jay Garner, a retired general. Although the Pentagon would oversee reconstruction efforts, international groups and non-government organizations would not deal directly with the Defense Department. Instead, they would work with US Agency for International Development (USAID).
More than a week before the invasion, news reports surfaced that the US had invited five engineering firms to bid on the largest of a series of USAID reconstruction contracts – an estimated $900 million to repair schools, health services, ports and airports in post-war Iraq. Although the companies all had prior experience as contractors in the Middle East, they also had close ties to the Bush administration.
The timing of the announcements raised questions about the propriety of planning for post-war construction while negotiations aimed at averting war were still in progress. But the US preoccupation with reconstruction in Iraq was actually nothing new. In September 2002, US national security adviser Condoleeza Rice had announced the United States would be “completely devoted” to the reconstruction of Iraq in the event that the US launched a military strike.
The decision to shortlist the five companies for the largest USAID contract, without inviting open competitive bids, raised the most eyebrows. European diplomats complained that no European companies had been invited to submit bids. Furthermore, the five companies – Bechtel Group Inc., Fluor Corp., Parsons Corp., Louis Berger Group Inc. and Kellogg Brown & Root, a subsidiary of Halliburton Co – seemed to be reaping the rewards of their close ties and campaign contributions to the Republican Party and the Bush administration. And, because USAID was expected to enlist the help of US congressional committees in making work assignments, any ties between the companies and members of Congress would almost certainly draw attention to oily palms.
All five companies have long-term business relationships with the US government, and according to the Center for Responsive Politics (www.opensecrets.org), four of the five made substantial campaign contributions to the Republican Party in 2000 or 2002. At Halliburton, 89 per cent of the money from its political action committee (PAC) went to Republicans in 2002; Fluor gave 61 per cent to Republicans, and Parsons and Bechtel each gave 57 per cent. On average, oil and gas industry PACs contributed 76 percent of their funding to Republicans, while the construction services PACs awarded the Republicans 62 percent of their donations.
Thus, aside from Halliburton, the three other companies for which data are available don’t appear to have contributed more PAC funding to Republicans on a percentage basis than other companies in their industries. Soft-money is another matter, however. Halliburton and Fluor both contributed 100 percent of their “soft” donations to Republicans in 2002, while Bechtel gave the Republicans 52 percent.
In total dollars contributed, the same four companies were big spenders. According to Center for Responsive Politics compilations as of April 16, 2003, in 2002 Parsons Corp. ranked seventh in total campaign contributions among construction services firms, giving $153,051 (61 per cent to Republicans). Among general contractors, Bechtel ranked fourth with donations of $277,050 (43 per cent to Republicans) and Fluor was 5th with $276,172 (58 per cent to Republicans). In 2000, Parsons Corp. ranked 13th among construction services firms, contributing $99,350 (61 percent to Republicans). Bechtel was eighth among general contractors with contributions of $184,425 (28 percent to the GOP); Fluor ranked ninth with $174,856 in contributions (55 percent to Republicans), while Halliburton ranked 15th with $108,780 (96 per cent to Republicans). The four also spent heavily on lobbying in 2000: Halliburton, $600,000; Fluor, $480,000; Bechtel, $240,000; and Parsons, less than $60,000. No data was available for Louis Berger.
Pointing to the close ties between the five companies and the Bush administration, European Union external affairs commissioner Chris Patten called the situation “maladroit.” The Observer of London asked whether the Bush administration might be using the war in Iraq to benefit US companies. A high-ranking British official was quoted as saying, “The Americans look like they are looking for an American administration in Iraq. USAID is taking this further still. We are saying this needs to be a UN-led administration.”
British companies haven’t forgotten that US companies walked away with most of the Kuwait reconstruction contracts in 1991. The Observer recently cited a USAID spokesperson as saying that this time the contracts were technically open to foreigners, but since there were sufficient numbers of interested US companies, there was no need for foreign companies to apply.
Meanwhile, British contractors suspected they were being relegated to subcontractor roles. According to another UK paper, Sunday Business, as many as 60 British companies had expressed an interest in working in post-war Iraq. But many reportedly received little assistance from the British government in getting on the tender lists for the US contracts. Sunday Business also reported in mid-March that France’s largest construction company, Vinci, had begun lobbying for reconstruction contracts. Specializing in road-building, the company reportedly hoped to land a $500 million contract to rebuild hospitals, roads, and urban areas.
Even Germany wanted to be included. Karsten Voight, coordinator for US relations with the German foreign ministry, said, “The Americans will discover that the participation of other partners and the United Nations in stabilizing Iraq is useful also for America.” But any French, German or Russian participation was expected to meet resistance in Washington and London, as well as from Kurds in Iraq, who weren’t likely to honor past Russian and French oil and gas contracts negotiated with Saddam Hussein’s government.
The Europeans hadn’t been left out of the loop completely. The Bush administration began negotiations with the European Union (EU) about reconstruction as early as February. But in mid-March, several members of the EU suggested that it might refuse to participate if the US launched an attack on Iraq without UN approval. Coincidence or not, if any European companies were ever contenders for primary contracts, none of them made it to the short list.
In late March, USAID administrator Andrew S. Natsios told The Washington Post that one reason the main contracts would only be awarded to US companies was that reconstruction personnel need security clearances to access classified documents. Natsios added, however, that he expected long-term reconstruction projects to include non-US companies, and “UN agencies will be involved in a major way.” After British trade and industry secretary Patricia Hewlett called Natsios, she reportedly received assurances that British contractors would be given some of the work. The International Monetary Fund and World Bank were also lining up.
The Oil Rush Begins
Although US oil companies are expected to team up eventually with their European counterparts to exploit Iraq’s oil reserves, the services sector is poised to reap the greatest windfall by providing drilling, pumping and refining gear, and maintenance, technical and management skills. Service companies like Halliburton and Bechtel should be able to avoid capital outlays for exploration and production, without being dependent on the fluctuating returns from petroleum.
Officially, the US has had no ties to the Iraqi oil business for two decades. Although US Secretary of State Colin Powell repeatedly insisted that war with Iraq wasn’t about oil, on-going uncertainty about the future reliability of Saudi Arabian sources no doubt made the Iraqi oil fields an attractive alternative as a source of imported Middle East oil to the administration. According to CIA political analyst Stephen Pelletierre, who opposed the invasion of Iraq, “If there’s even a hint the US benefited at the expense of the Iraqi people, the regional faults will far offset the standard 15 per cent returns you’re going to get for US [oil] multinationals. And you can be absolutely certain the contracts won’t survive America’s departure from Iraq, which will probably occur in less than two years.”
On March 25, the Bush administration waived a law that required only US companies win federal contracts, paving the way for
non-US firms to bid for USAID reconstruction subcontracts. Six days later, The Independent reported that the British development assistance firm, British Crown Agents, had been named a subcontractor to the US-owned International Resources Group to provide procurement, transport and warehouse management support in Kuwait and Iraq. USAID administrator Andrew Natsios quickly pointed out that bids for the subcontracts were open. “We are using British Crown Agents to do our purchasing in the Gulf,” he explained, “so there’s a British company already working for us.”
But the prime contracts would still go to US companies. By early April, prime contracts had been awarded to Halliburton to organize fire-fighting and rebuild torched oil wells; to the International Resources Group for personnel support; and to Stevedoring Services of America for plans to reopen and operate Iraq’s deep-water port at Umn Qasr. The major reconstruction contract, now said to be worth $680 million, was awarded to Bechtel on April 17.