Monday :: Sep 22, 2003

The GOP/Corporate Rape of Iraq Is Set to Begin

by Steve

We probably saw this one coming. With UN offices under ongoing attack, and Coalition troops still dying due to inadequate security and a justifiably hostile oppressed population, you would think that the occupation regime of Paul Bremer would focus on restoring basic services, installing a local police force, and getting local companies up and running to hire folks.

Nope. It’s time to privatize and let the GOP’s selected business partners rape a tinderbox of a country in the middle of the Islamic world.

The Guardian reports with its typical edge not found in any US paper that the Bush Administration, instead of waiting to develop a local business and entrepreneurial class, has decided to initiate “reforms” of the Iraqi economy by implementing rules that allow the multinational vultures of prior similar failures to swoop in and gobble up Iraqi assets.

Iraq was effectively put up for sale yesterday, when the US-backed administration unveiled a sweeping overhaul of the economy, giving foreign companies unprecedented access to Iraqi firms which are to be sold off in a privatisation windfall.

Under the new rules, announced by the finance minister, Kamil Mubdir al-Gailani, in Dubai, foreign firms will have the right to wholly own Iraqi companies, except those in the oil, gas and mineral industries. There will be no restrictions on the amount of profits that can be repatriated or on using local products. Corporate tax will be set at 15%.

Yesterday, one Iraqi businessman warned that the economic reforms would "destroy the role of the Iraqi industrialist". Wadi Surab told the BBC that Iraqi entrepreneurs would be unable to compete with foreign companies in privatisation tenders.

The rules give foreign firms greater access to business in Iraq than in most developing countries, where local industries are often shielded from overseas buyers. For some Iraqis such unfettered access is a concern, yet the privatisation of Iraq's 192 public sector companies is not up for debate.

The most valuable contracts on offer have already gone to US corporate giants. Kellogg, Brown and Root - a subsidiary of Halliburton which was once run by the American vice-president, Dick Cheney - won a contract worth up to $7bn (£4.3bn) to repair Iraq's oil infrastructure.

Bechtel, a San Francisco-based firm, won the $680m chief contract to start rebuilding other essentials, such as roads and schools.

And where the locally-grown Iraqi businessmen have tried to compete for their own markets, they are greatly disadvantaged by the rules being put in place, which of course favor multinational non-Iraqi firms that have committed similar rapes elsewhere.

One of the most high-profile contracts still up for grabs - for mobile phone licences - is to be announced shortly. Fifteen bids have been put forward, including some from Iraqi businessmen who plan to involve more Iraqis in the business of reconstruction.

"There is a big business class of Iraqis that we haven't seen yet. We want to get them back doing things for their own economy," said Mohamed Shaboot, an Iraqi businessman educated in the US who has spent 10 years in Baghdad. Mr Shaboot and several other Iraqis have formed a consortium, called Zagil, which has submitted a bid to run one of three new mobile phone networks. The consortium's proposal for the licence includes a pledge to sell half the company to ordinary Iraqis.

Mr Shaboot said: "We are trying to get Iraqi investors to put in some of the money that they have made abroad back into their country. This is the first step towards really rebuilding."

There are few mobile phone contracts left in the world that offer such potential. Many expect at least 2 million subscribers within a few years.

But the licence, worth at least $200m, will not be won easily. The US-led authority in Iraq, the coalition provisional authority (CPA), stipulated that bidders must have run mobile phone networks in other countries. Some argue that key contracts should be reserved for Iraqis. But among the elder Iraqi businessmen, some are struggling to adapt to the new business climate.

Farouk al-Obeidi, the vice-president of al-Maimana group, one of the country's most established construction and trading firms, has a file on his desk containing some of the CPA's requests for bids to provide equipment. "This is a chaotic situation. Out of these 50 offers, I've only been able to submit proposals for three and none of them has won," he said.

In the Washington Post’s lamer effort on this story, there is this:

The new policy, enacted on Saturday by U.S. administrator L. Paul Bremer, allows foreign firms to enter and potentially dominate key elements of the economy, from banking to manufacturing, that had been off-limits to outside ownership.

(New Iraqi Finance Minister) Gailani said Iraq would "allow up to 100 percent foreign ownership in all sectors except natural resources." He said Iraq's oil reserves -- the world's second largest after Saudi Arabia's -- would remain in government hands for now.

For now?

Gailani said six foreign banks will be permitted to purchase and fully take over Iraqi banks. Other foreign banks will be allowed to purchase 50 percent stakes in local banks, he said.

Foreigners will be permitted to lease land for as long as 40 years, he said.

And who is one of the leading architects of this effort? Why, none other than Yegor Gaidar, a former prime minister under Boris Yeltsin who presided over the looting of Russian assets by the St. Petersburg Mafia as a privatization, reform agenda. Matt Taibbi of the New York Press tells us all we need to know about Gaidar’s “accomplishments.”

Their legacy was the wholesale theft of Russias riches from the population, and their delivery into mafia and foreign control. The theft was a surprisingly quick and brutal process.

If Iraq is in for the same treatment, here are some of the things Iraqis have to look forward to. First, stealing money from peoples pockets. In 1992, Gaidar began implementing a program known as "Shock Therapy" (yet another cruel irony of this business: first Shock and Awe, now Shock Therapy?). Shock Therapy was the brainchild of another Harvard villain, Jeffrey Sachs. In the early phase, this took the form of Gaidars move to free the ruble before the end of state-controlled prices. This resultedas even a child could have predicted it wouldin hyperinflation. By the end of 1992, prices in Russia had increased by a factor of 26. Money from 1991 became worthless overnight. Families that had been stuffing mattresses since the siege of Stalingrad saw their life savings disappear in a few weeks.

The beneficiaries? The banks that had been licensed by the state to handle currency exchange operations, which naturally became lucrative as Russians fled to foreign currencies. This small group of bankers, hand-picked by the Gaidar government, would become the first bidders on public properties in the next phase, privatization. After all, who else could bid? Nobody else had any money.

There is not enough space here to detail the many obscene nuances of the privatization effort, but roughly speaking it came down to one thing: The crown jewels of the Russian economy were handed over to a small group of thugs and gangsters at fractions of their actual cost. In some cases the Chubais/Gaidar clan actually lent state money to friends to help them buy properties.

The privatization schemes enacted by Gaidar and Chubais were created in close consultation with American aid officials. Much of the legislation and legal infrastructure for the effort was designed by such pseudo-governmental organizations as the Russian Privatization Center (RPC) and the Harvard Institute for International Development (HIID), the latter organization owning the USAID contract for Russian economic reform. The chief figures here were Chubais and Gaidar on the Russian side and Harvard economists Sachs, Andrei Shleifer and Jonathan Hay on the American side. (Hay and Shleiffer were subsequently investigated by a grand jury for investing in privatized properties through their wives). There was no question that the grossly regressive effects of privatization were enacted at the express will of the U.S. government.

Why? What was the point? The point was to seize control of a country’s valuable property in Russia as in Iraq, primarily oil. Then you hand it over to the right six people, so that you can plunder the country and dictate its politics. The U.S. kept the Gaudier/Tubas clan in pocket by lavishing hundreds of millions of dollars in aid money on their private reform organizations; it kept the new Russian tycoons in pocket by making them dependent upon state tribute, administered by their puppets; and it kept Boris Yeltsin in pocket by making him politically reliant upon the financial support of the tycoons it created.

Gaidar last week noted the "similarities" between the post-Soviet economy and Iraq, and the World Bank has noted that the Baathist party "modeled its economy on Eastern European communism," hinting that similar reforms might be needed. Anyone who’s lived in those places knows what this means: privatization, mass layoffs, the gutting of healthcare and education and the creation of a super-rich class of ruthless, America-friendly dickheads.

Well, we are about to unleash this GOP business class carnage right in the middle of the Islamic world.

Steve :: 6:38 AM :: Comments (10) :: Digg It!