The Hindu Business Line : Iraq `worth it', but for whom?

ON WEDNESDAY, the US President, Mr George W. Bush, in his address to soldiers at Fort Bragg, one of the largest military installations in America, on the anniversary of the "transfer of sovereignty" in Iraq observed: "Like most Americans, I see the images of violence and bloodshed. Every picture is horrifying, and the suffering is real. Amid all this violence, I know Americans ask the question, is the sacrifice worth it? It is worth it."

This pithy summing up of his administration's assessment of an adventure described by the Wall Street Journal (WSJ) as "one of the most audacious hostile takeovers ever," is accurate, as far as the US is concerned.

However, it is not very clear whether Iraqis too consider the illegal occupation of their country by the US and its allies as being "worth it".

In balance, one would say that the WSJ has, if anything, understated the case. It is arguably one of the most brutal attempts in recent history to reconstruct an entire economy in accordance with the basic tenets of neo-conservatism.

The US invasion of Iraq, in 2003, was preceded by the drawing up of a blueprint for the reconstruction of Iraq's economy.

The document titled, `Moving the Iraqi economy from recovery to growth', was nothing but an elaborate and thought-through plan for the transformation of Iraq's centralised economy into a market economy, where the state is marginalised and used as a medium for the creation and perpetuation of an economy subservient to the US and its allies.

In fact, Mr Michael Bleyzer, former executive of Enron, is reported to have told the US Defence Secretary, Mr Donald Rumsfeld: "We want to set up a business environment where global companies like Coca-Cola and McDonalds could come in and create a diversified economy not dependent on oil."

There was never any confusion what the "reconstruction" of Iraq was going to be about. It was not about humanitarian or relief operations — as was made clear by Mr Rumsfeld's much-quoted statement: "I don't believe it's our job to reconstruct that country after 30 years of centralised Stalinist-like economic controls in that country."

The "reconstruction" was about the wrenching open of Iraq's economy to foreign investors, the privatisation of state-owned enterprises, the introduction of a regime of patents and intellectual property rights and, of course, access to Iraq's oil.

If there is any ambiguity in one's mind about this, all one has to do is read the contract between USAID and Bearing Point, a private business consultancy responsible for reconstructing Iraq's economy.

Among other things, the contract stipulates: "The new government will seek to open up its (Iraq's) trade and investment linkages and to put into place the institutions promoting democracy, free enterprise and reliance on a market-driven private sector as the engine of economic recovery and growth." Bearing Point lost no time in implementing this contract. Approximately a month after Mr Bush's dramatic "mission accomplished" declaration, in May 2003, the head of the Coalition Provisional Authority (CPA), Mr L. Paul Bremer II, said at a World Economic Forum meeting in Jordan: "Our strategic goal in the months ahead is to set in motion policies which will have the effect of re-allocating people and resources from state enterprises to the more productive private firms."

Thus, under the CPA's Order 39, described by The Economist as one fulfilling the "wish list of international investors," foreign investors were allowed to buy and take over Iraq's state-0owned enterprises and to repatriate all of their profits and other assets at any time. Oil was exempted from this order.

But, according to the Bearing Point contract, it would "implement USAID-approved recommendations to begin supporting the privatisation, especially of those entities in the oil and supporting industries".

Further, the private business consultancy firm was instructed to draft legislation to ensure an "improved fiscal regime for petroleum and mining sectors and for transit pipelines".

Under Order 12, tagged the "Trade Liberalisation Policy," tariffs, duties, and other taxes on goods entering Iraq's market were suspended, depriving the Iraqis of revenue control over trade flows.

And then there was Order 49, which slashed the tax rate on corporations and individuals from 40 per cent to a flat rate of 15 per cent in violation of the principle of progressive taxation.

Order 40 permitted some foreign banks to enter the Iraqi market and take over up to 50 per cent of the Iraqi banks.

Order 81 laid the foundation for Iraq's intellectual property rights regime and introduced a system of monopoly rights over seeds, thereby facilitating the entry of multinational agricultural corporations and eroding Iraq's food sovereignty.

The above and other orders/laws passed by the CPA were illegal in that they were in violation of international law; in specific, Article 43 of the Hague Regulations of 1907 which states that an occupying power "must re-establish and insure as far as possible, public order and safety, while respecting, unless absolutely prevented, the laws in force in the country".

In other words, the US had no legal right or authority to change or scrap existing laws in Iraq — things that only a sovereign government can do.

Further, according to Article 55 of the Hague Regulations, "The occupying State shall be regarded only as administrator and usufructuary of public buildings, real estate, forests, and agricultural estates belonging to the hostile State, and situated in the occupied country.

It must safeguard the capital of these properties, and administer them in accordance with the rules of usufruct." This translates to: The US was not legally empowered to sell Iraq's state-owned companies.

But Mr Bush says it was all "worth it". He should know of the benefits that have accrued to many American corporations, which are known to be close to him and his cronies in the government he heads.

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