Reconstruction contracts in Iraq limited to U.S. allies

Nations that opposed war locked out of $18.6 billion

December 10, 2003|By Paul Richter | Paul Richter,LOS ANGELES TIMES

WASHINGTON - The Pentagon will bar companies from France, Germany, Russia and other countries that opposed the war in Iraq from bidding on $18.6 billion in prime contracts for reconstruction of the country, according to a memo released yesterday.

The memo, signed by Deputy Defense Secretary Paul D. Wolfowitz, says that "for the protection of the essential security interests of the United States," only companies from the United States, Iraq and 61 countries that joined the coalition against Saddam Hussein will be allowed to bid on the 26 contracts to be announced soon.

The order did not come as a great surprise to the war's opponents, diplomats in Washington said, because Bush administration officials had long said that coalition members would receive special preference in rebuilding efforts.

Nevertheless, the move is the most serious retaliation yet against the dissenters, and it comes as the Bush administration has been trying to restore relations with European allies.

Sen. Joseph R. Biden Jr. of Delaware, the top Democrat on the Senate Foreign Relations Committee, said in a statement late yesterday that the action was a "totally gratuitous slap that does nothing to protect our security interests and everything to alienate countries we need with us in Iraq."

Canada, another traditional U.S. ally that opposed this war, was among the 100-plus countries forbidden to bid.

All countries, however, will be eligible to bid for subcontracts, defense officials noted.

Wolfowitz's three-page memo said that limiting competition for the lucrative prime contracts "will encourage the expansion of international cooperation in Iraq, and in future efforts." It also will "encourage the continued cooperation of coalition members," it said.

U.S. officials have been under pressure to produce a payoff for the countries that provided troops and other military and economic assistance to the war effort.

There have been widespread public complaints in such countries as Britain, Denmark, Poland and Portugal that while U.S. giants Bechtel Corp. and Halliburton Co. have won reconstruction contracts worth hundreds of millions of dollars, the United States has not given similar opportunities to companies from allied nations.

Officials of the U.S.-led coalition have promised that more companies from allied nations will be involved in future efforts.

A spokeswoman for the French Embassy in Washington declined to comment, saying that officials in France were still unaware of the news, which broke late yesterday. Officials at the German and Russian embassies could not be reached for comment.

Although the decision is a symbolic slap at the war's opponents, it might have little effect in limiting the commercial presence of non-coalition countries in Iraq. Many companies from those nations are likely to get significant subcontracts.

For example, Siemens AG, the German industrial giant, won a $95 million subcontract from Bechtel last month to build a turbine plant in northern Iraq. The company already had about $50 million worth of subcontracts.

French and Russian companies also have long-standing relationships with Iraqi government agencies and companies. The Iraqis might want to do business with them, and they might have an edge in competition because they built many of the older systems now in place.

As a practical matter, very few companies are likely to qualify as serious competitors for the biggest contracts. Only very large firms with great financial resources and long experience dealing with the U.S. government in the Middle East have a realistic chance of competing, business executives said. The contracts will authorize work on projects to improve the electric grid, communications, public buildings, transportation, security and justice.

One contract will be awarded for management of the effort and another for the equipping of the Iraqi army.

The Los Angeles Times is a Tribune Publishing newspaper.

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