Cola Wars as Coke Moves on Baghdad

Coca-Cola has returned to Iraq after an absence of nearly four decades, triggering a cola war in a lucrative but potentially hostile market.

Coke ended its 37-year exile last week by setting up a joint-venture bottling company to compete with Pepsi for 26 million consumers.

The upsides for Coke include a thirst-inducing climate and burgeoning Islamic conservatism which has banned beer and other alcoholic drinks in much of the country.

The downsides, besides Pepsi's head start, are a raging insurgency and banditry which threaten supply routes, and a perception that Coca-Cola is linked to Israel and "American Zionists".

Coke withdrew from Iraq in 1968 when the Arab League declared a boycott because of business ties to Israel, leaving Pepsi to dominate the Middle East market for soft drinks. The boycott ended in 1991, but sanctions and wars kept Coke out of Iraq.

After a trickle of Coca-Cola imports from neighbouring countries, the company is attempting a proper comeback by launching a joint venture with a Turkish company, Efes Invest, and its Iraqi partner HMBS, which will reportedly bottle the Coke in Dubai and distribute it across Iraq.

"A local bottling company will employ local people to do this," a Coca-Cola spokesman said yesterday. "This happens in most of the 200 countries in which we operate around the world, despite the perception of us as an American company."

The response in Baghdad yesterday was mixed. One drink wholesaler, Abbas Salih, said the initiative was doomed. "Coca-Cola does business with those who are shooting our brothers in Palestine," he said. "How can we drink it?"

Abu Ream, a shop owner in Baghdad, repeated a widespread conspiracy theory: "If you hold up a Coke can to the mirror, the writing says 'No Allah'," Mr Ream said. "Or maybe 'No Mohammad'. I can't remember which."

But Mr Ream said since supplies became available two years ago he had sold more Coke than Pepsi. "People like the taste better. And they like the novelty."

Coca-Cola denies any political or religious bias. "The myth is indeed sometimes perpetuated, but has no truth to it," the spokesman said. "We are a local business that employs local people ... Our Palestinian bottler employs 250 Palestinians."

After the 1990 invasion of Kuwait, sanctions led the Iraqi licence holder, Baghdad Soft Drinks, to replace the authentic Pepsi concentrate it had used with fakes smuggled from eastern Europe. Matters were not helped when Saddam Hussein's son Uday bought 10% of the company. But Baghdad Soft Drinks says Pepsi is rebuilding, with bottling operations in the capital and southern Iraq.

In the west, Coke and Pepsi have been targeted as US symbols. Entrepreneurs have produced alternatives such as Mecca-Cola and Muslim Up. But in Iraq, hostility to the US is expressed more directly in attacks on US troops; Sunni Arab insurgent sympathisers have no problem drinking and serving Pepsi.

Why is War-Torn Iraq Giving $190,000 to Toys R Us?

For the Guardian, Naomi Klein reports:

Next week, something will happen that will unmask the upside-down morality of the invasion and occupation of Iraq. On October 21, Iraq will pay $200m in war reparations to some of the richest countries and corporations in the world.

If that seems backwards, it's because it is. Iraqis have never been awarded reparations for any of the crimes they suffered under Saddam, or the brutal sanctions regime that claimed the lives of at least half a million people, or the US-led invasion, which the UN secretary general, Kofi Annan, recently called "illegal". Instead, Iraqis are still being forced to pay reparations for crimes committed by their former dictator.
Quite apart from its crushing $125bn sovereign debt, Iraq has paid $18.8bn in reparations stemming from Saddam Hussein's 1990 invasion and occupation of Kuwait. This is not in itself surprising: as a condition of the ceasefire that ended the 1991 Gulf war, Saddam agreed to pay damages stemming from the invasion. More than 50 countries have made claims, with most of the money awarded to Kuwait. What is surprising is that even after Saddam was overthrown, the payments from Iraq have continued.

Since Saddam was toppled in April, Iraq has paid out $1.8bn in reparations to the United Nations Compensation Commission (UNCC), the Geneva-based quasi tribunal that assesses claims and disburses awards. Of those payments, $37m have gone to Britain and $32.8m have gone to the United States. That's right: in the past 18 months, Iraq's occupiers have collected $69.8m in reparation payments from the desperate people they have been occupying. But it gets worse: the vast majority of those payments, 78%, have gone to multinational corporations, according to statistics on the UNCC website.

Away from media scrutiny, this has been going on for years. Of course there are many legitimate claims for losses that have come before the UNCC: payments have gone to Kuwaitis who have lost loved ones, limbs, and property to Saddam's forces. But much larger awards have gone to corporations: of the total amount the UNCC has awarded in Gulf war reparations, $21.5bn has gone to the oil industry alone. Jean-Claude Aimé, the UN diplomat who headed the UNCC until December 2000, publicly questioned the practice. "This is the first time as far as I know that the UN is engaged in retrieving lost corporate assets and profits," he told the Wall Street Journal in 1997, and then mused: "I often wonder at the correctness of that."

But the UNCC's corporate handouts only accelerated. Here is a small sample of who has been getting "reparation" awards from Iraq: Halliburton ($18m), Bechtel ($7m), Mobil ($2.3m), Shell ($1.6m), Nestlé ($2.6m), Pepsi ($3.8m), Philip Morris ($1.3m), Sheraton ($11m), Kentucky Fried Chicken ($321,000) and Toys R Us ($189,449). In the vast majority of cases, these corporations did not claim that Saddam's forces damaged their property in Kuwait - only that they "lost profits" or, in the case of American Express, experienced a "decline in business" because of the invasion and occupation of Kuwait. One of the biggest winners has been Texaco, which was awarded $505m in 1999. According to a UNCC spokesperson, only 12% of that reparation award has been paid, which means hundreds of millions more will have to come out of the coffers of post-Saddam Iraq.

The fact that Iraqis have been paying reparations to their occupiers is all the more shocking in the context of how little these countries have actually spent on aid in Iraq. Despite the $18.4bn of US tax dollars allocated for Iraq's reconstruction, the Washington Post estimates that only $29m has been spent on water, sanitation, health, roads, bridges, and public safety combined. And in July (the latest figure available), the Department of Defence estimated that only $4m had been spent compensating Iraqis who had been injured, or who lost family members or property as a direct result of the occupation - a fraction of what the US has collected from Iraq in reparations since its occupation began.

For years there have been complaints about the UNCC being used as a slush fund for multinationals and rich oil emirates - a backdoor way for corporations to collect the money they were prevented from making as a result of the sanctions against Iraq. During the Saddam years, these concerns received little attention, for obvious reasons.

But now Saddam is gone and the slush fund survives. And every dollar sent to Geneva is a dollar not spent on humanitarian aid and reconstruction Iraq. Furthermore, if post-Saddam Iraq had not been forced to pay these reparations, it could have avoided the $437m emergency loan that the International Monetary Fund approved on September 29.

With all the talk of forgiving Iraq's debts, the country is actually being pushed deeper into the hole, forced to borrow money from the IMF, and to accept all of the conditions and restrictions that come along with those loans. The UNCC, meanwhile, continues to assess claims and make new awards: $377m worth of new claims were awarded last month alone.

Fortunately, there is a simple way to put an end to these grotesque corporate subsidies. According to United Nations security council resolution 687, which created the reparations programme, payments from Iraq must take into account "the requirements of the people of Iraq, Iraq's payment capacity, and the needs of the Iraqi economy". If a single one of these three issues were genuinely taken into account, the security council would vote to put an end to these payouts tomorrow.

That is the demand of Jubilee Iraq, a debt relief organisation based in London. Reparations are owed to the victims of Saddam Hussein, the group argues - both in Iraq and in Kuwait. But the people of Iraq, who were themselves Saddam's primary victims, should not be paying them. Instead, reparations should be the responsibility of the governments that loaned billions to Saddam, knowing the money was being spent on weapons so he could wage war on his neighbours and his own people. "If justice, and not power, prevailed in international affairs, then Saddam's creditors would be paying reparations to Kuwait as well as far greater reparations to the Iraqi people," says Justin Alexander, coordinator of Jubilee Iraq.

Right now precisely the opposite is happening: instead of flowing into Iraq, reparations are flowing out. It's time for the tide to turn.