Tuesday, July 15, 2003

Haiku on Maxim of International Aid (and Empire-Building)

Expensive? You bet!
Donors say "okay" to pay
*if* they get to play.

July 14, 2003
U.S. Seeks Help With Iraq Costs, but Donors Want a Larger Say

WASHINGTON, July 12 — Faced with the huge cost of rebuilding Iraq, the United States has called for an international conference in October to be attended by dozens of nations — many of which opposed the war to oust Saddam Hussein — to raise billions of dollars to restore Iraq's economy.

But the Bush administration has run into a now familiar diplomatic problem. Potential donor nations say they are uneasy about financing a military occupation, and some American officials concede there will have to be more participation by other countries in deciding how money for Iraq is raised and spent.

"The donors want a say on the allocation of funds," said a Western diplomat involved in aiding Iraq. "They want credit for what they give, and they don't want to commingle their money with money for the occupation. The way things are set up now will have to be changed."

Among the nations that want a different structure for international aid to Iraq are Germany and France, two countries that opposed the war, although French and German officials emphasize that they are ready now to help rebuild Iraq.

In response to donor concerns, American officials are pressing for the creation of another element of the occupation bureaucracy, a trust fund for donations by other countries. But it is not clear whether the fund will be seen by donors as sufficiently independent.

"We've believed from the beginning that many donors would like to see a separate trust fund for donor contributions, possibly under the World Bank or the United Nations," said Alan Larson, the under secretary of state for economic affairs. "Now we are hard at work on it."

The call for aid comes at a time when the occupation of Iraq is costing the United States more money across the board. Last Wednesday, Defense Secretary Donald H. Rumsfeld disclosed that military operations in Iraq were costing $3.9 billion a month, nearly twice the estimate the administration issued in April.

The more the United States needs others to help run Iraq, the more likely it is to share power. Some experts say the same dynamic could unfold militarily.

"The administration faces a classic trade-off between keeping control and getting outside participation," said James Dobbins, who has run or helped run the reconstruction of Kosovo, Haiti, Afghanistan and other countries. "This administration does not want to lose control, but they'll have to take another look at that position."

Mr. Dobbins, who is currently director of the International Security and Defense Policy Center at the Rand Corporation, said that providing security in Iraq would probably require twice the roughly 160,000 foreign troops who are there now, and that other countries that join the rebuilding effort might not want to serve under the command structure set up by the American military.

Similarly, he said, international aid to Iraq may have to be carried out under an entirely different structure than the one currently contemplated.

"The United States will have to share power to secure resources for Iraq and to establish an image of legitimacy," he added.

The donor conference for Iraq is to take place in New York City in October. A preliminary meeting last month in New York drew more than 50 interested nations as well as representatives of the World Bank, the United Nations, the International Monetary Fund and several independent relief organizations.

The financial reserves being used to run civilian operations in Iraq are going to run out at the end of the year, or perhaps shortly thereafter, and it is far from clear how much oil revenue will be available for Iraq's reconstruction.

The current supply of about $7 billion for Iraqi nonmilitary operations came from several sources, administration officials say. These include $1.7 billion in Iraqi assets frozen in American banks since 1991, $900 million found in hiding places in Iraq and $1.6 billion from Iraqi oil sold before the war.

In addition, the United Nations has set aside $1 billion in development funds for Iraq, and Congress appropriated $2.4 billion for Iraqi reconstruction contracts by the Bechtel Group and other companies.

Administration officials say this money will be used up by the beginning of next year.

Meanwhile, L. Paul Bremer III, the occupation administrator, has submitted a budget of roughly $6 billion for the rest of this year, and it is expected that the amount for 2004 will be considerably higher.

Oil revenues for Iraq, if the country somehow manages to resume pumping two million to three million barrels a day, could bring in $15 billion to $22 billion per year at currently projected oil prices, administration officials say. But a considerable amount of this money will have to be used to pay for food, medicine and other basic needs.

The Bush administration is exploring a number of ideas about how to use oil revenue to pay for the reconstruction, according to John Taylor, the Treasury under secretary for international affairs.

One proposal would generate tens of billions of dollars by "securitizing" the oil revenues — borrowing large sums up front and having them repaid over several years. But Mr. Taylor said that this idea would run up against Iraq's tens of billions of dollars in debt to foreign countries and companies, which would almost certainly challenge the first claim of any Iraqi "oil bonds" to oil revenues.

Other ideas include setting up a fund like Alaska's and making payments to individual Iraqis, perhaps by establishing individual retirement accounts. Some officials want to privatize Iraq's oil industry and use revenues for a widely held private company. Still others say that the revenues could be managed by a development board for use in major projects.

Administration officials say there may be resistance if other countries want some say in how money is spent for Iraq. Many officials are adamant that it will be the Coalition Provisional Authority, or C.P.A. — the current name for the American and British led occupation — that decides.

"It still hasn't entirely sunk into the international community, but the C.P.A. is the government of Iraq," said a senior administration official. "There are already unfortunate misunderstandings on that. But I cannot underline that often enough. The C.P.A. is the government of Iraq."