Asia Times, BANGKOK – This coming October 23 to 24, the United States will be sitting down with rich creditor countries, the International Monetary Fund (IMF) and the World Bank (WB) during an international donors' conference on Iraq in Madrid. The IMF, the World Bank and the UN have estimated that Iraq will need US$36 billion for reconstruction within the next four years, in addition to $19 billion for other nonmilitary needs calculated by the American occupation regime. [1] With few options left, the US will be passing the hat.
This meeting could be a turning point in the occupation because whether the hat goes back to the US full or not will determine whether the US can afford to stay. The decision of donor countries to cough up cash will depend, in turn, on whether this continues to be a unilateral or multilateral economic takeover of an occupied country.
'This has nothing to do with oil'
The US is now forced to turn to the creditor countries, including war opponents France and Germany, and international financial institutions (IFIs) because it has nowhere else to go. The US initially had two options: to turn to the Iraqis or to the American taxpayers.
A few weeks after President George W Bush announced the end of “major hostilities” in Iraq, the US managed to pass UN Resolution 1483, which created the so-called UN Development Fund. Under this fund, all of Iraq's past and future oil revenues, as well as all the assets of the former Iraqi government located anywhere in the world, would be placed under the direct control of the US, as overseen by the IMF and the WB – two institutions in which the US has considerable voting power.
The resolution passed the UN Security Council because the US assured Russia, France and China that all contracts entered into by their firms under the UN Oil-for-Food program during the sanctions regime would be honored by the occupation authority and any subsequent interim government. [2]
The development fund is intended to finance the rehabilitation of all that's been damaged by the war. The choice of corporations to undertake this reconstruction, however, has so far been a question reserved exclusively for the US. And since most contracts are negotiated on a cost-plus basis, the price of the “reconstruction” is all up to the chosen contractor. In other words, what will be paid to Kellogg, Brown and Root to repair Iraq's oil fields and machinery, for example, will be financed out of Iraqi oil revenues at a price determined by Kellogg, Brown and Root itself.
Paying to get robbed?
Aside from financing reconstruction, the fund will be used by the US for leveraging US government guaranteed loans, as well as for directly financing corporate investments in Iraq.
According to a press release by the US Export and Import Bank, which is officially tasked to promote American business overseas, the fund will be used for lending money to US companies wishing to do business in Iraq. Few risk-averse private banks will willingly give money to any investor applying for a loan to open business in war-torn Iraq. But with the development fund, there'd be lots of money for the daring, adventurous, or simply bargain-hunting types. [3]
And in Iraq, there'd be lots of bargains around. The US handpicked Iraq Governing Council's (GC) Finance Minister, Kamel al-Kelani, announced on September 21 that all of Iraq's assets and state-owned corporations, except the oil industry, will be sold off. As sweeteners, the buyers will be entitled to 100 percent ownership of their purchase, full repatriation of profits, and minimal taxation. [4] Given Iraq's present condition, the items on the bidding block will come very cheap. But in a few more years, what was bought at dirt-cheap prices – using the Iraqis' oil revenues – could then be sold for a nice profit.
Making use of the Iraqis' assets for reconstruction means that the Iraqis themselves will be paying for rebuilding what the Americans destroyed. This is a violation of the Geneva Convention, which unequivocally states that humanitarian assistance, aid, reconstruction and other development expenses are the legal and moral obligation of the occupying forces. The use of the Iraqis' money to finance the massive privatization scheme of their economy means that the Iraqis themselves will be paying US corporations to buy off their own assets from them.
Unreliable oil
But Iraq's oil, though definitely plentiful, is not enough – at least for now. To the war planners' chagrin, oil coming out of Iraq's spigots has only been able to fill around 1 million barrels a day (mbd) – far less than on what the US originally based their plans. [5] Analysts say it would take another 18 months more before the output could even begin to hit the prewar production level of 3 mbd, and even longer to surpass it. Add a couple more years to that if the rate at which the pipelines are being sabotaged keeps up.
Worse news is that even the multinational oil giants are keeping their distance. “There has to be a proper security, legitimate authority and a legitimate process … by which we will be able to negotiate agreements that would be longstanding for decades,” Sir Philip Watts, chair of Royal Dutch/Shell, was quoted as saying. “When the legitimate authority is there on behalf of Iraq, we will know and recognize it.” [6] Whether Watts considers as legitimate the US-installed GC, one of whose members has already been killed by the resistance, remains to be seen from the oil industry's actions.
In an attempt to solve its liquidity problems, the US is considering converting Iraq's expected future oil revenues into marketable securities that could be sold at discounted rates in the present. [7] This promises to be a controversial measure not only because it could indicate that the US will be there to stay for the long haul, but also because, as with other decisions, it raises the question of whether the US has the right to decide on matters which should normally be reserved for legitimate and sovereign governments.
'The most consequential national security debate'
If an invader cannot count on the invaded to fund its occupation, then surely it could count on its own taxpayers on whose behalf the invasion was waged in the first place.
Not in this case. The Bush administration had just given its richest taxpayers $1.8 trillion in tax cuts, but it cannot afford to spend $20 billion on the people it has just liberated. Just last week, Republicans quashed Democrat efforts to fund the war by raising taxes from the wealthiest Americans [8]
