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PART 2 OF 3
THE BAGHDAD YEAR ZERO BY NAOMI KLEIN
www.harper.org/BaghdadYearZero.html
www.truthout.org
September 26, 2004
Some of the holdup had to do with the physical risks of doing business
in Iraq. But there were other more significant risks as well. When
Paul Bremer shredded Iraq's Baathist constitution and replaced it with
what The Economist greeted approvingly as "the wish list of foreign
investors," there was one small detail he failed to mention: It was
all completely illegal. The CPA derived its legal authority from
United Nations Security Council Resolution 1483, passed in May 2003,
which recognized the United States and Britain as Iraq's legitimate
occupiers. It was this resolution that empowered Bremer to
unilaterally make laws in Iraq. But the resolution also stated that
the U.S. and Britain must "comply fully with their obligations under
international law including in particular the Geneva Conventions of
1949 and the Hague Regulations of 1907." Both conventions were born as
an attempt to curtail the unfortunate historical tendency among
occupying powers to rewrite the rules so that they can economically
strip the nations they control. With this in mind, the conventions
stipulate that an occupier must abide by a country's existing laws
unless "absolutely prevented" from doing so. They also state that an
occupier does not own the "public buildings, real estate, forests and
agricultural assets" of the country it is occupying but is rather
their "administrator" and custodian, keeping them secure until
sovereignty is reestablished. This was the true threat to the Year
Zero plan: since America didn't own Iraq's assets, it could not
legally sell them, which meant that after the occupation ended, an
Iraqi government could come to power and decide that it wanted to keep
the state companies in public hands, or, as is the norm in the Gulf
region, to bar foreign firms from owning 100 percent of national
assets. If that happened, investments made under Bremer's rules could
be expropriated, leaving firms with no recourse because their
investments had violated international law from the outset.
By November, trade lawyers started to advise their corporate clients
not to go into Iraq just yet, that it would be better to wait until
after the transition. Insurance companies were so spooked that not a
single one of the big firms would insure investors for "political
risk," that high-stakes area of insurance law that protects companies
against foreign governments turning nationalist or socialist and
expropriating their investments.
Even the U.S.-appointed Iraqi politicians, up to now so obedient, were
getting nervous about their own political futures if they went along
with the privatization plans. Communications Minister Haider al-Abadi
told me about his first meeting with Bremer. "I said, ‘Look, we
don't have the mandate to sell any of this. Privatization is a big
thing. We have to wait until there is an Iraqi government.'" Minister
of Industry Mohamad Tofiq was even more direct: "I am not going to do
something that is not legal, so that's it."
Both al-Abadi and Tofiq told me about a meeting - never reported in
the press - that took place in late October 2003. At that gathering
the twenty-five members of Iraq's Governing Council as well as the
twenty-five interim ministers decided unanimously that they would not
participate in the privatization of Iraq's state-owned companies or of
its publicly owned infrastructure.
But Bremer didn't give up. International law prohibits occupiers from
selling state assets themselves, but it doesn't say anything about the
puppet governments they appoint. Originally, Bremer had pledged to
hand over power to a directly elected Iraqi government, but in early
November he went to Washington for a private meeting with President
Bush and came back with a Plan B. On June 30 the occupation would
officially end - but not really. It would be replaced by an appointed
government, chosen by Washington. This government would not be bound
by the international laws preventing occupiers from selling off state
assets, but it would be bound by an "interim constitution," a document
that would protect Bremer's investment and privatization laws.
The plan was risky. Bremer's June 30 deadline was awfully close, and
it was chosen for a less than ideal reason: so that President Bush
could trumpet the end of Iraq's occupation on the campaign trail. If
everything went according to plan, Bremer would succeed in forcing a
"sovereign" Iraqi government to carry out his illegal reforms. But if
something went wrong, he would have to go ahead with the June 30
handover anyway because by then Karl Rove, and not Dick Cheney or
Donald Rumsfeld, would be calling the shots. And if it came down to a
choice between ideology in Iraq and the electability of George
W. Bush, everyone knew which would win.
At first, Plan B seemed to be right on track. Bremer persuaded the
Iraqi Governing Council to agree to everything: the new timetable, the
interim government, and the interim constitution. He even managed to
slip into the constitution a completely overlooked clause, Article
26. It stated that for the duration of the interim government, "The
laws, regulations, orders and directives issued by the Coalition
Provisional Authority . . . shall remain in force" and could only be
changed after general elections are held.
Bremer had found his legal loophole: There would be a window - seven
months - when the occupation was officially over but before general
elections were scheduled to take place. Within this window, the Hague
and Geneva Conventions' bans on privatization would no longer apply,
but Bremer's own laws, thanks to Article 26, would stand. During these
seven months, foreign investors could come to Iraq and sign forty-year
contracts to buy up Iraqi assets. If a future elected Iraqi government
decided to change the rules, investors could sue for compensation.
But Bremer had a formidable opponent: Grand Ayatollah Ali al Sistani,
the most senior Shia cleric in Iraq. al Sistani tried to block
Bremer's plan at every turn, calling for immediate direct elections
and for the constitution to be written after those elections, not
before. Both demands, if met, would have closed Bremer's privatization
window. Then, on March 2, with the Shia members of the Governing
Council refusing to sign the interim constitution, five bombs exploded
in front of mosques in Karbala and Baghdad, killing close to 200
worshipers. General John Abizaid, the top U.S. commander in Iraq,
warned that the country was on the verge of civil war. Frightened by
this prospect, al Sistani backed down and the Shia politicians signed
the interim constitution. It was a familiar story: the shock of a
violent attack paved the way for more shock therapy.
When I arrived in Iraq a week later, the economic project seemed to be
back on track. All that remained for Bremer was to get his interim
constitution ratified by a Security Council resolution, then the
nervous lawyers and insurance brokers could relax and the sell-off of
Iraq could finally begin. The CPA, meanwhile, had launched a major new
P.R. offensive designed to reassure investors that Iraq was still a
safe and exciting place to do business. The centerpiece of the
campaign was Destination Baghdad Exposition, a massive trade show for
potential investors to be held in early April at the Baghdad
International Fairgrounds. It was the first such event inside Iraq,
and the organizers had branded the trade fair "DBX," as if it were
some sort of Mountain Dew-sponsored dirt-bike race. In keeping with
the extreme-sports theme, Thomas Foley traveled to Washington to tell
a gathering of executives that the risks in Iraq are akin "to
skydiving or riding a motorcycle, which are, to many, very acceptable
risks."
But three hours after my arrival in Baghdad, I was finding these
reassurances extremely hard to believe. I had not yet unpacked when my
hotel room was filled with debris and the windows in the lobby were
shattered. Down the street, the Mount Lebanon Hotel had just been
bombed, at that point the largest attack of its kind since the
official end of the war. The next day, another hotel was bombed in
Basra, then two Finnish businessmen were murdered on their way to a
meeting in Baghdad. Brigadier General Mark Kimmitt finally admitted
that there was a pattern at work: "the extremists have started
shifting away from the hard targets . . . [and] are now going out of
their way to specifically target softer targets." The next day, the
State Department updated its travel advisory: U.S. citizens were
"strongly warned against travel to Iraq."
The physical risks of doing business in Iraq seemed to be spiraling
out of control. This, once again, was not part of the original
plan. When Bremer first arrived in Baghdad, the armed resistance was
so low that he was able to walk the streets with a minimal security
entourage. During his first four months on the job, 109 U.S. soldiers
were killed and 570 were wounded. In the following four months, when
Bremer's shock therapy had taken effect, the number of U.S. casualties
almost doubled, with 195 soldiers killed and 1,633 wounded. There are
many in Iraq who argue that these events are connected - that Bremer's
reforms were the single largest factor leading to the rise of armed
resistance.
Take, for instance, Bremer's first casualties. The soldiers and
workers he laid off without pensions or severance pay didn't all
disappear quietly. Many of them went straight into the mujahedeen,
forming the backbone of the armed resistance. "Half a million people
are now worse off, and there you have the water tap that keeps the
insurgency going. It's alternative employment," says Hussain Kubba,
head of the prominent Iraqi business group Kubba Consulting. Some of
Bremer's other economic casualties also have failed to go quietly. It
turns out that many of the businessmen whose companies are threatened
by Bremer's investment laws have decided to make investments of their
own - in the resistance. It is partly their money that keeps fighters
in Kalashnikovs and RPGs.
These developments present a challenge to the basic logic of shock
therapy: the neocons were convinced that if they brought in their
reforms quickly and ruthlessly, Iraqis would be too stunned to
resist. But the shock appears to have had the opposite effect; rather
than the predicted paralysis, it jolted many Iraqis into action, much
of it extreme. Haider al-Abadi, Iraq's minister of communication, puts
it this way: "We know that there are terrorists in the country, but
previously they were not successful, they were isolated. Now because
the whole country is unhappy, and a lot of people don't have jobs
.. . . these terrorists are finding listening ears."
Bremer was now at odds not only with the Iraqis who opposed his plans
but with U.S military commanders charged with putting down the
insurgency his policies were feeding. Heretical questions began to be
raised: instead of laying people off, what if the CPA actually created
jobs for Iraqis? And instead of rushing to sell off Iraq's 200
state-owned firms, how about putting them back to work?
From the start, the neocons running Iraq had shown nothing but disdain
for Iraq's state-owned companies. In keeping with their Year
Zero-apocalyptic glee, when looters descended on the factories during
the war, U.S. forces did nothing. Sabah Asaad, managing director of a
refrigerator factory outside Baghdad, told me that while the looting
was going on, he went to a nearby U.S. Army base and begged for
help. "I asked one of the officers to send two soldiers and a vehicle
to help me kick out the looters. I was crying. The officer said,
‘Sorry, we can't do anything, we need an order from President
Bush.'" Back in Washington, Donald Rumsfeld shrugged. "Free people are
free to make mistakes and commit crimes and do bad things."
To see the remains of Asaad's football-field-size warehouse is to
understand why Frank Gehry had an artistic crisis after September 11
and was briefly unable to design structures resembling the rubble of
modern buildings. Asaad's looted and burned factory looks remarkably
like a heavy-metal version of Gehry's Guggenheim in Bilbao, Spain,
with waves of steel, buckled by fire, lying in terrifyingly beautiful
golden heaps. Yet all was not lost. "The looters were good-hearted,"
one of Asaad's painters told me, explaining that they left the tools
and machines behind, "so we could work again." Because the machines
are still there, many factory managers in Iraq say that it would take
little for them to return to full production. They need emergency
generators to cope with daily blackouts, and they need capital for
parts and raw materials. If that happened, it would have tremendous
implications for Iraq's stalled reconstruction, because it would mean
that many of the key materials needed to rebuild - cement and steel,
bricks and furniture - could be produced inside the country.
But it hasn't happened. Immediately after the nominal end of the war,
Congress appropriated $2.5 billion for the reconstruction of Iraq,
followed by an additional $18.4 billion in October. Yet as of July
2004, Iraq's state-owned factories had been pointedly excluded from
the reconstruction contracts. Instead, the billions have all gone to
Western companies, with most of the materials for the reconstruction
imported at great expense from abroad.
With unemployment as high as 67 percent, the imported products and
foreign workers flooding across the borders have become a source of
tremendous resentment in Iraq and yet another open tap fueling the
insurgency. And Iraqis don't have to look far for reminders of this
injustice; it's on display in the most ubiquitous symbol of the
occupation: the blast wall. The ten-foot-high slabs of reinforced
concrete are everywhere in Iraq, separating the protected - the people
in upscale hotels, luxury homes, military bases, and, of course, the
Green Zone - from the unprotected and exposed. If that wasn't injury
enough, all the blast walls are imported, from Kurdistan, Turkey, or
even farther afield, this despite the fact that Iraq was once a major
manufacturer of cement, and could easily be again. There are seventeen
state-owned cement factories across the country, but most are idle or
working at only half capacity. According to the Ministry of Industry,
not one of these factories has received a single contract to help with
the reconstruction, even though they could produce the walls and meet
other needs for cement at a greatly reduced cost. The CPA pays up to
$1,000 per imported blast wall; local manufacturers say they could
make them for $100. Minister Tofiq says there is a simple reason why
the Americans refuse to help get Iraq's cement factories running
again: among those making the decisions, "no one believes in the
public sector."[1]
This kind of ideological blindness has turned Iraq's occupiers into
prisoners of their own policies, hiding behind walls that, by their
very existence, fuel the rage at the U.S. presence, thereby feeding
the need for more walls. In Baghdad the concrete barriers have been
given a popular nickname: Bremer Walls.
As the insurgency grew, it soon became clear that if Bremer went ahead
with his plans to sell off the state companies, it could worsen the
violence. There was no question that privatization would require
layoffs: the Ministry of Industry estimates that roughly 145,000
workers would have to be fired to make the firms desirable to
investors, with each of those workers supporting, on average, five
family members. For Iraq's besieged occupiers the question was: Would
these shock-therapy casualties accept their fate or would they rebel?
The answer arrived, in rather dramatic fashion, at one of the largest
state-owned companies, the General Company for Vegetable Oils. The
complex of six factories in a Baghdad industrial zone produces cooking
oil, hand soap, laundry detergent, shaving cream, and shampoo. At
least that is what I was told by a receptionist who gave me glossy
brochures and calendars boasting of "modern instruments" and "the
latest and most up to date developments in the field of industry." But
when I approached the soap factory, I discovered a group of workers
sleeping outside a darkened building. Our guide rushed ahead, shouting
something to a woman in a white lab coat, and suddenly the factory
scrambled into activity: lights switched on, motors revved up, and
workers - still blinking off sleep - began filling two-liter plastic
bottles with pale blue Zahi brand dishwashing liquid.
I asked Nada Ahmed, the woman in the white coat, why the factory
wasn't working a few minutes before. She explained that they have only
enough electricity and materials to run the machines for a couple of
hours a day, but when guests arrive - would-be investors, ministry
officials, journalists - they get them going. "For show," she
explained. Behind us, a dozen bulky machines sat idle, covered in
sheets of dusty plastic and secured with duct tape.
In one dark corner of the plant, we came across an old man hunched
over a sack filled with white plastic caps. With a thin metal blade
lodged in a wedge of wax, he carefully whittled down the edges of each
cap, leaving a pile of shavings at his feet. "We don't have the spare
part for the proper mold, so we have to cut them by hand," his
supervisor explained apologetically. "We haven't received any parts
from Germany since the sanctions began." I noticed that even on the
assembly lines that were nominally working there was almost no
mechanization: bottles were held under spouts by hand because conveyor
belts don't convey, lids once snapped on by machines were being
hammered in place with wooden mallets. Even the water for the factory
was drawn from an outdoor well, hoisted by hand, and carried inside.
PART 3 OF 3
About the Author: Naomi Klein is the author of "No Logo" and
writer/producer of "The Take", a new documentary on Argentina's
occupied factories.
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