8:40 am and the Sheraton Hotel ballroom thunders
with the sound of plastic explosives pounding
against metal. No, this is not the Sheraton
in Baghdad, it's the one in Arlington, Virginia.
And it's not a real terrorist attack, it's
a hypothetical one. The screen at the front
of the room is playing an advertisement for
"bomb resistant waste receptacles": This trash
can is so strong, we're told, it can contain
a C4 blast. And its manufacturer is convinced
that given half a chance, these babies would
sell like hotcakes in Baghdad--at bus stations,
Army barracks and, yes, upscale hotels. Available
in Hunter Green, Fortuneberry Purple and Windswept
is ReBuilding Iraq 2, a gathering of 400 businesspeople
itching to get a piece of the Iraqi reconstruction
action. They are here to meet the people doling
out the cash, in particular the $18.6 billion
in contracts to be awarded in the next two
months to companies from "coalition partner"
countries. The people to meet are from the
Coalition Provisional Authority (CPA), its
new Program Management Office, the Army Corps
of Engineers, the US Agency for International
Development, Halliburton, Bechtel and members
of Iraq's interim Governing Council. All these
players are on the conference program, and
delegates have been promised that they'll
get a chance to corner them at regularly scheduled
now there have been dozens of similar trade
shows on the business opportunities created
by Iraq's decimation, held in hotel ballrooms
from London to Amman. By all accounts, the
early conferences throbbed with the sort of
cash-drunk euphoria not seen since the heady
days before the dot-coms crashed. But it soon
becomes apparent that something is not right
at ReBuilding Iraq 2. Sure, the organizers
do the requisite gushing about how "nonmilitary
rebuilding costs could near $500 billion"
and that this is "the largest government reconstruction
effort since Americans helped to rebuild Germany
and Japan after the Second World War."
for the undercaffeinated crowd staring uneasily
at exploding garbage cans, the mood is less
gold rush than grim determination. Giddy talk
of "greenfield" market opportunities has been
supplanted by sober discussion of sudden-death
insurance; excitement about easy government
money has given way to controversy about foreign
firms being shut out of the bidding process;
exuberance about CPA chief Paul Bremer's ultraliberal
investment laws has been tempered by fears
that those laws could be overturned by a directly
elected Iraqi government.
ReBuilding Iraq 2, held on December 3-4, it
seems finally to have dawned on the investment
community that Iraq is not only an "exciting
emerging market"; it's also a country on the
verge of civil war. As Iraqis protest layoffs
at state agencies and make increasingly vocal
demands for general elections, it's becoming
clear that the White House's prewar conviction
that Iraqis would welcome the transformation
of their country into a free-market dream
state may have been just as off-target as
its prediction that US soldiers would be greeted
with flowers and candy.
mention to one delegate that fear seems to
be dampening the capitalist spirit. "The best
time to invest is when there is still blood
on the ground," he assures me. "Will you be
going to Iraq?" I ask. "Me? No, I couldn't
do that to my family."
was still shaken, it seemed, by the afternoon's
performance by ex-CIAer John MacGaffin, who
had harangued the crowd like a Hollywood drill
sergeant. "Soft targets are us!" he bellowed.
"We are right in the bull's-eye.... You must
put security at the center of your operation!"
Lucky for us, MacGaffin's own company, AKE
Group, offers complete counterterrorism solutions,
from body armor to emergency evacuations.
Sleiman, managing director of Iraq Initiatives
for the Harris Corporation, has a similarly
entrepreneurial angle on the violence. Yes,
helicopters are falling, but "for every helicopter
that falls there is going to be replenishment."
begin to notice that many of the delegates
at ReBuilding Iraq 2 are sporting a similar
look: Army-issue brush cuts paired with dark
business suits. The guru of this gang is retired
Maj. Gen. Robert Dees, freshly hired out of
the military to head Microsoft's "defense
strategies" division. Dees tells the crowd
that rebuilding Iraq has special meaning for
him because, well, he was one of the people
who broke it. "My heart and soul is in this
because I was one of the primary planners
of the invasion," he says with pride. Microsoft
is helping develop "e-government" in Iraq,
which Dees admits is a little ahead of the
curve, since there is no g-government in Iraq--not
to mention functioning phones lines.
matter. Microsoft is determined to get in
on the ground floor. In fact, the company
is so tight with Iraq's Governing Council
that one of its executives, Haythum Auda,
served as the official translator for the
council's Minister of Labor and Social Affairs,
Sami Azara al-Ma'jun, during the conference.
"There is no hatred against the coalition
forces at all," al-Ma'jun says, via Auda.
"The destructive forces are very minor and
these will end shortly.... Feel confident
in rebuilding Iraq!"
speakers on a panel about "Managing Risks"
have a different message: Feel afraid about
rebuilding Iraq, very afraid. Unlike previous
presenters, their concern is not the obvious
physical risks, but the potential economic
ones. These are the insurance brokers, the
grim reapers of Iraq's gold rush.
turns out that there is a rather significant
hitch in Paul Bremer's bold plan to auction
off Iraq while it is still under occupation:
The insurance companies aren't going for it.
Until recently, the question of who would
insure multinationals in Iraq has not been
pressing. The major reconstruction contractors
like Bechtel are covered by USAID for "unusually
hazardous risks" encountered in the field.
And Halliburton's pipeline work is covered
under a law passed by Bush on May 22 that
indemnifies the entire oil industry from "any
attachment, judgment, decree, lien, execution,
garnishment, or other judicial process."
with bidding now starting on Iraq's state-owned
firms, and foreign banks ready to open branches
in Baghdad, the insurance issue is suddenly
urgent. Many of the speakers admit that the
economic risks of going into Iraq without
coverage are huge: Privatized firms could
be renationalized, foreign ownership rules
could be reinstated and contracts signed with
the CPA could be torn up.
multinationals protect themselves against
this sort of thing by purchasing "political
risk" insurance. Before he got the top job
in Iraq this was Bremer's business--selling
political risk, expropriation and terrorism
insurance at Marsh & McLennan Companies,
the largest insurance brokerage firm in the
world. Yet in Iraq, Bremer has overseen the
creation of a business climate so volatile
that private insurers--including his old colleagues
at Marsh & McLennan--are simply unwilling
to take the risk. Bremer's Iraq is, by all
insurance industry has never been up against
this kind of exposure before," R. Taylor Hoskins,
vice president of Rutherford International
insurance company, tells the delegates apologetically.
Steven Sadler, managing director and chairman
at Marsh Industry Practices, a division of
Bremer's old firm, is even more downbeat.
"Don't look to Iraq to find an insurance solution.
Interest is very, very, very limited. There
is very limited capacity and interest in the
clear that Bremer knew Iraq wasn't ready to
be insured: When he signed Order 39, opening
up much of Iraq's economy to 100 percent foreign
ownership, the insurance industry was specifically
excluded. I ask Sadler, a Bremer clone with
slicked-back hair and bright red tie, whether
he thinks it's strange that a former Marsh
& McLennan executive could have so overlooked
the need for investors to have insurance before
they enter a war zone. "Well," he says, "he's
got a lot on his plate." Or maybe he just
has better information.
when the mood at ReBuilding Iraq 2 couldn't
sink any lower, up to the podium strides Michael
Lempres, vice president of insurance at the
Overseas Private Investment Corporation (OPIC).
With a cool confidence absent from the shellshocked
proceedings so far, he announces that investors
can relax: Uncle Sam will protect them.
US government agency, OPIC provides loans
and insurance to US companies investing abroad.
And while Lempres agrees with earlier speakers
that the risks in Iraq are "extraordinary
and unusual," he also says that "OPIC is different.
We do not exist primarily to generate profit."
Instead, OPIC exists to "support US foreign
policy." And since turning Iraq into a free-trade
zone is a top Bush policy goal, OPIC will
be there to help out. Earlier that same day,
President Bush signed legislation providing
"the agency with enhancements to its political
risk insurance program," according to an OPIC
with this clear political mandate, Lempres
announces that the agency is now "open for
business" in Iraq, and is offering financing
and insurance--including the riskiest insurance
of all: political risk. "This is a priority
for us," Lempres says. "We want to do everything
we can to encourage US investment in Iraq."
news, as yet unreported, appears to take even
the highest-level delegates by complete surprise.
After his presentation, Lempres is approached
by Julie Martin, a political risk specialist
at Marsh & McLennan.
it true?" she demands.
nods. "Our lawyers are ready."
stunned," Martin says. "You're ready? No matter
who the government is?"
ready," Lempres replies. "If there's an expro[priation]
on January 3, we're ready.... I don't know
what we're going to do if someone sinks a
billion dollars into a pipeline and there's
doesn't seem too concerned about these possible
"expros," but it's a serious question. According
to its official mandate, OPIC functions "on
a self-sustaining basis at no net cost to
taxpayers." But Lempres admits that the political
risks in Iraq are "extraordinary." If a new
Iraqi government expropriates and re-regulates
across the board, OPIC could be forced to
compensate dozens of US firms for billions
of dollars in lost investments and revenues,
possibly tens of billions. What happens then?
the Microsoft-sponsored cocktail reception
in the Galaxy Ballroom that evening, Robert
Dees urges us "to network on behalf of the
people of Iraq." I follow orders and ask Lempres
what happens if "the people of Iraq" decide
to seize back their economy from the US firms
he has so generously insured. Who bails out
OPIC? "In theory," he says, "the US Treasury
stands behind us." That means the US taxpayer.
Yes, them again: The same people who have
already paid Halliburton, Bechtel et al. to
make a killing on Iraq's reconstruction would
have to pay these companies again, this time
in compensation for their losses. While the
enormous profits being made in Iraq are strictly
private, it turns out that the entire risk
is being shouldered by the public.
the non-US firms in the room, OPIC's announcement
is anything but reassuring: Since only US
companies are eligible for its insurance,
and the private insurers are sitting it out,
how can they compete? The answer is that they
likely cannot. Some countries may decide to
match OPIC's Iraq program. But in the short
term, not only has the US government barred
companies from non-"coalition partners" from
competing for contracts against US firms,
it has made sure that the foreign firms that
are allowed to compete will do so at a serious
reconstruction of Iraq has emerged as a vast
protectionist racket, a neocon New Deal that
transfers limitless public funds --in contracts,
loans and insurance--to private firms, and
even gets rid of the foreign competition to
boot, under the guise of "national security."
Ironically, these firms are being handed this
corporate welfare so they can take full advantage
of CPA-imposed laws that systematically strip
Iraqi industry of all its protections, from
import tariffs to limits on foreign ownership.
Michael Fleisher, head of private-sector development
for the CPA, recently explained to a group
of Iraqi businesspeople why these protections
had to be removed. "Protected businesses never,
never become competitive," he said. Quick,
somebody tell OPIC and Paul Wolfowitz.
issue of US double standards comes up again
at the conference when a CPA representative
takes the podium. A legal adviser to Bremer,
Carole Basri has a simple message: Reconstruction
is being sabotaged by Iraqi corruption. "My
fear is that corruption will be the downfall,"
she says ominously, blaming the problem on
"a thirty-five-year gap in knowledge" in Iraq
that has made Iraqis "not aware of current
accounting standards and ideas on anticorruption."
Foreign investors, she said, must engage in
"education--bring people up to world-class
hard to imagine what world-class standards
she's referring to, or who, exactly, will
be doing this educating. Halliburton, with
its accounting scandals back home and its
outrageous overbilling for gasoline in Iraq?
The CPA, with its two officers under investigation
for bribetaking, and nonexistent fiscal oversight?
On the final day of ReBuilding Iraq 2, the
cover headline in our complimentary copies
of the Financial Times (a conference sponsor)
is "Boeing linked to Perle investment fund."
Perhaps Richard Perle--who supported Boeing's
$18 billion refueling-tanker deal and extracted
$20 million from Boeing for his investment
fund--can teach Iraq's politicians to stop
soliciting "commissions" in exchange for contracts.
the Iraqi expats in the audience Basri's is
a tough lecture to sit through. "To be honest,"
says Ed Kubba, a consultant and board member
of the American Iraqi Chamber of Commerce,
"I don't know where the line is between business
and corruption." He points to US companies
subcontracting huge taxpayer-funded reconstruction
jobs for a fraction of what they are getting
paid, then pocketing the difference. "If you
take $10 million from the US government and
sub the job out to Iraqi businesses for a
quarter-million, is that business, or is that
were the sorts of uncomfortable questions
faced by George Sigalos, director of government
relations for Halliburton KBR. In the hierarchy
of Iraqi reconstruction, Halliburton is king,
and Sigalos sits onstage, heavy with jeweled
ring and gold cufflinks, playing the part.
But the serfs are getting restless, and the
room quickly turns into a support group for
jilted would-be subcontractors.
Sigalos, what are we going to have to do to
get some sub-contracts?"
Sigalos, when are you going to hire some Iraqis
in management and leadership?"
have a question for Mr. Sigalos. I would like
to ask what you would suggest when the Army
says 'Go to Halliburton' and there's no response
patiently instructs them all to register their
companies on Halliburton's website. When the
questioners respond that they have already
done so and still haven't heard back, Sigalos
invites them to "approach me afterward."
scene afterward is part celebrity autograph
session, part riot. Sigalos is swarmed by
at least fifty men, who elbow each other out
of the way to shower the Halliburton VP with
CD-ROMs, business plans and résumés.
When Sigalos spots a badge from Volvo, he
looks relieved. "Volvo! I know Volvo. Send
me something about what you can achieve in
the region." But the small, no-name players
who have paid their $985 entrance fees, here
to hawk portable generators and electrical
control paneling, are once again told to "register
with our procurement office." There are fortunes
being made in Iraq, but it seems they are
out of reach to all but the chosen few.
next session is starting and Sigalos has to
run. The serfs wander off through the displays
of shatterproof glass and bomb-resistant trash
cans, caressing Sigalos's red-and-white business
card and looking worried.
Use Notice: This site contains copyrighted material
the use of which has not always been specifically authorized by the copyright
owner. We are making such material available in our efforts to advance understanding
of environmental, political, economic, democratic, domestic and international
issues, etc. We believe this constitutes a 'fair use' of any such copyrighted
material as provided for in section 107 of the US Copyright Law. In accordance
with Title 17 U.S.C. Section 107, the material on this site is distributed without
profit to those who have expressed a prior interest in receiving the included
information for research and educational purposes. For more information go to:
If you wish to use copyrighted material from this site for purposes of your own
that go beyond 'fair use', you must obtain permission from the copyright owner.