Rebuilding Iraq will cost tens of billions of dollars in next year alone, US admits

In a startling admission that the cost of occupying Iraq is spiralling out of control, the US administrator in the country, Paul Bremer, said yesterday that rebuilding Iraq would need "several tens of billions of dollars" in the next year alone.

President George Bush's administration is reportedly preparing to ask Congress for a "huge" new injection of cash for Iraq, even as it is preparing to post a record budget deficit of $480bn (£300bn) next year.

The predictions were made as two American soldiers were killed in separate attacks in Iraq, a day after George Bush vowed America would not retreat from the country in the face of a guerrilla insurgency and terror attacks.

Just to fix the constant power cuts in Iraq and meet current electricity demand will cost $2bn, Mr Bremer said in an interview with The Washington Post. He said Iraq's economic needs were "almost impossible to exaggerate". Providing clean water across the country alone will cost $16bn over the next four years.

This is on top of the $1bn a week the Pentagon says it costs to keep numbers of US soldiers in Iraq at their current levels. And this is the occupation that was supposed to pay for itself, with revenues from Iraq's vast oil reserves. But Mr Bremer said yesterday that Iraqi revenues would not be enough. US efforts to get Iraq's oil flowing are not going well, plagued by sabotage, looting and the power shortages.

Under US occupation, Iraq is only producing about 1.7 million barrels per day, Mr Bremer admitted, far less than its output of 2.5 to 3 million bpd before the war. And Mr Bremer does not expect to get oil production back to pre-war levels by October next year.

It means that Mr Bush will have to justify spending billions of American money in Iraq as he seeks re-election in 2004. Washington wants to get foreign governments to help pay the bill for Iraq, and is preparing for a donors' conference in Madrid in October. But the US may get the same answer it is getting from foreign governments to its requests for soldiers to serve in occupation forces: not unless the United Nations is given a say in running Iraq. Mr Bremer is sticking to the US line, however. "What ... makes things better if the UN is in charge of reconstruction?" he asked.

Meanwhile, the US will have to find the $13bn that Mr Bremer said engineers need to fix Iraq's antiquated power grid over the next five years. He called electric power "in many ways the key to reconstruction".

Power cuts have slowed progress in pumping oil and have led to severe fuel shortages. The power cuts and fuel shortages have added to growing resentment of the occupation.

Iraq is producing about 3,330 megawatts a day, says Mr Bremer, less than the 4,000mw a day under Saddam Hussein and well short of the 6,000mw needed to meet demand. The US administration has ordered a 400mw generator for Baghdad but does not expect to meet demand until next year.

"I keep reading stories about how it's a country in chaos," Mr Bremer said. "This is simply not true. It's not a country in chaos."

Events yesterday did little to support his case. The killing of the two US soldiers brings to 64 the number killed in combat since President Bush declared on 1 May that the war was over. The total now exceeds the number of US troops killed during the main combat phase of the invasion.One of the soldiers was killed in Fallujah, a town 30 miles west of Baghdad that has become a main resistance centre. Witnesses said a convoy drove over landmines planted in the road. Three other soldiers were wounded in the incident. Another American soldier was killed in an attack on a US convoy in Baghdad.

Several attacks are believed to take place every day, but the occupation forces only confirm those in which their soldiers die. They will not confirm those in which soldiers are injured or failed attempts.

In another incident three civilians and two Iraqi police officers were killed in a shoot-out with criminals in Kahramaneh Square in the centre of Baghdad. Witnesses said the Iraqi police caught the criminals in the middle of a robbery and when they tried to stop them a gunfight ensued.