Showing posts with label Source:Independent UK. Show all posts
Showing posts with label Source:Independent UK. Show all posts

Sunday, January 14, 2007

Shock and oil: Iraq's billions & the White House connection

Stephen Foley reports from New York
The Independent/UK
Published: 14 January 2007

The American company appointed to advise the US government on the economic reconstruction of Iraq has paid hundreds of thousands of dollars into Republican Party coffers and has admitted that its own finances are in chaos because of accounting errors and bad management.

BearingPoint is fighting to restore its reputation in the US after falling more than a year behind in reporting its own financial results, prompting legal actions from its creditors and shareholders.

According to the Center for Responsive Politics, BearingPoint employees gave $117,000 (£60,000) to the 2000 and 2004 Bush election campaigns, more than any other Iraq contractor. Other recipients include three prominent Congressmen on the House of Representatives' defence sub-committee, which oversees defence department contracts.

One of the biggest single contributors to BearingPoint's in-house political fund was James Horner, who heads the company's emerging markets business which is working in Iraq and Afghanistan. He donated $5,000 in August 2005.

The company's shares have collapsed to a third of their value when the firm listed in 2001, and it faces being thrown out of the New York Stock Exchange altogether. Despite annual revenues of $3.4bn, the company made a loss of $722m in 2005. Those figures were released only last month, nine months late, and the company has not yet been able to report any fully audited figures at all for 2006.

Analysts in the US claim the reason is a culture of poor management controls stretching back to before the company was carved out of KPMG, the global accounting giant, at the start of the decade. A litany of failings included invoices going astray, poorly trained accounting staff and a failure to work out the tax implications of having so many employees working in foreign countries.

The chaos is not the result of malfeasance, but is "embarrassing and inexcusable" none the less, according to Harry You, a former computer company finance chief brought in to head BearingPoint in 2005 after it fired its long-standing previous chief executive, the former US army captain Randolph Blazer. BearingPoint did not return calls asking for comment yesterday.

BearingPoint is being paid $240m for its work in Iraq, winning an initial contract from the US Agency for International Development (USAid) within weeks of the fall of Saddam Hussein in 2003. It was charged with supporting the then Coalition Provisional Authority to introduce policies "which are designed to create a competitive private sector". Its role is to examine laws, regulations and institutions that regulate trade, commerce and investment, and to advise ministries and the central bank.

Last week The Independent on Sunday revealed that a BearingPoint employee, based in the US embassy in Baghdad, had been tasked with advising the Iraqi Ministry of Oil on drawing up a new hydrocarbon law. The legislation, which is due to be presented to Iraq's parliament within days, will give Western oil companies a large slice of profits from the country's oil fields in exchange for investing in new oil infrastructure.

BearingPoint's first task in Iraq in 2003 was to help to plan the introduction of a new currency, and it was hoped that it would eventually organise small loans to Iraqi entrepreneurs to stimulate a significant market economy. The contract award was immediately criticised by public integrity watchdogs and by the company's rivals, because BearingPoint advisers to USAid had a hand in drafting the requirements set out in the tender. It spent five months helping USAid to write the job specifications and even sent some employees to Iraq to begin work before the contract was awarded, while its competitors had only a week to read the specifications and submit their own bids after final revisions were made.

USAid's independent inspector ruled that "BearingPoint's extensive involvement in the development of the Iraq economic reform program creates the appearance of unfair competitive advantage in the contract award process". The company said it was selected through a transparent and competitive bidding process.

Across the world, BearingPoint has become, thanks to USAid funding, a part of the US government's strategy of spreading free-market reforms to developing countries and America's allies. Elsewhere in the Middle East it is advising the government of Jordan on how to minimise the regulation of business and reform its tax policies in order to attract foreign investment; in Egypt it is advising on customs reform and respect for international companies' patents.

It has won more than $100m of business in Afghanistan since American troops invaded in 2002, and has been helping to build a banking system, training civil servants in the finance ministry and offering advice on economic policy.

Its economic reconstruction work grew out of early work in eastern Europe after the fall of communism, and became a significant contributor to the business after it won contracts in the former Yugoslavia following US intervention there.

The company changed its name to BearingPoint from KPMG Consulting in 2002, shortly after separating from its parent company. In the years since, contracts with the US government have proved the highlight of the business, while its work for private company clients has failed to live up to hopes. In part because of its reliance on the US federal government - which accounts for about 30 per cent of revenues - BearingPoint has dramatically stepped up its attempts to buy influence in Washington. Its contracts in Iraq and Afghanistan coincide with a big increase in its lobbying efforts on Capitol Hill. In 2005, the latest year for which figures have been collated, BearingPoint paid $1m to lobbyists, equalling the record total it paid in 2003. That is five times its average annual bill for lobbyists prior to the war in Iraq.

It also dramatically increased its political contributions in the run-up to the midterm elections, distributing $120,000 to candidates and campaign groups from its employee-sponsored political fund. That compares with $61,000 in the 2004 elections.

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Surge: US troops prepare for George Bush's last stand

But with allies they don't trust and enemies who confuse them,
commanders know it will be bloody


By Kim Sengupta
Published: 14 January 2007
The Independent/UK


The narrow ambush alleys of Kadhamiyah, the tenements providing sniper cover at Diyala Bridge, the dusty, sprawling killing grounds of Sadr City. These are the strongholds of the Shia militias that the Americans will have to take in the battle for Baghdad.

The US forces in the "surge" into the Iraqi capital face a war on two fronts. The murder miles of Haifa Street and Adhamiyah are the homes to the Sunni insurgency, which continues its bloody course four years after the official end of the war, and there is no sign of this stopping as the US forces take on the Shias.

There are other logistical difficulties of fighting an urban guerrilla war in a city like Baghdad. The militias have spread from their power bases into the so called "mixed areas". Outside the Hamra Hotel, where the dwindling group of Western journalists in Baghdad stays, there are checkpoints run by the Mehdi army, led by the radical Shia cleric Muqtada al-Sadr; their Shia competitors, the Badr Brigade; and the Kurdish Peshmerga. Further out are the Shia Defenders of Kadhamiyah, set up by Mr Sadr's cousin Hussein al-Sadr and the government-backed Tiger and Scorpion Brigades.

They all look similar: balaclavas or wrap-around sunglasses and headbands, black leather gloves with fingers cut off, and a very lethal arsenal of weapons. When not manning checkpoints, they hurtle through the streets in 4x4s, scattering the traffic by firing in the air. It is impossible to say which particular group they belong to.

This is what confronts the US forces gathering for George W Bush's last throw of the dice in Iraq. He sees the battle to wrest control of Baghdad from the militias as the key to salvaging victory in the Iraqi quagmire, but distinguishing friend from foe will not be easy. The President has already warned that bloodshed will increase, but will there be any gains?

The main target, the Mehdi army, has around 50,000 well-armed fighters in the capital, mostly concentrated in Sadr City, the vast slum next to Baghdad, and the Shia holy city of Najaf and surrounding areas. But Mr Sadr also has 25,000 more militiamen in the south, where British forces will be in the firing line of retaliation for what the Americans do in Baghdad.

The Shia militias are backed by Iran, while the Syrians are accused of harbouring Sunni insurgents. In his speech last week Mr Bush once again accused the two countries of "allowing terrorists and insurgents to use their territory to move in and out of Iraq ... We will seek out and destroy the networks providing advanced weaponry and training to our enemies in Iraq. "

To many, this rhetoric is paving the way for a wider escalation. William Arkin writes in The Washington Post: "There is an ominous element here ... To me that means the threat of strikes on targets in those countries." A British analyst, Robert Emerson, adds: "The Americans want to take on the Shia militias. Iran backs them, and will undoubtedly step up covert aid to them. How long will the Americans let that continue before they do something?" Even if there is no "hot pursuit", the Iranian response to US action in Baghdad is likely to place British forces in danger. The UK military has withdrawn from much of the south, concentrating its 7,200 troops in Basra. US authorities were against the British pullout from much of Maysan province, including the capital, Amarah, and are now particularly concerned about plans to hand over all security in the province, including the long Iranian border, to the Iraqi government at the end of February.

Instead of ending patrols by the 600-strong detachment of the Queen's Royal Lancers, the Americans want the British to significantly boost their numbers, especially at the border, in anticipation of Iran's attempts to aid its allies. Doing so would not only mean reversing the process of gradual disengagement, under which up to 3,000 British troops were due to return this spring, but getting sucked back into what threatens to be a prolonged war of attrition. This is particularly problematic for Britain, with its Afghanistan commitment in the background. The accepted consensus is that the Taliban, with hundreds of fighters training and arming in Pakistan, will launch a spring offensive after the winter lull in fighting.

But the first effects of the "surge" will be felt in Baghdad. At present the Americans have more or less withdrawn from the streets of the city, leaving Iraqi forces to man the checkpoints. Instead they base themselves in "Fort Apaches" - heavily fortified camps - emerging to carry out operations, invariably with the use of pulverising, and sometimes indiscriminate, firepower. After being reinforced by some 20,000 troops, the Americans will once again deploy on the streets. Baghdad will be divided into either nine or 11 sectors, according to different contingency plans being drawn up, in which the US troops will work alongside Iraqi forces with "embedded" US personnel.

The soldiers will aim to create mini "green zones" - cut-down versions of the area in the capital where US and British officials, and the Iraqi government, take refuge - guarded by checkpoints, sandbags and barbed wire. Residents would be issued with ID badges, and their every entry and exit logged.

To do this the US and Iraqi government forces will have to win back these areas from the militias. In particular they will have to take on the Shia fighters, many of them government backed, who have been accused of operating death squads.

Ironically, these death squads are the direct by-product of US policy. At the beginning of 2004, with no end to the Sunni insurgency in sight, the Pentagon was reported to have decided to train Shia and Kurdish fighters to carry out "irregular missions". The policy, exposed in the US media, was called the "Salvador Option" after the US-backed counter-insurgency in Latin America more than 20 years ago, which led to 70,000 deaths and countless violations of human rights. Some of the most persistent allegations of abuse have been made against the Wolf Brigade. Their main US adviser until April last year was James Steele, who states in his autobiography that he commanded the US military group in El Salvador during the height of the guerrilla war. The complaints against Iraqi special forces continue.

While in Iraq, I interviewed Ahmed Sadoun, who was arrested in Mosul and held for seven months before being released without charge. He showed the marks on his body of beatings and burning. Mr Sadoun, 38, did not know which paramilitary group had seized him. But they were accompanied by American soldiers, and the Wolf Brigade was widely involved in suppressing disturbances in Mosul at the time.

As for the Mehdi army, the Americans fought a short and fierce battle with Mr Sadr's militia in Najaf two years ago. At the time, however, the Sunni insurgents were still the bigger threat, and it was deemed convenient to let Shia clerics organise a truce. Since then the Mehdi army has been left relatively untroubled by both the US and UK forces. When it briefly took over Amarah in a recent action and blew up a number of police stations, a British force was sent up from Basra, but did not intervene, leaving the Iraqi army to deal with the situation.

There are also tricky political considerations. The Iraqi Prime Minister, Nouri al-Maliki, depends on parliamentary support from Muqtada al-Sadr's followers. Recently US and Iraqi forces went into Sadr City, named after the cleric's father, to capture, according to the military, "a top, illegal armed group commander directing widespread death-squad activity".

Instead of congratulating the troops, Mr Maliki angrily complained he was not told about the operation. "We will ask for clarification of what happened in Sadr City, we will review the issue with the multinational forces so that it will not be repeated," he added. Falan Hassan Shansai, leader of the Sadr bloc, which has 30 of the 275 seats in parliament, warned of the consequences if there was a repetition.

Many in the US military believe the Shia militias, especially the Mehdi army, is too entrenched to be removed. Sergeant Jeff Nelson, an intelligence analyst with the US army's 1st Battalion, 23rd Infantry Regiment, in Baghdad, said recently: "They have infiltrated every branch of public service and every political office they can get their hands on. As soon as the US leaves, they will be able to dominate the area with key citizens, key offices."

Sgt Nelson said his battalion had investigated 40 sectarian killings and collected 57 bodies in a week. None had led to an arrest: "Sometimes we have a feeling of complete hopelessness."

The new strategy is modelled on an operation carried out by Colonel HR McMaster in Tal Afar, north of Baghdad, in 2005. His troops took over the town, which had a reputation for violence, searched it section by section, established a presence and kept the insurgents out. Col McMaster became established as a counter-insurgency expert, and his name is intrinsically linked with the new policy. Both President Bush and his Secretary of State, Condoleezza Rice, have spoken of his action at Tal Afar as a blueprint for Iraq as a whole.

The overall commander picked by Mr Bush to lead the mission, Lt-Gen David Petraeus, is another Iraq veteran with a counter-insurgency reputation. He is one of the few senior members of the US military to support the " surge". He also supports the "hearts and minds" policies advocated by the British military, again unlike many of his US colleagues, who believe the army is for fighting, not nation-building.

They are not the only ones, however, who doubt whether some sort of Northern Ireland option can really be applied to a state in anarchy, like Iraq, especially by an army not culturally attuned to it. The time when it could have been applied, say US and British officers, has gone. The last chance may have been in 2005, when a plan presented by the British was rejected by Donald Rumsfeld.

Critics point out that Baghdad is not Tal Afar, a small place in a remote area. There is also deep scepticism about the ability of the Iraqi armed forces to fulfil their role in the equation. They were supposed to play a major part along the Americans in Operations "Forward Together" and "Forward Together II" in Baghdad last summer. However, at that time, only two of the six battalions supposed to take part in the mission actually turned up.

The correct analogy for the coming battle for Baghdad is not Tal Afar, but a US operation carried out in the Iraqi capital last year. More than 12,000 US troops, supported by helicopter gunships swooping over the rooftops, were sent in to destroy the Shia militias and break the back of the Sunni insurgency.

But by the end of the campaign the power of the gunmen had not diminished, and the scale of bloodshed had risen. It is an ominous template for a struggle on which not only President Bush's credibility, but the future of Iraq is likely to depend.

US ARMY: The plan to 'sanitise' Baghdad

Most of the extra 20,000 US reinforcements will deploy in Baghdad, which will be divided into up to 11 sectors. A plan based on the successful pacification of the northern town of Tal Afar will be carried out, with " safe zones" being created, surrounded by checkpoints, sandbags and barbed wire. Residents would be issued with ID badges, and have their entry and exit logged. The eventual aim is to "join up the dots" and create a large "sanitised" area, from which both Shia militias and Sunni insurgents will be kept out. US troops will also be "embedded" with Iraqi forces taking part in the operation.

IRAQI GOVERNMENT FORCES: Infiltrated and unreliable

The battle for Baghdad will fail unless the newly trained Iraqi army, paramilitary and police forces play their part. In a strategy called " clear and hold", the ultimate aim is for them to retain control when US forces eventually go back into their barracks.

But the Iraqi police in particular has been heavily infiltrated by Shia militias, and the Iraqi army, although not tainted to such an extent, has not proved the most reliable of allies for the US in the past. Out of six battalions scheduled to take part in an operation in Baghdad last year, only two turned up for duty.

MILITIAS: US to take on Shia leader

Until now the focus of US action in Iraq has been the Sunni insurgency. The new strategy is to take on the Shia militias which, often in official uniforms, have operated death squads and carried out sectarian attacks on Sunnis and, at times, Christians. The main target of the Americans is said to be Muqtada al-Sadr, whose heavily armed Mehdi army is blamed for much of the communal strife. Any action against his fighters in Baghdad may lead to retaliation against British troops in the Shia south. There is also anxiety about the reaction of Iran, which backs the Shia militias.

---Raymond Whitaker

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