American crony capitalists go to war

Jeffrey D. Sachs Professor of Economics Director, Earth Institute Columbia University Project Syndicate

When financial crisis hit Asia in 1997, America's leaders charged Asian governments with practicing crony capitalism. In retrospect, the charge seems like rank hypocrisy. America has shown itself to be second to none in practicing cronyism, first with its rotten corporate scandals of recent years, and now in Iraq. Asian capitalists may have stolen some borrowed loot, but at least they didn't mix finance with war.

The Bush Administration seems keen to line the pockets of its cronies and to capture increased control over Middle East oil and pipeline routes. Only a few pesky obstacles -- the UN, and the Iraqi people -- stand in their way.

The Iraq war was ostensibly launched because of Saddam's weapons of mass destruction, yet each passing day suggests that the threat was exaggerated. Another goal also loomed large: Control over 11 percent (or more) of the world's oil reserves and, in the longer term, control over pipeline routes between the Mediterranean, the Caspian Sea, and the Indian Ocean.

The failure to locate Saddam's WMD's is putting America's grab for Iraqi oil into sharp focus. The Cheney-Rumsfeld team is so arrogant that it acts as if it can flaunt the takeover of Middle East oil while brushing aside questions. In Afghanistan last year, the U.S. installed Hamid Karzai, a former consultant for oil giant Unocal, as interim leader. It also appointed Kalmay Khalilzad, another former Unocal consultant -- indeed, Karzai's boss -- as special U.S. envoy.

Khalilzad and Karzai spent considerable efforts in the late 1990s to get an American-built pipeline to carry gas from Turkeminstan through Afghanistan to Pakistan and the Indian Ocean. Even before the bombs stopped falling on Baghdad, Khalilzad's writ as Special Envoy was extended to Iraq. Among his likely jobs in Iraq will be to secure a pipeline carrying Iraqi oil from Mosul, Iraq to Haifa, Israel via Syria. To stop Syria from objecting, the U.S. is now threatening it as well.

Khalilzad will have much support in the Bush Administration, which is heavily loaded with oil industry executives. National Security Advisor Condeleeza Rice was a Director of Chevron -- Texaco before coming to the National Security Council. She even had an oil tanker named after her. Commerce Secretary Don Evans is also an oil-company CEO.

Vice President Richard Cheney was lead conductor of the group when he served as Chairman of Halliburton, the world's largest oil services company. Halliburton is now at the front of the line for Iraqi reconstruction projects, for which contracts are being handed out without any transparent and competitive process whatsoever.

But what is happening here is more than "guilt by association" with the oil industry. The Bush Administration is flouting every rule to give its cronies the inside track.

Before joining the Pentagon, Donald Rumsfeld was a key player as well. A longstanding sidekick of Cheney, Rumsfeld traveled to Baghdad in 1983 and 1984 at the behest of former Bechtel Corporation President George Shultz, then passing a bit of non- corporate time as U.S. Secretary of State. Rumsfeld's hidden mission was to win Saddam's support of a Bechtel-built oil pipeline to run from Iraq via Jordan to the Gulf of Aqaba.

This is the same Bechtel which built Saddam's "dual use" chemical industry; now it has been awarded a non-competitive $600 million mega-contract to rebuild Iraqi infrastructure.

American newspapers now report that former Shell Oil CEO Philip Carroll will be appointed as the U.S. czar of Iraqi oil. Carroll's most recent job was as Chief Executive of Fluor, the giant construction conglomerate, another company that, together with Bechtel and Halliburton, is in line for the big bucks that will soon be paid (using Iraq's oil earnings) for U.S.-led reconstruction.

The United Kingdom can't match the U.S. in cronyism, but Britain's support for America in the war also has a commercial logic. While Saddam gave oil contracts to French, Russian, and Chinese oil firms, UK firms such as BP were frozen out. UK firms are counting on returning to Iraq on America's coattails.

Only a few hurdles remain before the U.S. can consummate its crony takeover of Iraq's oil. America will soon try to appoint an Iraqi regime that will aim to cancel many of Saddam's oil contracts with France, Russia, and China, in order to make room for U.S. and UK firms. But this will be harder to accomplish than simply sending in the U.S. army.

The U.S. cannot legally market Iraqi oil, much less invest in new fields, until the old UN sanctions against Iraq are lifted. But the rest of the world believes that lifting the sanctions is tantamount to handing Iraq's oil future over to the U.S. and UK occupying forces and their corporate cronies.

More telling, and significant in the long term, is the remarkable anti-U.S. and anti-UK sentiment now sweeping Iraq. Rather than being welcomed as liberators, the U.S. and UK are seen as new colonial occupiers, and the Iraqis are mobilizing to push the occupiers out.

The U.S. may have done something few could have expected: United the Shi'ites and the Sunnis in a common cause. Democracy may come to Iraq, and the will of the people will be to stop the plunder of their country's natural resources by U.S. crony capitalists.