International donors say they are ready to commit millions of dollars to aid Iraq's reconstruction once the security situation has been brought under control. But many of them believe Iraq requires a different approach than other rebuilding efforts in places like Bosnia-Herzegovina and Afghanistan. Unlike those countries, Iraq has vast oil resources, a skilled labor force, and an existing, albeit decrepit, infrastructure. So how can Iraq contribute to its own reconstruction? And what more needs to be done to lure outside donors?
Prague, 4 September 2003 (RFE/RL) -- Yesterday's closed-door donors meeting in Brussels heard general commitments to aid redevelopment efforts in Iraq. But participants -- who were using the meeting to lay the groundwork for an October reconstruction conference in Madrid -- indicated few donors would pledge substantial support to Iraq until the security situation improves.
"Obviously, security and an adequate security environment is important for donors and for those who want to assist in the reconstruction of the country," says Emma Udwin, spokeswoman for EU external affairs commissioner Chris Patten. The EU hosted yesterday's meeting in Brussels. Patten, addressing the European Parliament in Strasbourg in a speech timed to coincide with the donors session, said: "All members of the core [donors] group have agreed that we must not allow our timetable to be delayed by the violence on the ground." But, he added, "I cannot pretend that attacks of the kind we are now seeing won't inevitably have some effect on international reconstruction efforts."
The core group of potential donor nations and bodies attending yesterday's meeting ranges from the United States and the EU to the World Bank and United Nations, as well as Iraq's Coalition Provisional Authority and the U.S.-appointed Iraqi Governing Council.
Participants acknowledged that, despite the security setbacks -- highlighted by last month's terrorist attacks on the UN's Baghdad headquarters and a prominent Shi'a mosque in Al-Najaf, as well as near-daily attacks on coalition troops and sabotage directed at pipelines and other infrastructure -- Iraq still has far greater potential to contribute to its own reconstruction than places like Afghanistan, Bosnia-Herzegovina, or Kosovo.
Francis Dubois, who until July headed the UN Development Program's operations in Iraq, said yesterday: "We are dealing with an immensely rich country not just in terms of oil but in terms of culture and people. It is one of the most educated peoples in the Arab world, [and] it has had a functioning bureaucracy and infrastructure -- though now dilapidated."
Despite such advantages, the cost of rebuilding Iraq will be staggering. Assessments are still being drawn up by the World Bank and other authorities, but Iraq's U.S. civilian administrator, L. Paul Bremer, last week said the reconstruction price tag may run into the billions of dollars and is "almost impossible to exaggerate." He also said Iraq's oil revenues will not be sufficient to cover the country's financial needs even a year from now, when he expects exports to again reach their pre-war levels.
Moreover, many donors say the ongoing security crisis and continued U.S.-led occupation may seriously hamper reconstruction efforts. British oil expert Ken Cowell says Iraq must secure its main export routes to ensure steady oil revenues and draw international investment.
"It's really an issue of being able to get the crude [oil] reliably to load ports. Particularly, there is the problem of getting crude from the northern fields, from the Kirkuk area to Ceyhan, with the sabotage on the pipelines. It's less of a problem in the south. The southern fields are loading out of the Basra area, although there have been problems there with power supply over the last few weeks. The major oil companies are all expressing some reluctance to really step into Iraq with any major presence until the security situation is improved," Cowell says.
Both the Coalition Provisional Authority and the Iraqi Governing Council also hope to attract investors, and particularly private companies, by bringing oil industry standards in line with international norms.
David Aron, a managing director in the London office of Petroleum Development Consultants, said, "I think the main issue is really the same for any country that wants to develop its oil industry and wants external finances. It's basically having clear rules about licenses and obligations and so on in terms of production-sharing contracts. If those are clear, then oil companies can come in and then invest on that basis. I suppose there will be some questions today whether any oil companies would be prepared to sign new production-sharing agreements until they were clear exactly on who has the authority in Iraq to sign those contracts."
Some international donors, wary of Iraq's uncertain security and investment climate, have suggested creating a trust fund for voluntary donations that would operate independently of the U.S.-led civilian administration in Baghdad. European Commission spokeswoman Emma Udwin says the details of such an arrangement are still being considered.
"There is a lot of discussion still going on, on exactly what it should look like," says Udwin. But one of the key points to consider, she says, is that the trust fund should be distinct from the fund managed by the U.S.-led Coalition Provisional Authority, but also "be capable of operating in a way that is coherent with the other efforts that are going on in Iraq, because clearly everybody wants to minimize waste and duplication."
There is still no estimate of how much money donors may be prepared to pledge to Iraqi reconstruction at next month's Madrid conference. But in the words of EU External Relations Commissioner Chris Patten, "you cannot build a modern, democratic, open society on the cheap."