IRAQ: Donors Wary of Washington

By Emad Mekay Reprint | | Print |

Analysis - By Emad Mekay

WASHINGTON, Oct 23 2003 (IPS) - The United States’ bid to get international donors to bankroll the occupation and reconstruction of Iraq might be derailed by Washington’s own alliance with corporations and its continuing unilateral foreign policy.

The United States’ bid to get international donors to bankroll the occupation and reconstruction of Iraq might be derailed by Washington’s own alliance with corporations and its continuing unilateral foreign policy.

Representatives from some 80 countries started a two-day donors’ conference in Madrid on Thursday where Washington, which has occupied Iraq since leading an invasion of the nation in March, asked nations to pledge billions of dollars to rebuild the devastated country.

Iraq was crippled by 12 years of U.S.-promoted United Nations economic sanctions and the U.S.-led invasion, which was opposed around the globe.

Japan has already pledged to provide 1.5 billion dollars for 2004 while the World Bank said it will commit 3.5 -5.0 billion dollars in the next four years.

The bank and the United Nations estimate that Iraq will need 56 billion dollars over the coming four years to overcome the widespread destruction.

Washington is looking for other countries to also promise billions.

Yet officials from nations attending the meeting and various advocacy groups have said the money offered might fall well short of what the United States wants to see because of donors’ mistrust of U.S. policies in Iraq.

Various advocacy groups and foreign officials oppose policies that have so far favoured U.S. corporations for reconstruction projects while ignoring Iraqi firms and have marginalized the Iraqi people.

The 15-member European Union (EU) has called for a “separate and transparent” fund to hold its pledged money apart from that administered by Washington.

Earlier this week, a World Bank official told the ‘New York Times’ that European countries were concerned that the U.S.-headed Coalition Provision Authority (CPA) “is the decision-making authority in Iraq”.

“For political reasons, they don’t want their funds to be perceived as being commingled with funds controlled by the CPA. They want their own say over how the money is spent,” said the unnamed source.

Most of the 20 billion dollars pledged by Washington, part of a package of 87 billion dollars requested by the administration of President George W. Bush from Congress for military operations and reconstruction, will finance business deals involving U.S. companies, making the sum appear as a handout to American corporations.

To date, the distribution of such lucrative deals has happened behind closed doors in Washington; U.S. officials have cited security justifications for assigning many of the rebuilding contracts to U.S. companies rather than opening them to competitive bidding.

Donors and advocacy groups are also concerned about the accountability of U..S. companies working in Iraq after Bush signed an executive order three months ago giving U.S. oil companies blanket immunity from lawsuits and criminal prosecution in connection with the sale of Iraqi oil.

Lawyers for various groups maintain that the order appears to completely shelter those companies from legal responsibility.

Observers also object to committing large sums of money to Iraq because no process exists to monitor spending. A proposed oversight committee still has not been appointed and no auditing mechanism is yet in place.

On Thursday, British charity Christian Aid said in a report that four billion dollars in oil revenues and other Iraqi funds intended to rebuild the country has disappeared into ”opaque bank accounts” administered by the CPA..

Others have criticised the attempt to ”internationalise” the costs of rebuilding Iraq on the basis that United States and Britain, as the belligerents and occupying powers, should provide for the humanitarian needs of the Iraqi people.

The Bush administration’s 20 billion dollars is insufficient to meet Washington’s obligations under international law, according to the Institute of Policy Studies (IPS).

In a statement written by Phyllis Bennis, a long-time critic of the war at the Washington-based institute, the group urged opponents of the war to ask for more U.S. money in the form of grants and to demand that the funds be used to ”build the local economy, not to enrich U.S. corporations”.

Instead of hiring U.S. firms, which charge more money and exclude local workers and companies, the funds should be used to give business to Iraqis and build the capacity of local companies, said Bennis.

”Contracts should not be based on the false illusion of a ‘level playing field’ in which impoverished Iraqi construction firms, for example, have to compete with (U.S. firms) Halliburton or Bechtel,” Bennis wrote.

Others argue that financial backing of U.S. plans for Iraq would amount to international approval of the complete privatisation of Iraq’s economy, as announced by CPA chief Paul Bremer in June.

But privatisation of public resources must be decided on by an elected government, the critics argue.

Canadian group Probe International and newly formed London-based Jubilee Iraq argue the Madrid meeting will be unproductive.

On Thursday, the groups said the best way for donors to help Iraqis rebuild their country would be to write off Iraq’s debt.

The debts were incurred by a dictator and were mostly used to buy weapons and other instruments of repression, or for corrupt purposes. Creditors knew they were lending to a brutal regime, they argued.

”Should any of the debts prove to be valid because they benefited the people of Iraq, donors could consider relieving the Iraqi people of those claims on humanitarian grounds,” said a statement from the groups.

There is no exact figure of what the regime of former president Saddam Hussein owed the world, but U.S estimates place it at around 125 billion dollars, while some think tanks and research groups put it at a 383 billion dollars. The latter would include war reparations for Saddam’s invasion of Kuwait in 1990.

At 1,200 percent of Iraq’s gross domestic product (GDP), that sum would make the country 12 times more indebted than Argentina.

Jürgen Kaiser, coordinator of the German Jubilee debt networks, called in a press release for a debt-forgiveness conference instead of a donors’ conference.

Such a move could pay off for Iraq. Kuwait, for example, promised Wednesday to unveil a “generous” aid package but at the same time it said earlier this month that it would not budge on demanding war reparations from Iraq, a sum that could be much higher that what it will contribute as aid.