Sabotage and scandal eat billions to rebuild Iraq

By Oliver Morgan

Even John Bolton, the neocon's neocon and former United States ambassador to the UN, now admits it. Mistakes were made in the aftermath of the invasion of Iraq. Not regime change - he is unrepentant about that - but what happened next.

Some US$21 billion ($29.3 billion) in US reconstruction funds later, and despite President Bush's promises that the US would leave Iraq with a better infrastructure, the country produces less electricity and oil than it did before the invasion four years ago, according to the US special inspector-general for Iraq reconstruction (Sigir).

Others go further than Bolton: it could never have gone to plan because there was no credible plan to reconstruct the country.

Andy Bearpark, who worked for the Coalition Provisional Authority, which ran the country for a year after the war, says: "The problem was fatally flawed planning, that was then completely overtaken by the collapse of the security situation. The CPA drew up plans in the Baghdad green zone with little appreciation of practicalities out in the country."

There have been scandals aplenty in the aftermath of the war. Barely had hostilities begun when it was revealed that contracts to rebuild the country's infrastructure were being handed out without competition to companies such as Bechtel and the Halliburton subsidiary Kellogg Brown and Root, both of which had close ties to the Bush Administration.

Rosemary Hollis, head of research at the Royal Institute of International Affairs, says: "It is scandalous that what little infrastructure there was before the war was not salvaged and that reconstruction has been so poorly planned."

Bearpark adds: "The real scandal is that the output from the money that has been spent on reconstruction is only a fraction of what the Iraqi people had a right to expect."

Most of the US$21 billion that was authorised by Congress in 2003 has been spent - Sigir said that by October last year, 80 per cent had gone. In its most recent quarterly report, Sigir's Stuart Bowen found continuing problems with corruption, security, the ability of Iraqi ministries to administer funds and a lack of co-ordination among agencies overseeing reconstruction. A key problem has been the need to shift funds from reconstruction - utilities, transport and healthcare - to security and justice.

Under the original plans, electricity - upgrading power stations, transmission and distribution - was to take the largest slice of reconstruction funds: US$5.56 billion. That has been cut to US$4.24 billion. Oil and gas projects were cut from US$1.89 billion to US$1.72 billion, transport from US$870 million to US$800 million.

Projects to provide drinking water and improve sewerage systems suffered the biggest loss - almost half the US$4.33 billion earmarked. The lost funds were reallocated largely to security, which saw its budget increase from US$4.56 billion to US$6.31 billion. Healthcare increased from US$793m to US$820m. After all the reallocation, security took 34 per cent of funds, while electricity was below a quarter, water 12 per cent and oil 9 per cent.

As a result, Sigir found that by the beginning of this year, Iraq was producing 2.17 million barrels of oil and 4260MW of electricity: both below pre-war levels.

The oil and gas figure is particularly difficult because it was envisaged that revenues from this source would help pay for reconstruction.

Sigir indicates that sabotage of infrastructure - oil pipelines, electricity pylons - is a key reason for the lack of progress in upgrading infrastructure. A leading UK contractor who had hundreds of employees in Iraq working on US-funded infrastructure programmes, and employed thousands of Iraqi sub-contractors, says: "If you look at the sums of money that have been spent, the security costs for protecting our workers have been of the order of 20 per cent."

Industry experts say this is four times the amount spent in other hostile environments around the world. "On top of that," adds the contractor, "is another 20 per cent because we have to re-do a lot of the work after it has been sabotaged. So that means you are down to 60 per cent of the original contract sum."

US congressmen, particularly the Democrat representative Henry Waxman, have followed the contract allocation and reconstruction process carefully over the past four years. Waxman, now chairman of the Congressional Committee on Oversight and Government Reform, a powerful investigative body, launched a hearing on Iraq reconstruction earlier this year. Waxman said: "We spent a lot of money in Iraq with very little to show for it."

According to Bowen's evidence to the hearing, the contracts offered to companies often allowed rewards without putting in place adequate performance regimes. Several contracts illustrate the point: a US$243 million contract to reconstruct 150 primary health centres was awarded to US contractor Parsons in March 2004, but lack of progress meant that two years later the number of centres had to be reduced and eventually the contract was terminated and the work recontracted out; another contract, to build a children's hospital in Basra, awarded to Bechtel, saw the bill almost double to US$98 million, with completion delayed from December 2005 to July 2007. In these cases, Sigir did not focus on interruptions in a hostile environment.

It pointed to lack of qualified staff, poor supervision of staff and subcontractors, and poor government oversight and cost control.

A third contract, to administer Iraqi police training, went to US group Dyncorp, and included building a residential camp. Dyncorp carried out unauthorised work including building the facility away from its original site and constructing an Olympic-sized swimming pool. Dyncorp was found not to have kept proper documentation of its work.

Hollis believes that what has happened in Iraq has wider ramifications than within of Washington.

She says it undermines claims the war was an attempt to create a democracy after the fall of Saddam.

"If the US had genuinely been interested in the rebuilding of Iraq as a stable nation, then they would have had a better plan.

"As it was, there were many US companies out there to make a killing and this all adds to the cynicism throughout the Middle East about US motives for the invasion."

Cutbacks

* US reconstruction spending.

* Electricity: Cut from US$5.56b ($7.7b) to US$4.24b.

* Oil and gas: Cut from US$1.89b to US$1.72b

* Transport: Cut from US$870m to US$800m

* Water and sewerage: Cut from US$433b to about US$215b.

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