It's 8:40 am and the Sheraton Hotel ballroom thunders with the sound of
plastic explosives pounding against metal. No, this is not the Sheraton in
Baghdad, it's the one in Arlington, Virginia. And it's not a real terrorist
attack, it's a hypothetical one. The screen at the front of the room is
playing an advertisement for "bomb resistant waste receptacles": This trash
can is so strong, we're told, it can contain a C4 blast. And its
is convinced that given half a chance, these babies would sell like hotcakes
in Baghdad--at bus stations, Army barracks and, yes, upscale hotels.
in Hunter Green, Fortuneberry Purple and Windswept Copper.
This is ReBuilding Iraq 2, a gathering of 400 businesspeople itching to get
piece of the Iraqi reconstruction action. They are here to meet the people
doling out the cash, in particular the $18.6 billion in contracts to be
awarded in the next two months to companies from "coalition partner"
countries. The people to meet are from the Coalition Provisional Authority
(CPA), its new Program Management Office, the Army Corps of Engineers, the
Agency for International Development, Halliburton, Bechtel and members of
Iraq's interim Governing Council. All these players are on the conference
program, and delegates have been promised that they'll get a chance to
them at regularly scheduled "networking breaks."
By now there have been dozens of similar trade shows on the business
opportunities created by Iraq's decimation, held in hotel ballrooms from
London to Amman. By all accounts, the early conferences throbbed with the
of cash-drunk euphoria not seen since the heady days before the dot-coms
crashed. But it soon becomes apparent that something is not right at
ReBuilding Iraq 2. Sure, the organizers do the requisite gushing about how
"nonmilitary rebuilding costs could near $500 billion" and that this is "the
largest government reconstruction effort since Americans helped to rebuild
Germany and Japan after the Second World War."
But for the undercaffeinated crowd staring uneasily at exploding garbage
the mood is less gold rush than grim determination. Giddy talk of
market opportunities has been supplanted by sober discussion of sudden-death
insurance; excitement about easy government money has given way to
about foreign firms being shut out of the bidding process; exuberance about
CPA chief Paul Bremer's ultraliberal investment laws has been tempered by
fears that those laws could be overturned by a directly elected Iraqi
At ReBuilding Iraq 2, held on December 3-4, it seems finally to have dawned
the investment community that Iraq is not only an "exciting emerging
it's also a country on the verge of civil war. As Iraqis protest layoffs at
state agencies and make increasingly vocal demands for general elections,
becoming clear that the White House's prewar conviction that Iraqis would
welcome the transformation of their country into a free-market dream state
have been just as off-target as its prediction that US soldiers would be
greeted with flowers and candy.
I mention to one delegate that fear seems to be dampening the capitalist
spirit. "The best time to invest is when there is still blood on the
he assures me. "Will you be going to Iraq?" I ask. "Me? No, I couldn't do
to my family."
He was still shaken, it seemed, by the afternoon's performance by ex-CIAer
John MacGaffin, who had harangued the crowd like a Hollywood drill sergeant.
"Soft targets are us!" he bellowed. "We are right in the bull's-eye.... You
must put security at the center of your operation!" Lucky for us,
own company, AKE Group, offers complete counterterrorism solutions, from
armor to emergency evacuations.
Youssef Sleiman, managing director of Iraq Initiatives for the Harris
Corporation, has a similarly entrepreneurial angle on the violence. Yes,
helicopters are falling, but "for every helicopter that falls there is going
to be replenishment."
I begin to notice that many of the delegates at ReBuilding Iraq 2 are
a similar look: Army-issue brush cuts paired with dark business suits. The
guru of this gang is retired Maj. Gen. Robert Dees, freshly hired out of the
military to head Microsoft's "defense strategies" division. Dees tells the
crowd that rebuilding Iraq has special meaning for him because, well, he was
one of the people who broke it. "My heart and soul is in this because I was
one of the primary planners of the invasion," he says with pride. Microsoft
helping develop "e-government" in Iraq, which Dees admits is a little ahead
the curve, since there is no g-government in Iraq--not to mention
No matter. Microsoft is determined to get in on the ground floor. In fact,
company is so tight with Iraq's Governing Council that one of its
Haythum Auda, served as the official translator for the council's Minister
Labor and Social Affairs, Sami Azara al-Ma'jun, during the conference.
is no hatred against the coalition forces at all," al-Ma'jun says, via Auda.
"The destructive forces are very minor and these will end shortly.... Feel
confident in rebuilding Iraq!"
The speakers on a panel about "Managing Risks" have a different message:
afraid about rebuilding Iraq, very afraid. Unlike previous presenters, their
concern is not the obvious physical risks, but the potential economic ones.
These are the insurance brokers, the grim reapers of Iraq's gold rush.
It turns out that there is a rather significant hitch in Paul Bremer's bold
plan to auction off Iraq while it is still under occupation: The insurance
companies aren't going for it. Until recently, the question of who would
insure multinationals in Iraq has not been pressing. The major
contractors like Bechtel are covered by USAID for "unusually hazardous
encountered in the field. And Halliburton's pipeline work is covered under a
law passed by Bush on May 22 that indemnifies the entire oil industry from
"any attachment, judgment, decree, lien, execution, garnishment, or other
But with bidding now starting on Iraq's state-owned firms, and foreign banks
ready to open branches in Baghdad, the insurance issue is suddenly urgent.
Many of the speakers admit that the economic risks of going into Iraq
coverage are huge: Privatized firms could be renationalized, foreign
rules could be reinstated and contracts signed with the CPA could be torn
Normally, multinationals protect themselves against this sort of thing by
purchasing "political risk" insurance. Before he got the top job in Iraq
was Bremer's business--selling political risk, expropriation and terrorism
insurance at Marsh & McLennan Companies, the largest insurance brokerage
in the world. Yet in Iraq, Bremer has overseen the creation of a business
climate so volatile that private insurers--including his old colleagues at
Marsh & McLennan--are simply unwilling to take the risk. Bremer's Iraq is,
all accounts, uninsurable.
QUOT-The insurance industry has never been up against this kind of exposure
before," R. Taylor Hoskins, vice president of Rutherford International
insurance company, tells the delegates apologetically. Steven Sadler,
director and chairman at Marsh Industry Practices, a division of Bremer's
firm, is even more downbeat. "Don't look to Iraq to find an insurance
solution. Interest is very, very, very limited. There is very limited
and interest in the region."
It's clear that Bremer knew Iraq wasn't ready to be insured: When he signed
Order 39, opening up much of Iraq's economy to 100 percent foreign
the insurance industry was specifically excluded. I ask Sadler, a Bremer
with slicked-back hair and bright red tie, whether he thinks it's strange
a former Marsh & McLennan executive could have so overlooked the need for
investors to have insurance before they enter a war zone. "Well," he says,
"he's got a lot on his plate." Or maybe he just has better information.
Just when the mood at ReBuilding Iraq 2 couldn't sink any lower, up to the
podium strides Michael Lempres, vice president of insurance at the Overseas
Private Investment Corporation (OPIC). With a cool confidence absent from
shellshocked proceedings so far, he announces that investors can relax:
Sam will protect them.
A US government agency, OPIC provides loans and insurance to US companies
investing abroad. And while Lempres agrees with earlier speakers that the
risks in Iraq are "extraordinary and unusual," he also says that "OPIC is
different. We do not exist primarily to generate profit." Instead, OPIC
to "support US foreign policy." And since turning Iraq into a free-trade
is a top Bush policy goal, OPIC will be there to help out. Earlier that same
day, President Bush signed legislation providing "the agency with
to its political risk insurance program," according to an OPIC press
Armed with this clear political mandate, Lempres announces that the agency
now "open for business" in Iraq, and is offering financing and
insurance--including the riskiest insurance of all: political risk. "This is
priority for us," Lempres says. "We want to do everything we can to
US investment in Iraq."
The news, as yet unreported, appears to take even the highest-level
by complete surprise. After his presentation, Lempres is approached by Julie
Martin, a political risk specialist at Marsh & McLennan.
"Is it true?" she demands.
Lempres nods. "Our lawyers are ready."
"I'm stunned," Martin says. "You're ready? No matter who the government is?"
"We're ready," Lempres replies. "If there's an expro[priation] on January 3,
we're ready.... I don't know what we're going to do if someone sinks a
dollars into a pipeline and there's an expro."
Lempres doesn't seem too concerned about these possible "expros," but it's a
serious question. According to its official mandate, OPIC functions "on a
self-sustaining basis at no net cost to taxpayers." But Lempres admits that
the political risks in Iraq are "extraordinary." If a new Iraqi government
expropriates and re-regulates across the board, OPIC could be forced to
compensate dozens of US firms for billions of dollars in lost investments
revenues, possibly tens of billions. What happens then?
At the Microsoft-sponsored cocktail reception in the Galaxy Ballroom that
evening, Robert Dees urges us "to network on behalf of the people of Iraq."
follow orders and ask Lempres what happens if "the people of Iraq" decide to
seize back their economy from the US firms he has so generously insured. Who
bails out OPIC? "In theory," he says, "the US Treasury stands behind us."
means the US taxpayer. Yes, them again: The same people who have already
Halliburton, Bechtel et al. to make a killing on Iraq's reconstruction would
have to pay these companies again, this time in compensation for their
While the enormous profits being made in Iraq are strictly private, it turns
out that the entire risk is being shouldered by the public.
For the non-US firms in the room, OPIC's announcement is anything but
reassuring: Since only US companies are eligible for its insurance, and the
private insurers are sitting it out, how can they compete? The answer is
they likely cannot. Some countries may decide to match OPIC's Iraq program.
But in the short term, not only has the US government barred companies from
non-"coalition partners" from competing for contracts against US firms, it
made sure that the foreign firms that are allowed to compete will do so at a
The reconstruction of Iraq has emerged as a vast protectionist racket, a
neocon New Deal that transfers limitless public funds --in contracts, loans
and insurance--to private firms, and even gets rid of the foreign
to boot, under the guise of "national security." Ironically, these firms are
being handed this corporate welfare so they can take full advantage of
CPA-imposed laws that systematically strip Iraqi industry of all its
protections, from import tariffs to limits on foreign ownership. Michael
Fleisher, head of private-sector development for the CPA, recently explained
to a group of Iraqi businesspeople why these protections had to be removed.
"Protected businesses never, never become competitive," he said. Quick,
somebody tell OPIC and Paul Wolfowitz.
The issue of US double standards comes up again at the conference when a CPA
representative takes the podium. A legal adviser to Bremer, Carole Basri has
simple message: Reconstruction is being sabotaged by Iraqi corruption. "My
fear is that corruption will be the downfall," she says ominously, blaming
problem on "a thirty-five-year gap in knowledge" in Iraq that has made
"not aware of current accounting standards and ideas on anticorruption."
Foreign investors, she said, must engage in "education--bring people up to
It's hard to imagine what world-class standards she's referring to, or who,
exactly, will be doing this educating. Halliburton, with its accounting
scandals back home and its outrageous overbilling for gasoline in Iraq? The
CPA, with its two officers under investigation for bribetaking, and
nonexistent fiscal oversight? On the final day of ReBuilding Iraq 2, the
headline in our complimentary copies of the Financial Times (a conference
sponsor) is "Boeing linked to Perle investment fund." Perhaps Richard
Perle--who supported Boeing's $18 billion refueling-tanker deal and
$20 million from Boeing for his investment fund--can teach Iraq's
to stop soliciting "commissions" in exchange for contracts.
For the Iraqi expats in the audience Basri's is a tough lecture to sit
through. "To be honest," says Ed Kubba, a consultant and board member of the
American Iraqi Chamber of Commerce, "I don't know where the line is between
business and corruption." He points to US companies subcontracting huge
taxpayer-funded reconstruction jobs for a fraction of what they are getting
paid, then pocketing the difference. "If you take $10 million from the US
government and sub the job out to Iraqi businesses for a quarter-million, is
that business, or is that corruption?"
These were the sorts of uncomfortable questions faced by George Sigalos,
director of government relations for Halliburton KBR. In the hierarchy of
Iraqi reconstruction, Halliburton is king, and Sigalos sits onstage, heavy
with jeweled ring and gold cufflinks, playing the part. But the serfs are
getting restless, and the room quickly turns into a support group for jilted
"Mr. Sigalos, what are we going to have to do to get some sub-contracts?"
"Mr. Sigalos, when are you going to hire some Iraqis in management and
"I have a question for Mr. Sigalos. I would like to ask what you would
suggest when the Army says 'Go to Halliburton' and there's no response from
Sigalos patiently instructs them all to register their companies on
Halliburton's website. When the questioners respond that they have already
done so and still haven't heard back, Sigalos invites them to "approach me
The scene afterward is part celebrity autograph session, part riot. Sigalos
is swarmed by at least fifty men, who elbow each other out of the way to shower
the Halliburton VP with CD-ROMs, business plans and rÃ©sumÃ©s. When Sigalos
spots a badge from Volvo, he looks relieved. "Volvo! I know Volvo. Send me
something about what you can achieve in the region." But the small, no-name
players who have paid their $985 entrance fees, here to hawk portable
generators and electrical control paneling, are once again told to "register
with our procurement office." There are fortunes being made in Iraq, but it
seems they are out of reach to all but the chosen few.
The next session is starting and Sigalos has to run. The serfs wander off
through the displays of shatterproof glass and bomb-resistant trash cans,
caressing Sigalos's red-and-white business card and looking worried.