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Iraq: Concern Growing That U.S. Firms Will See Biggest Windfall From Reconstruction

Construction and engineering companies around the world could reap billions of dollars as part of the reconstruction effort in Iraq. Concern is mounting, however, that U.S. companies will win the largest share of the deals -- especially in the potentially lucrative oil sector. Indeed, the first invitations to bid for business have already gone exclusively to U.S. firms. RFE/RL correspondent Mark Baker looks at the coming battle to rebuild Iraq after the guns are quiet.

Prague, 3 April 2003 (RFE/RL) -- Plans for the postwar reconstruction of Iraq are taking shape, but it is unclear to what extent companies outside the U.S. will be able to compete for contracts.

The end of the war is not yet in sight. Nevertheless, companies around the world are lining up to take part in a rebuilding effort that will be worth billion of dollars.

Many of these companies are from Eastern Europe and the former Soviet Union, countries that have traditionally close ties to Iraq and built much of the existing infrastructure in the country.

Ellen Yount works for the U.S. Agency for International Development (USAID), a government agency that provides U.S. economic and humanitarian assistance worldwide. She says that non-U.S. companies will participate in the U.S.-led reconstruction effort, but as sub-contractors, not prime contractors.

"Companies in what's considered any 'free world' country will be able to participate and will be eligible to be considered as subcontractors. Now, subcontractors are chosen by the prime contractors. We do not have a contractual relationship -- a legal, contractual relationship -- with [subcontractors] here at USAID."

She says U.S. rules prohibit foreign companies from acting as prime contractors for USAID contracts.

She also says many of the 40-plus countries supporting the U.S.-led effort against Iraq have indicated they would like to participate directly in the reconstruction process. This would also involve companies from those countries.

"There will certainly be coalition members. Already, many coalition countries have said that they will be actively involved in the reconstruction work. I don't want to name them by name because I don't want to leave anybody out who's doing reconstruction work."

For example, Slovakia, a member of the coalition, said yesterday it would send the U.S. a list of Slovak companies that could participate in the reconstruction.

Yount's agency is responsible for managing only part of the reconstruction effort in Iraq. The U.S. has created a new Office of Reconstruction and Humanitarian Assistance to oversee the early postwar administration of Iraq, and it will likely also set initial reconstruction priorities. That office, which will report to the Defense Department, is led by retired U.S. Lieutenant-General Jay Garner.

A key issue in rebuilding Iraq will be to decide who will manage the country's potentially lucrative oil industry. Iraq, before the war, pumped about 2.5 million barrels of oil a day and has the world's second-biggest reserves after Saudi Arabia.

France and Russia, with longtime oil interests in Iraq, have said the international community -- through the United Nations -- must share in making the important rebuilding decisions. Both fear exclusion by the United States for failing to back the war. Russia has said it will consider its existing contracts with Iraq valid, regardless of the outcome of the war.

British Prime Minister Tony Blair, facing opposition over the war within his own Labour Party, is also pushing for a larger UN effort. Blair, in an appearance before the House of Commons yesterday, said any decisions on Iraq must have UN endorsement.

"There will be difficulties as to when we make the transition to the Iraqi interim authority, as to precisely what the negotiations in the UN bring us. But I think the one point that there is in common, whatever the differences, is that everybody understands it has got to be UN-endorsed."

Observers say pressure will certainly grow on the U.S. to include other countries in the rebuilding effort. One possibility might be for the international community to offer peacekeepers in Iraq in exchange for a postwar rebuilding role, although this has not yet come under public discussion.

The U.S., in any event, is expected to pay for a large part of the rebuilding costs. The U.S. Congress this month will vote on a special appropriations bill allocating about $75 billion this year for Iraq -- although much of this will be used to pay for the direct costs of the war.

Congress this week gave preliminary approval for a special fund of $2.5 billion for Iraqi reconstruction.

The U.S. has already taken the first steps in the rebuilding phase, inviting several American -- but no foreign -- companies to bid on contracts worth about $1.7 billion. A decision on the bids is expected soon. It has already awarded one contract, to a subsidiary of U.S. construction giant Halliburton, for rebuilding some of Iraq's oil infrastructure.

The selection of Halliburton is controversial given its close ties with U.S. Vice President Dick Cheney. Cheney ran the company from 1995 to 2000. Reports say Halliburton has withdrawn from further bidding as a prime contractor, although it may take part as a subcontractor.

The list of what needs to be done in Iraq is long and not restricted to war damage. The Iraqi economy languished during 12 years of UN economic sanctions. Moreover, there is still significant unrepaired damage from the first Gulf War in 1991 and a decade of conflict in the 1980s between Iran and Iraq. A quick "to do" list would include repairs to oil infrastructure, water and sewage treatment facilities, power and telephone networks, as well as airports, schools, hospitals, and highways.

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    Mark Baker

    Mark Baker is a freelance journalist and travel writer based in Prague. He has written guidebooks and articles for Lonely Planet, Frommer’s, and Fodor’s, and his articles have also appeared in National Geographic Traveler and The Wall Street Journal, among other publications.