Selling (Off) Iraq
Martin Hoffmann, a former Secretary of the Army and a key adviser to Defense Secretary Donald Rumsfeld, is known in Washington as the man who urged Rumsfeld, an old friend from Princeton, to hire executives from Enron and other corporations to lead the armed services. Recently, he and Michael Bleyzer, a former Exxon executive who runs a private equity firm that invests heavily in Bleyzer's native Ukraine, have been briefing senior US officials, including Rumsfeld himself, on their ideas for the rapid privatization of Iraq's state-run industries.
Hoffmann and Bleyzer want the Bush Administration to allow the private sector to supplant the US Agency for International Development (AID) as the driving force behind the reconstruction of postwar Iraq. They consult frequently with Robert "Bud" McFarlane, President Reagan's National Security Adviser, who runs a company that invests in energy projects in Russia and Eastern Europe. McFarlane and Bleyzer co-wrote a recent commentary in the Wall Street Journal called "Taking Iraq Private." "We're all in there trying to figure out a different way to get effective American economic development assistance going over there, and AID is just not up to it," said Hoffmann, who is also chairman of the board of Mitretek Systems, a Virginia company that does technical research for the Defense Department and other government agencies. He said Rumsfeld "is very knowledgeable about this kind of development assistance" and once accompanied him on a trip to Ukraine to conduct a seminar on privatization.
"What I'd like to see over the next ten years is to really rebuild Iraq, and that means a market economy," said Bleyzer, adding that Iraq would have a "much better business environment if BP or Exxon-Mobil or Shell could invest. We want to set up a business environment where global companies like Coca-Cola and McDonald's could come in and create a diversified economy not dependent on oil." McFarlane, who said he has "no formal ties" with Bleyzer's fund, was enthusiastic about the work of his colleagues. "I hope their concepts are being digested inside the Administration," he said.
Apparently they are. On May 27 Rumsfeld pledged in an opinion column in the Journal that Bush is committed to making decisions in Iraq that "favor market systems" and "encourage moves to privatize state-owned enterprises."
The relationships between Rumsfeld and the three men are a microcosm of what is happening in Washington as US corporations, entrepreneurs and former officials scramble to take advantage of the occupation of Iraq--now legalized by the UN Security Council's May 22 vote to lift sanctions--in order to win a piece of the market and press their ideas for transforming the Iraqi economy. Already, Bechtel, the San Francisco engineering powerhouse, was hired by AID as the prime contractor to rebuild Iraq's infrastructure in a project worth at least $680 million. And the Kellogg Brown & Root unit of Halliburton, the oil-services company once headed by Vice President Dick Cheney, took control of Iraq's oilfields under a controversial, no-bid contract from the Army Corps of Engineers. In May the Pentagon awarded MCI a contract of about $45 million to build a wireless network in Iraq.
Meanwhile, behind closed doors in the Pentagon and State Department and on Washington's K Street corridor, executives, bankers, trade lawyers and consultants are using their influence to create opportunities for future profits in Iraq. Those groups, and the relationships they have developed with Iraqi exiles and Washington insiders, underscore the politicized nature of the US rebuilding effort and the hopes of many officials that Iraq will become an engine of growth, not only for the region but for US corporations searching for new markets and investment sites.
Rumsfeld's roadmap for Iraq reflects the aggressive foreign policy championed by neoconservative hawks such as Richard Perle and former CIA Director James Woolsey, both members of Rumsfeld's Defense Policy Board. For more than a decade, they have been part of a group of militant conservatives pushing to invade Iraq and, in Woolsey's words, "change the face of the Middle East." The group includes former officials like McFarlane as well as key figures from the current Administration, including Rumsfeld and his top deputy, Paul Wolfowitz.
"What I think we have won on the battlefield is the right to try to establish consistent policies that are for the benefit of the people of Iraq," Perle said in an April speech at the American Enterprise Institute. "It's not that we are looking for anything for ourselves, but we do have responsibility, a stewardship," not to "turn it [Iraq] over to institutions incapable of seeing this through to a successful conclusion." In an aside, he added that "the last thing the Iraqis need is French statism or German labor practices." Woolsey was equally blunt when he spoke to a May 1 closed-door conference on postwar Iraq co-sponsored by his employer, the consulting firm Booz Allen Hamilton, where he's an officer in the global strategic security unit. "Basically, he said to hell with France, to hell with Germany and to hell with the United Nations; the United States is going to do this alone," an Arab banker recalled. Two other attendees confirmed that account.
Both Woolsey and Perle are involved in businesses that could benefit from the war on terrorism. Woolsey is a principal of Paladin Capital Group, a Washington-based private-equity firm investing in companies that defend against terrorist attacks. Perle has financial stakes in a similar fund known as Trireme Partners and in the Autonomy Corporation, which supplies eavesdropping software to intelligence agencies. Perle was also hired to advise telecom giant Global Crossing and provided security briefings to the investment firm Goldman Sachs.
Those conflicts of interest could cause trouble for the Administration and in Perle's case have already done so, leading him to resign as chair of the Defense Policy Board after revelations of his ties to companies doing business with the Pentagon. "I think they're going to have a problem in resolving the greedy impulses of companies and individuals, and the need for this to be a showcase for the world," said Philip Mattera, the director of the Corporate Research Project, a nonprofit group that analyzes corporations for unions and community organizations.