European Companies Fear They'll Be Left Out in Post-war Iraq

As the U.S.-led war against Iraq enters its second week and air strikes continue to bomb Baghdad’s buildings, there’s little doubt that the reconstruction of a shattered post-war Iraq will turn out to be a massive operation. Companies around the world have already begun eyeing the prospects of lucrative contracts for rebuilding Iraq’s roads, schools, ports, bridges and other damaged infrastructure.

In Europe, in particular, British, French and German engineering and construction companies are hoping to grab plum contracts to rebuild Iraq owing to their technological expertise. But whether that will materialize depends on the United States Agency for International Development, USAID, which is in charge of overseeing and awarding contracts for the first phase of postwar reconstruction.

Iraq's reconstruction a touchy topic for the U.S.

Signs aren’t encouraging so far. USAID has invited tenders for eight large contracts, and already awarded two to U.S. firms.

The first winners in the massive money grab include the U.S. logistics group International Resources Group (IRS) and the Stevedoring Services of America (SSA). They have been given a total of $11.9 million. The IRS is expected to provide logistics for $7.1 million while the SSA has been given a $4.8 million contract to repair and manage the severely damaged but strategically important port of Umm Qasr in southern Iraq.

The Wall Street Journal reported that bidding solicitations also went out to Parsons Corp., Louis Berger Group, Inc. and engineering and construction firm Kellogg Brown & Root (KBR), a subsidiary of Halliburton, which was once headed by U.S. Vice President Dick Cheney. KBR is reported to have received the first contract to extinguish burning oilfields in Iraq and carry out the first repair work in the oil industry.

The reconstruction of Iraq is a controversial topic in the U.S., with the U.S. government being repeatedly accused of only being interested in controlling Iraq’s enormous oil fields.

The Bush administration has vehemently rejected the accusations, with several officials assuring from time to time that the oil wealth belongs to the Iraqis and should be used to benefit them. But there remains little doubt that once U.S. forces succeed in ousting Saddam Hussein, it will be the Americans who will initially be in control of Iraqi oilfields. Indeed, the U.S. is planning to finance the reconstruction of Iraq through the sale of oil.

U.S. eager to emphasize fair play

USAID, which is reported to have a budget of $900 million for rebuilding contracts in Iraq ranging from street construction to providing medical supplies, has insisted that it does not give preferential treatment to American firms when it comes to handing out contracts.

"Non-American firms are not excluded," USAID said in a press release. At the same time, the agency said that a "large enough number of U.S. applications" are already in place for the first eight projects.

The administrator of the U.S. Agency for International Reconstruction, Andrew Natsios, said on Wednesday that post-war reconstruction contracts for Iraq totaling $1.9 billion would go to American firms by law, but half of the rebuilding work will be open to subcontractors.

Even the U.S. Under Secretary of State for Economic and Agricultural Affairs, Alan Larson, on a trip to Europe this week, was eager to play down suspicions that European companies were being sidelined in the U.S. procurement process. "I am surprised there should be any concern over contracts," Larson told journalists in Brussels.

The motivation behind contract awards was to restore disrupted electricity supplies, open up ports and ensure that water was safe to drink as quickly as possible, he said. "It’s the responsible thing to do," he said. "These contracts are about how we help the Iraqi people effectively."

British firms sure of getting some work

But despite American assurances that bidding for reconstruction contracts will be fair and open to all, several European companies are worried that they will be cut out of the first phase of contracts for postwar reconstruction.

One prominent exception is Britain. Officials on both sides of the Atlantic acknowledge that British companies will be first in line after the U.S. for subcontracting work given the country’s special status as Washington's staunchest ally in the war against Iraq.

"We have had extensive discussions (with British companies) and there is no doubt that some of the American funds will go to British subcontractors," Natsios said.

British Trade Minister Patricia Hewitt, too, appeared confident British firms would be considered as contenders. "British companies have strong trade ties with the U.S. and they have much expertise to offer. That’s why I believe that many of our companies will be participating," she told DW-RADIO this week.

Britain’s Crown Agents, a procurement agency with worldwide operations, is already working on purchasing activities in the Gulf region for USAID’s Iraqi initiatives as a subcontractor. Other British companies tipped to be involved in the bidding process include the construction and engineering firms Balfour Beatty, Carillion and AMEC.

European companies fear remaining empty-handed

But while British companies can rely on their solid ties with the U.S. to expect future work in the Gulf region, many European firms will have a tougher time trying to get a foot in the door, given the souring of transatlantic relations over the Iraq crisis.

"I am quite sure that the Americans will try hard to reserve this kind of business for themselves," Rudolf Rupprecht, chief executive of German truck-maker and industrial group MAN, told Reuters.

"The rebuilding situation will depend on the development in the relationship between the United States and Europe," he said.

German firms fret

Several European countries, in particular war opponents France and Germany, are now calling for a total overhaul of the rebuilding efforts and for the United Nations to play the key role rather than the U.S.

The head of the Federation of German Industries (BDI), Michael Rogowski is also pushing for the U.N. to play a central part in Iraq’s reconstruction. He hopes that the reconstruction, much like in Afghanistan, will be decided upon within the framework of an international donor conference. "And then Germany will and must participate," he told Reuters. Rogowski added that many German firms fear not getting any contract work at all in Iraq.

Hannes Hesse, managing director of the Frankfurt-based VDMA machinery and plant builders’ association told the Financial Times, "It is obvious that the initial contracts will go to U.S. and, possibly, British companies. The political climate between the U.S. and Germany is not good, and this makes a difference for our companies."

Hesse also said that Germany could contribute to Iraq’s reconstruction because many of Iraq’s oil exploration plants and other installations were originally built by German companies in the period before the first Gulf War.

France anxious about special ties with Iraq

France, too, is urging the UN to get involved in the rebuilding of Iraq. "The UN must be at the heart of the reconstruction and administration of Iraq," French Foreign Minister Dominique de Villepin said in London on Thursday.

French firms like Renault, Peugeot, Saint-Goban and TotalFinaElf are worried that President Jacques Chirac’s strong stance against the war, which has angered both Washington and London, may result in their total exclusion from the rebuilding process.

To counter that possibility, the French Finance Ministry and the Employers’ Association MEDEF have commissioned a 10-member working group to examine "how French firms can come back to Baghdad." Paris and Baghdad have maintained a close partnership for decades. In 2001, France exported goods worth €660 million to Iraq.