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$1 Billion a Week
And that’s on the low side. So much for a ‘self-sustaining’ reconstruction. Parsing the real cost for U.S. taxpayers
By Christopher Dickey
NEWSWEEK
July 21 issue — Richard Lugar, chairman of the Senate Foreign Relations Committee, came back from his recent trip to Iraq with some disturbing stories.
ONE AFTERNOON HE was headed out on the highway to the Baghdad airport in a heavily protected convoy. He’d already been warned that, on that road, “people get shot, there are fire fights.” Then the general with him suddenly ordered a machine gunner on top of a Humvee to get down. The reason: Iraqi killers are good at blindsiding American troops. “From time to time,” Lugar was told, “there are enemy, whoever they are, who sort of loop wires down from the bridges that might pluck somebody off at the neck as they go down the road.”
By the time Lugar’s trip to Iraq was over, the Indiana Republican worried the American people were being blindsided, too, by the true costs in blood and treasure of a war that has yet to end. “This idea that we will be in [Iraq] ‘just as long as we need to and not a day more’,” he said, paraphrasing the administration line, “is rubbish! We’re going to be there a long time.” Lugar said he kept demanding answers about the cost to American taxpayers and was not quite getting them. “Where does the money come from?” he asked. “How is it to be disbursed, and by whom?”
Last week, at last, some of the answers started coming in, and they were grim. Defense Secretary Donald Rumsfeld told a hearing that the “burn rate” for American money to fund the military presence in Iraq was now $3.9 billion a month—almost $1 billion a week. “This is tough stuff,” said a cranky Rumsfeld, lecturing the Senate committee. “This is hard work. This takes time. We need to have some patience.”
A MATTER OF FUNDING
But that billion a week is just the beginning. It doesn’t include the cost of running Iraq’s government and rebuilding it, which could be an additional billion a month, according to rough U.N. estimates made before the war. Then there’s the matter of Iraq’s enormous debts. Last week the major creditor countries in the so-called Paris Club agreed to restructure about $21 billion worth, but estimates of the total external debt, including war reparations to Kuwait, run well over $100 billion. How will the reconstruction be funded? For the administration it’s an especially painful question, in part because it comes at a time when the U.S. economy is in the doldrums, when budget deficits are ballooning and when tax cuts are the preferred method of getting business churning again. No wonder “Rumsfeld lost his cool,” said a former senior official from the first Bush administration. “He was befuddled. I think he’s running out of confidence and wriggle room.”
Why did the administration rush into this war so ill prepared for what would come after? Supposedly there was a clear and present danger from Saddam Hussein’s weapons of mass destruction, but even if it was present, clearly it wasn’t imminent. No such weapons were used and none have been found. While administration hawks were pushing hard for war, however, they airily dismissed questions about the long-term cost of occupying post-Saddam Iraq. Some suggested there might not be a long term. “Most of the Iraqi bureaucracy, and most of the Iraqi infrastructure, will be left intact,” a State Department official assured a NEWSWEEK reporter just before the war. An occupation might not have to last more than “30 to 60 days.”
As for financing the occupation, “We’re dealing with a country that can really finance its own reconstruction, and relatively soon,” Deputy Defense Secretary Paul Wolfowitz told the Senate a week after the invasion started in March. Now such pretenses have to be dropped. “It’s not going to be self-financing,” says L. Paul Bremer III, the Coalition administrator for Iraq. “Although Iraq is potentially a rich country, it’s not very rich now.”
‘IT WAS A NATIONAL LOSS’
At the Exploration Studies and Research Center in Baghdad, you can see why. Some of the most valuable intellectual property in the country, key to reviving the oil industry, is missing or destroyed. Millions of dollars’ worth of equipment and materials were either stolen or ripped apart. Scores of “rock cores”—four-foot-long cylinders that held the keys to geological data in oil-rich zones—were smashed when looters threw them one by one on the ground and took off with the wood frames that held them. “It was a national loss,” says Natic al Bayati, an oil-exploration expert. Seismic maps and original documents, some dating back to 1967, were burned. Seismic data collected on more than 200,000 kilometers of land—at an estimated cost of about $15,000 per kilometer—went up in smoke. “Our people [of Iraq], now they are destroying themselves,” says al Bayati.
Two weeks ago Iraq’s State Oil Marketing Organization (SOMO) sold off some 8 million barrels that had been stored in Ceyhan, Turkey, since before the war. Last week an additional 8 million barrels were sold to four international companies: Shell, ChevronTexaco, BP and Taurus, a Swiss-American trading company. It was the first newly produced petroleum sold since the fighting, and it brought in about $200 million. “Peanuts,” says Mussab al-Dujayli, a SOMO oil expert. He thinks the U.S. administration is dreaming if it believes it will be able to finance the reconstruction with oil money alone.
“The oil industry is in a state of chaos and anarchy,” says al-Dujayli. He points out that the Oil Industry Guards, a military unit that was tasked to secure the pipelines, has been either destroyed or dismantled. The Americans are talking about replacing the force but, meanwhile, pipelines north and south have been attacked several times in just the past two weeks. Iraq is actually importing gasoline from Kuwait, Jordan, Turkey and elsewhere, according to industry sources.
Nor is the oil business all that’s a shambles. As one senior U.N. official points out: “Iraq is not Afghanistan. It’s an urbanized, industrialized country where people are used to services like clean water, electricity, air conditioning. And that makes it really, really expensive.” The American failure to provide Baghdad with adequate power and light is now notorious, hampered by looting, sabotage and even the murder of electrical-company workers for “collaboration.” But even without those problems, the electrical grid is in a sorry state. Both U.N. and U.S. estimates predict that $3 billion to $5 billion will be needed just for emergency repairs. “It will take $10 billion to make it hold,” says one U.N. official.
A MISSING MINISTRY
The Ministry of Housing is working with U.S. contractor Bechtel on vast infrastructure projects, and Bechtel certainly has the wherewithal: it was given $680 million by Washington to repair and build highways and bridges, airports, water-treatment facilities, sewage plants, hospitals and clinics, schools, and police and fire stations. But the Ministry of Housing has “no buildings, no vehicles, no documentation, no designs, no specifications,” says Saad Al-Zubaidi, a senior official there. “It was all burned. There’s not even a single piece of paper.”
To bring the country back to life, Bremer presented a budget last week that sketches expenditures and revenues for the last six months of this year. At first glance, it looks reasonable. It projects oil revenues of a modest $3.4 billion. It draws on financing from Iraq’s frozen assets in the United States (total: $1.7 billion) and cash and other assets seized from Saddam ($795 million), as well as leftover funds from the United Nations’ prewar Oil-for-Food Program. But some of the numbers are misleading. When visitors are briefed by the Coalition Provisional Authority on “2003 Revenue Sources,” for instance, they’re shown “Special Programs & military downsizing” as a $900 million revenue item. In fact, that’s what Saddam might have spent on the Baath Party and secret security forces if he’d stayed in power. Now he won’t. But that’s not a tangible asset, much less disposable income.
The frozen assets and bales of cash are real enough, but they’re one-time windfalls that won’t be in next year’s budget. And the hoped-for oil revenues in 2004 of $13 billion won’t materialize either, according to Bremer’s aides, unless $1.2 billion is invested in the infrastructure right away. That hefty sum is included as a footnote to the Ministry of Oil line item in the current balance sheet: “Over $1 billion of capital expenditures to be funded off-budget.” If it were “on,” the sheet wouldn’t balance at all.
Will the United States have to eat all these costs? Under the Geneva Conventions, as the occupying power, it might. But in practical terms, it’s more likely to eat crow. Having turned its back on most of the other major players in the world community when it rushed to invade Iraq, and having held the United Nations at arm’s length afterward, Washington now talks about sharing the burdens of long-term occupation with others. As of last week, a total of $1.7 billion had been raised from nongovernmental and international organizations, major industrialized nations, Kuwait, Saudi Arabia and a handful of smaller countries. A major donors’ conference is to be convened by the United Nations in October. At the same time, the Coalition is moving to create an Iraqi executive council in the next few days that can share responsibility for some of the country’s administration, and share some of the blame as well.
The $1 billion-a-week tab for the military presence is another matter, however. Not-withstanding Washington’s talk about a “Coalition of the Willing” and its frequent enumeration of the number of countries doing their bit, it’s the number of soldiers on the ground that count right now. By that measure, the Americans are doing all the heavy lifting, with 145,000 troops in Iraq, against 14,000 for Britain, and much smaller contingents for the others. The Pentagon plans to entice other countries to contribute forces. But America will maintain its lead role, and provide the bulk of the troops. Outgoing CENTCOM commander Gen. Tommy Franks last week predicted that forces will have to stay in Iraq for two to four years. As long as they’re needed—and not a day more—could turn into a long and costly stay.
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With Scott Johnson, Rod Nordland and Colin Soloway in Baghdad, Michael Hirsh and Richard Wolffe in Washington and Tamara Lipper traveling with the president
© 2003 Newsweek, Inc.
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