The cost of Iraq’s reconstruction and the practice of awarding large contracts to big corporations with close ties to the administration, such as Halliburton, have been repeatedly criticized over the past year. Recent news reports, however, indicate the truth is even worse. While Iraqi economy remains starved of development and cash, funds allocated by Congress for Iraqi reconstruction are not being spent. Meanwhile, billions of dollars in frozen Iraqi assets and Iraqi oil revenues are being spent without accountability, transparency, and now, apparently in a mad dash as the date for turning over control of those funds approaches.
Here’s the short version: we have spent billions of Iraqi assets and oil revenues, some of it distributed as $100 bills by roaming American military teams pretending to be generous using this Iraqi money, while actually spending possibly as little as half a billion dollars of the $18.7 billion Congress allocated for Iraqi reconstruction -- and even that only as contracts to corrupt and wasteful American firms that did very little construction and hired perhaps as little as 15,000 Iraqis in a country of 22 million.
Here are the appalling details. For the past year, all proceeds from Iraqi oil and gas exports have been deposited into the “Development Fund for Iraq,” created on May 2003 by UN Resolution 1483. The fund also took over about one billion from the Oil-for-Food program and a similar amount in frozen Iraqi assets. Those funds were given to the control of the occupying authority, the CPA, “to be used in a transparent manner to meet the humanitarian needs of the Iraqi people” and they were to be audited by the International Advisory and Monitoring Board [IAMB], which the UN set up for this purpose.
The IAMB has been trying to audit the Development Fund for Iraq [DFI] for many months now and it’s due to release its report this July. Financial Times obtained an advance copy: it turns out that coalition officials "resisted cooperating with the auditors," refused to turnover "U.S. audits of sole-source contracts funded with Iraqi oil money and awarded to Halliburton last year without competitive bidding," and "delayed completing audits of the State Oil Marketing Organization" which markets Iraqi oil.
According to Iraq Revenue Watch, an affiliate of the Open Society Institute, it gets worse: the auditors “encountered bureaucratic hurdles in obtaining the passes needed to enter the ‘green zone’ where CPA and government offices are based.”
That’s right. The auditors couldn’t get passes to go into the green zone.
After all, once June 30th passes CPA staff will disperse and any real audit will become next to impossible. Thus the CPA’s finely-tuned method of delay, deny and drag your feet till you’re outta there.
They are, however, keeping busy till then. The CPA has been rushing to spend what money is left in the DFI, the control of which would have to be turned over to the Interim Government on June 30. The New York Times reported on it a few days ago: “Struggling with bureaucratic problems in spending the money appropriated by Congress to rebuild Iraq, American authorities are moving quietly and quickly to spend $2.5 billion from a different source, Iraqi oil revenue...” ( www.nytimes.com/2004/06/21/politics/21DIPL.html )
The rush may be new but Bremer has been spending Iraqi money like there was no tomorrow for the past year. The CPA awarded sole-source contracts to Halliburton out of the Iraqi revenues without competitive bidding -- and then refused turn over audits of these blatantly problematic contracts. The CPA had told the IAMB that meters were being installed to monitor Iraqi oil output, without which it’s impossible to even know how much is being produced or sold. It turns out the contracts for those meters weren’t even awarded -- and without meters the whole process open to all kinds of corruption. (The IAMB news release politely regrets how facts turned out to be “contrary to earlier representations” by the CPA.) (news.yahoo.com/news?tmpl=story&u=/nm/20040622/ts_nm/iraq_oil_audit_dc_2)
Untold amounts in Iraqi money has also been spent by roaming military teams that are “famous in Iraq for the way they have spread across the country, commissioning repairs and paying for them from satchels bulging with $100 bills.” Those $100 bills, incidentally, are seized Iraqi assets. That’s right, American military has been distributing Iraqi money as if it were coming from the U.S. military. According to the NY Times article ( www.nytimes.com/2004/06/21/politics/21DIPL.html ), an administration official stated that "You want to hire everybody on the street, put money in their pockets and make them like you. We have always spent Iraqi money on that," and unsurprisingly, "The military commanders love that program, because it buys them friends."
Well, what’s not to love?
Lack of receipts, transparency or any itemized reports according to the auditors. That’s right, there is no itemized accounting of these seized Iraqi assets spent by American military commanders in cash. The NY Times also reports that “at least $1 billion has been distributed in this fashion by some estimates more than $2 billion.” You see, we know the number give or take a billion.
The lack of transparency is unsurprising given the Development Fund for Iraq’s accounting by the CPA “lacks a double entry system and consists solely of spreadsheets and tables maintained by a single accountant, making the records prone to error.” That’s right, the CPA appointed a single accountant for a fund that last reported over $20 in collected Iraqi oil revenues. ( www.iraqrevenuewatch.org/reports/062404.pdf ) The fewer records, the fewer headaches, I suppose.
What little information the CPA grudgingly publishes about this fund it was mandated to use “in a transparent manner to meet the humanitarian needs of the Iraqi people” show an outrageous lack of transparency. There are single line items totaling as much as $7.4 billion without any details.
More appallingly, somehow, the Iraqi revenue paid US Army Corps of Engineers $367,297,119 since it’s inception a year ago. Compare that with the meager $1,100,000 allocated to the Iraqi Ministry of Education. One of the programs that distribute Iraqi cash in the manner explained above, Commanders Emergency Response Program, received whopping $391,825,786. Iraqi Ministry of Justice? $1,000,219. Ministry of Culture? $20,000. That’s right, Iraq’s Ministry of Culture received twenty thousand dollars in all of last year. ( www.cpa-iraq.org/budget/DFI_19jun2004.xls )
That is not to say the Iraqi economy did not need an emergency infusion of cash and development funds. It certainly did, and one might have thought that the $18.7 billion Congress allocated might have something to do with that. And that an occupying power might, as it is obliged under International law, at least pretend to try to be judicious and transparent about spending resources of the occupied country, while being at least moderately forthcoming with its own.
Don’t hold your breath.
While some large contracts have been awarded to big American companies, the Washington Post recently reported that, according to an administration official familiar with the transition plans, “only some $500 million has been spent of the $18.7 billion” that Congress authorized for reconstruction.” And most of that spending has benefited American corporations, while only “about 15,000 Iraqis have been hired to work on projects funded by $18.6 billion in U.S. aid.” ( www.washingtonpost.com/ac2/wp-dyn/A54817-2004Jun19?language=printer )
Meanwhile, hundreds of billions are being spent for the escalating military costs of occupying a increasingly hostile Iraq. The oft-quoted $87 billion figure, which has since gone way up, is mostly military costs of the occupation and it was never meant for reconstruction except for the $18.7 billion part. Whatever remains of that will now be controlled by “Ambassador” Negroponte, adding to the multiple levers of control the United States has over any Iraqi government.
As we approach June 30th, the administration completes a year of occupation during which it demonstrated an attitude guaranteed to generate maximum resentment and animosity: stingy with existing U.S. resources, cavalier towards Iraqi life and treasure. While evidence from very early on has been that they were intent on crushing any possibility of genuine democracy and determined to install a pliable regime under their control, one would have thought they would have wanted to run a more friendly, more accommodative occupation. It should not have been too hard to exceed expectations in a country that suffered for decades under Saddam Hussein’s totalitarian tyranny. Perhaps future documents and insider accounts will clarify if they deliberately tried to engender maximum bitterness in the region or it was their crony, imperial nature -- a la scorpion and the frog story-- that took them down this path.