Corporate Colonialism

Companies . . . March!

Like one of the 19th-century European colonial empires, the Bush government is calling on Bechtel, Halliburton, and other major corporations to take over the job of running the Iraqi colony. These companies are to act in the name of the government. They are to be paid out of our taxes. It might just as well be the British East India company. The colonial corporations become the instrument of the nation-state, in this case to undertake the reconstruction of Iraq. They, not the government, are the purveyors of laws and customs and democratic ideals.


The main instrument of the U.S. in Iraq is not the Pentagon, the U.S. Agency for International Development, or the Army Corps of Engineers, but the Bechtel Group. The giant international engineering outfit has won a contract worth up to $680 million that gives the company a leading role in rebuilding Iraq, a job that eventually may cost $100 billion.

Bechtel maintains close ties with politicians and the government. It is the 17th largest defense contractor, with $1.03 billion in Defense Department deals. (The firm's total revenues are $11.6 billion.) It gave $1.3 million in campaign contributions during the 1999-2000 cycle, according to the Center for Responsive Politics. Some of Bechtel's government connections are well-known: Jack Sheehan, a vice president, is on the Defense Policy Board, which advises Secretary of Defense Donald Rumsfeld. Riley Bechtel, the company chairman, is on the President's Export Council. Other connections are not so well-known. Former Bechtel executive Ross Connelly is chief operating officer of the Overseas Private Investment Corporation (OPIC), the government office that insures speculative business ventures in unsafe parts of the world. OPIC has no work in the Middle East at the moment, but as a spokesman put it last week, "The conflict is still winding down, and OPIC as of yet has not received official authorization to activate its programs in Iraq. However, given OPIC's traditional role in supporting U.S. investment in post-war reconstructions such as Afghanistan and the former Yugoslavia, it is safe to assume that OPIC will play an important role in the reconstruction of liberated Iraq."

Both Reagan's secretary of defense, Caspar Weinberger, and Reagan's secretary of state, George Shultz, came from Bechtel. Shultz is currently a director. Reagan sent Rumsfeld to Iraq as his special envoy during the early 1980s to encourage Saddam in Iraq's war with Iran. According to memos uncovered by the National Security Archives, Rumsfeld may also have been upholding Shultz's private interests in Bechtel by using his visits to lobby for an oil pipeline Bechtel wanted to build from Iraq to the Gulf of Aqaba. In the end, Saddam refused to go for the pipeline.


If Bechtel is the senior partner in rebuilding Iraq, its junior partner is Vice President Dick Cheney's old employer, Halliburton. Its subsidiary Kellogg Brown & Root (KBR) won an earlier deal to put out oil field fires. Through KBR, Halliburton has an open-ended $7 billion contract—its secretive details still classified—with the U.S. military to provide logistical support for various operations around the world.

In a recent conference call with stockholders, Halliburton execs told of "a cost-reimbursable design-build contract valued in excess of $100 million for construction of the new U.S. embassy compound in Kabul, Afghanistan, and two contracts from the U.S. State Department for security upgrades and general construction work at multiple facilities of at least $70 million."

Incidentally, Halliburton has worked for some pretty unsavory governments, including those of Azerbaijan, Iran, Iraq, Libya, and Nigeria. It has lobbied for removal of sanctions against those countries and in certain instances appears to have skirted sanctions by operating through foreign subsidiaries. (At one point, the company opened a subsidiary in Iran despite sanctions.)

Halliburton has also been remarkably free and easy with taxpayers' dollars. Among other incidents, it wound up having to pay the government $2 million for inflating costs of work between 1994 and 1998 at Fort Ord in California while Cheney was the firm's president. More recently, stockholders took Halliburton to task for building a pipeline in Burma because of human rights abuses there. Cheney has been accused of trying to skirt tax laws by placing 44 of the firm's subsidiaries in foreign tax havens, according to Lee Drutman and Charlie Cray of Citizen Works. And Halliburton is the subject of an SEC probe and shareholder lawsuit about alleged accounting irregularities stemming from policies the company instituted while Cheney was CEO.


The overall administrator of U.S. operations in Iraq is retired general Jay Garner, who ingratiated himself with his superiors during the first Persian Gulf War with adept handling of the Kurds in northern Iraq. During the Vietnam War, Garner was a district senior adviser in the strategic hamlet program. Recently questions were raised about Garner's judgment in accepting a free trip to Israel in 2000, after which he declared his support for the government there, all this taking place during Israel's incursions into Palestinian territory.

He has been president of SY Coleman, a firm that specializes in military guidance systems and is owned by a bigger firm called L-3 Communications.

Garner's operations in Iraq will be closely tied to Iraq's oil industry. Oil is Iraq's major asset, and the Bush government has said repeatedly that the country can at least partially rebuild itself by selling that oil. A crucial and immediate goal is to find people for two key jobs: a manager of operations for the Iraqi state national oil company and an experienced oil person to run the company's marketing operation.

As of last week, two men with long experience at Shell and BP were being discussed as possible candidates.

Phillip Carroll, cited by oil industry sources as a possible director of Iraqi oil operations, most recently was CEO of Fluor Co., and before that was president of U.S. Shell, the American subsidiary of Royal Dutch Shell, which is owned by both British and Dutch interests. Carroll has acknowledged he has been approached for the job.

Both Fluor and Shell have aroused controversy in the past. Fluor is all over the energy world, with pipeline deals in Alaska, oil in Kazakhstan, gas and petrochemicals in Saudi Arabia, and so on. It is a Fortune 500 company with a backlog of contracts, as of last year, of $10.6 billion. Along with two other companies, Fluor has contracts for as much as $100 million from the Army Corps of Engineers for work in Afghanistan.

The company also currently faces a lawsuit by South African black workers claiming, according to activists, that Fluor "exploited and brutalized them during the apartheid era." Among other things, the claimants say Fluor security men dressed up as Ku Klux Klan members in white robes and attacked unarmed workers. Fluor denies all the allegations.

Before working at Fluor, Carroll ran operations for U.S. Shell during a period when the parent Royal Dutch Shell was under attack for its handling of protests against its operations on the Ogoni tribal lands in Nigeria. Activists were attacked by a private police force allegedly run by the company. Nigeria arrested opposition figures, including the leader, Ken Saro-Wiwa, and hanged them.

The second man mentioned by industry sources for a major job in Iraq is Rodney Chase, a long time BP executive involved in major deals and deputy chairman of beverage behemoth Diageo (Smirnoff's, Bailey's, Captain Morgan, Jose Cuervo, et al.) and supermarket superfirm Tesco (the United Kingdom's largest retailer).

Discussion of outsiders running the Iraq oil business already has ignited controversy. Issam al-Chalabi, the Iraqi oil minister from 1987 to 1990 (not the U.S. puppet Ahmed Chalabi), told the Platts.com news service last week, "I believe that any kind of direct rule by the Americans, whether military or civilian, will be rejected and resisted by Iraqis and will not be to the advantage of the Americans."

Commenting on one report that speculated Bush would set up 23 ministries, al-Chalabi said such a scheme was "absolutely absurd." He said Iraqi oil employees couldn't stomach it, adding, "I would let the Iraqis run their institutions, ministries, companies, departments." On the other hand, a UN-run operation, in his view, held out some possibilities.

But the U.S. seems intent on avoiding the UN if it can. A recent proposal by the Heritage Foundation suggests creating a federal government with representation by the three main groups: Kurds, Sunni Muslims and Shiite Muslims. Under this scheme the U.S. government, through Garner, would guide Iraq toward privatization of the oil industry.

But having captured the Iraqi oil fields, the U.S. may find that it's not so simple to market the oil because of Iraq's outstanding debts abroad. Creditors may well attempt to tie up any oil shipments in an effort to get their money back. Among them are the major oil companies, whose holdings were nationalized in the 1950s. These firms may lay claim to their former holdings, which would cause an endless legal fight. Until ownership of Iraqi oil is firmly settled, the UN's Oil for Food program is the one existing and agreed-upon arrangement for oil sales. Even Bush seems to acknowledge that. In the end, it may not be so easy to get rid of the UN.


Additional reporting: Phoebe St John and Joanna Khenkine

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