[Marxism] "Iraqi" govt plans to hand over more of economy to US

["Fred Feldman" <ffeldman@xxxxxxxxxxxxxxxx>]

Inter-Press Service Agency


http://us.oneworld.net/link/gotoarticle/addhit/100591/3319/10933

CHALLENGES 2004-2005:
U.S. to Take Bigger Bite of Iraq's Economic Pie

Emad Mekay

The United States is helping the interim Iraqi government continue to
make major economic changes, including cuts to social subsidies, full
access for U.S. companies to the nation's oil reserves and
reconsideration of oil deals that the previous regime signed with France
and Russia.

WASHINGTON, Dec 23 (IPS) - The United States is helping the interim
Iraqi government continue to make major economic changes, including cuts
to social subsidies, full access for U.S. companies to the nation's oil
reserves and reconsideration of oil deals that the previous regime
signed with France and Russia.

During a visit here this week, officials of the U.S.-backed
administration detailed some of the economic moves planned for Iraq,
many of them appearing to give U.S. corporations greater reach into the
occupied nation's economy.

For example, the current leadership is looking at privatising the Iraqi
National Oil Company, said Finance Minister Adil Abdel Mahdi.

The government, which is supposed to be replaced after elections
scheduled for January, will also pass a new law that will further open
Iraq's huge oil reserves to foreign companies. U.S. firms are expected
to gain the lion's share of access in a process estimated to be worth
billions of dollars.

"So I think this is very promising to the American investors and to
American enterprises, certainly to oil companies," Abdel Mahdi said at
the National Press Club in Washington, DC on Tuesday.

Abdel Hadi, formerly a member of the exile Iraqi opposition, said the
interim government will also reconsider deals signed between French and
Russians oil firms and the regime of former President Saddam Hussein. It
is still not clear whether those contracts will be cancelled altogether
or just reduced.

France and Russia both opposed the March 2003 U.S.-led invasion of the
Arab country and companies from those nations were initially banned by
the U.S. occupation administration, the Coalition Provisional Authority
(CPA), from helping to "rebuild" Iraq.

Washington later said non-U.S. firms could work there, after the world's
rich nations agreed to forgive part of Iraq's debt, a decision that
opened the door to Baghdad signing on to a loan programme designed by
the International Monetary Fund (IMF).

But to date all contracts let for "reconstruction" by the U.S. Agency
for International Development (USAID) have gone to U.S. firms, which
have then subcontracted some work to foreign companies.

Iraq's oil sector is essential both to world energy markets and to the
nation's economy. Iraq sits on the planet's second largest oil reserves,
after Saudi Arabia, and oil revenues account for more than 95 percent of
the country's current budget. (The rest comes mainly from taxes and
profits of certain state-owned enterprises).

Iraq is now producing a maximum 2.5 million barrels of oil a day (bpd),
which drops to around two million bpd during attacks from the armed
opposition.

But Baghdad says it expects to produce 3.5 million bpd when more U.S.
companies move in and security improves.

"We found it very useful and interesting to hear the representatives of
the government describe some of the preliminary thinking about
structuring of the state-owned oil sector in Iraq," said Alan Larson,
undersecretary of state for economic, business and agriculture, during
the press club conference with Iraqi officials.

Washington is also expanding its influence in Iraq's oil sector via
training programmes.

During meetings this week of the Iraq-U.S. Joint Economic Commission
(JEC), the body that coordinates U.S. plans for Iraq's economy, Larson
said the United States will provide training for oil-sector personnel,
at U.S. universities.

Since it invaded Iraq, the United States has worked to reshape the Arab
nation in its image. All the economic programmes, including the most
liberal tax scheme in the Middle East and nearly non-existent trade
tariffs, instituted by the CPA are being continued by the interim
government.

Washington has installed hundreds of U.S. economic advisors in all Iraqi
government ministries, who have a decisive say on most economic
decisions. It has also sponsored the bulk of the nation's economic
changes, based on a neo-liberal model that emphasises privatisation of
government entities and cuts to social spending.

One major move the country is inching towards under U.S. guardianship,
which was discussed this week, is a rollback of Iraq's huge subsidies
system, which may have kept millions of Iraqis from starvation under
U.S. and UK-backed sanctions imposed by the United Nations after the
1991 Gulf War.

The sanctions lasted for 12 years. A study by the U.N. Children's Fund
(UNICEF) and Iraq's Ministry of Health found that 500,000 more Iraqi
children died under sanctions, from 1991 to 1998, than would have
otherwise perished, but they stressed that not all the deaths could be
directly blamed on the provisions.

It is believed that many more Iraqis would have died if not for a strong
subsidies system that gave food rations to Iraqi families.

Under its October agreement with the IMF, Baghdad's interim leaders
agreed to cut the support, among many other conditions. Officials
defended the move during their Washington visit.

"I think this is a necessity for the Iraqi economy," Abdel Mahdi said.
"We really need to work on our subsidy side. Subsidies are taking almost
60 percent of our budget. So this is something we have to work on .
Other measures really were a real necessity for the Iraqi economy before
(becoming) conditions asked by the IMF."

Iraqi officials say the country's unemployment rate is now 27 percent,
but some groups have estimated it to be as high as 50 percent.

The IMF has been notorious for imposing conditions that its economists
say are necessary to slash nation's budget deficits.

Development groups and anti-poverty campaigners argue those measures
favour corporations in the most industrialised nations while harming the
poor and middle class in borrowing countries.

The programme with Iraq appears to be no different.

Called the "enhanced post-conflict facility," the IMF programme bestows
420 million dollars in loans to the Iraqi government as a first step,
promising more in 2005 if the nation meets more demanding conditions.

The IMF, which is dominated by the United States and other rich nations,
has said it is willing to loan Iraq 2.5-4.3 billion dollars over three
years now that an internationally recognised government is in place in
the nation.

Washington also brokered talks that began two weeks ago to make Iraq a
member of the World Trade Organisation (WTO).

During this week's meeting of the JEC, the United States Agency for
International Development (USAID) said it will focus on lending for
Iraq's agricultural sector, which will include over 100 demonstration
projects throughout the country to reinvigorate crops and to boost the
industry, with the help of U.S. companies.

The United States Treasury and USAID also said they will back a housing
fund in Iraq, which will start lending in January 2005 and is designed
to add 30,000 new residential units in and around Baghdad during the
year. Many U.S. companies will be involved.

Washington is also pushing lending programmes to Iraq through the U.S.
Export-Import Bank, the Overseas Private Investment Corporation and the
U.S. Trade and Development Agency, all of which would produce more
opportunities for U.S. firms in the occupied nation. (END




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