Joe Hendren

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The Hijacking of a Nation:

Democracy and self determination are a farce in occupied Iraq

Foreign Control Watchdog 105, April 2004

The claims by the United States that it is bringing democracy to Iraq simply do not measure up to the facts. Paul Bremer, the US viceroy in Iraq, has imposed a free market economy, ordered mass privatisation of Iraqi State assets and signed contracts with American corporate interests, all before the Iraqi people could have their say in an election. As such privatisation and foreign ownership is outlawed under the Constitution and the laws of Iraq, this is a breach of the Hague Regulations of 1907 that state that an occupying Power must respect "unless absolutely prevented, the laws in force in the country".

The US is using the military occupation of Iraq to enforce a far-reaching economic colonisation of the country, in violation of international law. Furthermore, the US is acting to restrict an elected Iraqi transitional government from reversing changes to laws the US has imposed. This action is clearly to protect US corporate interests now in Iraq.

Making Iraq Safe For US Corporations

On the 19th of September 2003, Paul Bremer issued an Order (39) on behalf of the Coalition Provisional Authority (CPA) that "replaced" all foreign investment law in Iraq. It decreed that foreign companies could own 100% of Iraqi companies in all sectors except natural resources (i.e. oil). Foreign investors would be free to transfer all proceeds from profits, shares and dividends back home. Although foreign interests will not be able to purchase land, the Order permits companies or individuals to lease properties for up to 40 years.

Following Order 39 it was announced that over 200 Iraqi State-owned-enterprises would be offered up for privatisation (1), including electricity, telecommunications, pharmaceuticals, ports and airports. This was in line with a US Agency for International Development (USAID) document that called for "Mass Privatizations" in Iraq. This document was prepared by BearingPoint, a US contractor, which is effectively acting as a private sector International Monetary Fund (IMF) in Iraq (2).  The management contract for Iraq’s main port, Umm Qasar has gone to Stevedoring Services of America, the parent company of New Zealand Stevedoring. The operation of the port is now in private hands.

On 1st April 2004 Bremer announced Order 64, making more changes to the Iraq Companies Law of 1997, designed to encourage takeovers of existing Iraqi companies and to enforce equal treatment of foreign investors and local nationals for the purposes of establishing entities. This order also removed the previous limits placed on the percentage of shares that could be held by a single shareholder in Iraqi private sector joint stock companies.

Other changes forced on Iraq by Bremer have included allowing complete foreign ownership of Iraqi banks and removing restrictions on trade and capital flows. The top personal income tax has been slashed from 45% to 15% and import tariffs have been slashed to 5% (3). In any other country, especially in those that consider themselves to be a democracy, such changes would be regarded as totally politically driven. Yet the only Iraqis to be consulted on these changes were the 25 members of the US-appointed Iraqi Governing Council, a powerless body that acts in an advisory role to the CPA.

The Laws In Force In Iraq

The draft or interim Constitution adopted by Iraq in 1970 made the promotion of a socialist system as one of the basic goals of the state (4). It provides that "natural resources" and the "basic means of production" are owned by "the People". The Constitution also prohibits foreign ownership of immoveable property, such as land, buildings and other permanent structures. The Iraqi Companies Law of 1997 prohibits investment in, and establishment of companies in Iraq by foreigners who are not resident citizens of Arab countries. Under the provisions of the Hague Convention, these laws are still in effect and should be respected.

The point at present is not whether Iraq adopts a free market capitalist or a socialised economy. Following the fall of Saddam Hussein (Iraq’s dictator from 1979 until he was overthrown and captured by the American-led invasion and occupation in 2003), it should be entirely up to the Iraqi people to decide the type of economy they want and the laws that will govern it. Not only are the radical reforms imposed by the CPA in violation of international law, they have been imposed before the Iraqi people have had a chance to have a say in an election.

TINA Takes A Holiday In Iraq

George Bush and the CPA attempt to justify the "reforms" on the basis of the dire economic situation in Iraq, a situation they blame on Saddam. They point to figures that show that average annual incomes of Iraqis have fallen from the equivalent of US$3,600 in the early 1980s to US$600 a year (3). They point to the fact that, access to electricity, clean water and health care have plummeted. But Bush and the CPA paint a very shallow picture.

While it is true that Iraq’s economic fortunes have been in decline since the Iran-Iraq War (1980-88), the situation only became a complete catastrophe following the imposition of heavy economic sanctions by the UN Security Council after the Gulf War of 1991. As well as heavy restrictions on trade, the sanctions prevented Iraq from importing many resources necessary in order to supply electricity, clean water and medical supplies. Despite it becoming obvious that the sanctions had failed to remove Saddam from power, the US and the UK blocked many attempts to remove the sanctions. The sanctions were only removed once Saddam was removed by force.

In November 2003, Peter McPherson, the CPA’s former top economic adviser in Iraq, addressed a Congressional committee. During his report he claimed that delaying economic reforms such as radical investment measures was not a viable option, as "it would’ve deferred recovery". McPherson also boasted that the changes ordered by the CPA were "more sweeping, frankly, than anything in the Middle East", but also cautioned that "we cannot expect substantial, real growth soon. There is no evidence that that happens in a case like this" (3).

To citizens of Russia, Eastern Europe and even New Zealand, McPherson’s argument could be familiar. Describe a dire economic crisis, call for urgent "shock therapy" reform and claim that There Is No Alternative (TINA). McPherson’s caution that there may be little or no growth is either a form of "no pain, no gain" or could even be an admission that such policies have resulted in little to no growth when tried elsewhere. Indeed, Russia provides the last example of a socialised economy inflicted to market "shock therapy". These "reforms" led to a 50% fall in Gross Domestic Product, mass unemployment, widespread poverty and power in the hands of a small corrupt oligarchic minority (2). But TINA, the bloodthirsty bad tourist, is at it again in Iraq.

Are These Changes Legal?

The Hague Conventions are a set of treaties widely adopted in 1907 that carefully spelt out the duties and obligations of combatants and those holding a foreign territory under occupation. While the Geneva Conventions provided further protections, the Hague regulations contain the more specific provisions relating to the protection of property in an occupied territory (5). The United States has ratified both the Hague and Geneva Conventions.

Not surprisingly, when US occupation officials reviewed the new investment law they decided it did not violate international conventions. But there are other signs that indicate the occupying powers might not be so sure. A United States Congressional Research Service report found that the sale by an occupying Power of State assets violates the Hague Convention On The Laws Of War. "Most authorities believe that Iraq will need a legitimate government before permanent changes can be made to laws, economy and institutions," states the June 2003 report for Congress (3).

In a memo that was leaked to the media, UK Prime Minister, Tony Blair, was advised by his Attorney General, Lord Goldsmith, on the 26th March 2003 that "a further Security Council resolution is needed to authorise imposing reform and restructuring of Iraq and its government" 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" (1).

In a series of articles reporting from Iraq, Naomi Klein (6) points to other legal problems for the wholesale auction of Iraqi assets. 

Article 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" (Hague Regulations).

Usufruct is an arrangement that allows one party the right to use and derive benefit from another’s property "without altering the substance of the thing". For example, crops could be harvested and used to feed an occupying army. As crops can be planted again with no serious damage to the land this is regarded as an appropriate use of usufruct. In contrast, the imposition of massive structural changes to public assets appears to go far beyond this very limited warrant. As Klein asks "What could more substantially alter ‘the substance’ of a public asset than to turn it into a private one?". It also could be argued that any sales to foreign interests in the current environment would breach the obligation to safeguard the capital of these assets. Selling assets to selected parties, in the aftermath of a war, creating a situation where such assets are likely to fetch the lowest price, is hardly safeguarding their capital.

Article 53 of the Geneva Convention also prohibits the "destruction by the occupying Power of real or personal property belonging…to the State, or to other public authorities…except where such destruction is rendered absolutely necessary by military operations". Mass layoffs of Iraqis working in the State sector has already occurred. Asset stripping of the most profitable parts of Iraqi public institutions is likely, if it has not happened already. The Oxford English Dictionary defines destruction as "the action or process of causing so much damage to something that it no longer exists or cannot be repaired". Following completion of the mass privatisation plan in Iraq, most State services will no longer exist, and based on international experience of neo-liberal "reform" these institutions will be very difficult, if not impossible to repair, even if it is the desire of a sovereign Iraqi government to do so.

Klein also points out that the US Army’s own Law of Land Warfare states that "the occupant does not have the right of sale or unqualified use of (non military) property" (6). The Law of Land Warfare codifies the provisions of both the Hague and Geneva Conventions, together with customary law. Prior to the invasion of Iraq, US Secretary of State, Colin Powell made a commitment that any occupation of Iraq would be in accordance with international law (5). As a former general, Powell should know the Law of Land Warfare better than most.

On 22nd of May 2003, the United Nations Security Council made it clear that it expected the occupying Powers to comply with international law. Resolution 1483 abolished the sanctions against Iraq and recognised the United States and the United Kingdom as the occupying Powers of Iraq. But the Resolution also called on 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".

Yet the pillage continues. On the 23rd of March 2004 the CPA announced the Iraq Joint Venture Initiative Conference had attracted billions of dollars of private sector investment, as part of a programme to bring Iraqi State Owned Entities into partnership with the international private sector. The companies investing may not be aware of the existing Iraqi laws concerning "joint ventures", laws that limit their involvement to the completion of a specific project and prohibit them from gaining any equity capital from the Iraqi company. In a rush to formalise public private partnerships, will these laws also be forgotten?

Why Delay Democracy In Iraq?

In a touch of deep irony, the Transitional Administrative Law (TAL), signed with much fanfare on March 8th 2004, was signed on an antique desk once owned by King Faisal I (1921-1933) (7), a monarch only officially accepted by the British once he had signed the Anglo-Iraq Treaty (1922), a treaty that placed military and economic control of Iraq in British hands (8).

In the leadup to the signing of the TAL, an interim Constitution, the US was actively resisting calls for direct elections anytime soon. They proposed a system where "notables" held provincial caucuses to appoint an assembly that would appoint a government. The Shia leader, Grand Ayatollah Ali al-Sistani, successfully resisted this utterly undemocratic plan. He rejected the US claim that it would take at least a year to prepare poll cards, pointing out direct elections could be based on the oil-for-food ration-card lists that already cover the whole Iraqi population (9). Sistani feared that the US wanted to control the selection of a government because the "wrong people" will win, in particular the Shia. These "wrong people" would also include those who oppose American corporations having significant economic interests in Iraq.

Under the TAL, the US appointed Coalition Provisional Authority will hand over control to a US-appointed transitional Iraqi Government on June 30, 2004. Elections will be held for a transitional assembly no later than 31st of January 2005. A referendum on a permanent Constitution will be held by October 15 2005 and, assuming the Constitution is adopted, elections will be held later that year. Following the rejection of the US plan for regional caucuses it is most likely that the first "sovereign" Iraqi government come June 30 will be an expanded version of the US-appointed Iraqi Governing Council, an even more undemocratic proposal than the last (10).

Illegal Privatisation In Iraq Makes Renationalisation Possible

Not only is the US attempting to control the selection of a government for as long as possible, it is also acting to ensure the illegal law changes stay on the books for as long as possible. The TAL includes a statement that the laws, regulations, orders and directives issues by the CPA shall remain in force. It also states that the only way these laws can be changed is by a 75% vote "by the Iraqi Transitional Government", a body that will not exist until elections are held in 2005 (10). Order 39, Order 64 and the far-reaching contracts with the US corporate sector are safe from democracy for now.

Expect the illegal foreign investment and contract making with US corporations to be stepped up in the transitional period. Once a government is actually elected in Iraq, expect a lot of US corporate driven bleating about the sanctity of contract. Pressure will be put on the elected Iraqi government to ratify the illegal "reforms". On the other hand, if this is not the will of the Iraqi people, the next Iraqi government could cancel contracts not seen to benefit the Iraqi people. It could renationalise any assets sold to Halliburton (11) and Co, on the grounds that privatisation under occupation is illegal. Juliet Blanch, of the international law firm Norton Rose, maintains that because the "reforms" contradicted Iraq’s existing Constitution, they are "in breach of international law and are likely not enforceable" (6), and that a sovereign Iraqi government would have "quite a serious argument for renationalisation without paying compensation." She argues that US corporations such as Halliburton would have "no legal recourse" faced with such expropriation.

If going to war with Iraq made Blair a "B.liar", such a turn of events could leave Bush and Bremer in the "Briar" with the American corporate establishment. It is interesting that Bremer is now promoting "leases" with an option to buy. Despite the Security Council making it clear that it expects the US-UK occupation force to uphold the Hague Regulations and the Geneva Conventions, it is clear that the US has given scant regard to international law, in practice or in spirit. The orders of Paul Bremer, imposing a "free market" economy and unrestricted foreign investment in direct contradiction with Iraq’s existing Constitution and laws, are a violation of the requirement in the Hague Regulations for an occupying Power to respect the laws in force in the occupied country.

The fact that these changes have occurred before the Iraqi people have had a chance to have a say in an election is a profound insult to the principles of democracy and self determination. The government of Iraq, come June 30, will be far from sovereign. Most of its members will be US appointees, and it will not be able to change any of Bremer’s illegal laws. If the Iraqi people decide at the 2005 election that they wish to follow another road, it can only be hoped that the damage of free market fundamentalism can be repaired. They may even have the legal means to kick out the economic colonisers. King Faisal’s old desk, twice a symbol of imperialist overlordship in Iraqi history, is likely to remain in Baghdad. When the Iraqi people are truly free, it will be up to them to decide what they want to do with it.

Joe Hendren 27 April 2004

 

References

  1. The Guardian (7/11/03), "Pillage Is Forbidden", Arron Mate

  2. See "War Profiteers: Corporate Beneficiaries Of The US War on Iraq", by Bill Rosenberg, Watchdog 103, August 2003. It can be read online at http://www.converge.org.nz/watchdog/03/01.htm

  3. Associated Press (15/11/03), "Shock-therapy US led restructuring of Iraqi Economy in on shaky ground".

  4. US Dept of Commerce (12/9/03), "Overview of Commercial Law in Iraq".

  5. R. Dobie Langenkamp (2003), What Happens to the Oil: International Law and the Occupation of Iraq", University of Tulsa http://www.energy.uh.edu/documents/behind_the_gas_pump/Langenkamp_FullPaper.pdf

  6. The Nation, 6/11/03, ‘Bring Halliburton Home’, Naomi Klein, www.nologo.org

  7. Guardian, 8/3/04, "Iraq Interim Constitution Signed".

  8. Hiro, Dilip (2003), "Iraq: A Report From The Inside", Granta Publications, London, p. 22.

  9. Guardian, 19/1/04, "Why The US Is Running Scared Of Elections In Iraq"

  10. Klein,Naomi (25/03/04) ‘Who Is Going To Stop Them?", www.nologo.org.

  11. Halliburton – a huge US transnational corporation, with close ties to leading figures in the Bush Administration. It is one of the main contractors for the US occupation forces and the leading profiteer, so much so that it is embroiled in scandals about its ripping off the US military and the American taxpayer in Iraq and Kuwait. Foriegn Control Watchdog Editor.


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