The White House took its strongest action yet to retain control over proposed Iraq reconstruction funds when it told the US Congress that President George W. Bush would veto a bill that requires Iraq to pay back part of the money.
"Including a loan mechanism slows efforts to stabilize the region and to relieve pressure on our troops, raises questions about our commitment to building a democratic and self-governing Iraq, and impairs our ability to encourage other nations to provide badly needed assistance without saddling Iraq with additional debt," Joshua Bolten, White House budget director said in a letter to congressional leaders Oct. 21.
A pending Senate version directs Iraq to repay half of an estimated $18 billion reconstruction budget.
The House bill provides grants as the White House originally requested, but on the eve of a brief week recess Oct. 21, the chamber, in a symbolic 277-139 vote, called on congressional negotiators to support the Senate loan provision.
At presstime, Congress was expected to resume debate Oct. 27 over its emergency $85 billion supplemental funding measure for Iraq and Afghanistan.
Both House and Senate drafts now include about $18 billion for Iraq reconstruction (OGJ, Oct. 13, 2003, p. 37).
The White House requested $20.3 billion, but pending legislation cuts that figure to $18.4 billion in the Senate and $18.6 billion in the House.
Lingering disputes over whether the Iraq aid money should be in the form of loans or grants meant the bill would not be ready before a proposed Iraq donors' conference that as of last week had been scheduled for Oct. 23-24 in Madrid.
White House officials still expect Congress to eventually approve most of the funds, but had hoped to finalize the package before the Madrid meeting with key allies.
Now it appears the bill may take another week or two to complete as the White House and lawmakers spar over the US's own financial commitment to reconstruction.
While the administration ultimately is expected to largely receive its latest Iraq budget request, getting that money is going to mean spending some political capital along the way.
Recent comments by Senate Minority Leader Tom Daschle (D-SD) illustrates the frustration many lawmakers feel over how the White House has handled the issue.
"I am troubled by the conflicting statements made by the Bush administration in the past week," Daschle said Oct. 21. "The Senate was told there was an urgency to passing the supplemental [measure] because our troops in the field greatly needed the resources. Now the administration is willing to significantly delay the enactment of this bill because of their opposition to a loan for Iraq. It is troubling that the administration is willing to jeopardize these funds over a dispute over the loan—especially when the vast majority of the American people support the loan. "
The debate
What generally is not disputed is the administration's request to spend $1.2 billion for oil infrastructure repair. But what is disputed is how the US will finance the overall reconstruction request, which also goes for highway repairs, water treatment facilities, and other public works.
In an action that surprised the White House, the Senate voted 51-47 to accept an amendment by Sen. Susan Collins (R-Me.) that requires Iraq to repay half of the reconstruction funds when its economy is "stable." Under terms of the loan, if other nations to which Iraq is indebted forgive 90% of Iraq's debt, the loans would be converted to grants.
"I do not believe that it is unfair to ask the Iraqi people to invest in their own future by repaying the American taxpayer some of these dollars used to construct their infrastructure, particularly because they will clearly have the ability to do so one day," said Collins Oct. 17.
In a speech on the Senate floor, Collins emphasized that the spending request, the largest since the Marshall Plan after World War II, was necessary. "I believe, however," said Collins in her speech, "there are ways to structure our reconstruction assistance to provide the Iraqis with the assistance they need while lessening the impact on the American taxpayer."
Other issues
Meanwhile, a related $900 million plan to import into Iraq refined products for domestic use and to create a 30-day product stockpile reignited criticism from the administration's most vocal critics that its contracting procedures favor politically well-connected companies.
Citing US Army Corps of Engineers documents and a separate Oct. 8 analysis by the independent Congressional Research Service, Rep. Henry Waxman (D-Calif.) said Halliburton Co. is overcharging the US government for fuel imports into the country.
"Millions of Americans want to help Iraqis, but they don't want to be fleeced (by Halliburton)," Waxman said at a news conference.
Waxman and the ranking member of the House Energy and Commerce Committee, Rep. John Dingell (D-Mich.), have called for congressional investigations into Halliburton's oil services contract.
On the fuel issue, Waxman said that as of Sept. 18, the US paid Halliburton $300 million to import about 190 million gal of gasoline into Iraq. That average price of $1.59/gal was over double the wholesale price for fuel in the region and represents a significant markup that does not even include the company's fee of 2-7%, according to Waxman.
Responding to Waxman's statements, a Halliburton spokesperson defended the way the contract was handled. The company said Halliburton's KBR unit "continues to negotiate fair and competitive prices to provide fuel to the Iraqi people.
"We used a sound procurement process that has been approved by the government for procurement activities. We awarded the fuel acquisition contract to the suppliers who could meet the requirements defined by our client." Halliburton also said that the contract requires "the ability to acquire the necessary quantities of fuel and the ability to deliver it in a hostile environment."
Meanwhile, the highest-ranking Democrat on the Senate Armed Services Committee asked the General Accounting Office to audit the billions of dollars in contracts awarded to Halliburton and other US companies to repair war-related damage in Iraq.
Sen. Carl Levin (D-Mich.) said he fears that the White House ignored "important safeguards" and that US taxpayers are being overcharged in the process.
His actions followed a recent decision by the Bush administration to give the Department of Defense more control over future Iraq reconstruction contracts by centralizing work through a Baghdad-based Project Management Office. Halliburton's KBR oil contract is already administered by the Pentagon's Army Corps of Engineers, but nonoil work has been routed through the Department of State.
A public-interest watchdog group, Taxpayers for Common Sense, said the Pentagon's track record is much worse than State's with regard to existing reconstruction contracts. But Pentagon officials say oil-related cost estimates on Iraq have been far more difficult to monitor compared with other spending because of ongoing looting and sabotage.