BY ROHAN PEARCE
On September 21, Kamel al Gailani, the Iraqi "minister of finance" and a member of the US-appointed Iraqi Governing Council (IGC), announced at a meeting of the Institute of International Finance in Dubai a plan which he claimed would "significantly advance efforts to build a free and open market economy". The plan involves the whole-sale privatisation of Iraqi industry.
Although it was Gailani who announced the plan, the first steps of its implementation were signed into law by his US boss, Paul Bremer, head of the Coalition Provisional Authority (CPA), which has ruled Iraq since the US-led invasion six months ago.
A key goal of the US-led invasion was to replace Saddam Hussein's Baathist regime, which barred US corporations from directly exploiting Iraq's resources, with a pro-US puppet government that would legitimise the wholesale US corporate takeover of Iraq's economy, above all its oil industry.
Having removed Hussein's regime, put Iraq under US rule and handpicked the IGC to give US rule an Iraqi facade, Washington is pushing for a rapid hand over of Iraqi industry to US corporations — long before it allows the CPA to be replaced by a popularly elected Iraqi government.
Agence France Presse reported on June 12 that the US "plans to privatise the first of Iraq's 100 or so state-owned firms within a year as it begins overhauling the centralised economy of Saddam Hussein without waiting for a new government".
Tim Carney, the US "senior advisor" to the Iraqi industry and minerals ministry, told AFP: "Privatisation is the right direction for 21st century Iraq... it could happen certainly with the creation of some sort an interim Iraqi authority." AFP reported that the CPA had categorised Iraq's state-owned enterprises into fast-track, medium-track and long-track prospects for privatisation.
On July 25, BearingPoint, a Virginia-based company (formerly KPMG), won a contract to "facilitate responsible economic integration of Iraq with its regional and international partners" from the US Agency for International Development (USAID). The contract is speculated to be worth US$60-200 million, and is believed to include overseeing the end of the UN's "oil-for-food" program and privatising Iraq's state-owned enterprises.
World Bank
After an August meeting with Bremer, World Bank officials claimed they had convinced him that the CPA should proceed with privatisation at a slower rate than he initially planned. "[Bremer] was open to our ideas and was convinced of the need to slow down", a World Bank official who had attended the meeting told the September 18 Boston Globe. "We asked him to consider the ripple effects on the economy if we moved too quickly and he was particularly concerned about unemployment."
Around 60% of Iraqis are believed to have been rendered unemployed from economic disruption caused by the US invasion, the subsequent mass sacking of 440,000 Iraqi soldiers and large numbers of public servants. On October 4 and 5, unemployed Iraqi soldiers clashed with US troops in protests in Baghdad and Basra.
Despite the expectations of the World Bank officials, a CPA order issued by Bremer on September 19 began Iraq's "transition from a non-transparent centrally planned economy to a market economy characterised by sustainable economic growth through the establishment of a dynamic private sector". According to the CPA, the order "promote[s] and safeguards the general welfare and interests of the Iraqi people by promoting foreign investment through the protection of the rights and property of foreign investment".
The order abolished almost all restrictions on foreign ownership of any Iraqi industry, with the exception of the primary extraction and initial processing of the country's natural resources as well as the purchase of real estate. It mandates that a "foreign investor shall be entitled to make foreign investments in Iraq on terms no less favorable than those applicable to an Iraqi investor", with few exceptions. Other countries in the Persian Gulf limit foreign ownership to 49%.
According to the September 22 Wall Street Journal, the CPA's new bank law "permits foreign banks to set up shop in Iraq, and up to six foreign institutions can purchase 100% of local banks within the next five years".
"If it all works out, Iraq will be a capitalist's dream", enthused the British Economist on September 25.
The other economic regulations introduced by the CPA include capping tax rates at 15% for corporate and individual incomes for "2004 and subsequent years" and a tax break for the rest of the year.
On September 23, the Integrated Regional Information Networks (IRIN), the UN Office for the Coordination of Humanitarian Affairs' news service, revealed that the CPA planned to privatise Kimadia, Iraq's state-owned pharmaceutical corporation.
"Privatising the pharmaceutical industry will make things run more efficiently, since Kimadia was corrupt and losing money under the old regime anyway", Colonel Scott Svabek, the CPA-appointed CEO of Kimadia, told IRIN. But a representative of the international relief agency Medecins Sans Frontiers told IRIN: "Kimadia may not have worked efficiently, but it made low-cost medicine available to patients who needed it."
IRIN reported that Kimadia ensured that "patients paid less than US$1 for any drugs prescribed by a doctor". Such a situation is hardly bearable when there is a profit to be made.
Oil industry privatisation
On September 4, Ibrahim Bahr al Uloum, IGC oil minister, revealed to the London Financial Times that plans for the privatisation of Iraq's oil industry, nationalised in 1972, are being developed. He said Iraq's oil industry "needs privatisation, but it's a cultural issue... People lived for the last 30 to 40 years with this idea of nationalism". According to al Uloum, priority in the sell-off of the oil industry would be given to US oil companies.
With US and British forces still facing widespread resistance to their occupation, a sell-off of the oil industry could spark massive popular outrage. Additionally, while the devastation of Iraq's infrastructure represents a gold mine for firms contracted to reconstruct it, such as Bechtel and Halliburton, it represents an important factor holding back the full exploitation of Iraq's oil reserves.
At a May 23 meeting, held during the Arab Investment and Capital Markets Conference in Beirut, Jack Sheehan, a vice-president of Bechtel, one of the corporations with USAID contracts in Iraq, estimated that the bill for rebuilding Iraq would reach tens of billions of dollars. A representative of Kuwait's Global Investment House estimated that the cost would be at least $100 billion.
Despite the CPA formally having no plan for privatising Iraq's oil industry, according to the US Council on Foreign Relations think-tank, foreign oil industry companies are already benefiting from the US occupation. Since the US took control of the country, some 34 million barrels of Iraqi oil have so far been sold — to ChevronTexaco, British Petroleum, Royal Dutch Shell, Brazil's Petrobras, China's Sinochem International and France's TotalFinaElf.
Proceeds from oil sales (minus 5% for the continuing payment of war reparations to Kuwait from the 1991 Gulf War) go to the Development Fund for Iraq (DFI), created by UN Security Council resolution 1483, which also repealed the council's 1990 resolution 661 and its 1992 resolution 778 which imposed economic sanctions on Iraq, with the exception of arms and "related materiel".
A CPA decree of June 15 established Bremer has authority to control "the establishment, administration and use of the fund". The DFI is held by the Central Bank of Iraq. Use of the fund, resolution 1483 stated, "shall be disbursed at the direction of the Authority [the CPA] in consultation with the Iraqi interim administration", for the purposes of "the economic reconstruction and repair of Iraq's infrastructure, for the continued disarmament of Iraq, and for the costs of Iraqi civilian administration, and for other purposes benefiting the people of Iraq".
Executive order
Facilitating the US theft of Iraq's oil resources, US President George Bush signed executive order 13303 on May 22. The order rendered "null and void" any "attachment, judgment, decree, lien, execution, garnishment, or other judicial process" in relation to the DFI and "all Iraqi petroleum and petroleum products, and interests therein, and proceeds, obligations, or any financial instruments of any nature whatsoever arising from or related to the sale or marketing thereof".
The executive order created a win-win situation for US corporations their profits from the sale of Iraqi oil are protected and their payments for Iraqi crude can be used, via the DFI, to pay US corporations for the reconstruction of Iraqi oil industry infrastructure.
A pre-war planning document of the US State Department, obtained by British journalist Greg Palast, demonstrates that the Bush regime doesn't intend to be satisfied with just this, however. The document, Moving the Iraqi Economy from Recovery to Sustainable Growth, details plans for "private sector involvement in strategic sectors, including privatization, assets, sales, concessions, leases and management contracts — especially in the oil and supporting industries".
In an interview published in the August 31 Baghdad Bulletin, Palast commented: "Said more plainly, it is a plan to sell off the oil fields, the pipelines and the oil infrastructure of Iraq to private business and to turn what is left of Iraq into a free-market paradise...
"The plan contains details of how to rewrite Iraq's laws, including the nation's copyright laws, the nation's business regulations laws, taking over the banking sector and includes such strange things as writing for Iraq its application to join the World Trade Organisation. On top of that, the plan includes a detailed rewriting of Iraq's tax code."
While the invasion and occupation has already cost Iraqis much, reconstruction of the war-devastated nation has already been a profit-reaping bonanza for US corporations. Furthermore, the full US plan to sell-off Iraq and plunder the country's natural resources, if implemented, will ensure the Iraqi nation's complete economic enslavement to US big business.
From Green Left Weekly, October 15, 2003.
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