Report: Iraq contracts have cost at least $85B

By KIMBERLY HEFLING,
Associated Press Writer

WASHINGTON - Military contracts in the Iraq theater have cost taxpayers at least $85 billion, and when it comes to providing security, they might not be any cheaper than using military personnel, according to a report released Tuesday.

The Congressional Budget Office report comes on the heels of increased scrutiny of contractors in the last year, some of whom have been investigated in connection with shooting deaths of Iraqis and the accidental electrocutions of U.S. troops.

The United States has relied more heavily on contractors in Iraq than in any other war to provide services ranging from food service to guarding diplomats. About 20 percent of funding for operations in Iraq has gone to contractors, the report said.

Currently, there are at least 190,000 contractors in Iraq and neighboring countries, a ratio of about one contractor per U.S. service member, the report says.

The study does not include monetary figures for 2008, so the total paid to contractors for work in the Iraq theater since the invasion of Iraq in 2003 is probably much higher. If spending for contractors continues at about the same rate, by the end of the year, an estimated $100 billion will have been paid to military contractors for operations in Iraq.

Sen. Kent Conrad, D-N.D., chairman of the Budget Committee, which requested the CBO review, said the Bush administration's reliance on military contractors has set a dangerous precedent.

The use of contractors "restricts accountability and oversight; opens the door to corruption and abuse; and, in some instances, may significantly increase the cost to American taxpayers," Conrad said in a statement.

The death of a Green Beret from Pittsburgh, Sgt. Ryan Maseth, who was electrocuted in January while showering in Iraq, prompted a House committee oversight hearing last month into whether contractor KBR Inc. has properly handled the electrical work at bases it is tasked with maintaining. The military has also said that five other deaths were due to improperly installed or maintained electrical devices, according to a congressional report.

Senators have also been looking into the electrical work done by contractors.

In a separate matter, a federal grand jury is investigating whether Blackwater Worldwide guards acted illegally when they opened fire in a busy Baghdad intersection last September. Seventeen Iraqis died and the shooting strained US-Iraqi relations.

The Justice Department is expected to decide soon whether to bring charges. The company itself is not expected to be prosecuted. Executives from Blackwater, based in Moyock, N.C., said recently that they planned to scale back their security contracting business and focus on other areas, in large part because of the negative attention after the shooting.

The CBO estimated Tuesday that $6 billion to $10 billion has been spent on security work, and that the prices paid are comparable to a U.S. military unit doing that work. It estimated that about 25,000-30,000 employees of security firms were in Iraq as of early 2008.

The report said the legal status of contractor personnel is uncertain, particularly for those who are armed. It also noted that military commanders have less direct authority over the actions of contractors than they would a subordinate because the contract is managed by a government contracting officer and not a military commander.

That's because that's how the government designed the relationship, said Alan Chvotkin, executive vice president and counsel for the Professional Services Council, which represents government contractors.

"There is accountability through the contract and to the contracting officer," Chvotkin said.

The use of military contractors dates to the American Revolution. During the Vietnam War, U.S. contractors were targeted by protesters who accused the companies of profiting from the war.

Since the end of the Cold War, the military has relied more heavily on contractors as it reduced the size of its force. Also, the government in general has sought to outsource more activities that are not inherently governmental.

In Iraq and surrounding countries, contractors have performed duties that otherwise would have required the deployment of more troops. About 20 percent are U.S. citizens; 40 percent are citizens of the country where they are working; and the rest are from other countries.

The personal cost to many of the employees has been great.

They've faced kidnappings and at least 1,200 have died — including four Blackwater employees who were ambushed in 2004 by insurgents in Fallujah who strung their remains from a bridge. Some female employees of contractors have alleged they were raped by co-workers in Iraq. Investigators have said a contractor was electrocuted when the air conditioner in his living room shorted, and the death is among the electrocutions under investigation.

Since the 2003 invasion of Iraq, much criticism has been directed at Halliburton, an oil services company once run by Vice President Dick Cheney.

Last year, KBR — formerly known as Kellogg, Brown & Root — separated from Halliburton and is now the Army's largest contractor, according to its Web site. It holds a multibillion-dollar contract to provide basic services including food and shelter for U.S. soldiers.

It agreed in 2006 to pay $8 million to settle six-year-old claims that it overcharged the Army for construction and other support services in the Balkans.

A KBR spokeswoman declined to comment on Tuesday.

In May, an internal audit from the Defense Department's inspector general of about $8 billion paid to U.S. and Iraqi contractors found that nearly every transaction failed to comply with federal laws or regulations aimed at preventing fraud.

A copy of the report can be found at: HERE

Iraq, Foreign Companies Stalled in Oil Negotiations

Ministry Backs Off Over Deals' Terms; Political Concerns

By GINA CHON
August 13, 2008

BAGHDAD - Oil negotiations between a handful of foreign companies and the government here appear stalled, setting back once again efforts to open up Iraqi oil fields to international companies.

A petroleum law that would provide a legal framework for foreign investment has long languished in Parliament. Still, momentum had built up in the spring and early summer for a series of limited so-called technical-service contracts negotiated between a group of major oil companies and the Iraqi Oil Ministry.

The deals, essentially consulting contracts, were limited in nature and small-scale by oil-industry standards. They were intended to serve as short-term deals that would halt or reverse declining production at a handful of specific fields, while tenders for longer-term technical contracts could be vetted.

Oil Ministry officials had said they hoped to sign contracts by the end of June. That deadline came and went without a deal. Now, talks with major oil companies, such as Royal Dutch Shell PLC, BP PLC and Exxon Mobil Corp., appear to have hit new snags.

"I'm not sure if they are going to go through," said Charles Ries, who heads economic affairs at the U.S. Embassy.

The Oil Ministry, which had been championing the deals for months, is now balking. Oil Minister Hussein al-Shahrastani in an interview said that is because the companies are insisting that part of the payment for the consulting work be in oil, and the foreign companies want preferential treatment for future oil-exploration deals. Political sensitivities in Baghdad also appear to be in play.

The Oil Ministry was scheduled to announce the contracts on June 30. But that day, Mr. Shahrastani said they weren't yet ready after all. Instead, he said that 35 companies had made the first round of bidding for separate, longer-term contracts that the ministry hopes to award next year. Bid terms for those contracts will be revealed next month as planned, the Oil Ministry said.

While the short-term consulting deals had been widely reported, they drew fresh scrutiny in Baghdad and Washington just before they were set to be signed. Sen. Charles Schumer, a Democrat from New York, and other U.S. politicians criticized them as lucrative, no-bid contracts. Mr. Shahrastani said they were negotiated in a transparent manner.

BP spokesman David Nicholas said the company is continuing discussions with the Iraqi authorities and said the company had no further comment. A spokesman for Exxon declined to discuss specifics of its negotiations.

"If the Iraqi government decides it wants international oil companies to partner with them in developing their resources, Exxon Mobil would be interested in participating," said spokesman Len D'Eramo.

A Shell spokesman declined to discuss specific talks but said the negotiations are continuing.

In the meantime, deals for new exploration and production won't occur until Iraq passes an oil law. That bill has been stalled for more than 18 months, mainly because of differences among Kurdish and Baghdad officials over who has control over signing contracts for development and other issues. The Kurds have signed several deals on their own with international companies for development inside their semi autonomous enclave.

For years, Iraqi officials have tried to lure international oil companies to help it develop its vast but underdeveloped fields. Saddam Hussein awarded some contracts in an apparent attempt to gain diplomatic leverage amid United Nations sanctions. But the sanctions restricted meaningful development.

After the U.S.-led invasion of Iraq in 2003, many Iraqi and U.S. officials, along with many Iraqi oilmen, pushed for opening the fields to competitive bidding. International participation, these people said, would raise production. Since the invasion, however, several attempts at inviting foreigners in have withered. After wresting control of its oil resources from Western powers decades ago, many Iraqis are still loath to see foreign companies back.

Write to Gina Chon at gina.chon@wsj.com

China stirs over offshore oil pact

By Peter Navarro

In yet another skirmish over oil rights in the South China Sea, China has fired a stern warning shot across the bow of ExxonMobil Corporation. China is miffed that Exxon is seeking to enter into a deal with PetroVietnam to explore for oil in waters surrounding the disputed Spratly and Paracel island chains.

China has warned Exxon to pull out of the exploration deal, describing the project as a breach of Chinese sovereignty, according to the South China Morning Post at the weekend, citing unnamed sources close to the US company.

Chinese diplomats in Washington had made verbal protests to ExxonMobil executives in recent months, and warned them the company's future business interests on the mainland could be at risk, the report said. The protests involved a preliminary cooperation agreement, it said, without indicating when it was signed.

There is much at stake in this latest dispute, and much to be learned about China's growing blue water navy strategy. According to the US Energy Information Agency, the South China Sea has estimated oil reserves of around 7 billion barrels while the US Geological Survey has estimated there may be another 20 billion barrels to be discovered. For its part, China optimistically claims the undiscovered reserves could top 200 billion barrels. This latter amount would be enough to provide China with one to two million barrels of oil a day, or as much as 25% of its current daily consumption of close to 8 million barrels.

Much of the undiscovered reserves are believed to be beneath the disputed Paracel and Spratly island chains. The Paracels are roughly equidistant from China, Vietnam and the Philippines; and both China and Vietnam as well as Taiwan lay claim to the islands. However, to Hanoi's outrage, it is China that actually commands the Paracel turf.

In 1974, China took advantage of the ongoing civil war between South and North Vietnam to overrun a garrison on the Paracels manned by South Vietnamese troops, and China has held this position to this day, over the strenuous protests of the Vietnamese government.

As for the Spratlys, all or portions are laid claim to by China and Vietnam as well as Brunei, Malaysia, the Philippines, and Taiwan. They similarly consist of a large number of small islands and reefs and contain an undetermined but possibly vast amount of reserves.

Given the high energy stakes involved, it is hardly surprising that China has also engaged in military clashes with Vietnam over the Spratlys. In 1988, Vietnam and China fought a brief naval battle over the contested islands. This left China in control of six more islands and reefs for a total of nine. In 1994, Vietnamese gunboats forced a Chinese research vessel from a disputed area.

China's latest salvo against Exxon follows on the heels of a successful effort to push another foreign multinational oil company out of the Spratlys. Last year, a similar threat by China forced BP (formerly British Petroleum) to halt plans to cooperate with Vietnam on a US$2 billion natural gas project.

China's latest effort at intimidation can only escalate tensions between two countries that have longed maintained very large standing armies. China's army is the largest in the world while Vietnam's is the largest in Southeast Asia.

While economic relations have been blossoming of late between China and Vietnam, the longer term historical and political context is one of great enmity and mistrust. In this regard, neither side has forgotten that other "Vietnam War". In 1979, China invaded Vietnam with tanks and about 90,000 troops in retaliation for Vietnam’s pro-Soviet actions in Cambodia. In the space of fewer than 10 days of fighting, anywhere from 40,000 to more than 100,000 Chinese and Vietnamese troops were killed or wounded, depending on the estimates. These figures rival the entire number of American soldiers killed in battle during its more than 10-year war in Vietnam (about 52,000).

It's not just standing armies that enter into the geopolitical equation here. As noted, China has built a string of military bases in the South China Seas while the country is the only nation seeking to develop a deep water navy capability to challenge the United States is China. A major goal of such a deep water navy would be to protect and defend the Strait of Malacca against a US oil embargo in time of conflict.

In fact, the very narrow Strait of Malacca connecting the Pacific and Indian oceans is generally regarded as a maritime choke point. It is of supreme strategic significance because most of the imported crude oil that fuels China's mighty industrial machine passes through this Strait, and China has long feared a US embargo by America's Pacific fleet should relations sour over Taiwan or some other issue.

In the particular energy context, China's South China Sea bases and growing sea power also serve another synergistic strategic agenda. They not only help protect an important sea route. They allow for the "encirclement" of the potentially energy-rich Spratlys and Paracels - a realpolitik fact of life that has not been lost on Vietnam and a possibility noted as far back as 1998 by US Congressman Dana Rohrbacher.

Of course, the tragedy here is that continued China bullying and blustering is further delaying the development of oil and gas reserves that will be urgently needed by the region as oil markets continue to tighten. Cooperative development of these reserves would boost the fortunes of all of the countries involved in the dispute while reducing pressures on the supply side of the world oil market.

Peter Navarro is a business professor at the University of California-Irvine, a CNBC contributor, and author of The Coming China Wars (FT Press). www.peternavarro.com

Civilian Genocide, Dead Americans Cost Of U.S.-Russia Proxy War

By: Paul Joseph Watson
Prison Planet
Monday, August 11, 2008

The truth behind who is primarily responsible for the bloodshed unfolding in South Ossetia and surrounding areas has been buried by the western corporate media. Georgian forces, with a green light from NATO and the support of American and Ukrainian mercenaries, launched a brutal attack targeting civilians and Russian peacekeepers timed to coincide with the opening of the Beijing Olympics so as to temporarily deflect attention before the inevitable Russian response, by which time the global media machine kicked into high gear to smear Russia as the villains of the entire piece.

Georgia

Georgia is being used as a proxy client state through which the U.S. and NATO are advancing their geopolitical motives — to the cost of Ossetian, Georgian and Russian civilians alike caught in the middle of the carnage.
To accept such a characterization is not parroting Russian military propaganda, it is a reflection of the stone cold fact that Georgia was responsible for the first provocation - which itself amounted to a war crime - that launched the conflict.

That is not to hide from the fact that Russia’s unrelenting response continues to slaughter untold numbers of innocent people.

The initial Georgian bombardment of the provincial capital Tskhinvali was primarily directed to achieve maximum civilian casualties, with residential areas, hospitals and the university being targeted, leading to at least 1500 civilian deaths according to both western and Russian sources.

“The air and artillery bombardment left the provincial capital without water, food, electricity and gas. Horrified civilians crawled out of the basements into the streets as fighting eased, looking for supplies,” reported the Associated Press.

Reports of the initial carnage metered out by Georgian forces and the slaughter of Russian peacekeepers are difficult to find, because they have already been buried under the deluge of condemnation about Russia’s heavy-handed response.

An American man living in South Ossetia says U.S. and Georgian leaders are responsible for the violence that has killed 2,000 people in the region.

American citizen and resident of South Ossetia Joe Mestas described the war crimes he witnessed being carried out by Georgian forces, back by U.S. support, against innocent civilians. “I thought that since U.S. is supporting Georgia there would be some control over the situation in South Ossetia and that there would be a peaceful solution to the conflict. But what is happening there now it’s not just war, but war crimes. George Bush and [Georgian president] Mikhail Saakashvili should answer to the crimes that are being committed – the killing of innocent people, running over by tanks of children and women, throwing grenades into cellars where people are hiding,” Mestas said. “The war is when military fight against military. But the Georgian army is killing innocent civilians. This is genocide,” he added. A prime example of media bias in shielding Georgia from responsibility for the carnage is the fact that news outlets like the BBC continue to report that 1500 civilians have been killed in Georgia, with the obvious inference being that these are victims of the Russian onslaught. But these victims were not killed in Georgia, they were killed in Ossetia - by Georgian forces.

As the Chimes of Freedom Blog elaborates, “While the Ossetians claimed over 1000 dead the BBC neither reported this or any newsreel coming out of Ossetia showing the destruction caused by the Georgian shelling of the breakaway republic. All we are getting is one-sided reports of the destruction being caused by the Russians.”

“The BBC is giving carte blanche to the Georgian point-of-view to be aired on its services while nothing whatsoever is being heard from the Ossetian side. The BBC’s repetitive playing of a statement by George Bush, given several days ago, without balancing these against statements from the Russian side indicates where the BBC is coming from.”

Other mainstream news outlets are either aping the portrayal of Georgia, which enjoys the support of the American empire and NATO, as a poor isolated little country under brutal assault by the big bully Russia, or simply ignoring events altogether and obsessing about John Edwards’ extramarital affair.

In reality, Georgia is being used as a proxy client state through which the U.S. and NATO are advancing their geopolitical motives - to the cost of Ossetian, Georgian and Russian civilians alike caught in the middle of the carnage.

As Professor Michel Chossudovsky explains, “Georgia is an outpost of US and NATO forces, on the immediate border of the Russian Federation and within proximity of the Middle East Central Asian war theater. South Ossetia is also at the crossroads of strategic oil and gas pipeline routes.”

“Georgia does not act militarily without the assent of Washington. The Georgian head of State is a US proxy and Georgia is a de facto US protectorate.”

The price of the U.S. and NATO’s latest proxy war is already being paid with the deaths of thousands of innocent civilians - along with American mercenaries supporting Georgian forces.

According to the president of South Ossetia, Eduard Kokoity, the bodies of black men were found at the site of one battle near a school.

Russian envoy Dmitry Medoyev indicated the men may have been American mercenaries.

“In yesterday’s attack, the advancing tanks were supposedly crewed by Ukrainians. Two unidentified bodies found today are said to have black skin. Possibly they are Americans but we can’t say for sure yet. We will be able to publish the official conclusions after carrying out special tests,” Medoyev said.

Last month, the United States, Georgia, Azerbaijan, Armenia, and Ukraine conducted Immediate Response 2008, a joint training exercise said to be in “spirit of the NATO Partnership for Peace program,” according to Blackanthem Military News. Immediate Response 2008 was held at the Vaziani Military Base in Georgia. In another report, a woman interviewed by Russia Today in Tskhinvali, South Ossetia, talked about the presence of Georgian troops with American insignias. “There are lots of bodies over there, a lot of people have been killed, mostly Ossetians, but also Georgians, they had American emblems on their forearms and they were in black uniforms,” she said.

Black uniforms are a trademark of Blackwater and DynCorp mercenaries (see Chris Hedges, America’s Holy Warriors). DynCorp’s presence in Eastern Europe is well documented, particularly in occupied Bosnia where it engaged in sex-trafficking and prostitution.

In a Friday press conference, Chairman of Russia’s State Duma Security Committee Vladimir Vasilyev said without U.S. aid, Tbilisi would have been unable to start military operation in South Ossetia. “The further the situation unfolds, the more the world will understand that Georgia would never be able to do all this without America,” said Vasilyev. “In essence, the Americans have prepared the force, which destroys everything in South Ossetia, attacks civilians and hospitals.”

It is entirely feasible the U.S. has “prepared the force” with mercenaries as well.

Michel Chossudovsky explores the reasoning behind Georgia’s act of provocation that launched the conflict.

US-NATO military and intelligence planners invariably examine various “scenarios” of a proposed military operation– i.e. in this case, a limited Georgian attack largely directed against civilian targets, with a view to inflicting civilian casualties.

The examination of scenarios is a routine practice. With limited military capabilities, a Georgian victory and occupation of Tskhinvali, was an impossibility from the outset. And this was known and understood to US-NATO military planners.

A humanitarian disaster rather than a military victory was an integral part of the scenario. The objective was to destroy the provincial capital, while also inflicting a significant loss of human life.

If the objective were to restore Georgian political control over the provincial government, the operation would have been undertaken in a very different fashion, with Special Forces occupying key public buildings, communications networks and provincial institutions, rather than waging an all out bombing raid on residential areas, hospitals, not to mention Tskhinvali’s University.

The Russian response was entirely predictable.

Georgia was “encouraged” by NATO and the US. Both Washington and NATO headquarters in Brussels were acutely aware of what would happen in the case of a Russian counterattack.

The question is: was this a deliberate provocation intended to trigger a Russian military response and suck the Russians into a broader military confrontation with Georgia (and allied forces) which could potentially escalate into an all out war?

With rhetoric from figures like President Bush and Condoleezza Rice becoming increasingly heated towards Russia, the potential for an escalation in tensions is readily apparent. Only the most naive would believe that the U.S. missile defense shield is anything other than a bulwark against Russian military expansion, and Russia’s response in resuming bomber patrols across the Atlantic sends a clear message.

Knowing that Americans remain completely unconvinced about the necessity of attacking Iran, have the Neo-Cons in control of the White House lit the blue touch paper for a wider war that could swing the U.S. election in favor of pro-war candidate John McCain?

Or is this merely payback for Russia lending their expertise in building Iranian nuclear reactors?

The motives will become clear in due course but what’s certain is that innocent lives will continue to be lost as the American empire lurches into its next theater of conflict and the Neo-Cons play a deadly game that could have devastating wider consequences.