IRAQ: Making a killing

To the men who patrol it every day, the stretch of highway from the international airport to downtown Baghdad is the most dangerous street in the most dangerous city on Earth. Nothing reflects the perils of Iraq's brutal insurgency more powerfully than a journey along this treacherous stretch of road to the centre of the capital.

In one four-month period earlier this year it was the scene of 150 attacks. The US Army is forced to move people along it at night in steel-clad buses, with no lights, escorted by armoured Humvees and with helicopter gunships clattering overhead to reduce the chances of suicide bombers or sniper fire killing them.

I last made the eight-mile journey more than a year ago. It was when there were suicide bombings and roadside explosives, but before kidnappings and throat-cutting made the capital of Iraq a world of horrors. It was possible then to roam the streets relatively freely, to travel unprotected in an ordinary car with Ali, my brave Iraqi colleague, and to enjoy a bottle of red wine and traditionally cooked mazgouf fish from the Tigris river in a pavement cafe.

Now, on my return visit, I eye the streets through the bulletproof glass of a purpose-built, heavily armoured white Land Cruiser, a reinforced steel box. It is preceded and followed by two more armoured Land Cruisers (known as gunships) equipped with light machineguns.

Next to me in the back seat is a man with a tanned, confident face and intense eyes staring out of the window. He is cradling an American M4 automatic rifle, has a Glock handgun strapped to his hip and is constantly looking for any suspicious activity.

My companion is Lieutenant-Colonel Tim Spicer, former Scots Guards officer and Falklands war veteran. Spicer, who is 53, made national headlines in 1998 when his private military company Sandline International was accused of breaking UN sanctions and selling arms to Sierra Leone. He was labelled a notorious mercenary by the press and the Establishment. They sought to turn him into an outcast. In the end, Spicer believes he was vindicated by a parliamentary inquiry that found that Foreign Office officials had known in advance about the arms shipment. Today his involvement in murky wars in Africa is history. Sandline is defunct. Spicer now heads Aegis Defence Services, created in 2002, a powerful British risk-management and private security company, or PSC. Its London headquarters are almost bang next door to New Scotland Yard; it has a former chief of the general staff on its board and has landed a whopping contract with the American government to run security operations to aid American authorities in stabilising Iraq. In a significant development for the future, the UN also hired Aegis to run security for this month's referendum and end-of-year elections. Spicer has hired nearly 200 expatriate bodyguards and 1,000 Iraqis for the task. That the security of UN staff organising Iraq's critical elections should be put in the hands of a PSC is a highly significant development. Formerly, many UN officials equated them with mercenaries. Iraq has forced a UN change of heart. Spicer believes there is a template here for future UN-PSC co-operation in world trouble spots.

Aegis, together with the more than 50 foreign security companies licensed to operate in Iraq, is the new face of warfare. For as the western world's armed forces have shrunk from government defence cuts in the post-cold-war era, the business of war has been progressively privatised. Nowhere more than by America in Iraq, where the overstretched US military has had to hand over tasks it would normally perform itself to these PSCs.

Historically, there is nothing new about the military's use of private contractors. But Iraq has seen the subcontracting-out of war on an unprecedented scale. Whereas in the first Gulf war there was one private contractor serving on the ground for every 50 American soldiers, it is estimated that there is now one contractor for fewer than 10 servicemen, probably saving the Americans the cost of fielding an entire extra division, according to Spicer.

The truth is that the US can no longer manage a war like Iraq without private contractors. Its military has shrunk from 2.1m to 1.4m since the end of the cold war, creating a severe shortage of manpower in wartime.

The American forte in warfare is firepower. But in Iraq, the tradition of fighting through the massive deployment of troops and armour which had applied since the second world war went out of the window. The American defence secretary, Donald Rumsfeld, argued for "invasion lite" where air power, information dominance and speed would favour a small, agile force packing a big punch.

He was proved right with his "shock and awe" campaign. A small American force quickly overwhelmed the Iraqi army and captured Baghdad. But the 140,000 uniformed American troops who remain behind have proved insufficient and inadequate to deal with the explosive complexity of the post-invasion period. The Americans have found using PSCs is convenient, affordable and apparently effective.

The threats these foreign security companies are asked to meet, however, provide a grim summary of the dangers American and British forces still face 2½ years after President Bush declared the main fighting in Iraq over. A typical PSC contract says they have to be prepared to deal with all manner of dangers: vehicles containing explosive devices, improvised explosives planted on roads, direct fire and ground assaults by upwards of 12 personnel with military rifles, machineguns and rocket-propelled grenades, indirect fire by mortars and rockets, individual suicide bombers, and employment of other weapons of mass destruction in an unconventional warfare setting.

These PSCs saturate the highways of war-torn Iraq, their armoured Land Cruisers and Chevrolet Suburbans packed with armed men brandishing rifles to clear traffic in which a suicide bomber may be lurking out of their way. They are doing one of the most dangerous jobs in the world: escorting convoys, guarding diplomats and officials, and protecting infrastructure from attack.

The companies employ as many as 25,000 armed foreigners and Iraqi civilians; many are special-forces veterans from the British and American armies. They also recruit many soldiers from South Africa and ex-Gurkhas.

"The ex-paras are almost invariably Scottish and have a lot of attitude. The marines tend to think a bit more about things. The guards are always on time and always smart. The [Royal] Green Jackets have always got something to say," says Spicer of his men.

These hired guns, easily distinguishable by their sweptback sunglasses, muscled and tattooed bodies, operate like a shadow army. They live in barracks. They eat in mess halls. They enjoy all the ennui and excitement of soldiers in a combat zone. And every day they put their lives on the line, facing ambushes and booby traps, risking injury and the prospect of a violent death in excruciating desert heat, far from their loved ones. Scores have been killed, hundreds wounded. Despite the high risks, they are in a very privileged and special position. One big advantage they have over the uniformed soldiers in the British or American forces in Iraq is that they are paid a fortune, easily more than US$1,000 a day, two to four times what they would earn as a regular soldier. Many of their "top guns" earn more than a British major-general. "I earn more in a year here than I could earn in 3½ years in the army," says a former corporal. "And the job is more interesting."

These hired guns are not ashamed to admit the primary reason they are flocking to Iraq is for the money. It is a point of etiquette, however, that these men do not like to be referred to as mercenaries. "I am no dog of war," says an SAS veteran named Ken, who left the regiment and works for Spicer in Baghdad, running his company's military training programmes.

There are complaints that security companies are poaching highly trained American and British special-forces soldiers with these huge salaries. The Pentagon has responded by offering $150,000 cash bonuses for special-forces soldiers to re-enlist. The British have yet to react to the threat. The British Army likes to claim that Britain, with 8,500 men, has the second largest contingent in Iraq after the Americans. Clearly this is false. That distinction has to go to these PSCs; their security forces outnumber the British by a factor of 2½ to 1, and they have suffered more casualties. More than 300 private contractors and security men have been killed.

Questions are now being asked inside and outside the military about the virtues of allowing a shadow army to operate in Iraq that is largely unregulated and beyond the law. The system is also under scrutiny as a result of several shooting incidents in which civilians were killed or wounded. "It's the Wild West," says Peter Singer, a former Pentagon official and expert on the private military industry who is now a foreign-policy fellow at the Brookings Institution think-tank in Washington and a critic of privatising war.

Spicer believes, however, that without this force of private security men protecting contractors, the reconstruction of Iraq could not happen. Therefore, the PSCs are making a vital contribution to American and British attempts to stabilise the country.

There are certainly cowboys. "There are those who think that it is all about steroids and weapons, wearing cut-off T-shirts with large technicals and heavy calibrated weapons," said one American officer who deplores the fact that his country has allowed foreign civilians who are not subject to American or Iraqi law to carry weapons in Iraq.

"These guys run loose in this country and do stupid stuff. There's no authority over them, so you can't come down on them hard when they escalate force," Brigadier General Karl Horst has said. Horst is the deputy commander of the American 3rd Infantry Division, which is responsible for security in and around Baghdad. "They shoot people, and someone else has to deal with the aftermath. It happens all over the place."

The private security men I met travelling with Spicer around Iraq, however, are a conscientious breed determined to perform well, with responsibilities they take very seriously indeed.

Every "shooter" has to have a weapons-authorisation card. There are strict rules of engagement, akin to those enforced by the British Army. There is instant dismissal for serious breaches of discipline, such as disobeying orders, a negligent discharge of a firearm, drink, drugs, theft and bad driving. The risks of an accident are so high that huge emphasis is put on driving skills. "We have fired warning shots and shot into the engine block of a potential suicide bomber driving his car at us, but not on many occasions," says Andrew Josceline, a former colonel in the Scots Guards who runs Aegis's Iraq operations. "When that happens we have a boardroom inquiry. There are other PSCs that have a different approach. Ours has always been a bit typically British, understated."

Like soldiers in every war zone, the men I met like to turn the daily terror they face into humour. Women, or the absence of them, feature large in their thoughts. Thursday nights, when they meet up for a Gurkha curry or South African brai (barbecue), are loud and raucous.

One bodyguard, a former soldier in the RAF regiment, has decorated his spartan billet with furs, oriental rugs and seductive soft lighting. "That Frank has more patter than Gandhi's flip-flops," said a colleague envious at the friendship Frank had struck up with a pretty American girl, a dentist in the US Marines.

Mark, 36, from London, who spent seven years in the army, is getting divorced. "I spend my 90 days' leave building a relationship with my little boy. It's dangerous work but I can save real money in Iraq," he says.

Nick, a South African, lives in Belfast with his new wife and one-year-old daughter. Before he came to Iraq he had been working as a bodyguard in London and France for an Abu Dhabi princess. He got bored taking her round Harrods and contacted Aegis. Now, as a security-team leader with Aegis for 11 months, he says: "We have been shot at but survived. We must be doing something right because other companies get attacked all the time and have men killed."

After the deaths of a number of hired guns, there is an inevitable demand for more powerful weapons to travel in very dangerous areas. Aegis has just taken delivery of three Revas, fearsome South African-designed troop carriers with a machinegun mounted on a swivel turret on the roof. They have made the security teams appear to the Iraqis more like combat soldiers, but they will save lives.

The $293m Pentagon contract Aegis was awarded in May last year, which runs until 2007, evolved out of an atrocity that shook America: the lynching of four American private security contractors escorting a supply convoy to Falluja, west of Baghdad. The gruesome pictures of two of their charred bodies hanging from a bridge reminded the American public of the shocking lynching of soldiers in Mogadishu and forced the US Marines - who did not even know the contractors were in their area - to attack the city to hunt the killers. Hundreds of Iraqis and dozens of marines were killed and large parts of Falluja were razed.

The killings of the Americans made the US military realise it had to solve a serious co-ordination problem with the legion of foreign security contractors flourishing in Iraq.

It had also become imperative for it to make the work of American government agencies and reconstruction firms in Iraq safer. The Bush administration's plan to stabilise Iraq by funding a $24 billion reconstruction programme was foundering as insurgents targeted the infrastructure and anyone involved in protecting it or working for the US or Iraqi government.

As a result, the Pentagon tendered to the private sector to set up a system to co-ordinate and track all the private security forces operating in Iraq. Spicer came up with a remedy that the Pentagon liked. He devised the idea of a computerised control centre in Baghdad called the ROC (Reconstruction Operations Centre) plugged directly into the US military, which would use Tapestry, a civilianised version of Blue Force, the American military satellite system, to track every convoy and private security team moving through the country. He is contracted to provide protective and preventive security using qualified personnel with experience in anti-terrorism operations, to supply escorts and close personal protection to those involved in reconstruction work and - perhaps most innovatively for a security company - to run a "hearts and minds" campaign among Iraqis.

Against intense American competition, Spicer secured the largest contract yet awarded by the Bush administration to any British firm involved in Iraq. His enemies fought to get the contract annulled by dredging up his Sandline past and highlighting his vigorous defence of two Scots Guardsmen convicted of murder after shooting a Catholic teenager in Northern Ireland in 1992. They claimed he should be disqualified on humanitarian grounds. The Pentagon stood by Spicer, saying this had no bearing on his "integrity and business ethics".

But the Iraq to which Spicer has returned seems to be sliding inexorably towards civil war. In the past 21/2 years, it has gone from being a sanctions-wrecked country under the evil domination of Saddam Hussein to the global centre of suicide terrorism. In September, more than 1,000 people were killed in one of the bloodiest months since the American invasion.

Spicer has come back to Baghdad to inspect his company's operations, meet with American generals and talk to his men. "We are not trying to fight a war," he says as we begin the dangerous drive into the city along the notoriously perilous airport road. "There are others equipped and paid to do that. We can fight if necessary, but our whole ethos if we are attacked is to return fire and back off. We are not war-fighting people. If we are escorting a client, our job is to run."

Our three Land Cruisers travel in the form of a protective "bubble", keeping a distance from all traffic - especially American military convoys, the most frequent targets of insurgents. We all wear bulletproof vests. There is a hush of expectancy as we set off. We are linked by Tapestry to the ROC, which is receiving up-to-the-minute information about our location. If we are attacked, a panic button inside our vehicle will be pressed, signalling the alarm. Armed crews in our Land Cruiser and the two accompanying vehicles - one in front and one behind equipped with a Minimi light machinegun - will then spring into action.

The idea is that they will manoeuvre to provide protection, covering fire and our eventual extraction to safety, while an American quick-reaction force (QRF), alerted by the ROC, mounts a rescue operation. Tapestry has saved many contractors' lives and helped prevent a repeat of the grisly Falluja killings. Most thinking foreigners working in Iraq, diplomats and private contractors, now subscribe to it.

Our route into the city takes us past a hauntingly personal spot. Each of us knows people killed on this road by suicide bombers. Mine was Marla Ruzicka, a humanitarian worker and close personal friend. Spicer's was Alan Parkin, a member of his staff, a former para and 44-year-old father of three. Parkin was Aegis's first fatality. At his funeral, Spicer called him "a soldier through and throughÉ who believed he was doing something worthwhile".

Some security teams do what is known as the Baghdad shuffle, swivelling from side to side watching for potential attackers. Spicer's team has more sophisticated countermeasures to hand, which it asked me not to disclose.

We hit 90mph on the highway. Then we catch up with a plodding American military supply convoy and hang back. At the end is a Humvee with a machinegunner whose job is to keep the traffic 100 yards back. It bears a sign warning motorists: "Danger. Stay back. Deadly force is authorised." Reaching an Iraqi police post, we are finally through to the Green Zone. This heavily fortified four-square-mile area of villas and palaces in the heart of Baghdad was once the preserve of Saddam and his favourites. When they captured the city in April 2003, the Americans installed their occupation government, creating a surreal Little America, with Burger Kings, a PX and even a discotheque called Thousand and One Nights. It was full of redneck construction workers from Kellogg, Brown & Root wearing cowboy boots and Stetsons, who danced the Texan two-step.

"You could drink as much as you liked and it was really quite wild," said a habitué.

But an insurgent rocket soon shut the disco with a bang, and the Green Zone has become a kind of prison where the concrete walls and checkpoints protect but also isolate the Americans from the very people they say they have liberated and are trying to befriend. No sensible American strays outside its walls without armed bodyguards.

Even this heart of the American and Iraqi administrations is not safe from attack, however, despite the massive security. Suicide bombers have infiltrated several times. Guerrillas lob in mortars and attack it with rockets.

We disembark at the Aegis compound. Outside, the streets shimmer with a white glare and the sun burns with a diamond brilliance. Inside, protected by patrols of former Gurkhas, alsatian attack dogs and spaniel sniffer dogs, is the ROC, the command centre, manned round the clock. Here a giant video screen, straight out of a Star Wars set, displays the location of any ambushes and suicide attacks.

The favourite time of day for suicide bombers to strike in Baghdad is around eight in the morning, when the streets are full of people. There is a dull crump that shakes the windows and billows of black smoke rise into the sky.

On Spicer's last morning before returning to Britain, three bombs go off at this time in quick succession, killing and wounding nearly 200 people. But by then we have travelled 600 miles, from the capital down to the relative quiet of the British sector in Basra and back to the volatile Sunni triangle around Baghdad, the heart of the insurgency.

On our journey we have encountered a roadside bomb that has to be defused by American troops. Spicer has met American generals to discuss his Iraq operation, given rallying talks to his men and visited schools and orphanages that his company is supporting through its own charitable foundation.

Within days of returning to Britain, he learns that roadside bombs have badly wounded two more of his men.

And me? I have seen enough to convince me that this war is not winnable. Comparisons with Vietnam are too pat. But I have just read a bleak assessment in The Washington Post by Henry Kissinger, the hawkish former American secretary of state and President Nixon's national security adviser during Vietnam, warning that Iraq is messier now and more dangerous than Vietnam ever was.

Kissinger reminds us of the axiom that guerrillas win if they do not lose. So a stalemate or an early US withdrawal is unacceptable. He believes that victory over the insurgency is America's only meaningful exit strategy.

But how can it be achieved? I covered the Vietnam war and see today's suicide bombers in Iraq as the equivalent of the Vietcong who mounted commando raids on American airfields and crawled through barbed wire at US combat bases, with explosives tied to their bodies, through a terrible hail of fire. The Iraqi insurgents' vicious bombing of crowded market places - intended to cause the most horrific civilian casualties - do not make them the Vietcong's moral equivalent. But like the Vietcong, they are convinced that their goal is worth dying for. And the US Army's determination to equate the number of dead insurgents as a yardstick of success is meaningless, just as the famous Vietnam body counts were. For as fast as the Americans kill them, more committed insurgents step forward to take their place.

This, then, is the essence of this terrible war, a seemingly inexhaustible supply of Iraqis willing to die. Firepower alone cannot stop them. But from the US administration's point of view at least, outsourcing the war to PSCs saves the army a division of troops and probably keeps down the number of army bodybags going home.

When the Americans will finally leave Iraq is anybody's guess. It will certainly not be any time soon. But when it is, the betting is that Spicer will still be around in Baghdad to turn out the lights.

• 174 War & Disaster Profiteers Campaign