CIA Hunts Iraq Tie to Soviet Smallpox

For the NYTimes, Judith Miller writes:

The C.I.A. is investigating an informant's accusation that Iraq obtained a particularly virulent strain of smallpox from a Russian scientist who worked in a smallpox lab in Moscow during Soviet times, senior American officials and foreign scientists say.

The officials said several American scientists were told in August that Iraq might have obtained the mysterious strain from Nelja N. Maltseva, a virologist who worked for more than 30 years at the Research Institute for Viral Preparations in Moscow before her death two years ago.

The information came to the American government from an informant whose identity has not been disclosed. The C.I.A. considered the information reliable enough that President Bush was briefed about its implications. The attempt to verify the information is continuing.

Dr. Maltseva is known to have visited Iraq on several occasions. Intelligence officials are trying to determine whether, as the informant told them, she traveled there as recently as 1990, officials said. The institute where she worked housed what Russia said was its entire national collection of 120 strains of smallpox, and some experts fear that she may have provided the Iraqis with a version that could be resistant to vaccines and could be more easily transmitted as a biological weapon.

The possibility that Iraq possesses this strain is one of several factors that has complicated Mr. Bush's decision, expected this week, about how many Americans should be vaccinated against smallpox, a disease that was officially eradicated in 1980.

The White House is expected to announce that despite the risk of vaccine-induced illness and death, it will authorize vaccinating those most at risk in the event of a smallpox outbreak — 500,000 members of the military who could be assigned to the Middle East for a war with Iraq and 500,000 civilian medical workers.

More broadly, the Russian government's refusal to share smallpox and other lethal germ strains for study by the United States, or to answer questions about the fate of such strains, has reinforced American concerns about whether Russia has abandoned what was once the world's most ambitious covert germ weapons program.

A year ago in Crawford, Tex., Mr. Bush and Russia's president, Vladimir V. Putin, issued a statement vowing to enhance cooperation against biological terrorism. But after an initial round of visits and a flurry of optimism, American officials said Russia had resisted repeated American requests for information about the Russian smallpox strains and help in the investigation into the anthrax attacks in the United States in October 2001.

"There is information we would like the Russians to share as a partner of ours," William Winkenwerder Jr., assistant secretary of defense for health affairs, said in an interview. "Because if there are strains that present a unique problem with respect to vaccines and treatment, it is in the interests of all freedom-loving people to have as much information as possible."

Cooperation on biological terrorism was not discussed at the meeting last week between Mr. Bush and Mr. Putin in St. Petersburg, American officials said, mainly because administration officials are not certain just how willing Mr. Putin is to enhance cooperation in this delicate area. They wonder if he is not doing more because of the military's hostility to sharing the information.

"The record so far suggests he is either unable or unwilling to push the military on this front," an administration official said. "We think it may be a little of both, but we're not really sure at this point or what to do about it."

Administration officials said the C.I.A. was still trying to determine whether Dr. Maltseva traveled to Iraq in 1990, and whether she shared a sample of what might be a particularly virulent smallpox strain with Iraqi scientists.

World Health Organization records in Geneva and interviews with scientists who worked with her confirmed that Dr. Maltseva visited Iraq at least twice, in 1972 and 1973, as part of the global campaign to eradicate smallpox.

Formerly secret Soviet records also show that in 1971, she was part of a covert mission to Aralsk, a port city in what was then the Soviet republic of Kazakhstan, north of the Aral Sea, to help stop an epidemic of smallpox. The Soviet Union did not report that outbreak to world health officials, as required by regulations.

Last June, experts from the Monterey Institute of International Studies, drawing on those Kazakh records and interviews with survivors, published a report saying the epidemic was a result of open-air tests of a particularly virulent smallpox strain on Vozrozhdeniye Island in the Aral Sea.

The island, known as Renaissance Island in English, is between Kazakhstan and another Central Asian country, Uzbekistan. The United States recently spent $6 million to help both countries, which are now independent, to decontaminate anthrax that the Soviet military buried in pits on the island.

Alan P. Zelicoff, co-author of the Monterey report and a scientist at Sandia National Laboratories, said the Aralsk outbreak was a watershed because it demonstrated that the smallpox virus was more easily spread than previously thought and that there may be a vaccine-resistant strain.

The organism can indeed be made to travel long distances, city-size perhaps, and there may be a vaccine-resistant strain or one that is more communicable than garden-variety smallpox, he said in an interview.

The Monterey report led American officials to question whether America's smallpox vaccine would be effective against the Aralsk strain or whether new vaccines or drugs might be needed if the strain was used in an attack. American concern increased in recent months after the White House was told that Dr. Maltseva might have shared the Aralsk strain with Iraqi scientists in 1990, administration officials said.

David Kelly, a former United Nations weapons inspector in Iraq, said there was a "resurgence of interest" in smallpox vaccine in Iraq in 1990, "but we have never known why."

A spokesman for the Russian Research Institute for Viral Preparations declined to comment on Dr. Maltseva or her work. Her daughter, a physician in Moscow, said she had no recollection of her mother's ever going to Iraq.

Svetlana Sergeyevna Marennikova, Dr. Maltseva's deputy in the Moscow laboratory, said in an interview that Dr. Maltseva had never gone to Iraq as far as she knew.

"She worked, and then when she got sick, she took a sick leave when she was no longer able to work," she said. "I don't know about Iraq. I didn't know about a trip there. I don't think she was there. I would know."

Donald A. Henderson, a senior adviser to the Department of Health and Human Services and a leader of the smallpox eradication campaign, described Dr. Maltseva as an "outgoing, hard-working scientist." He said she had traveled widely for the W.H.O in the eradication campaign.

While the organization's records show that she visited Iran, Iraq and Syria, Dr. Henderson recalled that he had also sent her to Pakistan to follow up on an outbreak there. "She clearly enjoyed the international travel circuit," he said.

Scientists and American officials have speculated that Iraq may have tried to buy the Aralsk strain from Dr. Maltseva, whose institute, like so many other scientific labs in Russia, has fallen on hard times since the Soviet Union's collapse.

Dr. Henderson said he was deeply disappointed that Dr. Maltseva and other Russian scientists with whom he had worked closely had helped cover up outbreaks of infectious diseases that should have been reported to the W.H.O.

The Russian government has never publicly acknowledged that Aralsk outbreak or that it tested smallpox in the open air. At a World Health Organization meeting in Lyon, France, last August, officials said, Russian virologists argued privately, in response to the Monterey report and news accounts, that there was no reason to believe that the Aralsk incident was anything other than a natural outbreak and that the strain was not particularly virulent — assertions with which some American experts concur.

American officials familiar with discussions about Aralsk said Russians scientists had confirmed that Dr. Maltseva took tissue samples from Aralsk back to her Moscow lab in 1971. But Russians have insisted that the material was destroyed when Russia quietly moved its smallpox strain collection from the Moscow lab to Vector, where the collection is now stored.

Many American scientists and officials, even those who doubt that the Aralsk strain is unusually potent, are deeply skeptical that the strain was destroyed. Former Soviet germ warfare scientists have privately told American officials that the military took control of these strains when the collection was moved.

American health and defense officials have tried without success to press Russia for help in securing a sample of the strain from the Aralsk smallpox outbreak.

The American officials have also been unable to obtain information that they believe could help federal investigators with their stalled inquiry into the anthrax attacks of October 2001, in which 5 people died and at least 17 were infected

"Iraq is not America's to sell"

International law is unequivocal - Paul Bremer's economic reforms are illegal

Naomi Klein, in The Guardian, reports:

Bring Halliburton home. Cancel the contracts. Ditch the deals. Rip up the rules. Those are just a few of the suggestions for slogans that could help unify the growing movement against the occupation of Iraq. So far, activist debates have focused on whether the demand should be for a complete withdrawal of troops, or for the United States to cede power to the United Nations.

But the "troops out" debate overlooks an important fact. If every last soldier pulled out of the Gulf tomorrow and a sovereign government came to power, Iraq would still be occupied: by laws written in the interest of another country; by foreign corporations controlling its essential services; by 70% unemployment sparked by public sector layoffs.

Any movement serious about Iraqi self-determination must call not only for an end to Iraq's military occupation, but to its economic colonisation as well. That means reversing the shock therapy reforms that US occupation chief Paul Bremer has fraudulently passed off as "reconstruction", and cancelling all privatisation contracts that are flowing from these reforms.

How can such an ambitious goal be achieved? Easy: by showing that Bremer's reforms were illegal to begin with. They clearly violate the international convention governing the behaviour of occupying forces, the Hague regulations of 1907 (the companion to the 1949 Geneva conventions, both ratified by the United States), as well as the US army's own code of war.

The Hague regulations state that an occupying power must respect "unless absolutely prevented, the laws in force in the country". The coalition provisional authority has shredded that simple rule with gleeful defiance. Iraq's constitution outlaws the privatisation of key state assets, and it bars foreigners from owning Iraqi firms. No plausible argument can be made that the CPA was "absolutely prevented" from respecting those laws, and yet two months ago, the CPA overturned them unilaterally.

On September 19, Bremer enacted the now infamous Order 39. It announced that 200 Iraqi state companies would be privatised; decreed that foreign firms can retain 100% ownership of Iraqi banks, mines and factories; and allowed these firms to move 100% of their profits out of Iraq. The Economist declared the new rules a "capitalist dream".

Order 39 violated the Hague regulations in other ways as well. The convention states that occupying powers "shall be regarded only as administrator and usufructuary of public buildings, real estate, forests and agricultural estates belonging to the hostile state, and situated in the occupied country. It must safeguard the capital of these properties, and administer them in accordance with the rules of usufruct."

Bouvier's Law Dictionary defines "usufruct" (possibly the ugliest word in the English language) as an arrangement that grants one party the right to use and derive benefit from another's property "without altering the substance of the thing". Put more simply, if you are a housesitter, you can eat the food in the fridge, but you can't sell the house and turn it into condos. And yet that is just what Bremer is doing: what could more substantially alter "the substance" of a public asset than to turn it into a private one?

In case the CPA was still unclear on this detail, the US army's Law of Land Warfare states that "the occupant does not have the right of sale or unqualified use of [non-military] property". This is pretty straightforward: bombing something does not give you the right to sell it. There is every indication that the CPA is well aware of the lawlessness of its privatisation scheme. In a leaked memo written on March 26, the British attorney general, Lord Goldsmith, warned Tony Blair that "the imposition of major structural economic reforms would not be authorised by international law".

So far, most of the controversy surrounding Iraq's reconstruction has focused on the waste and corruption in the awarding of contracts. This badly misses the scope of the violation: even if the sell-off of Iraq were conducted with full transparency and open bidding, it would still be illegal for the simple reason that Iraq is not America's to sell.

The security council's recognition of the United States' and Britain's occupation authority provides no legal cover. The UN resolution passed in May specifically required the occupying powers to "comply fully with their obligations under international law including in particular the Geneva conventions of 1949 and the Hague regulations of 1907".

According to a growing number of international legal experts, that means that if the next Iraqi government decides it doesn't want to be a wholly owned subsidiary of Bechtel and Halliburton, it will have powerful legal grounds to renationalise assets that were privatised under CPA edicts.

Juliet Blanch, global head of energy and international arbitration for the huge international law firm Norton Rose, says that because Bremer's reforms directly contradict Iraq's constitution, they are "in breach of international law and are likely not enforceable". Blanch argues that the CPA "has no authority or ability to sign those [privatisation] contracts", and that a sovereign Iraqi government would have "quite a serious argument for renationalisation without paying compensation". Firms facing this type of expropriation would, according to Blanch, have "no legal remedy".

The only way out for the administration is to make sure that Iraq's next government is anything but sovereign. It must be pliant enough to ratify the CPA's illegal laws, which will then be celebrated as the happy marriage of free markets and free people. Once that happens, it will be too late: the contracts will be locked in, the deals done and the occupation of Iraq permanent.

Which is why anti-war forces must use this fast-closing window to demand that the next Iraqi government be free from the shackles of these reforms. It's too late to stop the war, but it's not too late to deny Iraq's invaders the myriad economic prizes they went to war to collect in the first place.

It's not too late to cancel the contracts and ditch the deals.

"Why The Privatization of Iraq is Illegal"

Aaron Mate on "What the US-UK's responsibilities are as occupier of Iraq":

On May 22 2003, the United Nations Security Council passed Resolution 1483, abolishing sanctions against Iraq and recognising the United States and United Kingdom as the country's occupying powers. The resolution called upon the US-UK authority to "comply fully with their obligations under international law, including in particular the Geneva Conventions of 1949 and the Hague Regulations of 1907." [1]

How has the CPA changed Iraq's economy and laws?
Among many changes, the US-UK Coalition Provisional Authority (CPA), has laid off hundreds of thousands of Iraqi workers, virtually eliminated trade tariffs and enacted laws that radically alter Iraq's economy. Order 39, decreed by CPA head Paul Bremer on September 20 2003, abolished Iraq's ban on foreign investment, allowing foreigners to own up to 100% of all sectors except natural resources. Over 200 state-owned enterprises, including electricity, telecommunications and pharmaceuticals have been privatised. Iraq's highest tax rate has been lowered from 45% to a flat rate of 15%. Although foreign ownership of land remains illegal, companies or individuals will be allowed to lease properties for up to 40 years. [2]

Are these changes legal?

These laws stand in clear violation of Iraq's constitution, as is openly admitted. The US department of commerce notes that "the Iraqi constitution prohibits foreign ownership of immovable (real) property," and "prohibits investment in, and establishment of, companies in Iraq by foreigners who are not resident citizens of Arab countries." [3]

Consider how the CPA's new laws and massive layoffs conform to its obligations under international law [4]:

· Hague Regulations

Art 43: The authority of the legitimate power having in fact passed into the hands of the occupant, the latter shall take all the measures in his power to restore, and ensure, as far as possible, public order and safety, while respecting, unless absolutely prevented, the laws in force in the country.

Art 46: Family honour and rights, the lives of persons, and private property, as well as religious convictions and practice, must be respected. Private property cannot be confiscated.

Art 47: Pillage is formally forbidden.

Art 53: An army of occupation can only take possession of cash, funds, and realisable securities which are strictly the property of the state, depots of arms, means of transport, stores and supplies, and, generally, all movable property belonging to the state which may be used for military operations. All appliances, whether on land, at sea, or in the air, adapted for the transmission of news, or for the transport of persons or things, exclusive of cases governed by naval law, depots of arms, and, generally, all kinds of munitions of war, may be seized, even if they belong to private individuals, but must be restored and compensation fixed when peace is made.

Art 55: The occupying State shall be regarded only as administrator and usufructuary of public buildings, real estate, forests, and agricultural estates belonging to the hostile State, and situated in the occupied country. It must safeguard the capital of these properties, and administer them in accordance with the rules of usufruct.

· Geneva Conventions:

Article 53: Any destruction by the occupying power of real or personal property belonging individually or collectively to private persons, or to the state, or to other public authorities, or to social or cooperative organisations, is prohibited, except where such destruction is rendered absolutely necessary by military operations.

Article 54: The occupying power may not alter the status of public officials or judges in the occupied territories, or in any way apply sanctions to or take any measures of coercion or discrimination against them, should they abstain from fulfilling their functions for reasons of conscience.

What is usufruct?

In accordance with Article 55 of the Hague Regulations, the US-UK are "regarded only as administrator and usufructuary" of Iraq's resources and immovable property, which it must administer "in accordance with the rules of usufruct." Bouvier's Law dictionary defines usufruct as: "The right of enjoying a thing, the property of which is vested in another, and to draw from the same all the profit, utility and advantage which it may produce, provided it be without altering the substance of the thing." [5]

As usufructary, the US-UK coalition would have the right to use Iraq's resources without altering or destroying the character of the resource itself. It is widely-recognised that agriculture, wherein crops can grow again and no serious effect is made on the soil or the land, is an appropriate usage of the right of usufruct. But oil is far different: the extraction of oil is the process of extracting the original resource itself, as the fossil fuels are not renewable and the character of the land from which it comes is severely altered, if not depleted. In addition, the responsibilities of usufruct can also apply to structural changes to a public resource or service. As Naomi Klein points out, "what could more substantially alter 'the substance' of a public asset than to turn it into a private one?"

Does the CPA know this already?

In a leaked March 26 memo that caused a stir in the UK, attorney general Lord Peter Goldsmith advised prime minister Blair that the invasion and subsequent occupation of Iraq was illegal. "My view is that a further security council resolution is needed to authorise imposing reform and restructuring of Iraq and its government," Lord Goldsmith wrote. He added that in his view "the imposition of major structural economic reforms would not be authorised by international law," and that "the longer the occupation of Iraq continues, and the more the tasks undertaken by an interim administration depart from the main objective [of disarming Saddam], the more difficult it will be to justify the lawfulness of the occupation." [6]

Notes

1. UN Security Council Resolution 1483, adopted May 22 2003.

2. Coalition Provisional Authority Order 39, enacted September 19 2003.

3. US Department of Commerce, "Overview of Commercial Law in Iraq".

4. Convention (IV) respecting the Laws and Customs of War on Land and its annex: Regulations concerning the Laws and Customs of War on Land (Hague Regulations). The Hague, 18 October 1907.

Convention (IV) relative to the Protection of Civilian Persons in Time of War (Geneva Conventions). Geneva, 12 August 1949.

5. Bouvier's Law Dictionary, cited in University of Tulsa Law Professor R. Dobie Langenkamp, What Happens to the Oil: International Law and the Occupation of Iraq", January 2003,

6. John Innes, "US and UK Action in post-war Iraq May be Illegal," The Scotsman, May 22, 2003.

Flat tax system imposed on Iraq

U.S. Administrator Orders 15% Rate

The Washington Post reports:

“The highest individual and corporate income tax rates for 2004 and subsequent years shall not exceed 15 percent,” Bremer wrote in Coalition Provisional Authority Order Number 37, “Tax Strategy for 2003,” issued last month.

The flat tax, long a dream of economic conservatives, is finally getting its day — not in the United States, but in Iraq. It took L. Paul Bremer, the U.S. administrator in Baghdad, no more than a stroke of the pen Sept. 15 to accomplish what eluded the likes of publisher Steve Forbes, former representative Jack Kemp (R-N.Y.), former senator Phil Gramm (R-Tex.) and former representative Richard K. Armey (R-Tex.) over the course of a decade and two presidential campaigns.

Voila, Iraq has a flat tax, and the 15 percent rate is even lower than Forbes (17 percent) and Gramm (16 percent) favored for the United States. And, unless a future Iraqi government rescinds it, the flat tax will remain long after the Americans have left.

“It’s extremely good news,” said Grover Norquist, head of Americans for Tax Reform and a Bush administration ally. Bremer’s vaguely worded edict leaves open the possibility that Iraqis could face different levels of taxation below 15 percent, but “they told me it’s a flat rate and it appears as though it’s a flat rate,” Norquist said. The tax fighter added: “It might be a hint to the rest of us.”

NO HISTORY OF PAYING TAXES IN IRAQ

Bremer’s new economic policy for Iraq will slash Saddam Hussein’s top tax rate for individuals and businesses from 45 to 15 percent. Of course, since Hussein’s government, like others in the Middle East, almost never enforced tax collection, there is no real history of paying taxes in the country.

During the more than three decades of Baath Party rule, Hussein ran a centrally controlled economy with most large businesses owned or operated by the state. The government also managed the import of most goods.

John B. Taylor, undersecretary of the Treasury for international affairs, said the Iraq flat tax was discussed before the war as preliminary planning was done with the help of some Iraqi exiles.

After major combat ended, the discussions continued with Iraqis in Baghdad, with emphasis on tax policies adopted by other countries making the transition from controlled economies. “One was Russia and subsequently Ukraine, where we heard good things after flat taxes were adopted,” Taylor said.

On Sept. 22, Bremer told the Senate Appropriations Committee: “Iraq’s new tax system is admirably straightforward. The highest marginal tax rate on personal and corporate income is 15 percent.”

Iraq’s new finance minister, Kamil Mubdir Gailani, is considered a follower of Ahmed Chalabi, the Western-oriented banker who has closely adhered to the Bush administration’s economic policies, according to one expert on the Iraqi economy. Gailani presented the new Iraq finance program, including the flat tax, at a recent international meeting.

“A piece of social engineering is being done on Iraq, but it has almost no support from other members of the U.S.-appointed Iraqi Governing Council,” said a Middle East expert who heard Gailani’s presentation.

Proponents of the flat tax have long favored this kind of tax system for Iraq. Without much of a framework to start with, Iraq “need not worry about all the political and transition problems that have made adoption of fundamental tax reform here so difficult,” Bruce Bartlett, an economist in the Reagan and first Bush administrations, wrote this spring. “It is gratifying, therefore, that leaders of the new Iraq are said to be looking at a flat rate tax system for their country.”

RUSSIA SEEN AS A MODEL FOR IRAQ

Bartlett, once an aide to Kemp and now with the National Center for Policy Analysis, said the model for Iraq should be Russia, which in 2001 set a 13 percent flat tax on individual income. The Bush administration, still disturbed by much higher tax rates here, has said it admires Russia’s flat tax. Russia “understands the importance of getting the tax structure right in your economy,” Commerce Secretary Donald L. Evans told the conservative Heritage Foundation last year.

President Bush, in Russia last year to see President Vladimir Putin, said: “The good news is that the flat tax in Russia is a good, fair tax — much more fair, by the way, than many Western countries, I might add.”

“At the previous 40 percent to 50 percent, Russian people were evading,” said one economist familiar with the area. “Now at a lower rate they are paying because the penalties are so heavy.”

Conservatives have similarly celebrated Bremer’s move in Iraq. “Such low rates will put Iraq on a par with Hong Kong and flat-tax-land Russia,” editorialist Amity Shlaes wrote in the Financial Times. “They contrast favorably with the onerous regimes of some neighbors.”

American flat-tax advocates have made little headway at home, in part because Democrats say it would disproportionately hurt lower-income Americans and because expensive tax breaks such as the deductions for mortgage interest and charitable donations are beloved in both parties. But in places such as Russia, the Baltic states and Iraq, there was no well-established tax code defended by an army of lobbyists. “Somehow, it’s easier when you start from scratch,” Norquist said.

The 15 percent rate does not take effect until January. In the meantime, Bremer has abolished all taxes except for real estate, car sales, gasoline and the pleasantly named “excellent and first class hotel and restaurant tax.” Even while leaving these Hussein-era levies in place, Bremer exempted his coalition authority, the armed forces, their contractors and humanitarian organizations. Exempting occupation personnel leaves only the Iraqis to pay taxes, as well as journalists, businesspeople and other foreigners.

Looking back at the failed attempt by presidential candidate Forbes to rally U.S. public support behind the flat tax, Gene Sperling, a senior Clinton economic adviser who is with the Council on Foreign Relations, said wryly, “If Steve Forbes does a bus tour [of Iraq] to promote it, I hope they have adequate security."

Flat tax system imposed on Iraq

U.S. Administrator Orders 15% Rate

The Washington Post reports:

“The highest individual and corporate income tax rates for 2004 and subsequent years shall not exceed 15 percent,” Bremer wrote in Coalition Provisional Authority Order Number 37, “Tax Strategy for 2003,” issued last month.

The flat tax, long a dream of economic conservatives, is finally getting its day — not in the United States, but in Iraq. It took L. Paul Bremer, the U.S. administrator in Baghdad, no more than a stroke of the pen Sept. 15 to accomplish what eluded the likes of publisher Steve Forbes, former representative Jack Kemp (R-N.Y.), former senator Phil Gramm (R-Tex.) and former representative Richard K. Armey (R-Tex.) over the course of a decade and two presidential campaigns.

Voila, Iraq has a flat tax, and the 15 percent rate is even lower than Forbes (17 percent) and Gramm (16 percent) favored for the United States. And, unless a future Iraqi government rescinds it, the flat tax will remain long after the Americans have left.

“It’s extremely good news,” said Grover Norquist, head of Americans for Tax Reform and a Bush administration ally. Bremer’s vaguely worded edict leaves open the possibility that Iraqis could face different levels of taxation below 15 percent, but “they told me it’s a flat rate and it appears as though it’s a flat rate,” Norquist said. The tax fighter added: “It might be a hint to the rest of us.”

NO HISTORY OF PAYING TAXES IN IRAQ

Bremer’s new economic policy for Iraq will slash Saddam Hussein’s top tax rate for individuals and businesses from 45 to 15 percent. Of course, since Hussein’s government, like others in the Middle East, almost never enforced tax collection, there is no real history of paying taxes in the country.

During the more than three decades of Baath Party rule, Hussein ran a centrally controlled economy with most large businesses owned or operated by the state. The government also managed the import of most goods.

John B. Taylor, undersecretary of the Treasury for international affairs, said the Iraq flat tax was discussed before the war as preliminary planning was done with the help of some Iraqi exiles.

After major combat ended, the discussions continued with Iraqis in Baghdad, with emphasis on tax policies adopted by other countries making the transition from controlled economies. “One was Russia and subsequently Ukraine, where we heard good things after flat taxes were adopted,” Taylor said.

On Sept. 22, Bremer told the Senate Appropriations Committee: “Iraq’s new tax system is admirably straightforward. The highest marginal tax rate on personal and corporate income is 15 percent.”

Iraq’s new finance minister, Kamil Mubdir Gailani, is considered a follower of Ahmed Chalabi, the Western-oriented banker who has closely adhered to the Bush administration’s economic policies, according to one expert on the Iraqi economy. Gailani presented the new Iraq finance program, including the flat tax, at a recent international meeting.

“A piece of social engineering is being done on Iraq, but it has almost no support from other members of the U.S.-appointed Iraqi Governing Council,” said a Middle East expert who heard Gailani’s presentation.

Proponents of the flat tax have long favored this kind of tax system for Iraq. Without much of a framework to start with, Iraq “need not worry about all the political and transition problems that have made adoption of fundamental tax reform here so difficult,” Bruce Bartlett, an economist in the Reagan and first Bush administrations, wrote this spring. “It is gratifying, therefore, that leaders of the new Iraq are said to be looking at a flat rate tax system for their country.”

RUSSIA SEEN AS A MODEL FOR IRAQ

Bartlett, once an aide to Kemp and now with the National Center for Policy Analysis, said the model for Iraq should be Russia, which in 2001 set a 13 percent flat tax on individual income. The Bush administration, still disturbed by much higher tax rates here, has said it admires Russia’s flat tax. Russia “understands the importance of getting the tax structure right in your economy,” Commerce Secretary Donald L. Evans told the conservative Heritage Foundation last year.

President Bush, in Russia last year to see President Vladimir Putin, said: “The good news is that the flat tax in Russia is a good, fair tax — much more fair, by the way, than many Western countries, I might add.”

“At the previous 40 percent to 50 percent, Russian people were evading,” said one economist familiar with the area. “Now at a lower rate they are paying because the penalties are so heavy.”

Conservatives have similarly celebrated Bremer’s move in Iraq. “Such low rates will put Iraq on a par with Hong Kong and flat-tax-land Russia,” editorialist Amity Shlaes wrote in the Financial Times. “They contrast favorably with the onerous regimes of some neighbors.”

American flat-tax advocates have made little headway at home, in part because Democrats say it would disproportionately hurt lower-income Americans and because expensive tax breaks such as the deductions for mortgage interest and charitable donations are beloved in both parties. But in places such as Russia, the Baltic states and Iraq, there was no well-established tax code defended by an army of lobbyists. “Somehow, it’s easier when you start from scratch,” Norquist said.

The 15 percent rate does not take effect until January. In the meantime, Bremer has abolished all taxes except for real estate, car sales, gasoline and the pleasantly named “excellent and first class hotel and restaurant tax.” Even while leaving these Hussein-era levies in place, Bremer exempted his coalition authority, the armed forces, their contractors and humanitarian organizations. Exempting occupation personnel leaves only the Iraqis to pay taxes, as well as journalists, businesspeople and other foreigners.

Looking back at the failed attempt by presidential candidate Forbes to rally U.S. public support behind the flat tax, Gene Sperling, a senior Clinton economic adviser who is with the Council on Foreign Relations, said wryly, “If Steve Forbes does a bus tour [of Iraq] to promote it, I hope they have adequate security."

Washington Insiders' New Firm Consults on Contracts in Iraq

The NYTimes reports:

A group of businessmen linked by their close ties to President Bush, his family and his administration have set up a consulting firm to advise companies that want to do business in Iraq, including those seeking pieces of taxpayer-financed reconstruction projects.

The firm, New Bridge Strategies, is headed by Joe M. Allbaugh, Mr. Bush's campaign manager in 2000 and the director of the Federal Emergency Management Agency until March. Other directors include Edward M. Rogers Jr., vice chairman, and Lanny Griffith, lobbyists who were assistants to the first President George Bush and now have close ties to the White House.

At a time when the administration seeks Congressional approval for $20.3 billion to rebuild Iraq, part of an $87 billion package for military and other spending in Iraq and Afghanistan, the company's Web site, www.newbridgestrategies.com, says, "The opportunities evolving in Iraq today are of such an unprecedented nature and scope that no other existing firm has the necessary skills and experience to be effective both in Washington, D.C., and on the ground in Iraq."

The site calls attention to the links between the company's directors and the two Bush administrations by noting, for example, that Mr. Allbaugh, the chairman, was "chief of staff to then-Gov. Bush of Texas and was the national campaign manager for the Bush-Cheney 2000 presidential campaign."

The president of the company, John Howland, said in a telephone interview that it did not intend to seek any United States government contracts itself, but might be a middleman to advise other companies that seek taxpayer-financed business. The main focus, Mr. Howland said, would be to advise companies that seek opportunities in the private sector in Iraq, including licenses to market products there. The existence of the company was first reported in National Journal, a weekly magazine of government and politics.

Mr. Howland said the company was not trying to promote its political connections. He said that although Mr. Allbaugh, for example, had spent most of his career "in the political arena, there's a lot of cross-pollination between that world and the one that exists in Iraq today."

As part of the administration's postwar work in Iraq, the government has awarded hundreds of millions of dollars in contracts to American businesses. Those contracts, some without competitive bidding, have included more than $500 million to support troops and extinguish oil field fires for Kellogg, Brown & Root, a subsidiary of Halliburton, which Vice President Dick Cheney led from 1995 until 2000.

Of the $3.9 billion a month that the administration is spending on military operations in Iraq, up to one-third may go to contractors who provide food, housing and other services, some military budget experts said. A spokesman for the Pentagon said today that the military could not provide an estimate of the breakdown.

Administration officials, including L. Paul Bremer III, the top American official in Iraq, have said all future contracts will be issued only as a result of competitive bidding. Already, the Web site for the Coalition Provisional Authority, http://cpa-iraq.org/, lists 36 recent solicitations, including those for contractors who might sell new AK-47 assault rifles, nine-millimeter ammunition and other goods for new army and security forces.

New Bridge Strategies was established in May and recently began full-fledged operations, including opening an office in Iraq, its officials said. They added that a decision by the Governing Council of Iraq to allow foreign companies to establish 100 percent ownership of businesses in Iraq, an unusual arrangement in the Mideast, had added to the attractiveness of the market.

Mr. Howland is a principal of Crest Investment in Houston and was president of American Rice, once a major exporter to Iraq. Richard Burt, ambassador to Germany in the Reagan administration and a former assistant secretary of state, and Lord Powell, a member of the British House of Lords and an important military and foreign-policy adviser to Prime Minister Margaret Thatcher, are among the 10 principals.

Mr. Allbaugh, the chairman, spent most of his career in Texas politics before Mr. Bush appointed him to head the federal disaster agency. Mr. Allbaugh, who now heads his own consulting firm here, did not return calls to his office today.

Mr. Rogers, the vice chairman who was a deputy assistant to the first President Bush and an executive assistant to the White House chief of staff, is also vice chairman of Barbour Griffith & Rogers, one of the best-connected Republican lobbying firms in the capital. Mr. Rogers founded it in 1991 with Haley Barbour, who became chairman of the Republican National Committee and is now running for governor of Mississippi.

Shortly after leaving the White House, Mr. Rogers was publicly rebuked by the first President Bush after he signed a $600,000 contract to represent a Saudi, Sheik Kamal Adham, who was a main figure under scrutiny in a case that involved the Bank of Commerce and Credit International. Mr. Rogers canceled his contract to represent the sheik, former head of Saudi intelligence.

Mr. Griffith, a director of the new company, is chief operating officer of Barbour Griffith & Rogers, which he joined in 1993. He was special assistant for intergovernmental affairs to the first President Bush and later worked under him as an assistant secretary of education.

Until November, Mr. Rogers's wife, Edwina, was associate director of the National Economic Council at the White House. Reached by telephone today, Mr. Rogers said he did not want to speak for the record and referred a reporter to Mr. Howland.

The company Web site says the company was "created specifically with the aim of assisting clients to evaluate and take advantage of business opportunities in the Middle East following the conclusion of the U.S.-led war in Iraq."

American To Oversee Iraqi Oil Industry

The US is preparing to install an American chairman on a planned management team of the Iraqi oil industry, providing further ammunition to critics who have questioned the Bush administration's agenda in the Middle East.

The Guardian reports:
The administration is planning to structure the potentially vast Iraqi oil industry like a US corporation, with a chairman and chief executive and a 15-strong board of international advisers.

According to a report in the Wall Street Journal, it has lined up the former chief executive of the US division of Royal Dutch/Shell, Philip Carroll, to take the job of chairman.

Large scale decisions on investment, capital spending and production are likely to need the approval of the advisory board, which will act like a board of directors. The day-to-day management team will be vetted by US officials and is likely to be made up of existing and expatriate Iraqi oil officials.

The structure is likely to anger opponents of the administration who argue that the US is wielding too much power in Iraq.

By involving non-Iraqis, the US could also expose itself to the accusation that it is attempting to take control of the industry and open the door to foreign investment by major western oil companies - a perception the Bush administration is keen to avoid.

The Middle East has, since the early-to-mid-1970s, largely closed the door on foreign oil firms - but contracts have been awarded to engineering and construction firms such as Bechtel, which was recently handed a $600m (£380m) commission in Iraq by the US Agency for International Development.

US and Iraqi engineers have resumed modest oil production in the south of the country, in fields close to Basra.

The other major field in the north, near Kirkuk, has yet to be restarted, but is expected to begin pumping oil in the next few days. The Basra fields produced 60% of Iraq's pre-war production of around 2.5m barrels a day.

The US is pushing for an end to economic sanctions to allow the oil to be freely exported.

A handful of Iraqi oil officials have been attempting to restore some order to the country's energy infrastructure and have been meeting regularly with the US military in Baghdad. The US has been eager to get the cooperation of the skilled Iraqi oil administration, but an attempt to impose a structure on the industry with outside involvement could cause friction.

The oil minister in the ousted Saddam regime, Amer Mohammed Rasheed, is on the US's most-wanted list.

Iraq, with 112bn barrels of proven reserves, is second only to Saudi Arabia, and has the potential to become a superpower in the oil industry. Experts believe that with billions of dollars of investment in the nation's crippled infrastructure it could produce up to 6m barrels a day within five or six years. There are believed to be 200bn barrels of probable reserves.

The oil beginning to pump in Iraq is being used for domestic purposes. Once exports are up and running again, US and British officials have said the aim is to put the proceeds into a fund to pay for the reconstruction of Iraq. But details of the fund, including who would administer it, have been scant.

The new management team and part of the advisory board are expected to be named next week. The chief executive would play a similar role to the former oil minister and would represent Iraq at meetings of Opec, the organisation of oil exporting nations. The position of vice chairman is expected to be filled by Fadhil Othman, who led Iraq's oil marketing group before Saddam came to power 24 years ago.

Thamir Gadhban, a senior oil ministry official working to restore order to the industry in Baghdad, told the Journal that he expected the chief executive to come from the ranks of the existing hierarchy. "The Iraqi oil industry is not a new one, and there are experienced people in the ministry of oil and its organisations," he said.