Oil, reconstruction and the reasons for suspicion over US intentions towards Iraq

24 October 2003

The Iraq donors' conference in Madrid is likely to close this afternoon on a positive note, with delight about the large number of potential contributors represented and pledges of $5bn as good as in the bank. This outcome qualifies as positive, however, only because the Americans and British lowered expectations so comprehensively in advance. The $5bn is very far from the $55bn Iraq is estimated to need over the next three years; far, too, from the $30bn originally hoped for.

Numbers, of course, are not everything. There is only so much assistance that a debilitated Iraq will be able to absorb in the coming year. If security improves, charitable donations and private investment may increase by themselves: success will breed success. Until then, however, Iraq will be almost totally dependent on outside help. And if the necessary billions are to be raised, some elementary ground rules must be established.

First, it is up to the United States and Britain, as the two countries that led the military assault on Iraq without UN approval, to take prime responsibility for reconstruction. So far, they have fallen lamentably short in their first task - ensuring security - which is their legal responsibility as occupying powers. Now, both countries are penny-pinching on aid funds: the US Congress - which gave President Bush his carte blanche to wage war - wants half of US assistance to take the form of a loan. Here in Britain, the Government is taking half its contribution from the existing overseas development budget, leaving some countries without already promised allocations.

Second, domestic political considerations may militate against generosity, but the two governments should have factored in a realistic appraisal of the costs before choosing the military option. The US and Britain have no right to rely on contributions from countries that opposed the war, and should not browbeat them into contributing now. It is also dishonest to suggest, as US and British officials have done in recent weeks, that all Iraq's infrastructure was hopelessly neglected before the war and that "construction" rather than "reconstruction" is now in order. Pre-war Iraq was no paradise; but more people still had clean water, electricity and phone lines then than for several months after hostilities ceased. It is the belligerents that must pay for this damage.

Third, recent changes in US policy on administering Iraq - including the shift of authority from the Pentagon to the White House - have sent many of the right signals, but they are not nearly enough. The decision to place foreign assistance in a new fund to be administered by the UN and the World Bank embodies the best and worst of US concessions. On the one hand, the creation of the new fund probably ensured unanimous passage of the recent UN resolution, and so encouraged contributions at Madrid. It should also increase transparency in the granting of contracts, and ensure that Iraq gets better value. On the other hand, this fund has one glaring omission: the oil industry, including the oil revenue, remains the responsibility of the US and British provisional authority.

Given that oil is the key to Iraq's eventual recovery, this omission must be rectified urgently. Many opponents of the war worldwide, not to speak of many Iraqis, always suspected that Washington's chief ambition was to secure a cheap and abundant source of oil. The preferential treatment accorded by the US authorities early on to such well-connected companies as Halliburton and Bechtel did nothing to dispel that impression. Nor did the equivocating answers offered yesterday by the provisional authority to Christian Aid, when it asked how Iraq's first post-war oil revenue and aid contributions had been spent. So long as such a large slice of Iraq's future is effectively controlled by America, out of international and Iraqi sight, suspicions will persist about US intentions, and the help that is so desperately needed will not be forthcoming.