US charts the chaos of Iraq's reconstruction programme

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A new report by the American government has highlighted the chaos of Washington's post-war reconstruction programme in Iraq, hamstrung from the start by inadequate staffing, bureaucratic infighting and mounting security costs.

The document, prepared last month by the programme's official watchdog agency, seems likely to add to the mounting pressure here for the US to extricate itself from Iraq, financially as well as militarily. Since the invasion in March 2003, the Bush administration has allocated $21bn (£12bn) into rebuilding the country, of which $18bn has already been allocated. But the White House will ask for no further funds in the budget request for the fiscal year starting next October, signalling its intention to wind down spending.

The report, leaked to The New York Times, confirms a picture that has long been obvious. Iraq's oil, electricity and water industries are struggling to return to pre-war levels of output, hindered by poor organisation, feuding between branches of government and an insurgency that grows month by month. Security routinely swallows more than 25 per cent of spending.

The document provides a wealth of fresh detail, charting from the inside how control over projects would jump from one US government agency to another, and how dozens of agencies had a hand in the process of awarding contracts, reducing it to chaos. The problems, it says, began even before the war. In November 2002, the US Army spent $1.9m producing a contingency plan, should Iraqi forces sabotage oil installations - as they had done to those of Iraqi-occupied Kuwait in February 1991.

That planning task was entrusted to Kellogg Brown & Root, a subsidiary of the Halliburton oil services group, once headed by Dick Cheney, the Vice-President. After the war, KBR was awarded the $1.4bn no-bid contract to restore Iraq's decrepit oil industry. Thereafter, Halliburton and KBR featured in a series of controversies over mismanagement and cost overruns in its Iraq operations.

Reconstruction planning before the war was kept very secret, the report says, "to avoid the impression that the US government had already decided on [military] intervention". This meant the occupation authorities had few detailed plans. And there was constant feuding between the State Department and the Pentagon, in charge of reconstruction. The latter clung to the assumption by Paul Wolfowitz, the former deputy defence secretary and a prime architect of the war, that because of Iraq's oil riches, reconstruction would pay for itself.

Instead, says the report, David Nash, a retired admiral who led the early rebuilding effort, and his staff quickly realised they would need a far larger sum, up to $100bn over several years, if rebuilding was to succeed.

"No matter how we pared the list, we needed $20bn more than we had available," Admiral Nash had said.

Every sign is that no more reconstruction money will be forthcoming from the US public coffers, beyond the small sums available for US commanders on the ground. "The US never intended to completely rebuild Iraq," Brigadier General William McCoy, commander of the Army Corps of Engineers, which currently heads the efforts, said recently.

In Congress, pressure is growing for an end to a military occupation costing $5bn a month. A Senate resolution in autumn, while opposing immediate withdrawal of the 140,000-strong US force, said 2006 must be the year in which Iraq started to take control of its security. The message is clear: foreign donors and the new Baghdad government, not the US, will have to pay for reconstruction.