The Handover That Wasn't

Before his departure, CPA chief Paul Bremer issued 100 Orders to dramatically restructure Iraq's economy to fit free-market ideals. And no Iraqi, including future elected officials, can undo them

In Foreign Policy in Focus, Antonia Juhasz writes:

The U.S. occupation of Iraq officially ended on June 28, 2004 , in a secret ceremony in Baghdad. Officially, "full sovereignty" was handed from the Americans to the Iraqi Interim Government. But it was clear from the start that this was sovereignty in name, not in deed. First, there is the continued military occupation: 138,000 U.S. soldiers and Marines, plus 20,000 troops from other countries and an estimated 20,000 contractors, all fully under U.S. control and immune to Iraqi laws. Equally debilitating, however significantly less well reported upon, is the continued political and economic occupation by the Bush administration and its corporate allies.

The most important tools being used by the Bush administration to maintain varying degrees of economic and political control in Iraq are the 100 Orders enacted by L. Paul Bremer, III, head of the now defunct Coalition Provisional Authority (CPA) before his departure. It was thought that the "end" of the occupation would also mean the end of the Orders. Instead, in his final Order enacted on his last day in the country, Bremer simply transferred authority for the Orders over to the new Prime Minister, Iyad Allawi. For his part, Allawi – a thirty-year exile of Iraq with close ties to both the CIA and British Intelligence Services – is considered America 's new man in charge of Iraq .

Bremer also ensured the implementation of the Orders by stacking every Ministry with U.S.-appointed authorities with five-year terms – well into the period of the new, elected government, which is to take office by the end of this year.

The Orders are exercised pursuant to the Iraqi interim constitution, the Transitional Administration Law (TAL). The Annex to the TAL states that the Orders can only be overturned with the approval of the president, the two vice presidents and a majority of the ministers.

But the Annex also denies the interim government from taking "any actions affecting Iraq 's destiny" beyond the election of an Iraqi government. The identical sentence appears in UN Security Council Resolution 1546, which outlines Iraq's transition to "sovereignty." Thus, while Allawi may succeed in overturning a few less far-reaching Orders if for no other reason than to demonstrate his independence from the Americans, it is beyond his authority to change any fundamental laws.

And, as Bremer said about the Orders, "You set up these things and they begin to develop a certain life and momentum on their own – and it's harder to reverse course."

It is difficult to over-state how far-reaching the Orders are. As described in Order #39 on Foreign Investment, the Orders are intended to do no less than "transition [ Iraq ] from a ... centrally planned economy to a market economy." This goal is explained in greater detail by BearingPoint, Inc., the Virginia based corporation that received the $250 million contract to facilitate this transition. The contract states:

"It should be clearly understood that the efforts undertaken will be designed to establish the basic legal framework for a functioning market economy; taking appropriate advantage of the unique opportunity for rapid progress in this area presented by the current configuration of political circumstances... Reforms are envisioned in the areas of fiscal reform, financial sector reform, trade, legal and regulatory, and privatization."

The (New and Improved) Bremer Orders

A sampling of the most important Orders demonstrates the economic imprint left behind by Bremer:

Order #39 allows for the following: (1) privatization of Iraq's 200 state-owned enterprises; (2) 100 percent foreign ownership of Iraqi businesses; (3) "national treatment" of foreign firms; (4) unrestricted, tax-free remittance of all profits and other funds; and (5) 40-year ownership licenses. Thus, it allows the U.S. corporations operating in Iraq to own every business, do all of the work, and send all of their money home. Nothing needs to be reinvested locally to service the Iraqi economy, no Iraqi need be hired, no public services need be guaranteed, and workers' rights can easily be ignored. And corporations can take out their investments at any time.

Order #40 turns the banking sector from a state-run to a market-driven system overnight by allowing foreign banks to enter the Iraqi market and to purchase up to 50 percent of Iraqi banks.

Order #49 drops the tax rate on corporations from a high of 40 percent to a flat rate of 15 percent. The income tax rate is also capped at 15 percent.

Order #12 enacted on June 7, 2003 and renewed on February 24, 2004, suspends "all tariffs, customs duties, import taxes, licensing fees and similar surcharges for goods entering or leaving Iraq, and all other trade restrictions that may apply to such goods." This led to an immediate and dramatic inflow of cheap consumer products, which has essentially wiped out all local providers of the same products. This could have significant long-term implications for domestic production as well.

Order #17 grants foreign contractors, including private security firms, full immunity from Iraq 's laws. Even if they do injure a third party by killing someone or causing environmental damage such as dumping toxic chemicals or poisoning drinking water, the injured third party can not turn to the Iraqi legal system, rather, the charges must be brought to U.S. courts under U.S. laws.

Order #77 established the Board of Supreme Audit and named its president and his two deputies. The Board oversees inspectors in every Ministry with wide-ranging authority to review government contracts, audit classified programs, and prescribe regulations and procedures.

Order #57 created and appointed an inspector within every Iraqi Ministry with five-year terms who can perform audits, write policies, and have full access to all offices, materials, and employees of the Ministries.

Then there are the approximately 200 mostly U.S. and other international advisers who will remain embedded as consultants in every Iraqi Ministry well after the official occupation has ended.

Clearly, the Bremer Orders fundamentally altered Iraq's existing laws. For this reason, the Bremer Orders are also illegal. Transformation of an occupied country's laws violates the Hague regulations of 1907 (the companion to the 1949 Geneva conventions, both ratified by the United States), and the U.S. Army's Law of Land Warfare. Indeed, in a leaked memo, British attorney general, Lord Goldsmith, warned Tony Blair that "the imposition of major structural economic reforms would not be authorized by international law."

Following the Money

The U.S. will also exert significant control over Iraq by holding the strings to the largest purse in the country for the foreseeable future.

In June 2004, the U.S. General Accounting Office reported that the CPA had spent virtually all of Iraq's money but relatively little of its own since the end of "active engagement."

There are two primary pots of money earmarked for Iraq's reconstruction. The largest is the approximately $24 billion of U.S. taxpayer money appropriated by Congress last year. The second is known as the Development Fund for Iraq (DFI) worth about $18 billion. This is primarily money from Iraq's oil revenues and was controlled by the CPA until authority for the fund was handed over to the new Interim Government on June 28.

While the CPA controlled the DFI, it spent approximately $13 billion from the fund. On the other hand, it only spent about $8.2 billion of the U.S. appropriation. Thus, the DFI is almost out of money, while the U.S. appropriation has hardly been touched. Control of this money now shifts to John Negroponte, the new U.S. Ambassador to Iraq . In addition to the largest pot of money in Iraq , Negroponte will exercise control over one of the largest embassies in the entire world with some 1,500 employees with offices throughout Iraq .

Pay for the Reconstruction

Reconstruction is the one thing that the U.S. is obligated under international law to do in Iraq . U.S. taxpayers have pledged billions of dollars toward this effort. However, the New York Times reported on June 30, 2004 , that fewer than 140 of 2,300 promised construction projects are even under way in Iraq and there have been widespread reports about waste, fraud, and abuse in the projects that have started.

Supplies of electricity and water are no better for most Iraqis, and in some cases are far worse than they were before the invasion. In fact, UN special envoy Brahimi said upon leaving Iraq that after security, the lack of reliable electricity is the number one problem facing Iraq today. Drinking water throughout the country is in a crisis state, with some villages having no access to water while larger cities receive water approximately 50 percent of the time – leading to vast outbreaks of cholera, diarrhea, nausea, kidney stones, and death. Destroyed bridges continue to create monstrous bottlenecks in many parts of the country. Iraq 's horribly overburdened hospitals need electricity, water, and sewage to function. Hospitals also need the medicines and medical supplies that are in woefully inadequate supply.

With few reconstruction projects underway, and with Bremer's rules favoring U.S. corporations, there has been little opportunity for Iraqis to go back to work, leaving nearly two million unemployed one and a half years after the invasion. Attempts by the Bush administration to reverse this have been minimal, at best. Only three months after Bremer pledged that 50,000 Iraqis would find jobs at construction sites before the formal transfer of sovereignty, fewer than 20,000 local workers are employed.

Compounding these problems is the ongoing security situation, which has slowed reconstruction and vastly increased the costs. Even Iraqis who may have initially welcomed the ouster of Hussein have become enemies of an occupation that increasingly reveals its true objectives: U.S. political and economic exploitation and dominance. This is one reason why U.S. contractors report that as much as one out of every three reconstruction dollars is going toward security costs rather than rebuilding.

End the Occupation

The Bremer Orders are both immoral and illegal and must be repealed to allow Iraqis to govern their own economic and political future. Given the Bush administration's failure to quickly, fairly, or transparently allocate U.S. reconstruction funds, and the complete lack of oversight of the CPA's depletion of nearly all of the DFI, the remainder of U.S. reconstruction funds should be turned over to full UN authority until free and democratic elections are held in Iraq, at which time the money should be turned over to the Iraqis themselves.

Reconstruction of Iraq should be based on rebuilding the economy to maximize fulfilling the long-term needs of Iraqis. All contract processes should be completely transparent and accessible to Iraqis. The awarding of contracts should be done with preference given first to Iraqi companies, experts, and workers. If no Iraqi company is capable of performing necessary work, preference should be given to international humanitarian organizations. If non-Iraqi companies are necessary, contracts must be open to global competition and profit margins held as low as possible by using fixed fees. Oversight must be immediate, independent, transparent, and thorough.

The U.S. needs to extricate itself from Iraq in every way other than the provision of money to pay for the reconstruction – done by and for Iraqis – and to pay for a truly multinational (non-U.S.) peacekeeping force to bring the stability required both for reconstruction and for truly free and democratic elections. The occupation must end.

"Bush's Iraq: An Appointocracy"

Naomi Klein reports:

'The people of Iraq are free," declared U.S. President George W. Bush in Tuesday's State of the Union address. The day before, 100,000 Iraqis begged to differ. They took to the streets of Baghdad shouting "Yes, yes to elections. No, no to selection."

According to Iraq occupation chief Paul Bremer, there really is no difference between the White House's version of freedom, and the one being demanded on the street. Asked on Friday whether his plan to form an Iraqi government through appointed caucuses was headed toward a clash with Ayatollah Ali al-Sistani's call for direct elections, Mr. Bremer said he had no "fundamental disagreement with him."

It was, he said, a mere quibble over details. "I don't want to go into the technical details of refinements. There are, if you talk to experts in these matters, all kinds of ways to organize partial elections and caucuses. And I'm not an election expert, so I don't want to go into the details. But we've always said we're willing to consider refinements."

I'm not an election expert either, but I'm pretty sure there are differences here than cannot be refined. Ayatollah al-Sistani's supporters want every Iraqi to have a vote, and for the people they elect to write the laws of the country -- your basic, imperfect, representative democracy.

Mr. Bremer wants his Coalition Provisional Authority (CPA) to appoint the members of 18 regional organizing committees. The committees will then select delegates to form 18 selection caucuses. These selected delegates will then further select representatives to a transitional national assembly. The assembly will have an internal vote to select an executive and ministers who will form the new government of Iraq. That, Bush said in his address, constitutes "a transition to full Iraqi sovereignty."

Got that? Iraqi sovereignty will be established by appointees appointing appointees to select appointees to select appointees. Add to that the fact that Mr. Bremer was appointed to his post by President Bush and that Mr. Bush was appointed to his by the U.S. Supreme Court, and you have the glorious new democratic tradition of the appointocracy: rule by appointee's appointee's appointees' appointees' appointees' selectees.

The White House insists that its aversion to elections is purely practical: there just isn't time to pull them off before the June 30 deadline. So why have the deadline? The most common explanation is that Bush needs "a braggable" on the campaign trail: When his Democratic rival raises the specter of Vietnam, Mr. Bush will reply that the occupation is over, we're on our way out.

Except that the United States has absolutely no intention of actually getting out of Iraq. It wants its troops to remain, and it wants Bechtel, MCI and Halliburton to stay behind and run the water system, the phones and the oil fields. It was with this goal in mind that, on Sept. 19, Mr. Bremer pushed through a package of sweeping economic reforms that The Economist described as a "capitalist dream."

But the dream, though still alive, is now in peril. A growing number of legal experts are challenging the legitimacy of Mr. Bremer's reforms, arguing that under the international laws that govern occupying powers -- the Hague Regulations of 1907 and the 1949 Geneva Conventions -- the CPA can only act as a caretaker of Iraq's economic assets, not as its auctioneer. Radical changes such as Mr. Bremer's Order 39, which opened up Iraqi industry to 100 per cent foreign ownership, violate these laws and could therefore be easily overturned by a sovereign Iraqi government.

That prospect has foreign investors seriously spooked, and many are opting not to go into Iraq. The major private insurance brokers are also sitting it out, having assessed Iraq as too great an expropriation risk. Mr. Bremer has responded by quietly canceling his announced plan to privatize Iraq's 200 state firms, instead putting up 35 companies for lease (with a later option to buy). For the White House, the only way for its grand economic plan to continue is for its military occupation to end: only a sovereign Iraqi government, unbound by the Hague and Geneva Regulations, can legally sell off Iraq's assets.

But will it? Given the widespread perception that the United States is not out to rebuild Iraq but to loot it, if Iraqis were given the chance to vote tomorrow, they could well immediately decide to expel U.S. troops and to reverse Mr. Bremer's privatization project, opting instead to protect local jobs. And that frightening prospect -- far more than the absence of a census -- explains why the White House is fighting so hard for its appointocracy.

Under the current U.S. plan for Iraq, the transitional national assembly would hold onto power from June 30 until general elections are held no later than Dec. 31, 2005. That's 17 leisurely months for a non-elected government to do what the CPA could not legally do on its own: invite U.S. troops to stay indefinitely and turn Mr. Bremer's capitalist dream into binding law. Only after these key decisions have been made will Iraqis be invited to have their say. The White House calls this self-rule. It is, in fact, the very definition of outside-rule, occupation through outsourcing.

That means that the world is once again facing a choice about Iraq. Will its democracy emerge stillborn, with foreign troops dug in on its territory, multinationals locked into multiyear contracts controlling key resources, and an entrenched economic program that has already left 60-70 per cent of the population unemployed? Or will its democracy be born with its heart still beating, capable of building the country Iraqis choose?

On one side are the occupation forces. On the other are growing movements demanding economic and voter rights in Iraq. Increasingly, occupying forces are responding to these movements by using fatal force to break up demonstrations, as British soldiers did in Amarah earlier this month, killing six. Yes, there are religious fundamentalists and Saddam loyalists capitalizing on the rage in Iraq, but the very existence of these pro-democracy movements is itself a kind of miracle: After 30 years of dictatorship, war, sanctions and, now, occupation, it would certainly be understandable if Iraqis met further hardships with fatalism and resignation. Instead, the violence of Mr. Bremer's shock therapy appears to have jolted tens of thousands into action.

Their courage deserves our support. Last week, at the World Social Forum in Mumbai, India, author and activist Arundhati Roy called on the global forces that opposed the Iraq war to "become the global resistance to the occupation." She suggested choosing "two of the major corporations that are profiting from the destruction of Iraq" and targeting them for boycotts and civil disobedience.

In his State of the Union address, President Bush said, "I believe that God has planted in every heart the desire to live in freedom. And even when that desire is crushed by tyranny for decades, it will rise again." He is being proven right in Iraq every day -- and the rising voices are chanting, "No, no U.S.A. Yes, yes elections."

"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.