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.