The Americans conquered it in a war the Bush administration claimed was aimed at neutralizing weapons of mass destruction that no one has yet been able to find, and is now scrambling to reconstruct it. What is potentially one of the richest countries in the Arab world has become impoverished by three wars since 1980, over 12 years of punitive United Nations sanctions kept in place largely by US pressure and is now being run by what many see as little more than carpetbaggers.

A few weeks ago, the Pentagon-controlled Coalition Provisional Authority (CPA), which has administered Iraq since the collapse of Saddam Hussein’s regime in April, unveiled a program giving unprecedented access to Iraq’s 192 public sector companies, which are to be privatized. That makes Iraq unique in the Arab world, where foreign ownership is highly restricted and privatization is almost a dirty word.

With the Bush administration desperately seeking to shed some of the mushrooming financial burden of rebuilding Iraq $56 billion and counting at the last estimate the idea is to attract urgently needed non-US foreign investment in all sectors except the oil industry and give foreign companies 100 percent ownership. But with the upheaval in Iraq and US fumbling likely to worsen, the prospects are not good.

The Bush administration hopes that a donors conference now under way in Madrid will come up with some $55 billion it says Iraq needs through 2007. But the gathering is unlikely to produce the numbers Washington is looking for. Many potential donors who opposed the invasion of Iraq are equally dismayed at Washington’s insistence on dominating the country and at the slow pace of returning sovereignty to the Iraq people.

Whether outside governments and corporations will respond to the privatization plan will depend to a large degree on the Americans and their friends’ ability to restore law and order. Every bombing that takes place sends a message to potential investors: come to Iraq at your peril.

That was acknowledged by US Treasury Secretary John Snow during the recent World Bank/International Monetary Fund (IMF) conference in Dubai.

"Capital is a coward. It doesn’t go places where it feels threatened. Companies will not send employees to places that aren’t secure," said Snow.

That includes the World Bank and the IMF, who pulled their people out of Baghdad after the Aug. 19 bombing of the UN headquarters in the violence-ridden city.

So far, major US corporations, particularly those with solid connections to the Bush administration and the Republican Party, have been awarded the prime contracts worth anywhere between $900 million to $1.5 billion. These were awarded in March, before the fighting and without any bidding process because of "emergency requirements," US officials say.

There have also been accusations of a lack of UN transparency in its handling of finances concerning Iraq and hanky-panky by major US contractors like Halliburton, the Texas energy conglomerate once run by Vice President Dick Cheney (who still gets six-figure payments from it).

Only now are monitoring mechanisms being put into place. That may be bolting the stable door after the horse has bolted. Christian Aid, a leading British aid agency, this week accused the US and British administrators in Iraq of failing to account for no less than $4 billion in oil revenues and other money meant to go toward reconstruction. Such allegations are likely to reverberate in the next year’s presidential election.

The liberalization program is supported by the US-appointed Governing Council of Iraq, an endorsement seen as vital to attracting urgently needed foreign investment. Arab governments have given a cautious welcome to the plan, with one senior Arab official saying that, given widespread Arab distrust of the Americans and their intentions and concerns about the abysmal security situation, "the proof will be if investors trust it enough."

The council’s backing notwithstanding, the liberalization plan has no mandate from Iraq’s 24 million people, most of whom have been dependent on state handouts for decades. State enterprises were heavily subsidized under Saddam Hussein and there are doubts in some quarters that removing the state from the economy does not ensure the emergence of a vibrant free-market.

The program is intended to reverse decades of economic decay and state corruption under Saddam Hussein’s tyrannical regime, as well as the economic paralysis caused by the post-war violence and large-scale looting. It sets no limit on how much profit can be repatriated and relatively free entry for foreign banks into Iraq. Six foreign banks will get "fast-track" entry and will be allowed to buy up to 100 percent of local banks within five years. The new banking law, should it gain traction with outsiders, would introduce competition to a market long dominated by just two large banks, Rafidain Bank and Rashid Bank.

Not unnaturally, this has raised fears among Iraqis, who are grappling with a wave of lawlessness the US-led forces cannot control, as well as 60 percent unemployment, dysfunctional electricity and water supplies five months after the fall of the Baath regime, that their economy will be dominated by foreigners. They are skeptical that Iraq’s oil wealth, the second largest proven reserves after Saudi Arabia and potentially equal to the kingdom’s, can be kept out of the equation for long.

"This is a prelude to include oil," says Iraqi financial expert Ridha al-Qoreishi. "The United States will have control of all the Arab oil in the Gulf, or 60 percent of the crude in the world, which reinforces their hold on the world economy."

On Sept. 24, confirming the pre-war fears of Russia, France and China who had major oil contracts with Saddam Hussein’s regime, Nabil Ahmed al-Musawi, one of the Governing Council’s 25 members, said US companies would receive preferential treatment to exploit Iraq’s oil reserves. "I think a future government may favor US companies and its allies because they were the first to help us," he said.

And worse, he said Baghdad might sue those companies that signed deals with the ancient regime.

The US neo-cons have had their eye on Iraq’s oil, whose proven reserves are worth some $3 trillion at today’s prices, for a long time. Way back in 1999, Patrick Clawson, a right-wing ideologue and analyst with the pro-Israel Washington Institute for Near East Policy, which enjoys close ties with the Bush administration, told a Washington forum on post-Saddam Hussein Iraq that "US oil companies would have an opportunity to make significant profits.

"We should not be embarrassed about the commercial advantages that would come from a re-integration of Iraq into the world economy. Iraq, post-Saddam Hussein, is highly likely to be interested in inviting international oil companies to invest in Iraq. This would be very useful for US oil companies, which are well positioned to compete there, and very useful for the world’s energy-security situation," he added.

This liberalization process, irrespective of how it will benefit the people of Iraq, and the missionary-like zeal being put into efforts to install democracy and transparency, is not being greeted with much enthusiasm by other Arab regimes. They see the new Iraq envisaged by the Bush administration as a harbinger of what they may soon be facing themselves turmoil and tempests.

The Saudis, among others, are deeply concerned that the volatile oil market will be destabilized and the Organization of Petroleum Exporting Countries (OPEC) seriously weakened once Iraq’s oil, under US control, starts flowing again in large volume, following the UN Security Council’s formal lifting of sanctions on May 23. The Americans are unlikely to shed any tears in either event. US officials in Baghdad talk about pushing Iraqi output as high as 8 million barrels a day within a few years to meet its financial needs, and that would rival that of Saudi Arabia, the world’s largest producer.

But reviving Iraq’s dilapidated oil industry is proving to be a major problem and Iraq’s 2004 budget, estimated at $13 billion-$14 billion, will not depend on the country’s rich oil resources but on foreign aid.

"Oil revenue will not figure in the budget calculations until a return to a substantial export level, which requires at least two years," said interim Finance Minister Kamel al-Kilani.

It will take an estimated $8 billion and at least two years’ work to restore electricity supplies to pre-war levels, and providing clean water will take $16 billion and four years’ work. The current budget allocation for electricity, water and sanitation is a paltry $347 million.

The dismal security situation, in which civilian employees of military and civilian contractors have been attacked, has seriously impeded the reconstruction program. Attacks on oil pipelines have seriously slowed the rehabilitation of the long-neglected oil industry.

Paul Bremer, top US administrator in Iraq, says the country is managing to produce 1.5 million barrels a day, less than a third of 1990 levels. At that rate, sales of Iraqi crude come nowhere near covering reconstruction costs, shattering the pre-invasion view held by many US officials that Iraq’s oil wealth could by itself rehabilitate the economy.

http://www.dailystar.com.lb/opinion/25_10_03_e1.asp