Significant foreign support to rebuild Iraq is in doubt

Sun Foreign Staff

LONDON - American officials uneasy at the prospect of spending more than $20 billion over the next year to begin rebuilding Iraq are unlikely to get significant financial help from an international donors conference that opens tomorrow in Madrid, and almost certainly not enough to reduce the U.S. contribution.

The amount now expected to be pledged at the conference totals about $3 billion - higher than the figure of a few weeks ago but substantially less than the administration expected when major fighting ended in Iraq. Based on the international pledges so far, President Bush is likely to return to Congress to ask for more money next year.

Few countries are stepping forward with substantial contributions because of a combination of ailing European economies and diplomatic blunders by Washington, European diplomats say.

"The bill will go to the United States, and I think that has nothing to do with resentment that was created before the war," said Christoph Bertram, director of the German Institute for International and Security Affairs in Berlin.

"Europe can blame the economy, but what is really happening is that nobody outside the United States - still - is happy with the amount of control held by the Americans, which is making it very easy for countries to say, 'No, we can't help because we don't have any money,'" Betram said.

President Bush has asked Congress for $20.3 billion in reconstruction aid for the next year. He is seeking another $51 billion for military operations in Iraq - in addition to $79 billion requested by the White House last spring for the war. At that time, Bush's request included $2.5 billion for reconstruction.

Several estimates have been made by U.S. and Iraqi officials of the total cost of reconstruction, the most recent ranging from $50 billion to $100 billion.

The working number used by the administration now is $55 billion through 2007, which includes $36 billion identified by a team of economic specialists led by the World Bank and the United Nations, plus $19 billion for a different set of needs identified by the American-led occupation, which includes security needs. Those figures do not include the cost of American military forces.

The reconstruction money will be used for everything from repairing roads and hospitals to clearing mines, with substantial amounts destined for Iraq's oil industry. Iraq's desperate poverty is not directly addressed by the money that will be spent, but it is hoped that repairs to the infrastructure will generate jobs.

"This is a Fiat, rather than a Cadillac, model of development," said William Orme, a spokesman for the United Nations Development Program. "This is not going to turn Iraq into Dubai."

Last week the United Nations Security Council approved an open-ended U.S. occupation of Iraq, which was hailed as a diplomatic victory by the Bush administration. The resolution, passed 15-0, designates the coalition troops in Iraq - almost solely American and British - as a "multinational force" and calls for a gradual handover of power to a new, representative Iraqi government.

After that vote, more countries stepped forward with pledges of money. But France, Germany and Russia made clear they were still unhappy with U.S. influence over the country. They wanted a stronger role for the United Nations along with tight timetables for handing over sovereignty to a provisional Iraqi government and then full control of the country over to the Iraqis.

"Start with the fact that the French and Germans were against the war, and every other reason they do not want to pay comes from that," said Dominique Moisi, senior adviser at the French Institute for International Relations. "They are saying to the U.S., 'Why should we pay for the consequences of the war we did not support? Why should we be willing to pay for a reconstruction program we have no say in?'

"The answer, of course, is that an American defeat in Iraq would be a catastrophe for the Western world," Moisi said. "I think the French feel that such an enormous amount of money is needed, whether they contribute or not is not going to mean the difference between failure and success."

Germany's and France's reluctance to offer aid for reconstruction, though, appears to be tied at least in part to their economies. Both countries have said they would not contribute more than their share of the $234 million included in a pledge by the European Union.

Their national budgets are in violation of deficit limits set by the 15-member group, and the economic growth for the union as a whole is the lowest it has been in more than a decade. Last week, the German government announced it would have to cut pension benefits, and over the summer the French government passed legislation delaying the age at which workers could retire.

"I hope the American people don't read bitterness into this," said Karsten D. Voigt, coordinator for U.S.-German relations in the German foreign ministry. "This is nothing to do with principles over the war. It has everything to do with our financial shortcomings."

The Bush Administration has steadfastly declined to predict how much money will be donated.

Voigt, though, said the Bush Administration has bungled diplomatically and that recent concessions should have been made long ago.

He referred to an announcement by National Security Advisor Condoleezza Rice, who said this week that a new agency would be set up to oversee the spending of billions of dollars in reconstruction aid.

The agency will be run by the World Bank and the United Nations - not the Coalition Provisional Authority, which has been criticized abroad as well as in the United States for handing out no-bid contracts worth billions of dollars to companies with ties to the Bush administration.

"The need for independent oversight of the money was such a basic that it's unbelievable to me that it was such a source of contention and wasted time," Voigt said.

"Imagine the German government coming to the U.S. Congress and saying, 'Please give us all this money but you will have no say on how it is spent, and in some cases, you will not know at all how it was spent,'" Voigt said. "That is a ludicrous scenario to even contemplate for any democratic government."

Aside from the United States, Japan has pledged the most toward Iraq's reconstruction, contributing $5 billion over four years, including $1.5 billion in next year. Spain, the host of the conference, has pledged $300 million and Britain $900 million, which includes money already spent and its contribution to the European Union pledge.

Canada has promised about $200 million next year and South Korea about $200 million over the next three years. Yesterday, Greece said it would provide about $200 million. The World Bank is considering low-interest loads of $1 billion over the next two years.

The Persian Gulf states have not announced how much they will contribute. Also left unanswered is how much of Iraq's foreign debt - estimated at $383 billion - countries will be willing to forgive. If Iraq were required to repay that amount, the payments would consume most or all of the future revenues from Iraq's oil production.

Earlier this year, Pentagon officials and Vice President Dick Cheney said that Iraq would be able to pay for much of its reconstruction through oil revenues.

On March 27, Paul Wolfowitz, the deputy secretary of defense, told Congress, "And on a rough recollection, oil revenues of that country could bring in between $50 [billion] and $100 billion over the course of the next two or three years. We're dealing with a country that can really finance its own reconstruction, and relatively soon."

Iraq is expected to produce virtually no oil revenues this year, and they will amount to only $35 billion by the end of 2005, according to estimates from the Coalition Provisional Authority and the Iraqi interim government. Subtracting for salaries and day-to-day operations by the Iraqi government, Pentagon officials said this week that only about $15 billion to $18 billion in oil revenues could be used for reconstruction through 2007.

A Pentagon spokesman, who spoke on condition that he not be named, said, "Our focus in not on how accurate our prewar estimates were but on how quickly Iraq's oil production can be returned to prewar levels."

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