Cheney's Halliburton paves the way for...
By Nicole Colson | January 9, 2004 | Page 12
THE LEECHES at Halliburton don't know when to quit. Vice President Dick Cheney's old corporate stomping ground has been under fire for months after Halliburton subsidiary Kellogg, Brown & Root (KBR) was awarded two sweetheart contracts--one, to put out oil fires and rebuild Iraq's infrastructure, and the other, to provide services to the U.S. military in Iraq.
KBR won its Pentagon contracts without competitive bidding--despite the fact that the company was under criminal investigation for shady dealings on another Pentagon job.
Military officials downplay the deals. "This contract is not going to be the kind of mega-billion-dollar deal many have been thinking," Brig. Gen. Robert Crear of the Army Corps of Engineers said last April.
But the potential value of KBR's two contracts is a mega-billion-dollar deal--$15.6 billion, to be precise. The Army estimates that Halliburton has already made about $5 billion total off the contracts so far.
But apparently that's not enough for this corporate giant. A Pentagon audit discovered that KBR had already overcharged the government by as much as $61 million for fuel it exported to Iraq.
The Pentagon also suspects KBR of deliberately delaying cost estimates for the construction of dozens of facilities for the military--leading to suspicions that the company might later try to overcharge the Pentagon for nearly completed projects. In one instance, the company estimated in July that overhauling the Qarmat Ali water treatment plant in southern Iraq--which is crucial to keeping oil flowing from the region's petroleum fields--would cost $75.7 million.
But just six weeks later, the Bush gang asked Congress for $125 million to do the job--a 40 percent increase. The initial price was based on "drive-by estimating," Richard Dowling, a spokesperson for the Army Corps of Engineers, which oversees the contract, tried to explain to the New York Times last week. "The best I can lamely fall back on is to say that estimates change. This is not business as usual."
Unfortunately, ripping off the Iraqi people while U.S. taxpayers foot the bills is all too "usual" in occupied Iraq. In the case of KBR, the U.S. government is paying Halliburton an average of $2.64 a gallon to export gasoline to Iraq from Kuwait--more than twice the going rate. On each gallon, Halliburton gets a 2-cent fee and 24 cents for "mark-up costs"--an incredibly high percentage.
Phil Verleger, a California oil economist and the president of a consulting firm told the New York Times that "I've never seen anything like this in my life," Phil Verleger, a California-based oil economist and consultant, told the New York Times. "That's a monopoly premium--that's the only term to describe it. Every logistical firm or oil subsidiary in the United States and Europe would salivate to have that sort of contract."
KBR claims that the U.S. government required it to export relatively expensive Kuwaiti fuel to Iraq--and that it actually saved taxpayers $164 million by importing most of the fuel from Turkey. Halliburton also says that its profits from the KBR deals have been minimal--"only" $1.3 billion in revenues from work in Iraq and $46 million in pretax profits for the first nine months of 2003.
But what the company doesn't mention is that once the Pentagon completes a formal evaluation of the work, Halliburton may be entitled to a "performance fee" of up to 5 percent of the contract's entire value--in other words, additional payments of $100 million or more.
Halliburton's blatant rip-offs are clearly embarrassing even its friends in the Bush administration. Last week, the Pentagon "demoted" KBR--announcing that it would be replacing the company as the military's fuel importer in Iraq.
But Halliburton is far from the only corporate vulture trying to get its claws into post-war Iraq. Banks and contractors have been lining up for months to grab a piece of the spoils of "liberated" Iraq.
There are big profits to be made. As part of the $87 billion package approved by Congress last year to fund the occupations of Iraq and Afghanistan, $18.6 billion will go to reconstruction projects. The Bush administration is doing everything in its power to make sure that this money goes straight into the pockets of U.S. corporations.
So far, for example, California-based construction giant Bechtel has won hundreds of millions in U.S. Agency for International Development contracts--and Virginia-based DynCorp raked in millions to train the new Iraqi police force. Stevedoring Services of America received a $4.8 million no-bid contract to operate the port of Umm Qasr on March 24, before the war was even over--though the contract could be worth as much as $14.3 million by its completion.
The U.S. isn't interested in having foreign competitors for Iraq's spoils. That's why the Bush administration has done everything possible to pave the way for U.S. companies--even provoking international outrage when it came to light that Washington was banning countries that didn't support the war from bidding on any of the reconstruction projects.
Yet despite the rush of corporations after the spoils of the Iraq war, the Pentagon last month quietly stopped awarding any new reconstruction contracts for Iraq until at least February. Why? Because, after the allegation about KBR's price-gouging surfaced, the Defense Department also was forced to begin an investigation into a controversial contract for an Iraqi cell phone grid.
For weeks, Iraqi businesspeople and officials had been calling for an investigation into the three telephone contracts worth hundreds of millions of dollars that occupation authorities awarded in October to three different consortiums of Arab companies. Work on the networks should have been well underway by now, and service was set to be up and running by spring.
But construction hasn't even begun. Today, estimates suggest that as much as one-third of the $3.9 billion monthly cost of keeping U.S. troops in Iraq is going to go independent contractors.
But while the Bush administration is out to rob Iraq blind, there is resistance. According to Ewa Jasiewicz, an organizer with the Occupation Watch Center in Baghdad, Iraqi unionists at the Southern Oil Company (SOC) have declared their workplaces off-limits for Halliburton subsidiary KBR--and have banned all KBR representatives and foreign workers from entering their sites.
Iraqi oil workers also met in December to discuss the occupation authorities' cut in public-sector wages (from $60 to $40 a month) and the cancellation of all previous state subsidies for public-sector workers. SOC trade union representative Faleh Khali Chiyid at North Rumeilla crude oil pumping station told Jasiewicz,
"We tried our hardest to push everything forward, but couldn't raise the lowest wage grade any higher than 6,000 dinars. So we decided to refuse the entire table...If the ministry refuses to pay our new table, all of the refineries, the power plants and crude oil pumping stations will stop. And no one from the administration will be able to interfere."
Not surprisingly, the threat of a general oil strike in Iraq's biggest oil company--one of only two still functioning and shipping oil to market--caused some alarm. The oil minister of Washington's hand-picked governing council even came down to personally hold talks with the union.
The result? According to Jasiewicz , until the new wage table can be agreed on through negotiations with the union, the old payment will remain in place.