Thursday, July 06, 2006

Kevin Zeese: Looting By Another Name

Looting By Another Name
The Corporate Takeover of Iraq's Economy
By Kevin Zeese

The roots of the economic takeover of Iraq are long and deep. They
became more aggressive after the strongest U.S. ally in the region,
the Shah of Iran, was deposed in the 1979. The roots of the quest of
dominance of the oil-rich region are found in both the Democratic and
Republican Party, but the most aggressive pursuit has been by George
W. Bush.

Former President Jimmy Carter wrote in his memoirs that many Americans
"deeply resented that the greatest nation on the earth was being
jerked around by a few desert states." And, when he was president he
put forward "the Carter Doctrine" in a State of the Union Address in
1980 that acknowledged "the overwhelming dependence of the Western
democracies on oil supplies from the Middle East" and promised
military force would be used to ensure access to Middle East oil: "Any
attempt by an outside force to gain control of the Persian Gulf will
be regarded as an assault on the vital interests of the United States
of America and . . . will be repelled by any means necessary including
the use of force."

But, according to a book by Antonia Juhasz, "The Bush Agenda," it was
the Reagan, Bush I and Bush II administrations that most aggressively
pursued the Iraq oil economy. Her excellent book tells a story that
explains the reasons for the invasion and occupation of Iraq. It shows
how the Reagan and Bush I administrations began by building a friendly
trade relationship that provided money, arms, intelligence, and
political protection to Saddam Hussein--despite his brutal record as a
despotic dictator. And, how the Clinton years led to 'regime change'
in Iraq becoming the policy of the United States and naturally
following that was the Bush II's military invasion of the country.

She highlights the web of corporate interests from the oil, oil
engineering and military sectors of the U.S. economy that have
combined with government to the build-up to the invasion of Iraq. Many
of the corporate players--Chevron, Bechtel, Lockheed Martin and
Halliburton--have corporate leaders who went into and out of
government over the years, influencing the direction of U.S. policy
and then ensuring that their corporations profited mightily from the
policies they put in place. Juhasz points to Dick Cheney, Donald
Rumsfeld, L. Paul Bremer, Scooter Libby, Robert Zoellick, Paul
Wolfowitz, Zalmay Khalilzad and George Shultz, as key players in the
long term quest to takeover of Iraq's economy.

The Root of the Problem: Peak Oil in the U.S. and Corporate
Globalization of Trade

The story of the invasion of Iraq and theft of the Iraqi economy is
part of a larger story of multi-national corporations and corporate
globalization affecting much of the world. Under the guise of "free
trade" economic policies that make multinational corporations more
powerful than governments. Laws favoring corporations are put in
place: less regulation, less commitment to specific locations, and
restrictions on government preventing the shift of economic benefit
away from small, local business, workers, consumers and the
environment. Globalization of trade claims to benefit by trickling
down the profit, but in reality it continues to funnel wealth to the
top--making the rich richer, the poor poorer and the middle class
class smaller.

In 1970, U.S. domestic oil production hit its peak. The United States
began to rely on foreign sources of oil, and went deeper into an oil
addiction that continues to this day. It was also the decade where
Middle East oil producers began to flex their muscles. OPEC used oil
as a weapon in response to the 1973 Arab-Israel War, imposing an
embargo on the United States. The embargo ended in March 1974, but the
threat was heard.

President Carter fought back, in 1977 his Defense Secretary, Harold
Brown, described the insecurity around oil as the most "serious threat
to the long-term security of the United States." In 1978 the second
oil shock hit with the Iranian oil embargo, reducing supplies by 5
percent, increasing oil prices by 150 percent causing inflation and
interest rates to skyrocket in the U.S. and the debt load of
developing countries to rapidly rise. Carter threatened military force
to protect access to oil and turned to the World Bank to find more
oil--by 1981 the World Bank had 28 oil projects underway.

President Reagan took the World Bank to another level--forcing
countries to change their laws so that U.S. corporations would have
direct access and control of oil. Reagan increased World Bank oil
projects from 1982 to 1984 to more than 55. Reagan also aggressively
put forward the trickle down theory--at home and abroad--making the
wealthy wealthier would, in theory, trickle down resources to all. But
the facts were the opposite. Juhasz points out that in the thirteen
years before Reagan the income divide was shrinking--from 1967 to 1980
the poorest in the U.S. increased their share of total income by 6.5
percent. Reagan's aggressive redistribution of wealth to the
wealthiest reversed that trend and from 1980 to 1990 the Census
reports that the poorest Americans lost more than 10 percent of the
income pie, while the wealthiest gained almost 20 percent.

Reagan and Bush I also dramatically increased trade with Iraq. They
knew of Saddam's human rights atrocities, and that Iraq was on the
U.S. terrorism list but they supplied money, arms, and commercial
products to Iraq. They even allowed U.S. corporations to provide the
ingredients for weapons of mass destruction. See the Arming of Iraq, .

Reagan removed Iraq from the list of terrorist nations in March 1982
to open up more trade. There was virtually no trade with Iraq in 1981
but by 1989 annual trade was up to $3.6 billion and had been expected
to double in 1990 before Iraq's invasion of Kuwait. When Saddam
refused U.S. efforts to build an oil pipeline, the strategy changed to
the removal of Saddam from office. The first effort the Gulf War and
the aftermath failed to achieve that goal.

The Blueprint for the Economic Takeover of the Middle East

The initial blueprint for the takeover of Iraq came in 1992 in the
final year of the Bush I administration. The 1992 "Defense Planning
Guidance" (DPG) describes America's overall military strategy and
represents guidance from the president and secretary of defense. The
1992 DPG was written by Dick Cheney, Paul Wolfowitz, Zalamy Khalizad,
Scooter Libby, Eric Edelman and Colin Powell--six men who served Bush
I and II, most worked in the Reagan administration as well.

The DPG was written after the success of the 1991 Gulf War, and the
failure to remove Saddam Hussein from power--two years after the fall
of the Berlin Wall and the emergence of the U.S. as a sole superpower.
The document, built on the Carter Doctrine and remained in effect
through the Clinton years, states the goal clearly--the objective of
the United States in the Middle East is "to remain the predominant
outside power in the region and preserve U.S. and Western access to
the region's oil." The document describes an aggressive, unilateral,
preemptive military agenda--that includes ad hoc coalitions of
countries--rather than working through organizations like the U.N.

Many in this same group reunited in 1997 to establish the Project for
the New American Century. PNAC restated support for the DNG and sought
U.S. military dominance in the world. They recognize the importance of
economic dominance as a compliment to unrivaled military power. They
proposed an annual increase in military spending of $15 to $20
billion. Being able to act preemptively in the Middle East gets
special attention noting that "the United States has for decades
sought to play a more permanent role in Gulf regional security." They
describe Saddam Hussein as providing an "immediate justification" for
a "substantial American force" in the Middle East. In January 1998
PNAC wrote President Clinton urging the removal of Saddam Hussein from
power noting that Hussein was a threat to "a significant portion of
the world's supply of oil."

Another key group was the Committee for the Liberation of Iraq. The
group was founded in 2002 by Robert Jackson, a Lockheed Martin
executive who wrote the Republican Party foreign policy platform in
2000. He formed the Committee while at Lockheed and advocated
aggressively for the overthrow of Saddam Hussein. The Chairman of the
Committee was former Secretary of State and Bechtel executive, George
Shultz. Shultz wrote a column in The Washington Post in 2002 claiming
the US must "ACT NOW. The danger is immediate. Saddam must be
removed." The article argued heavily for an immediate attack because
of weapons of mass destruction and Saddam's ties to terrorism saying:
"If there is a rattlesnake in the yard, you don't wait for it to
strike before you take action in self-defense." Shultz fanned the
flames of fear saying the risk is "tens or hundreds of thousands
killed by chemical, biological or nuclear attack." After the
occupation Lockheed Martin received more than an $11 billion increase
in sales and contracts including $5.6 million for work with the Air
Force in Iraq. Bechtel received nearly $3 billion in Iraq
reconstruction contracts.

The pro-military dominance advocates worked in other spheres as well.
Paul Wolfowitz left the Clinton administration and went to Johns
Hopkins School of Advanced International Studies, where he began to
advocate for a second Gulf War--this time including the overthrow of
Saddam Hussein. Zalmay Khalilzad, the current U.S. ambassador to Iraq,
went to the Rand Corporation and founded the Center for Middle Eastern
Studies and also served as a paid adviser to Unocal Oil Corporation
(purchased by Chevron in 2005) where he openly advocated for a close
relationship with the Taliban in order to build a 890 mile natural gas
pipeline. In a Washington Post Oped he urged re-engaging the Taliban
as "The Taliban does not practice the anti-U.S. Style of
fundamentalism practiced by Iran."

Bush II united military and corporate globalization into what Juhasz
calls "one mighty weapon of Empire." She points out that Bush's
unilateralism became evident before 9/11 with the withdrawal from the
Anti-Ballistic Missile Treaty, opposition to the Comprehensive Test
Ban Treaty, rejection of the International Criminal Court and the
Biological and Toxin Weapons Convention protocols. Instead of a new
DPG, Bush issued a National Security Strategy which makes U.S. status
as the only superpower a reason to expand U.S. military spending to
dissuade others from challenging U.S. dominance. Bush also put forward
that America "will not hesitate to act alone, if necessary, to
exercise our right of self defense by acting preemptively."

Embedding U.S. Corporations in the Iraq Economy

After George W. Bush became president, those who had planned and
advocated an attack on Iraq to remove Saddam took power. Dick Cheney
held meetings under his "Energy Task Force" with corporations
including Halliburton, Bechtel and Chevron. A draft of the Task
Force's recommendations came out to the media in April 2001. The first
recommendation under Strengthening Global Alliances included a graph
of Iraq oil output to the United States in 2000 and said a goal was to
"make energy security a priority of our trade and foreign policy." The
second goal was for the U.S. to "support initiatives by [Mid East]
suppliers to open up areas of their energy sectors to foreign
investment." In 1998 Chevron's CEO said: "Iraq possesses huge reserves
of oil and gas--reserves I'd love Chevron to have access to." His
dream was about to be realized.

The well-known drum beat for war with Iraq began and after the success
of the invasion the economic takeover began. The initial U.S. czar of
Iraq, Jay Garner headed the Office of Reconstruction and Humanitarian
Assistance. He advocated for putting Iraqis in charge as soon as
possible, with elections held quickly. Garner was fired by Rumsfeld on
the night he arrived in Iraq--fired, he believes because of these
views. He was replaced by neo-con Paul Bremer and the Coalition
Provisional Authority.

Bremer was in charge from May 6, 2003 to June 28, 2004. He had
complete legislative, executive and judicial authority over Iraq.
Bremer had four decades of corporate and government experience,
working with Kissinger as managing director of Kissinger and
Associates, as well as working in government with George Shultz and
Donald Rumsfeld.

Prior to the invasion, Bearing Point received a $250 million contract
from US AID to develop a blueprint for the remaking of Iraq's economy
into a 'free-market' economy friendly to U.S. corporate interests.
Bremer's job was to implement the Bearing Point plan. Juhasz points
out that while there may have been an inadequate military plan, there
was in fact a plan for the takeover and remaking of the economy of Iraq.

Bremer had the power to create laws by issuing "binding instructions
or directives." Bremer issued 100 Orders, Juhasz in 2005 interview
describes some of the key orders:

"Order No. 39 allows for: (1) privatization of Iraq's 200 state-owned
enterprises; (2) 100% foreign ownership of Iraqi businesses; (3)
"national treatment" - which means no preferences for local over
foreign businesses; (4) unrestricted, tax-free remittance of all
profits and other funds; and (5) 40-year ownership licenses.

"Thus, it forbids Iraqis from receiving preference in the
reconstruction while allowing foreign corporations - Halliburton and
Bechtel, for example - to buy up Iraqi businesses, do all of the work
and send all of their money home. They cannot be required to hire
Iraqis or to reinvest their money in the Iraqi economy. They can take
out their investments at any time and in any amount.

"Orders No. 57 and No. 77 ensure the implementation of the orders by
placing U.S.-appointed auditors and inspector generals in every
government ministry, with five-year terms and with sweeping authority
over contracts, programs, employees and regulations.

"Order No. 17 grants foreign contractors, including private security
firms, full immunity from Iraq's laws. Even if they, say, kill someone
or cause an environmental disaster, the injured party cannot turn to
the Iraqi legal system. Rather, the charges must be brought to U.S.

"Order No. 40 allows foreign banks to purchase up to 50% of Iraqi banks.

"Order No. 49 drops the tax rate on corporations from a high of 40% to
a flat 15%. The income tax rate is also capped at 15%.

"Order No. 12 (renewed on Feb. 24) suspends "all tariffs, customs
duties, import taxes, licensing fees and similar surcharges for goods
entering or leaving Iraq." This led to an immediate and dramatic
inflow of cheap foreign consumer products - devastating local
producers and sellers who were thoroughly unprepared to meet the
challenge of their mammoth global competitors."

Full interview at:

The result of these orders was to create an economic environment more
favorable to U.S. corporations than laws in the United States. As a
result Iraq corporations, and Iraqi workers have been excluded from
the rebuilding of Iraq. And, the Iraq reconstruction has failed to
provide adequate electricity, food, sewage treatment and even
gasoline--but U.S. corporations have profited handsomely from this
failed reconstruction.

Juhasz describes the impact of U.S. policies on the Iraqi economy:

"The new economic laws have fundamentally transformed Iraq's economy,
applying some of the most radical, sought-after corporate
globalization policies in the world and overturning existing laws on
trade, public services, banking, taxes, agriculture, investment,
foreign ownership, media, and oil, among others. The new laws lock in
sweeping advantages to U.S. corporations including greater U.S. access
to, and corporate control of, Iraq's oil. And the benefits have
already begun to flow. Between 2003 and 2004 alone, the value of U.S.
imports of Iraqi oil increased by 86 percent and then increased again
in the first three quarters of 2005."

To further embed a U.S. corporate economy in Iraq, the Iraq
Constitution contained provisions that approve the Bremer Orders. The
new Iraqi Constitution specifically repealed the Transitional
Administrative Law, but did no such thing for Bremer's Orders and
therefore they continue to be the law of the land. Thus, U.S.
corporations continue their hold on the reconstruction of Iraq, and
U.S. contractors continue to have full immunity from prosecution in
Iraq. Beyond that, several articles of the Constitution re-enforce the
Bremer Orders, e.g. Article 25 requires "modern economic principles
that insure the full investment of its resources, diversification of
its sources and the encouragement and development of the private
sector; Article 26 "guarantees the encouragement of investment in
various sectors," Article 27 allows for the privatization of state
property. Juhasz points out that modern economic principles means
corporate globalization and the market principles of the Bremer
Orders, and private investment means foreign investment.

Further, the Iraq Constitution does nothing to end the military
occupation. Early drafts of the Constitution included provisions that
forbid Iraq "to be used as a base or corridor for foreign troops" and
"to have foreign military bases in Iraq." These provisions were
deleted in the final draft.

The Future: Oil Takeover, US Economic Dominance of the Middle East and
the Battle Lines of World War III

The next stage for Iraq is a national oil law that will allow for oil
companies to sign contracts with Iraq that gives them access and
control over Iraqi oil. Juhasz points out that U.S. oil companies were
brought into to advise the Bush administration on Iraq oil policy six
months before the invasion. Further, the State Department's "Future of
Iraq Project's Oil and Energy Group," which included Ibrahim Bahr
al-Ulou,, a U.S. educated oil industry who served as Iraqi Minister of
Oil from September 2003 and again beginning in May 2005, agreed that
Iraq "should be opened to international oil companies as quickly as
possible after the war."

The method being used for U.S. control of Iraq's oil is Production
Sharing Agreements. PSA's favor private companies at the expense of
exporting governments as the entire exploration, drilling and
infrastructure-building process are turned over to private companies
in contracts that last twenty-five to forty years. These contracts
lock in the laws at the time the contract is signed. Thus contracts
signed now would have the Bremer Orders as their law no matter what a
future Iraqi government did.

Interim Prime Minister Allawi submitted guidelines for Iraq's new
petroleum law in September 2004. The guidelines put "an end to the
centrally planned and state-dominated Iraq economy" and urged the
"Iraqi government to disengage from running the oil sector." Further,
he recommended privatization stating the industry "should be
exclusively based in the private sector, that domestic wholesale and
retail marketing of petroleum products should be gradually transferred
to the private sector, and that major refinery expansions or
grassroots refineries should be built by the local and foreign private
sectors." Finally, Allawi called for all undeveloped oil and gas
fields to be turned over to private international oil companies. This,
at a time when only seventeen of Iraq's eighty known oil fields have
been developed. Article 109 of the Iraq Constitution re-enforces this
goal stating that the federal government only administers existing oil
and gas fields. The plans for a new Iraq petroleum law were made
public at a press conference in Washington, DC by Adel Abdul Mahdi,
formerly the Finance Minister, and now a Deputy President of Iraq.

Thus, the goal is about to be realized, control of Iraq's oil and the
Iraqi economy. Iraq will be dominated by U.S. corporations, supported
by the U.S. military. Ending the economic occupation of Iraq may be
more difficult than ending the military occupation. The embedding of
laws favoring foreign investment through the Bremer Orders and the
Iraq Constitution will make it difficult to give Iraq back to the Iraqis.

The U.S. is already moving to gain control of the broader Middle East
economy. The U.S. is aggressively pushing the U.S.-Middle East Free
Trade Area. MEFTA is modeled after NAFTA and seeks to economically tie
the region--where 54 percent of the world's oil reserves exist--to the
United States. MEFTA seeks to cover 20 countries in the Middle East
and North Africa. MEFTA is being developed through bi-lateral
negotiations with each country, leading to a region-wide agreement.
The U.S. is using the "us against them" strategy--those that oppose us
will be viewed as against us. Part of the negotiation includes
Generalized System of Preferences (GSP) which provide for duty free
import into the United States. Unique in the Middle East is the
trilateral nature of these agreements--the U.S. and another country
plus Israel. To get duty free entry to U.S. markets a certain
percentage of goods must go through Israel allowing Israel to take a
piece of the profit.

Iraq is the first economy to fall. The massive U.S. Embassy in Baghdad
shows it will be the base of U.S. operations in the region. Juhasz
subtitles her book "Invading the World, One Economy at a Time." This
is consistent with the views of PNAC, the 1992 DPG, and the 'access of
evil' speech. As John Gibson, the founder of Committee for the
Liberation of Iraq and a Lockheed Martin executive, said in 2003 "We
hope Iraq will be the first domino and that Libya and Iran will
follow. We don't like being kept out of markets because it gives our
competitors an unfair advantage." PNAC labeled the countries of
greatest concern 2000 as Iraq, Iran and North Korea--the future 'axis
of evil' of George W. Bush. They placed Iran as the second target
saying "Over the long-term, Iran may well prove as large a threat to
U.S. interests in the Gulf as Iraq has."

President Bush has declared that we are now in World War III. While
this World War is framed in terms of good vs. evil--terrorism against
the United States--what it may really be about is U.S.-corporate and
military dominance of the world. As Juhasz says--the U.S. taking over
one economy at a time.

For more information on "The Bush Agenda: Invading the World One
Economy at a Time," by Antonia Juhasz, Harper Collins, 2006 visit Juhasz is a leading expert on corporate
globalization, formerly the Project Director of the International
Forum on Globalization and currently a visiting scholar at the
Institute of Policy Studies. This is a must read book for those who
want to understand how we have gotten where we are in Iraq, and where
the next phase of 'World War III' will take the U.S.

Kevin Zeese is Director of Democracy Rising and a candidate for U.S.
Senate in Maryland.

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