Spoils of War
Oil, the U.S.-Middle East Free
Trade Area and the Bush Agenda
by Antonia Juhasz
Remember oil? That thing we didn't go
to war in Iraq for? Now with his war under attack, even President
George W. Bush has gone public, telling reporters last August,
"[a] failed Iraq would give the terrorists and extremists
an additional tool besides safe haven, and that is revenues from
oil sales." Of course, Bush not only wants to keep oil out
of his enemies' hands, he also wants to put it into the hands
of his friends.
The President's concern over Iraq's oil
is shared by the Iraq Study Group, which on December 6 released
its much-anticipated report. While the mainstream press focused
on the report's criticism of Bush's handling of the war and the
report's call for (potential) removal of (most) U.S. troops (maybe)
by 2008, ignored was the report's focus on Iraq's oil. Page 1,
chapter 1 laid out in no uncertain terms Iraq's importance to
the Middle East, the United States and the world with this reminder:
"It has the world's second-largest known oil reserves."
The group then proceeds to give very specific and radical recommendations
as to what should be done to secure those reserves.
Guaranteeing access to Iraq's oil, however
isn't the whole story. Despite the lives lost and the utter ruin
that the war has brought, the overarching economic agenda that
the administration is successfully pursuing in the Middle East
might be the most enduring legacy of the war-and the most ignored.
Just two months after declaring "mission
accomplished" in Iraq, Bush announced his plans for a U.S.-Middle
East Free Trade Area to spread the economic invasion well-underway
in Iraq to the rest of the region by 2013. Negotiations have progressed
rapidly as countries seek to prove that they are with the United
States, not against it.
The Bush Agenda
Within days of the 9/11 terrorist attacks,
then-U.S. Trade Representative Robert Zoellick announced that
the Bush administration would be "countering terror with
trade." Bush reiterated that pledge four years later when
he told the United Nations, "By expanding trade, we spread
hope and opportunity to the corners of the world, and we strike
a blow against the terrorists. Our agenda for freer trade is part
of our agenda for a freer world." In the case of the March
2003 invasion and ongoing occupation of Iraq, these "free
trade"-or corporate globalization-policies have been applied
in tandem with America's military forces.
The Bush administration used the military
invasion of Iraq to oust its leader, replace its government, implement
new economic and political laws, and write a new constitution.
The new economic laws have transformed Iraq's economy, applying
some of the most radical-and sought-after-corporate globalization
policies in the world and locking in sweeping advantages to U.S.
corporations. Through the ongoing occupation, the Bush administration
seeks to ensure that both Iraq's new government and this new economic
structure stay firmly in place. The ultimate goal-opening Iraq
to U.S. oil companies-is reaching fruition.
In 2004, Michael Scheuer-the CIA's senior
expert on al-Qaeda until he quit in disgust with the Bush administration-wrote,
"The U.S. invasion of Iraq was not preemption; it was an
avaricious, premeditated, unprovoked war against a foe who posed
no immediate threat but whose defeat did offer economic advantages."
How right he was. For it is an absolute
fallacy that the Bush administration had no post-invasion plan
for Iraq. The administration had a very clear economic plan that
has contributed significantly to the disastrous results of the
war. The plan was prepared at least two months prior to the war
by the U.S. consultancy firm, Bearing Point, Inc., which then
received a $250 million contract to remake Iraq's economic infrastructure.
L. Paul Bremer III-the head of the U.S.
occupation government of Iraq, the Coalition Provisional Authority
(CPA)-followed Bearing Point's plan to the letter. From May 6,
2003 until June 28, 2004, Bremer implemented his "100 Orders"
with the force of law, all but a handful of which remain in place
today. As the preamble to many of the orders state, they are intended
to "transition [Iraq] from a centrally planned economy to
a market economy" virtually overnight and by U.S. fiat.
Bremer's orders included firing the entire
Iraqi military-some half a million men-in the first weeks of the
occupation. Suddenly jobless, many of these men took their guns
with them and joined the violent insurgency. Bremer also fired
120,000 of Iraq's senior bureaucrats from every government ministry,
hospital and school. His laws allowed for the privatization of
Iraq's state-owned enterprises (excluding oil) and for American
companies to receive preferential treatment over Iraqis in the
awarding of reconstruction contracts. The laws reduced taxes on
all corporations by 25 percent and opened every sector of the
Iraqi economy to private foreign investment. The laws allowed
foreign firms to own 100 percent of Iraqi businesses (as opposed
to partnering with Iraqi firms) and to send their profits home
without having to invest a cent in the struggling Iraqi economy.
Iraqi laws governing banking, foreign investment, patents, copyrights,
business ownership, taxes, the media, agriculture and trade were
all changed to conform to U.S. goals.
After the U.S. corporate invasion of Iraq
More than 150 U.S. companies were awarded
contracts for post-war work totaling more than $50 billion.
The American companies were hired, even
though Iraqi companies had successfully rebuilt the country after
the previous U.S. invasion. And, because the American companies
did not have to hire Iraqis, many imported foreign workers instead.
The Iraqis were, of course, well aware that American firms had
received billions of dollars for reconstruction, that Iraqi companies
and workers had been rejected and that the country was still without
basic services. The result: increasing hostility, acts of sabotage
targeted directly at foreign contractors and their work, and a
Halliburton received the largest contract,
worth more than $12 billion, while 13 other U.S. companies received
contracts worth more than $1.5 billion each. The seven largest
reconstruction contracts went to the Parsons Corporation of Pasadena,
Calif. ($5.3 billion); Fluor Corporation of Aliso Viejo, Calif.
($3.75 billion); Washington Group International of Boise, Idaho
($3.1 billion); Shaw Group of Baton Rouge, La. ($3 billion); Bechtel
Corporation of San Francisco ($2.8 billion); Perini Corporation
of Framingham, Mass. ($2.5 billion); and Contrack International,
Inc. of Arlington, Va. ($2.3 billion). These companies are responsible
for virtually all reconstruction in Iraq, including water, bridges,
roads, hospitals, and sewers and, most significantly, electricity.
U.S. Air Force Colonel Sam Gardiner, author
of a 2002 U.S. government study on the likely effect that U.S.
bombardment would have on Iraq's power system, said, "frankly,
if we had just given the Iraqis some baling wire and a little
bit of space to keep things running, it would have been better.
But instead we've let big U.S. companies go in with plans for
Many companies had their sights set on
years-long privatization in Iraq, which helps explain their interest
in "major overhauls" rather than getting the systems
up and running. Cliff Mumm, head of Bechtel's Iraq operation,
put it this way: "[Iraq] has two rivers, it's fertile, it's
sitting on an ocean of oil. Iraq ought to be a major player in
the world. And we want to be working for them long term."
And, since many U.S. contracts guaranteed
that all of the companies' costs would be covered, plus a set
rate of profit (known as cost-plus contracts), they took their
time, building expensive new facilities that showcased their skills
and would serve their own needs should they be runing the systems
Mismanagement, waste, abuse and criminality
have also characterized U.S. corporations in Iraq-leading to a
series of U.S. contract cancellations. For example, a $243 million
contract held by the Parsons Corporation for the construction
of 150 health care centers was cancelled after more than two years
of work and $186 million yielded just six centers, only two of
which are serving patients. Parsons was also dropped from two
different contracts to build prisons, one in Mosul and the other
in Nasiriyah. The Bechtel Corporation was dropped from a $50 million
contract for the construction of a children's hospital in Basra
after it went $90 million over budget and a year-and-a-half behind
schedule. These contracts have since been turned over to Iraqi
Halliburton's subsidiary KBR is currently
being investigated by government agencies and facing dozens of
charges for waste, fraud and abuse. Most significantly, in 2006,
the U.S. Army cancelled Halliburton's largest government contract,
the Logistics Civil Augmentation Program (LOGCAP), which was for
worldwide logistical support to U.S. troops. Halliburton will
continue its current Iraq contract, but this year the LOGCAP will
be broken into smaller parts and competitively bid out to other
The Special Inspector General for Iraq
Reconstruction (SIGIR), a congressionally-mandated independent
auditing and oversight body, has opened 256 investigations into
criminal fraud, four of which have resulted in convictions. SIGIR
has provided critical oversight of the U.S. reconstruction, but
this fall it nearly fell prey to a GOP attempt to shut down its
activities well ahead of schedule. Fortunately, it survived.
SIGIR's October 2006 report to Congress
reveals the failure of U.S. corporations in Iraq. In the electricity
sector, less than half of all planned projects in Iraq have been
completed, while 21 percent have yet to even begin. Even the term
"complete" can be misleading as, for example, SIGIR
has found that contractors have failed to build transmission and
distribution lines to connect new generators to homes and businesses.
Thus, nationally, Iraqis have on average just 11 hours of electricity
a day, and in Baghdad, the heart of instability in Iraq, there
are between four and eight hours on average per day. Before the
war, Baghdad averaged 24 hours per day of electricity.
While there has been greater success in
finishing water and sewage projects, the fact that 80 percent
of potable water projects are reported complete does little good
if there is no electricity to pump the water into homes, hospitals
or businesses. Meanwhile, the health care sector is truly a tragedy.
Just 36 percent of planned projects are reported as complete.
Of 20 planned hospitals, 12 are finished and only six of 150 planned
public health centers are serving patients today.
Overall, the economy is languishing, with
high inflation, low growth, and unemployment rates estimated at
30 to 50 percent for the nation and as high as 70 percent in some
areas. The International Monetary Fund has enforced a structural
adjustment program on Iraq that mirrors much of Bush's corporate
globalization agenda, and the administration continues to push
for Iraq's admission into the World Trade Organization.
Iraq has not, therefore, emerged as the
wealthy free market haven that Bush & Co. had hoped for. Several
U.S. companies are now preparing to pack up, head home and take
their billions of dollars with them, their work in Iraq left undone.
The Bush administration is likely to follow
a dual strategy: continuing to pursue a corporate free-trade haven
in Iraq, while helping U.S. corporations extricate themselves
without consequence. The administration will also focus on the
big prize: Iraq's oil.
Winning Iraq's oil prize
The Bush Agenda does have supporters,
especially those corporate allies that have both shaped and benefited
from the administration's economic and military policies.
In the 2000 election cycle, the oil and
gas industry donated 13 times more money to Bush's campaign than
to Al Gore's. The Bush administration is the first in history
in which the president, vice president and secretary of state
are all former energy company officials. In fact, the only other
U.S. president to come from the oil and gas industry was Bush's
father. Moreover, both George W. Bush and Condoleezza Rice have
more experience running oil companies than they do working for
Planning to secure Iraq's oil for U.S.
companies began on the tenth day of the Bush presidency, when
Vice President Dick Cheney established the National Energy Policy
Development Group-widely referred to as "Cheney's Energy
Task Force." It produced two lists, titled "Foreign
Suitors for Iraqi Oilfield Contracts as of 5 March 2001,"
which named more than 60 companies from some 30 countries with
contracts for oil and gas projects across Iraq-none of which were
with American firms. However, because sanctions were imposed on
Iraq at this time, none of the contracts could come into force.
If the sanctions were removed-which was becoming increasingly
likely as public opinion turned against the sanctions and Hussein
remained in power-the contracts would go to all of those foreign
oil companies and the U.S. oil industry would be shut out.
As the Bush administration stepped up
its war planning, the State Department began preparations for
post-invasion Iraq. Meeting four times between December 2002 and
April 2003, members of the State Department's Oil and Energy Working
Group mapped out Iraq's oil future. They agreed that Iraq "should
be opened to international oil companies as quickly as possible
after the war" and that the best method for doing so was
through Production Sharing Agreements (PSAs).
PSAs are considered "privatization
lite" in the oil business and, as such, are the favorite
of international oil companies and the worst-case scenario for
oil-rich states. With PSAs, oil ownership ultimately rests with
the government, but the most profitable aspects of the industry-exploration
and production-are contracted to the private companies under highly
favorable terms. None of the top oil producers in the Middle East
use PSAs, because they favor private companies at the expense
of the exporting governments. In fact, PSAs are only used in respect
to about 12 percent of world oil reserves.
After the invasion
Two months after the invasion of Iraq,
in May 2003, the U.S.-appointed senior adviser to the Iraqi Oil
Ministry, Thamer al-Ghadban, announced that the new Iraqi government
would honor few, if any, of the dozens of contracts signed with
foreign oil companies under the Hussein regime.
At the same time, Bremer was laying the
economic groundwork for a "U.S. corporate friendly"
Iraq. When Bremer left Iraq in June 2004, he bequeathed the Bush
economic agenda to two men, Ayad Allawi and Adel Abdul Mahdi,
who Bremer appointed interim Prime Minister and Finance Minister,
respectively. Two months later, Allawi (a former CIA asset) submitted
guidelines for a new petroleum law to Iraq's Supreme Council for
Oil Policy. The guidelines declared "an end to the centrally
planned and state dominated Iraqi economy" and advised the
"Iraqi government to disengage from running the oil sector,
including management of the planned Iraq National Oil Company
(INOC), and that the INOC be partly privatized in the future."
Allawi's guidelines also turned all undeveloped
oil and gas fields over to private international oil companies.
Because only 17 of Iraq's 80 known oil fields have been developed,
Allawi's proposal would put 64 percent of Iraq's oil into the
hands of foreign firms. However, if a further 100 billion barrels
are discovered, as is widely predicted, foreign companies could
control 81 percent of Iraq's oil-or 87 percent if, as the Oil
Ministry predicts, 200 billion barrels are found.
On December 21, 2004, Mahdi joined U.S.
Undersecretary of State Alan Larson at the National Press Club
and announced Iraq's plans for a new petroleum law that would
open the oil sector to private foreign investment.
"I think this is very promising to
the American investors and to American enterprise, certainly to
oil companies," said Mahdi. He described how, under the proposed
law, foreign companies would gain access both to "downstream"
and "maybe even upstream" oil investment in Iraq. ("Downstream"
refers to refining, distribution, and marketing of oil. "Upstream"
refers to exploration and production.)
The draft petroleum law adopted Allawi's
recommendation that currently producing oil fields are to be developed
by Iraq's National Oil Company, while all new fields are opened
to private companies using PSAs.
The Bush administration and U.S. oil companies
have maintained constant pressure on Iraq to pass the petroleum
law. The administration appointed an advisor to the Iraqi government
from Bearing Point to support completion of the law. And in July
2006, U.S. Energy Secretary Samuel Bodman announced in Baghdad
that oil executives told him that their companies would not enter
Iraq without passage of the new oil law. Petroleum Economist magazine
later reported that U.S. oil companies considered passage of the
new oil law more important than increased security when deciding
whether to go into business in Iraq.
The Iraq Study Group, recognizing as it
did the primacy of oil in its Iraq calculations, recommended that
the U.S. "assist Iraqi leaders to reorganize the national
oil industry as a commercial enterprise" and "encourage
investment in Iraq's oil sector by the international community
and by international energy companies."
Put simply, U.S. oil companies want access
to as much of Iraq's oil as they can get and on the best possible
terms. The fact that Iraq is a war-ravaged and occupied nation
works to the companies' benefit. As a result, the companies and
the Bush administration are holding U.S. troops hostage in Iraq
until they get what they want. Once the companies get their lucrative
contracts, they will still need protection to get to work. What
better security force is there than 144,000 American troops?
Three days after the release of the Iraq
Study Group Report, the al-Maliki government announced that Iraq's
oil law was near completion. The law adopts PSAs and not only
opens Iraq to private foreign companies, but permits "for
the first time-local and international companies to carry out
oil exploration in Iraq."
To ensure that this model prevails, the
Iraq Study Group recommends that Iraq's constitution be rewritten
to give the central government of Iraq-as opposed to individual
regions-the ultimate decision-making authority over all of Iraq's
developed and undeveloped oil fields.
Standard Oil Company's John D. Rockefeller
famously said, "Own nothing, control everything." He
would be proud of the U.S. oil companies and the Bush administration,
as they seem poised to get exactly the control they want over
Beyond Iraq: the U.S.-Middle East Free
But the Bush agenda has never been limited
to Iraq. As the Wall Street Journal reported in May 2003, "For
many conservatives, Iraq is now the test case for whether the
U.S. can engender American-style free-market capitalism within
the Arab world." To this end, the administration has used
the "stick" of the Iraq war to convince nations across
the Middle East to adopt its free trade agenda. The mechanism
for doing so is the president's U.S.-Middle East Free Trade Area
The corporate lobbying group behind the
MEFTA, the aptly named U.S.-Middle East Free Trade Coalition,
includes among its 120 members Chevron, ExxonMobil, Bechtel and
Halliburton-companies intimately connected to the Bush administration
that have already been big winners in Iraq.
Insulated by oil revenue, the Middle East
has largely avoided succumbing to the sacrifices required under
free trade agreements. But since the war began, negotiations for
the MEFTA have progressed rapidly.
The Bush administration devised a unique
negotiating strategy for the MEFTA. Rather than negotiate with
all of the nations as a bloc, the United States negotiates one-on-one
with each country. This means that every nation-some half the
size of one state in the United States-must try to make a deal
that serves its own interests with the most economically and militarily
dominant nation in the world. The reality is that there can be
no "negotiation" between such thoroughly unequal pairings.
These individual free trade agreements
are then united under the MEFTA. If successful, the MEFTA would
be concluded by 2013 and include 20 countries: Algeria, Bahrain,
Cyprus, Egypt, Palestine, Iran, Iraq, Israel, Jordan, Kuwait,
Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, the
United Arab Emirates, Tunisia and Yemen.
To date, the Bush administration has signed
13 Trade and Investment Framework Agreements (TIFAs), which demonstrate
a country's commitment to the MEFTA, and are considered the key
step towards passage of a full Free Trade Agreement (FTA). Things
have moved briskly since the invasion of Iraq. Algeria and Bahrain
signed before the war, while agreements with Lebanon (the most
recent, signed in December), Tunisia, Saudi Arabia, Kuwait, Yemen,
the United Arab Emirates, Qatar, Egypt, Morocco, Oman and Iraq
all followed the war.
The United States has signed FTAs with
five Middle Eastern countries: Israel, Jordan, Morocco, Bahrain,
and Oman. The last three were signed after the 2003 invasion of
Iraq. Negotiations with the United Arab Emirates are underway
and near completion.
The winners, of course, are U.S. corporations.
On January 19, 2006, for example, then-U.S. Trade Representative
Robert Portman sent a letter to Oman's minister of commerce and
industry affirming that, when it signs contracts, the Omani government
may not give preference to the government's state-controlled oil
As for Oman's apparel industry, the U.S.
International Trade Commission estimates that the U.S.-Oman agreement
will lead to a 66 percent increase in U.S. imports of apparel
manufactured in Oman. What are the likely effects? In May, a report
by the National Labor Committee detailed the cost of the first
Middle East trade agreement signed by Bush in December 2001-the
U.S.-Jordan FTA. After that agreement was implemented, new factories
arrived in Jordan to service American companies, primarily apparel
firms such as Wal-Mart, JC Penney, Target and Jones New York.
These factories have engaged in the worst kinds of rights violations,
including 48-hour shifts without sleep, physical and psychological
abuse, and, in the case of imported foreign workers, employers
who hold passports and refuse to pay. (Wal-Mart also is a member
of the U.S.-Middle East Free Trade Coalition.)
The Bush administration will spend the
next two years aggressively pushing the MEFTA as it seeks to expand
the economic invasion of Iraq to the entire region.
Throughout his presidency, George W. Bush
has claimed that we will live in a safer, more prosperous, and
more peaceful world if the United States remains at war and if
countries throughout the world change their laws and adopt economic
policies that benefit America's largest multinational corporations.
The Bush Agenda has proven to have the opposite effect: increasing
deadly acts of terrorism and economic insecurity, reducing freedom,
and engendering more war. To replace the Bush Agenda, we must
address each of its key pillars individually-war, imperialism
and corporate globalization.
The most urgent first step is ending the
war in Iraq by ending both the military and corporate occupations.
We in the peace movement have already made tremendous progress
in reaching these ends. Most Americans now oppose the war. The
peace movement has welcomed with open arms U.S. soldiers and their
families who share this opposition and unity has made us all stronger.
Counter-recruitment efforts are blossoming across the country.
The U.S. labor movement has joined forces with its counterpart
in Iraq. Protests at corporate headquarters and shareholder meetings
have led to U.S. war profiteers being called to account for their
abuses in Iraq. Our success was made concrete with the dismissal
of the president's party from power in both the House and the
According to "Election 2006: No to
Staying the course on Trade," by Public Citizen, 18 House
races saw "fair traders" replace "free traders"
in the midterm election, and not a single "free trader"
beat a fair trade candidate. In every Senate seat that changed
hands, a fair trader beat a free trader. One of their most important
tasks this year will be to deny Bush the renewal of Fast Track
negotiating authority when it expires in July. Fast Track allows
the president to move trade bills through Congress quickly by
overriding core aspects of the democratic process, such as committee
deliberations, full congressional debate and the ability to offer
In addition to the newcomers, several
existing allies have been elevated to new positions of power.
Rep. Ike Skelton (D-Mo.) is now chairman of the House Armed Services
Committee. He has pledged to resurrect the subcommittee on oversight
and investigations. Rep. David Obey (D-Wisc.) will use his chairmanship
of the House Appropriations Committee to exercise greater oversight
of Bush's war spending. The most important ally, however, will
likely be Rep. Henry Waxman (D-Calif.), the new chairman of the
House Government Reform Committee. Waxman has been one of the
most effective and aggressive critics of Halliburton's work in
Iraq, greatly contributing to Halliburton's loss of its LOGCAP
Our allies in the new Congress should
put forward two key demands:
First, all remaining and future U.S. reconstruction
funds must be turned over to Iraqi companies and Iraqi workers.
SIGIR found that when Iraqi companies receive contracts (rather
than subcontracts from U.S. companies), their work is faster,
less expensive and less prone to insurgent attack. There are literally
hundreds of both private and public Iraqi companies-and millions
of Iraqi workers-ready, able and willing to do this work. U.S.
military commanders and soldiers in Iraq have repeatedly made
this demand as they have learned firsthand that a person with
a clipboard or a shovel in his or her hands is far less likely
to carry a gun.
Second, U.S. corporations must not be
allowed to "cut and run." Every U.S. corporation with
reconstruction contracts in Iraq must be individually audited
and each project investigated by SIGIR. Misspent funds must be
returned and made available to Iraqis for reconstruction. SIGIR
has begun this process with plans for a full audit of Bechtel's
work due out early this year. SIGIR needs more staff, greater
oversight authority and more money to complete this work in a
The Democrats must abandon the Bush administration's
plan to remake Iraq into an economic wonderland for U.S. corporations.
Iraq must belong to the Iraqis to remake as they see fit. Nowhere
is this demand more critical than in the case of Iraq's oil.
It is clear that Iraq needs to develop
its oil sector to survive and that it needs to retain as much
of the proceeds from its oil as possible. It is also clear that
it should be the Iraqi public-freed of the external pressure of
a foreign occupation, the Bush administration and U.S. corporations-that
decides how its oil is developed. U.S. oil corporations cannot
be permitted to "win" the war in Iraq while we-Iraqis
and Americans-pay the price for their victory.