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The Handover That Wasn't

By Antonia Juhasz, Foreign Policy in Focus. Posted July 20, 2004.

Before his departure, CPA chief Paul Bremer issued 100 Orders to
dramatically restructure Iraq 's economy to fit free-market ideals. And no
Iraqi, including future elected officials, can undo them.

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 ministers.

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 than "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 percent 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 percent of Iraqi banks.

Order #49 drops the tax rate on corporations from a high of 40 percent to
a flat rate of 15 percent. 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 procedures.

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 Ministries.

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
), 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 future.

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 percent 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 supply.

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 themselves.

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.

Antonia Juhasz writes for Foreign Policy in Focus.