In a practice recalling the mandated importation of goods under the now defunct Oil-for-Food Program, “U.S. government regulations dictated that everything, even the water in which hot dogs were boiled, to be shipped in from approved suppliers in other nations…Whatever could be outsourced was” (Chandrasekaran, 2006, pp. 9, 13). Chatterjee (2004) recounts that from schools to electricity to the military itself, what had been sacrosanct was now up for sale. Mega-corporations like Bechtel, Halliburton and KBR received no-bid, cost-plus contracts, leading to blundering mismanagement, inefficiencies and even dismantlement of the country’s electricity, health, education and sanitation infrastructure.
An accounting by Chandrasekaran (2006, p. 288) summarizes the entire snafu:
"Because of bureaucratic delays, only 2 percent of the $18.4 billion Supplemental [appropriation from the US Congress] had been spent. Nothing had been expended on construction, health care, sanitation, or the provision of clean water, and more money had been devoted to administration than all projects related to education, human rights, democracy, and governance combined. At the same time, the CPA had managed to dole out almost all of a $20 billion development fund fed by Iraq’s oil sales, more than $1.6 billion of which had been used to pay Halliburton, primarily for trucking fuel into Iraq."
Reflecting the particular style of Keynesianism favored by the dominant class, the American government used Iraqi oil to guarantee profits for American companies. Chatterjee describes the financing mechanism (2004, p. 93):
"The money from ExIm [the United States Export-Import Bank] ensured that the investments of US corporations in Iraq were risk-free. If Iraqi ministries defaulted on any of their payments to US companies, ExIm would be required to pay in their place. Then ExIm would take its money back from Iraq’s Development Fund, the acting budget for Iraq that is 95 percent made up of oil revenues."
Furthermore, “the occupation authority did take possession of $20 billion worth of revenues from Iraq’s national oil company, to spend as it wished” (Klein 2007:345). As will be discussed later, a medium-term oil bubble clearly benefits companies and governments that control oil and negatively affects any production or consumption that depends on oil, e.g., everything else (see “American Taxpayers”).
American banks have made out handsomely during the Iraq War. About $10 billion from Iraq’s coffers is deposited with U.S. banks (Glanz, 2008) through a bizarre mechanism that funnels all oil revenue through the Federal Reserve Bank of New York, skims off 5% for Kuwaiti reparations, and deposits the remaining 95% in a Ministry of Finance account at the Central Bank of Iraq (Blanchard, 2009, p. 16). Part of the substantial Iraqi surplus is the result of debt forgiveness that the United States orchestrated in 2004 to the tune of $29.7 billion, with a fraction ($4.1 billion) coming from the United States Treasury (Stiglitz & Bilmes 2009, p. 134), an extremely generous handout to the investment banks that owned that debt. All of this was in addition to CPA Order 39, which allowed Iraq’s banks to be 100 percent foreign-owned.
The Iraq War may have enshrined military Keynesianism to an extent unfathomable even by Eisenhower (Hossein-Zadeh, 2006, pp. 132-133). In Klein’s (2007, p. 13) opinion:
"Before, wars and disasters provided opportunities for a narrow sector of the economy – the makers of fighter jets, for instance, or the construction companies that rebuilt bombed-out bridges. The primary economic role of wars, however, was as a means to open new markets that had been sealed off and to generate postwar peacetime booms. Now wars and disaster responses are so fully privatized that they are themselves the new market."
Blanchard, Christopher M. 2009. “Iraq: Oil and Gas Legislation, Revenue Sharing and US Policy.” Congressional Research Service.
Chandrasekaran, Rajiv. 2006. Imperial Life in the Emerald City: Inside Iraq’s Green Zone. Knopf.
Chatterjee, Pratap. 2004. Iraq, Inc.: A Profitable Occupation. Seven Stories Press.
Glanz, James. August 5, 2008. “High Oil Prices Giving Iraq up to $79 Billion in Surplus Cash.” International Herald-Tribune.
Hossein-Zadeh, Ismael. 2006. The Political Economy of US Militarism. Palgrave MacMillan.
Klein, Naomi. 2007. The Shock Doctrine: The Rise of Disaster Capitalism. Metropolitan Books.
Stiglitz, Joseph and Linda Bilmes. 2009. The Three Trillion Dollar War: The True Cost of the Iraq Conflict. Penguin.