Friday, January 06, 2006


By William Fisher

Barely a month after appointing Secretary of State Condoleeza Rice to take over the leading role in supervising and coordinating the U.S. reconstruction program in Iraq, President George W. Bush announced he would not seek further funding for these efforts.

Relatively little of the $30 billion allocated for reconstruction since the
invasion remains to be spent, and spending authority is scheduled to run out
in June 2007. A decision not to renew the reconstruction program leaves Iraq
with tens of billions of dollars in unfinished projects, and an oil industry
and electrical grid that have yet to return to pre-war production levels.

It also leaves the State Department with mandates to provide a “focal point” for reconstruction efforts and the supervise and coordinate reconstruction programs not only in Iraq, but also in other countries that are emerging from civil strife. These include Afghanistan, but Bush Administration officials have announced they will henceforth rely more on the Afghan Government, NATO, and contractors from other countries.

The switch from the Pentagon to the State Department came in a little-noticed December 7 Presidential National Security Directive that said, “The Secretary of State shall coordinate and lead integrated United States Government efforts”, coordinating these efforts with the Secretary of Defense to ensure harmonization with any planned or ongoing U.S. military operations across the spectrum of conflict.”

The State Department will lead U.S. Government efforts to prevent countries at risk “from being used as a base of operations or safe haven for extremists, terrorists, organized crime groups, or others who pose a threat to U.S. foreign policy, security, or economic interests,” said the Bush directive.

Some administration observers say the switch from the Pentagon to the State Department was a product of increasing frustration with the pace of reconstruction work in Iraq. They also believe the cutoff in reconstruction funding is part of a new White House narrative that includes reduction in the number of U.S. troops in Iraq before U.S. mid-term elections in November 2006.

According to a report by the special inspector general for Iraq (IG), reconstruction officials cannot say how many planned projects they will complete, and there is no clear source for hundreds of millions of dollars a year needed to operate the projects that have been finished.

The IG’s report describes some progress but also an array of projects that have gone awry, sometimes astonishingly, like electrical substations that were built at great cost but never connected to the country's electrical grid. With more than 93 percent of the American money now committed to specific projects, it could become increasingly difficult to solve those problems.

Much of the reconstruction funding has been diverted to other projects. At least $2.5 billion earmarked for infrastructure and schools was diverted to building up a security force. Funds originally intended to repair the electricity grid and sewage and sanitation system were used to train special bomb squad units and a hostage rescue force. The US has shifted funds to build 10 new prisons to keep pace with the insurgency, and safe houses and armored cars for Iraqi judges.

In addition to the diversion of funds to other types of projects, the reconstruction efforts have been plagued by substantial corruption and overcharging by contractors.

Hundreds of millions of dollars from the reconstruction fund was also used to hold elections and for four changes of government, and establish a criminal justice system, including $128 million to examine several mass graves of Saddam's victims.

While 3,600 projects will be completed by the end of the year, the cost of security has eaten up as much as 25%-30% of each project, according to the IG. A U.S. congressional report last October forecast that many reconstruction projects were unlikely to get off the ground because of security costs.

Production on Iraq's national electrical grid remains at 4,000 megawatts, 400 megawatts below pre-war levels, with the average Iraqi receiving less than 12 hours of power a day. Oil production, which was supposed to provide the funds for Iraqi reconstruction, according to the Pentagon's prewar planning, also remains well below prewar levels. The shortfall has been attributed mainly to sabotage by insurgents. Iraq's refineries are currently producing approximately 1.1 million barrels of oil a day, compared with 2.6 million barrels on the eve of the invasion.

The ending of reconstruction funding appears to mark a change from a promise the president made in 2003 to provide Iraq with the best infrastructure in the region.

But just how far the U.S. intended to go in that process has always been murky. For example, Defense Secretary Donald Rumsfeld told the Senate Appropriations Committee in March 2003, “I don't believe that the United States has the responsibility for reconstruction, in a sense…[Reconstruction] funds can come from those various sources I mentioned: frozen assets, oil revenues and a variety of other things, including the Oil for Food, which has a very substantial number of billions of dollars in it.”

On the other hand, that view seems to contradict a 2003 report from the consulting contractor hired by the Pentagon to lay out the future of Iraq’s economy. The company, BearingPoint Inc. of McLean, Virginia, said, "It should be clearly understood that the efforts undertaken will be designed to establish the basic legal framework for a functioning market economy; taking appropriate advantage of the unique opportunity for rapid progress in this area presented by the current configuration of political circumstances. Reforms are envisioned in the areas of fiscal reform, financial sector reform, trade, legal and regulatory, and privatization."

The report added, “The reconstruction of Iraq has begun. Not the reconstruction of vital public services such as water, electricity or public security, but rather the radical reconstruction of its entire economy.”

Clearly, this has not happened. And the president’s recent funding decision suggests it is not likely to happen any time soon.

With many of Iraq’s key ministries in disarray and some dogged by persistent corruption it is doubtful that the current government infrastructure will be competent to manage the many remaining large-scale reconstruction projects.