Iraq: Who won the war?

Not the 90,000 Iraqi civilians or the 4,200 US and UK troops killed since 2003. The big winners are the money men who have made billions. Raymond Whitaker and Stephen Foley report

Five years ago today, Britain stood on the brink of war. On 16 March 2003, United Nations weapons inspec-tors were advised to leave Iraq within 48 hours, and the "shock and awe" bombing campaign began less than 100 hours later, on 20 March. The moment the neocons around President George Bush had worked so long for, aided by the moral fervour of Tony Blair, was about to arrive.

"I believe demolishing Hussein's military power and liberating Iraq would be a cakewalk," Kenneth Adelman, a leading neocon, had said a few weeks before, and so it proved. Within barely a month, Saddam's bronze statue in Baghdad's Firdaus Square was scrap metal. But every other prediction by the Bush administration's hawks proved wrong.

No weapons of mass destruction – Britain's key justification for war – have been found. The Pentagon acknowledged last week that a review of more than 600,000 captured Iraqi documents showed "no evidence that Saddam Hussein's regime had any operational links with Osama bin Laden's al-Qa'ida terrorist network".

In 2008, there are still more American troops in Iraq than during the invasion, with no exit yet in sight. Britain's Ministry of Defence has just admitted that it has been unable to withdraw as many British troops as it planned – there are 4,000 still based just outside Basra, instead of the projected 2,500. So far 3,987 American soldiers and 197 British troops have died in Iraq.

So, five years on, who can be said to have won the war? Certainly not Iraqi civilians, at least 90,000 of whom have died violently since 2003, at the most conservative estimate. Other studies have multiplied that figure by five or six. Two million Iraqis have fled the country, and at least as many again are internally displaced. Baghdad households suffered power cuts of up to eight hours a day in Saddam's time; now they can expect less than eight hours of electricity a day on average. The US troop "surge" has cut the number of murders, but there are still 26 a day in the capital. The list goes on.

Nor have the eager promotors of the war, such as Mr Adelman, fared well. (By October 2006 he was admitting: "We're losing in Iraq.") The most arrogant of them all, Donald Rumsfeld, the ex-secretary of defence, was reluctantly dropped by Mr Bush in his second term. His former deputy, Paul Wolfowitz, who famously said that WMD had been used as the excuse for war because it was the only topic Washington's bureaucracy could agree on, was forced to resign as president of the World Bank after arranging a pay rise for his girlfriend. The Senate refused to confirm John Bolton as US ambassador to the UN.

George Bush is the most unpopular President since opinion polls began, mainly because of Iraq. Tony Blair, his partner in the reckless venture, has already gone; those in a position to know believe he would still be Prime Minister had it not been for the war. The standing of both Britain and the US has suffered immeasurably, and the international scepticism engendered by manipulation of the evidence on WMD has hampered efforts to deal with nuclear threats from the likes of North Korea.

The main winners of the war are not the ones its instigators planned: Iran and al-Qa'ida. No one in Washington appeared to have calculated that to unseat Saddam, whom the US once supported as a bulwark against the Iranians, would empower the majority community in Iraq, the Shias, or that many of them would look to the world's only Shia nation, Iran. The US insists that Tehran retains nuclear ambitions, despite its own intelligence estimate that work on a weapon has stopped, but its occupation of Iraq has given Iran a hostage it could never have imagined having.

As for al-Qa'ida, it never had a foothold in Iraq until the chaos created by the invasion gave it the opportunity to establish one. And while the US is preoccupied in Iraq, the conflict it neglected, in Afghanistan, is getting worse. Al-Qa'ida has re-established itself in the lawless tribal areas of Pakistan, while its old host, the Taliban, regains ground on the other side of the Afghan border.

In early 2003, Mr Rumsfeld mused on what might be the cost of the war to come: $50bn (£25bn) or $60bn, he and White House planners thought. Five years on, the bill is already 10 times that, while here the Commons Defence Committee has just warned of a "surprising" 52 per cent increase in the cost of operations in Iraq to nearly £1.45bn in the current financial year, despite the reductions in troop levels. An unprecedented amount has been funnelled to the private sector. The big winners have been the money men.

Another army of private security guards escorts convoys, protects infrastructure projects and ferries military equipment around Iraq. These have been followed by business consultants, building project planners and government advisers, many of whom have put their lives at risk in the pursuit of a reconstructed Iraq while their companies earn billions.

An estimate last October put the number of private contractors working in Iraq at 160,000 from up to 300 separate companies. About 50,000 were private security guards from companies such as Blackwater – whose killing of 17 Iraqi civilians last September in a gun battle shone a spotlight on the US military's reliance on poorly controlled private armies. Each Blackwater guard in Iraq, of whom there have been up to 900, costs the US government $445,000 per year.

British firms have also been operating in Iraq. After courting controversy in the Nineties, Tim Spicer – whose previous company, Sandline International, was accused of breaking a United Nations embargo by selling arms to Sierra Leone – has re-emerged as a powerful player with his latest venture, Aegis Defence Services. Aegis won a $293m Pentagon contract in 2004, which has since been extended, and employs more than 1,000 contractors in the country. Another British company, Global Strategies, which calls itself a "political and security risk-management company", employs cheaper Fijian contractors for its Iraq operations.

At one point, ArmorGroup, chaired by the former foreign secretary Sir Malcolm Rifkind, was getting half its revenues from Iraq. It carried out convoy protection at rates estimated at between $8,000 and $12,000 a day, and helped to guard polling stations during the country's elections. By far the biggest winner of contracts in Iraq, though, is Halliburton, the oil and related services company run by Dick Cheney before he became US vice-president and a key architect of the war. The connections between the company and the Bush administration helped to generate $16bn in contracts in Iraq and Afghanistan in the three years from the start of 2004 – nine times as much as any other company. Halliburton decided last year to spin off the division operating in Iraq. That business, KBR, has generated half its revenues there each year since the invasion, providing private security to the military and infrastructure projects and advising on the rebuilding of the country's oil industry.

The Washington-based Center for Public Integrity, which tracks Iraqi contracts in its investigation "Windfalls of War", says the total value of contracts tendered by the US government in Iraq rose 50 per cent each year from 2004 to 2006. That had been planned to slow in 2007, but KBR said recently that the US military "surge" meant more business than previously expected. After KBR, the US security contractor DynCorp secured the most work, worth $1.8bn over the three years to the end of 2006.

Many of the biggest contract winners have extensive lobbying budgets and funds for targeting political donations. Public records show that BearingPoint, the consulting firm appointed to advise on the economic reconstruction of Iraq, has paid hundreds of thousands of dollars into Republican Party coffers, including $117,000 to the two Bush presidential campaigns. The company is being paid $240m for its work in Iraq, winning an initial contract from the US Agency for International Development (USAid) within weeks of the fall of Saddam. It was charged with supporting the then Coalition Provisional Authority to introduce policies "which are designed to create a competitive private sector".

Last year, The IoS revealed that a BearingPoint employee based at the US embassy in Baghdad was involved in drafting the controversial hydrocarbon law that was approved by Iraq's cabinet last March. The legislation opens up the country's oil reserves to foreign corporations for the first time since 1972.

Western companies will be able to pocket up to three-quarters of profits from new drilling projects in their early years. Supporters say it is the only way to get Iraq's oil industry back on its feet after years of sanctions, war and loss of expertise. But it will operate through "production-sharing agreements", which are highly unusual in the Middle East; the oil industries of Saudi Arabia and Iran, the world's two largest producers, are state-controlled.

So far, major companies such as Shell, BP and ExxonMobil have held back on investing directly in the country while the violence continues – but the war has still contributed handsomely to their record-breaking profits because of sky-high oil prices. As the US prepared to march into Iraq, crude soared to what then seemed an impossibly high $37 a barrel. Last week it reached a record $110.

The Nobel prize-winning economist Joseph Stiglitz estimates that the war has added between $5 and $10 a barrel to the price of oil. The figure could be higher, if one believes that the rise also reflects a big additional premium for the threat of future supply disruptions that might be caused by geopolitical tensions or increased terrorist activity in oil-producing regions – any of which might be traced back to the passions inflamed by the war.

The Winners

Dick Cheney

The only Washington hawk still in a position of power after the occupation went so disastrously wrong. Part of a lame-duck administration, but can look forward to a comfortable retirement: his former company, Halliburton, has done nicely out of the whole Iraq business.

Iran

Could the ayatollahs ever have imagined that the Great Satan would overthrow its great enemy, Saddam, put its Shia co-religionists in power in Iraq and make its soldiers hostage to Tehran's good will? They have George Bush where they want him, and Israel is nervous

Sir John Scarlett

Author of the notorious WMD dossier along with Alastair Campbell, he was criticised for allowing MI6 to be used for political ends. But a grateful Tony Blair granted his ambition of heading the service, and the traditional knighthood followed.

Al-Qa'ida

Saddam had no truck with Osama bin Laden's men, but that did not stop the White House convincing the US public they were in cahoots. It was the invasion that gave al-Qa'ida a foothold in Iraq and eased the pressure on it in Afghanistan and Pakistan.

The Kurds

The only Iraqis still wholeheartedly behind the occupation, and why not? America ousted the man who attacked them with poison gas, and guarantees the safety of the closest thing the Kurds have ever had to an independent nation.

Tim Spicer

Got into hot water with his previous military company, Sandline, in Sierra Leone and New Guinea. Bounced back spectacularly with Aegis Defence Services, which won a huge contract in Iraq, to the dismay of his American competitors.

The Losers

George Bush

Thanks to his invasion of Iraq, historians are seriously debating whether he is the worst President in US history. Even if Cheney and Rumsfeld were more to blame, he will bear ultimate responsibility for the damage to America's standing in the world.

The neocons

Never have arrogance and incompetence combined to such disastrous effect. The ideologues might have been "mugged by reality" and humiliated, but Iraq will suffer the consequences for decades to come.

Tony Blair

Might still be Prime Minister if Iraq had not stained his record. But given the millions he's now making, some might think that he belongs in the Winners column.

The Palestinians

Preoccupied by Iraq, the US has had little time or inclination to press Israel to talk peace, apart from the half-hearted initiative launched in Mr Bush's last year in office.

The US media

How did a press that prides itself on its rigour and accuracy get carried along by war hysteria? 'The New York Times' and WMD propaganda, anyone?

Afghanistan

The world supported the US when it overthrew the Taliban and ousted its al-Qa'ida "guests". But America switched its attention to Iraq. The result: al-Qa'ida and the Taliban have regained strength.

British security

The 7/7 bombers used Britain's role in Iraq as their excuse, and the authorities have their hands full trying to prevent disaffected young Muslims seeking to emulate them.

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