War Inc.

American corporations with close ties to the White House are poised to cash in on Saddam's defeat. French companies need not apply.

Published March 17, 2003 8:30PM (EST)

As the prospect of war with Iraq comes ever closer, companies with expertise in combating oil-well fires have begun to publicly complain that the U.S government has not been forthcoming with details of the firefighting services it may require in the Middle East.

Their concern is not abstract; many experts think it is likely that Saddam Hussein may duplicate his behavior in Kuwait and destroy Iraqi oil fields in a last-gasp gesture of defiance. So, early in March the Department of Defense finally announced that it had developed a plan to deal with the possibility, and on Thursday the Pentagon posted a toll-free phone number on its Web site to provide "a recorded message ... on the information necessary for firms to be added to the bidders list." After just a few hours, the phone number had been overwhelmed with calls; by the afternoon, a message said that the voice-mailbox was full, and it offered no details on how firms could bid for firefighting contracts.

The overloaded Defense Department bidding line provides a good illustration of the frenzy for war that is building in some sectors of the business community. It's not just the firefighters; many companies see war in Iraq in a favorable light, as a significant source of new business.

Representatives of these firms won't say so in so many words, certainly, and some -- like the firefighters or the construction companies that will rebuild critical infrastructure in Iraq -- convincingly defend their work as necessary to immediately aid civilians and repair a war-ravaged nation. War is hell, but when the fighting is over, somebody's got to make things better. What's so wrong with profiting from the deal in the process?

But even if there's nothing exactly new about making money from war, this particular conflict, a preemptive war of choice, presents the somewhat novel prospect of the U.S. government deciding how war profits will be distributed even before the first sorties are launched. Whether you think Iraq will be "conquered" or "liberated" by American forces, regime change in the country will open up vast new opportunities for commercial interests to do business there, and the Bush administration could have wide latitude in determining which of those interests win out. Already, companies are jockeying for prime positions, and already there are signs that the White House is being nicest to its friends.

On March 10, for example, the Wall Street Journal reported that the United States Agency for International Development (USAID) had invited a handful of large engineering firms to bid on a $900 million contract for rebuilding Iraq. The Journal described the agency's efforts as "quiet," but "secret" seems a more apt term. In a procedure designed to respond to "urgent circumstances," the agency decided not to put out a public notice soliciting engineering bids and instead approached select firms "with a proven track record," said Ellen Yount, an agency spokeswoman.

All of these firms are American, and many have close ties to present and former government officials. One of the companies is Kellogg Brown & Root, a subsidiary of the Halliburton Co., the firm that Vice President Dick Cheney ran during the 1990s. (KBR also developed the Pentagon's firefighting plan.) USAID declined to discuss the sort of work it had asked the companies to do, and several of the firms would neither confirm nor deny that they had been contacted by the government regarding Iraqi reconstruction. The others were only slightly less reticent, admitting they were part of the group but refusing to discuss details of USAID's request.

On Wednesday, top U.S. foreign policy experts, working on behalf of the Council on Foreign Relations, released a report estimating rebuilding in Iraq to cost up to $20 billion per year for "several years"; it's reasonable to expect, then, that after the war, contracts worth much more than USAID's initial $900 million request will be made available to firms.

The news that some well-connected American firms will be first in line for these billion-dollar deals did not help the Bush administration's case for war internationally. Headlines all over the world questioned the White House's true motives for war. During a session of the British Parliament, one Liberal Democrat member asked Prime Minister Tony Blair why his allies in the U.S. had "pointedly excluded British and foreign firms." Vincent Cable, the M.P., continued, "Is the prime minister not embarrassed to have given such unstinting loyalty to an American president who regards international cooperation with such contempt and war as an opportunity to dish out contracts to his cronies?" Blair dodged the question, but his spokesman told the British press that the prime minister hopes the United Nations, and not the U.S., would head the rebuilding effort.

It's hyperbole to argue that the Bush administration wants to invade Iraq only for the benefit of its friends in the corporate world (though some people no doubt believe that). For some businesses -- most notably the airlines, which fear billions in losses if there is a war -- an invasion will likely be terrible for the balance sheet. But, as in the Gulf War, some companies will make a bundle from an attack, and one doesn't have to be very conspiracy-minded to notice that these are the very same firms that have intimate ties with the Bush administration. Is it unreasonable to think that the high-minded goal of bringing freedom to Iraqis exists, in this White House, alongside many less noble political calculations -- for instance, old-fashioned corporate opportunism? Or, making sure that the spoils of war stay out of the hands of the troublesome French?

In the waning days of the Gulf War, estimates for the cost of rebuilding Kuwait, which had been plundered by Iraq's occupying forces, ranged in the hundreds of billions of dollars. Construction and oil-services firms saw the country as a bonanza. Even before the exiled Kuwaiti government had been fully restored, it was welcoming reconstruction bids from foreign companies. American executives were the most assiduous deal makers, visiting Kuwaiti royals at their base in Taif, Saudi Arabia, and beating European firms to multibillion-dollar deals.

It turned out that Kuwait was a smaller prize than businesses had initially anticipated -- reconstruction cost tens, not hundreds, of billions of dollars. But U.S. firms got the lion's share of the work, with one company, Bechtel Corp., a private, family-owned and very secretive firm based in San Francisco, ending up with the main rebuilding contract, worth an estimated $2.5 billion.

Bechtel has a legendary history of setting its sights on large projects and successfully networking with influential people who can bring those projects to the company. The firm built the Hoover Dam, the subway systems in San Francisco and Washington, D.C., the tunnel under the English Channel, and many U.S. nuclear power plants. In his book "Friends in High Places: The Bechtel Story: The Most Secret Corporation and How It Engineered the World," the journalist Laton McCartney outlines Bechtel's ties to powerful people, many of them Republicans. Caspar Weinberger, Ronald Reagan's defense secretary, was once Bechtel's general counsel; Reagan's secretary of state, George Schultz, is a former Bechtel president. "Gerald Ford had also lent a hand, as Richard Nixon had before him, and Ronald Reagan after him, by trying to give Bechtel commercial access to the nation's most secret nuclear technology," McCartney writes, citing one example of Bechtel's reach. And Bechtel is no stranger to the current Bush administration. In February, the company's CEO, Riley Bechtel, was named, along with dozens of other executives, to the president's Export Council, a White House trade advisory group.

Not surprisingly, Bechtel was one of the companies selected by USAID to bid for a contract in Iraq. "We are one of the world's leading engineering and construction firms, so if there's infrastructure work to be done in Iraq, we have extensive experience in doing that," Jonathan Marshall, a spokesman for Bechtel, said. But Marshall was wary of Bechtel being seen as pushing for a war. "We do hope for a peaceful resolution here," he said. "If there's work to be done it should be done in an atmosphere of peace and not war. We're not trying to take advantage of anything here."

Parsons, a construction company based in Irvine, Calif., is another of the major firms contacted by USAID. Parsons also did well in Kuwait, landing a contract worth hundreds of millions to expand the country's refining capacity. But when asked what kind of work the company might do in Iraq, Erin Kuhlman, a spokeswoman, said that any Iraq contract would be similar to the rebuilding efforts Parsons headed in Bosnia and Kosovo in the 1990s. Such a contract would, in Kuhlman's description, have little to do with oil.

"The bulk of the aid money that went to Bosnia and Kosovo was to firms that provided labor and equipment to make repairs," she said. "We went in and we cleared areas for mines, and then we organized construction teams to restore water supplies, rebuild roads, hospitals, schools, all sorts of infrastructure that had been damaged in the war."

Kuhlman added that if American firms get rebuilding contracts in Iraq, they would likely employ Iraqis to do the work. "What we did [in Bosnia and Kosovo] is we were the program managers and we hired local groups," Kuhlman said. "People are saying that all the money is going to be coming to American firms, but in fact that's not the way it works. The money goes to the local firm."

The other main contender for business in Iraq is Kellogg Brown & Root, owned by Halliburton. As the New York Times reported last summer, the war on terrorism has been good to KBR. After the Sept. 11 attacks, the company was selected to build a permanent base for detainees held at Guantanamo Bay, Cuba. KBR was also awarded a 10-year, open-ended contract to provide logistics supplies -- managing everything from dining operations to power generation -- to the Army.

But Halliburton has recently been going through a rough period, too. The company has been dogged by a host of class-action lawsuits seeking damages stemming from asbestos-containing products made by some of its subsidiaries. As part of a $4 billion settlement it reached in 2002, KBR, the unit likely to do work in Iraq, is expected to file for bankruptcy later this year.

The company's proximity to the White House may also not be as much of an asset as one would expect. Last year, when corporate accounting scandals were making headlines, the news that Halliburton was being investigated by the Securities and Exchange Commission for alleged accounting improprieties during Cheney's tenure caused much unwanted press for the firm. Now, according to some industry analysts and political experts, the government may be reluctant to award Halliburton a contract precisely because it would appear unseemly.

"It certainly wouldn't be ideal if they gave the first contract to Halliburton," says Bathsheba Crocker, an expert on postwar reconstruction at the Center for Strategic & International Studies. "There are certainly many people out there who already think this is all about the Bush administration getting access to Iraqi oil in the first place."

Still, says Crocker, if Halliburton is indeed passed over in the first round, that won't be the end of the story. "Brown & Root often does work for the government, and I have no doubt there would be enough to go around" in Iraq, she says.

As many academics, pundits and lawmakers have noted during the past year's war debate, ousting Saddam Hussein could turn out to be the easy part of regime change in Iraq -- the difficult part would be rebuilding a nation suffering from two decades of warfare and sanctions.

"It's not going to be cheap," says Patrick Garrett, an associate analyst at GlobalSecurity.org. "There's going to be a cleanup after the military, because some of those things -- say if cluster munitions are used -- could have a long-term effect on the country. But it's not just cleaning up after the war, it's essentially rebuilding the whole country. There will be school reconstruction, roads, and helping to rebuild the economy that was there before the Gulf War, before the sanctions."

But the biggest prize for American firms like Bechtel and Halliburton will be a contract to repair Iraq's oil industry. On March 6, the Pentagon announced that it had "reliable reports" indicating that Saddam Hussein may be planning "to damage or destroy Iraq's oil fields, potentially causing a crisis for both Iraq's people and its neighbors."

The government said that "Iraq has received 24 railroad boxcars full of pentolite explosives" that would be used to blow up the country's oil facilities, similar to what Iraqi forces did to Kuwait's oil industry in their retreat during the Gulf War. The destruction of Kuwaiti fields caused enormous environmental damage -- 5 million barrels of oil were dumped into the sea, an "impact twenty times larger than that of the Exxon Valdez disaster," according to the government. (Seeking to label Saddam Hussein a "terrorist" any way it can, the Pentagon described the Kuwaiti fires as an act of "eco-terrorism," an incorrect use of the term. According to the FBI, "eco-terrorism" is done with the intention of saving the environment, not damaging it.)

Mike Miller, the CEO of Safety Boss, a Canadian oil-well firefighting company that helped fight the Kuwaiti fires, expects that oil fires in Iraq -- which he thinks are very likely to be set -- will be the biggest event his industry has ever seen. Iraq has more oil fields spread out over a larger area than Kuwait, "so it would be much bigger, and cause potentially much more environmental damage," Miller says.

But Miller fears his firm will be shut out of the bid process. "Whoever gets this firefighting contract has got to have a huge political contact," he says, "and we're a little concerned because as a Canadian company we don't have access to the American government. I guess I would say that once the fires start it would be hard to ignore us -- we did have the best record in Kuwait and the world will ask why we're being left out." But so far, he has had little contact with American officials, and he worries that because Canada has been somewhat noncommittal on a war -- officially, the government wants to give Saddam Hussein until the end of March to comply with inspections -- his company will be left out of the initial plans.

Miller's situation raises an interesting question. If the war in Iraq turns out to be an almost entirely American affair, with foreign governments refusing to go along with the effort, and American troops doing much of the fighting, and American taxpayers bearing much of the cost, does the White House have any obligation to see that foreign firms take part in efforts to rebuild Iraq, enjoying a fair shot at the billions that will be spent upgrading the country's oil infrastructure? Some people in government, the kind of people who want to replace the word "French" with "freedom," may have already concluded that once the U.S. military secures the peace in Iraq, U.S. companies would be justified in securing the dollars. But experts warn of obvious political fallout from such shortsightedness.

If the White House is seen as favoring American firms, especially American firms close to the Bush administration, it could serve as just the proof antiwar critics need to conclude that the U.S. is invading Iraq for the basest reasons -- money and oil.

In the Middle East, the United States is vulnerable to the charge that it is an imperialist power; Saddam Hussein's government regularly accuses the Bush administration of seeking to enslave Iraqis. "It is very politically incorrect to do this," a Saudi Arabian contractor recently told the Middle East Economic Digest. "Look at the Gulf war. Bechtel said that because the Saudis had been good to Kuwait it would source everything locally. Then it had everything flown in from Houston. A lot of Saudis remember that, and Bechtel is not flavor of the month here because of that."

Michael Renner, a researcher at the Worldwatch Institute, wonders whether the Bush administration might be trying to send some not-so-subtle political cues to governments that are now on the fence in the war. "It seems to me that the way it comes across, whether intended or not, is you're sending a signal that if the rest of the world is not going along with this, your companies aren't going to get all the contracts," he says. "They're saying, 'Anybody out there, if you want to get on the bandwagon, this is a good time.' Maybe we should take George Bush at his word when he says, 'If you're not with us, you're against us.' He may mean that not only in political terms, but also in business terms."

But Renner predicts a huge international outcry to American profiteering from war. "If that's what plays out, if there's a sense that this carries a commercial side to it as well, then given the fact that public opinion is very much up in arms against the current policy, that there's a rather unprecedented groundswell of opinion against this, I wouldn't be surprised if people react very angrily to it."

By Farhad Manjoo

Farhad Manjoo is a Salon staff writer and the author of True Enough: Learning to Live in a Post-Fact Society.

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