How the Occupation of Iraq Continues

From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Tue Jul 20 2004 - 12:11:14 EDT

FPIF Policy Report
July 2004

How the Occupation of Iraq Continues

By Antonia Juhasz
(Antonia Juhasz is a Project Director at the International Forum on
Globalization ( and a Foreign Policy In Focus
( scholar. She is a Project Censored Award recipient and
co-author of Alternatives to Economic Globalization: A Better World
is Possible, 2 nd Ed. Her articles have appeared in publications such
as The New York Times, The Cambridge University Review of
International Relations Journal, and the Johannesburg Star.)

Foreign Policy In Focus

The U.S. occupation of Iraq officially ended on June 28, 2004 , in a
secret ceremony in Baghdad . Officially, "full sovereignty" was
handed from the Americans to the Iraqi Interim Government. But it was
clear from the start that this was sovereignty in name, not in deed.
First, there is the continued military occupation: 138,000 U.S.
soldiers and Marines, plus 20,000 troops from other countries and an
estimated 20,000 contractors, all fully under U.S. control and immune
to Iraqi laws. Equally debilitating, however significantly less well
reported upon, is the continued political and economic occupation by
the Bush administration and its corporate allies.

The most important tools being used by the Bush administration to
maintain varying degrees of economic and political control in Iraq
are the 100 Orders enacted by L. Paul Bremer, III, head of the now
defunct Coalition Provisional Authority (CPA) before his departure.
It was thought that the "end" of the occupation would also mean the
end of the Orders. Instead, in his final Order enacted on his last
day in the country, Bremer simply transferred authority for the
Orders over to the new Prime Minister, Iyad Allawi. For his part,
Allawi--a thirty-year exile of Iraq with close ties to both the CIA
and British Intelligence Services--is considered America 's new man
in charge of Iraq .

Bremer also ensured the implementation of the Orders by stacking
every Ministry with U.S.-appointed authorities with five-year
terms--well into the period of the new, elected government, which is
to take office by the end of this year.

The Orders are exercised pursuant to the Iraqi interim constitution,
the Transitional Administration Law (TAL). The Annex to the TAL
states that the Orders can only be overturned with the approval of
the president, the two vice presidents and a majority of the

But the Annex also denies the interim government from taking "any
actions affecting Iraq 's destiny" beyond the election of an Iraqi
government. The identical sentence appears in UN Security Council
Resolution 1546, which outlines Iraq's transition to "sovereignty."
Thus, while Allawi may succeed in overturning a few less far-reaching
Orders if for no other reason than to demonstrate his independence
from the Americans, it is beyond his authority to change any
fundamental laws.

And, as Bremer said about the Orders, "You set up these things and
they begin to develop a certain life and momentum on their own--and
it's harder to reverse course."

It is difficult to over-state how far-reaching the Orders are. As
described in Order #39 on Foreign Investment, the Orders are intended
to do no less then "transition [ Iraq ] from a ... centrally planned
economy to a market economy." This goal is explained in greater
detail by BearingPoint, Inc., the Virginia based corporation that
received the $250 million contract to facilitate this transition. The
contract states:

"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 (New and Improved) Bremer Orders

A sampling of the most important Orders demonstrates the economic
imprint left behind by Bremer:

Order #39 allows for the following: (1) privatization of Iraq's 200
state-owned enterprises; (2) 100% foreign ownership of Iraqi
businesses; (3) "national treatment" of foreign firms; (4)
unrestricted, tax-free remittance of all profits and other funds; and
(5) 40-year ownership licenses. Thus, it allows the U.S. corporations
operating in Iraq to own every business, do all of the work, and send
all of their money home. Nothing needs to be reinvested locally to
service the Iraqi economy, no Iraqi need be hired, no public services
need be guaranteed, and workers' rights can easily be ignored. And
corporations can take out their investments at any time.

Order #40 turns the banking sector from a state-run to a
market-driven system overnight by allowing foreign banks to enter the
Iraqi market and to purchase up to 50% of Iraqi banks.

Order #49 drops the tax rate on corporations from a high of 40% to a
flat rate of 15%. The income tax rate is also capped at 15%.

Order #12 enacted on June 7, 2003 and renewed on February 24, 2004,
suspends "all tariffs, customs duties, import taxes, licensing fees
and similar surcharges for goods entering or leaving Iraq, and all
other trade restrictions that may apply to such goods." This led to
an immediate and dramatic inflow of cheap consumer products, which
has essentially wiped out all local providers of the same products.
This could have significant long-term implications for domestic
production as well.

Order #17 grants foreign contractors, including private security
firms, full immunity from Iraq 's laws. Even if they do injure a
third party by killing someone or causing environmental damage such
as dumping toxic chemicals or poisoning drinking water, the injured
third party can not turn to the Iraqi legal system, rather, the
charges must be brought to U.S. courts under U.S. laws.

Order #77 established the Board of Supreme Audit and named its
president and his two deputies. The Board oversees inspectors in
every Ministry with wide-ranging authority to review government
contracts, audit classified programs, and prescribe regulations and

Order #57 created and appointed an inspector within every Iraqi
Ministry with five-year terms who can perform audits, write policies,
and have full access to all offices, materials, and employees of the

Then there are the approximately 200 mostly U.S. and other
international advisers who will remain embedded as consultants in
every Iraqi Ministry well after the official occupation has ended.

Clearly, the Bremer Orders fundamentally altered Iraq's existing
laws. For this reason, the Bremer Orders are also illegal.
Transformation of an occupied country's laws violates the Hague
regulations of 1907 (the companion to the 1949 Geneva conventions,
both ratified by the United States), and the U.S. Army's Law of Land
Warfare. Indeed, in a leaked memo, British attorney general, Lord
Goldsmith, warned Tony Blair that "the imposition of major structural
economic reforms would not be authorized by international law."

Following the Money

The U.S. will also exert significant control over Iraq by holding the
strings to the largest purse in the country for the foreseeable

In June 2004, the U.S. General Accounting Office reported that the
CPA had spent virtually all of Iraq 's money but relatively little of
its own since the end of "active engagement."

There are two primary pots of money earmarked for Iraq's
reconstruction. The largest is the approximately $24 billion of U.S.
taxpayer money appropriated by Congress last year. The second is
known as the Development Fund for Iraq (DFI) worth about $18 billion.
This is primarily money from Iraq's oil revenues and was controlled
by the CPA until authority for the fund was handed over to the new
Interim Government on June 28.

While the CPA controlled the DFI, it spent approximately $13 billion
from the fund. On the other hand, it only spent about $8.2 billion of
the U.S. appropriation. Thus, the DFI is almost out of money, while
the U.S. appropriation has hardly been touched. Control of this money
now shifts to John Negroponte, the new U.S. Ambassador to Iraq . In
addition to the largest pot of money in Iraq , Negroponte will
exercise control over one of the largest embassies in the entire
world with some 1,500 employees with offices throughout Iraq .

Pay for the Reconstruction

Reconstruction is the one thing that the U.S. is obligated under
international law to do in Iraq . U.S. taxpayers have pledged
billions of dollars toward this effort. However, the New York Times
reported on June 30, 2004 , that fewer than 140 of 2,300 promised
construction projects are even under way in Iraq and there have been
widespread reports about waste, fraud, and abuse in the projects that
have started.

Supplies of electricity and water are no better for most Iraqis, and
in some cases are far worse than they were before the invasion. In
fact, UN special envoy Brahimi said upon leaving Iraq that after
security, the lack of reliable electricity is the number one problem
facing Iraq today. Drinking water throughout the country is in a
crisis state, with some villages having no access to water while
larger cities receive water approximately 50% of the time--leading to
vast outbreaks of cholera, diarrhea, nausea, kidney stones, and
death. Destroyed bridges continue to create monstrous bottlenecks in
many parts of the country. Iraq 's horribly overburdened hospitals
need electricity, water, and sewage to function. Hospitals also need
the medicines and medical supplies that are in woefully inadequate

With few reconstruction projects underway, and with Bremer's rules
favoring U.S. corporations, there has been little opportunity for
Iraqis to go back to work, leaving nearly two million unemployed one
and a half years after the invasion. Attempts by the Bush
administration to reverse this have been minimal, at best. Only three
months after Bremer pledged that 50,000 Iraqis would find jobs at
construction sites before the formal transfer of sovereignty, fewer
than 20,000 local workers are employed.

Compounding these problems is the ongoing security situation, which
has slowed reconstruction and vastly increased the costs. Even Iraqis
who may have initially welcomed the ouster of Hussein have become
enemies of an occupation that increasingly reveals its true
objectives: U.S. political and economic exploitation and dominance.
This is one reason why U.S. contractors report that as much as one
out of every three reconstruction dollars is going toward security
costs rather than rebuilding.

End the Occupation

The Bremer Orders are both immoral and illegal and must be repealed
to allow Iraqis to govern their own economic and political future.
Given the Bush administration's failure to quickly, fairly, or
transparently allocate U.S. reconstruction funds, and the complete
lack of oversight of the CPA's depletion of nearly all of the DFI,
the remainder of U.S. reconstruction funds should be turned over to
full UN authority until free and democratic elections are held in
Iraq, at which time the money should be turned over to the Iraqis

Reconstruction of Iraq should be based on rebuilding the economy to
maximize fulfilling the long-term needs of Iraqis. All contract
processes should be completely transparent and accessible to Iraqis.
The awarding of contracts should be done with preference given first
to Iraqi companies, experts, and workers. If no Iraqi company is
capable of performing necessary work, preference should be given to
international humanitarian organizations. If non-Iraqi companies are
necessary, contracts must be open to global competition and profit
margins held as low as possible by using fixed fees. Oversight must
be immediate, independent, transparent, and thorough.

The U.S. needs to extricate itself from Iraq in every way other than
the provision of money to pay for the reconstruction--done by and for
Iraqis--and to pay for a truly multinational (non-U.S.) peacekeeping
force to bring the stability required both for reconstruction and for
truly free and democratic elections. The occupation must end.

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