[OPE-L] Operation Corporate Freedom: The IMF and World Bank in Iraq

From: glevy@PRATT.EDU
Date: Wed Mar 29 2006 - 10:18:22 EST

From _Left Turn: Notes from the Global Intifada_
<http://www.leftturn.org>. After the article by Sen & Chu there is
"A Joint Statement Concerning the Programs of the World Bank
and International Monetary Fund in Iraq by Iraqi Trade Unions"
dated January 16.

In solidarity, Jerry


      by Basav Sen, Hope Chu

      While the three-year U.S. occupation of Iraq faces a quagmire in
operations, the economic forces of the International Monetary Fund
(IMF) and the World Bank are moving full speed ahead implementing
various economic reforms that will cause U.S.-based corporations -
Bechtel, Halliburton, and others - to proclaim, "Mission
Accomplished!" As the Bush administration touts its rhetoric of
freedom and liberation, the IMF and World Bank are busily
"liberating" Iraq's resources - oil and labor - and "freeing" Iraq's
markets. The recent rise in fuel prices in Iraq and the subsequent
riots are just a glimpse of what the future holds for Iraq under IMF
and World Bank plans.

    *Stage One: Debt cancellation for Iraq, increased control for the IMF*

      Shortly after the start of the US occupation of Iraq, the Bush
administration sent former Secretary of State James Baker on a
pilgrimage to the capitals of other wealthy countries to seek
cancellation of Saddam Hussein's odious debts. In a move that seemed
inexplicable at first, the Bush administration was using the
principle of odious debt to ask for cancellation of Iraq's Saddam
Hussein-era debt.

      Now, the political motivations behind this unexpected move are
clear. The cancellation of Iraq's debt is a Trojan horse for the
IMF, World Bank, and WTO to enter Iraq and start restructuring the
economy further, continuing where Paul Bremer's Coalition
Provisional Authority (CPA) left off. In a move reminiscent of the
Heavily Indebted Poor Countries (HIPC) program, not only debt but
debt relief is being used as a tool to restructure Iraq's economy.

      The Paris Club of Creditors, a cartel of most of the world's major
creditors (including all the G8 governments and the governments of
other wealthy countries), agreed on November 21, 2004, to cancel 80%
of Iraq's debt of about $39 billion to Paris Club members, in three
steps. The terms of the cancellation are that:

        a.. 30% of the debt would be cancelled outright;

        b.. 30% would be cancelled as soon as a standard IMF programme is
approved, according to the Paris Club press release announcing the
move, essentially conditioning debt cancellation on the
subjugation of Iraq's economic policy to the IMF;

        c.. Another 20% would be cancelled after three years, subject to
the IMF Board's review of Iraq's implementation of the terms of
the agreement, further binding Iraq to IMF conditions.

      Two things about the Paris Club "deal" are noteworthy. First, Iraq's
debt to the IMF is only about 1% of its total Paris Club debt, and
yet the IMF gets to determine the conditions for most of the debt
cancellation being offered to Iraq. This shows that the political
clout of the IMF is way out of proportion to its financial clout.

      Secondly, the Paris Club made it clear that the offer of debt
cancellation was because of "the exceptional situation of the
Republic of Iraq and... its limited repayment capacity over the
coming years." While the initial rhetoric of the Bush administration
had focused on the principle of odious debt, the Paris Club was
careful not to set a precedent for acknowledging this principle,
lest they face pressure in the future to cancel the debts of other
repressive regimes such as the apartheid regime in South Africa, the
Suharto dictatorship in Indonesia, the notorious Duvaliers of Haiti,
or the Mobutu regime in Congo. Denying the odious nature of the debt
also provides the Paris Club political cover to keep 20% of Iraq's
debt off the table. Even the Iraqi National Assembly, a body that
rarely contradicts the United States, has publicly condemned the
Paris Club deal for failing to recognize the odious nature of Iraq's
debt and consequently requiring Iraq to repay a fifth of it.

      In this manner, a move that appears on the surface to be beneficial
for Iraq  debt cancellation  is being used as a tool of control by
the World Bank, the IMF and the wealthy creditor countries. What is
more, it is a tool of control that will last long after the
withdrawal of U.S. combat forces.

      *Stage Two: The rule of the Coalition Provisional Authority*

      In this context, it is worthwhile to review how the Coalition
Provisional Authority restructured Iraq's economy. (See "World Bank
Brings Market Fundamentalism to Iraq," Economic Justice News,
September 2004) Paul Bremer passed a series of Executive Orders
(without any accountability to Iraqi people) that, among other

        a.. Laid off 500,000 government workers  400,000 of them
employees of the Iraqi Armed Forces  in a country with a
workforce of 6.5 million. This lay-off thus represented nearly 8%
of the workforce.

        b.. Changed laws governing foreign investment to "make Iraq one of
the most liberalised economies in the developing world and go
beyond even the laws in many rich countries," according to the
Financial Times. (CPA Order No. 39)

        c.. Made it illegal for Iraqi farmers to plant saved seeds and to
exchange knowledge freely. Now they are allowed to plant only
"protected" crop varieties which remain the property of the
multinational seed companies. Previously, the Iraqi constitution
did not allow patenting of plants. The CPA, however, changed the
law to allow "intellectual property" control over plant varieties.
(CPA Order No. 81)

      Every single one of these policies fit the neoliberal framework, and
sound as if they were World Bank and IMF conditions. But they
aren't. Even before the IMF and World Bank made their entry into
Iraq to any significant extent, the US occupation was unilaterally
coercing Iraq to conform to policies identical to what these
institutions would have required  and at a more accelerated pace.
There are more ways to restructure economies than through loan
conditions. What Iraq has undergone under the CPA can best be
described as a structural adjustment program imposed at gun-point.

      *Stage Three: Economic occupation by the IMF and World Bank*

      Not content with the extent to which Iraq's economy has already been
restructured on neoliberal lines by the U.S., the IMF and World Bank
have more designs for the Iraqi economy, and are using debt
cancellation as leverage to compel Iraq to comply with their
conditions. In addition, they have begun normalizing their relations
with Iraq, thereby strengthening their hand in the country. The IMF
made its first-ever loan to Iraq in September 2004. In July 2005,
the World Bank made its first loan to Iraq since 1973. This was
followed by a $100 million World Bank loan for the education sector
last November, and an IMF Standby Arrangement in December. The
cancellation of Iraq's debt under the Paris Club plan, referred to
earlier, is conditioned on Iraq entering into this Standby
Arrangement, and implementing it to the satisfaction of the IMF.

      Timing the IMF deal immediately after the elections is a move that
appears designed to prevent Iraqis from having a say in the deal. If
the deal had been signed before the elections, it would have been an
election issue. The timing of the decision spared politicians from
voters' wrath, the Washington Post pointed out in a December 28

      The recent increase in domestic fuel prices was a requirement of the
Standby Arrangement with the IMF, under which prices of petroleum
products are to rise to the levels of corresponding products in
other countries of the region by 2007. The price increases required
by the IMF are staggering: the initial increases implemented in
December on the eve of signing the Standby Arrangement were 400% for
regular gasoline and kerosene (from 20 dinars to 100 dinars per
liter, and from 5 dinars to 25 dinars per liter, respectively), and
800% for diesel (from 10 dinars to 90 dinars per liter), with
further quarterly increases planned through September 2006. The IMF
makes clear its intentions of keeping tabs on the price increases:
"Progress in adjusting petroleum product prices will be assessed
in the context of the programs (quarterly) reviews," according to the
language of the Standby Arrangement.

      Fuel is an input to the retail price of most goods, since they need
to be transported. Inevitably, the prices of most goods, including
food, have risen sharply as a consequence of the increase in fuel

      Other conditions imposed by the IMF and World Bank on Iraq include
the following:

        a.. *Privatization of all state-owned enterprises in Iraq except
oil.* This IMF-imposed condition will lead to the lay-offs of an
estimated 145,000 workers. It will also provide foreign
corporations with control of vital sectors of Iraq's economy. As
for the oil industry, while it will not be totally privatized,
legal changes are underway to provide for partial foreign
ownership. Former Finance Minister Adel Abdul Mehdi (who is now
one of Iraq's two Vice-Presidents) admitted that these legal
changes would be "very promising to the American investors and
to American enterprise, certainly to oil companies." The IMF calls
for "expanding the participation of the private sector in the
domestic market for petroleum products" in its press release
announcing the Standby Arrangement.

        b.. *An end to food subsidies.* Subsidized food rations have been a
lifeline for 60% of Iraq's population, and often their only
protection against starvation, but the IMF and World Bank want to
eliminate them. The elimination of subsidized food distribution
will facilitate the control of Iraq's market for food by
corporate agribusiness.

        c.. *Liberalization of food prices.* The World Bank wants to
eliminate regulations that keep food prices under control.
"Liberalization" of food prices has led to severe food
shortage, even famine, in many countries, most recently in Niger
and Mali.

        d.. *Further layoffs and/or wage and benefit freezes in the public
sector.* The Standby Arrangement requires a ceiling on the Iraqi
government's non-security/defense wage bill, as a "performance
criterion" (i.e. a criterion that will be used by the IMF to
evaluate Iraqi compliance with its conditions). It is significant
that the only sector of government expenditure that is exempted
from the IMF payroll budget ceiling is defense! The IMF celebrates
the fact that the Iraqi government withdrew legislation in the
National Assembly requiring pensions to be set at 80% of final
salary  making it clear that neither the existence of a
democratic process in Iraq, nor retirement security for senior
Iraqis, are any concern to the IMF.

      The Iraqi reaction to IMF and World Bank policies in general, and to
the recent fuel price increases in particular, has been one of
near-unanimous disapproval. Thousands have demonstrated against the
fuel price increases throughout the country; the Oil Minister,
Ibrahim Bahr-al-Uloum, resigned in protest in early January (and has
been replaced by the notoriously corrupt Ahmed Chalabi); and some
provinces, including oil-rich Basra, have refused to implement the
price increase. A number of Iraqi labor unions issued a joint
statement on January 16 (see box), condemning the oil price
increase, and unequivocally rejecting the entire IMF and World Bank
agenda of privatization and deregulation.

      *Paul Wolfowitz: Master and Commander*

      The economic restructuring of Iraq to benefit foreign investors was
most likely one of the main motivations for the U.S. invasion and
occupation of Iraq  or at least a highly profitable windfall. The
fact that Paul Wolfowitz, the newly appointed president of the World
Bank, was one of the major architects of the invasion only heightens
the probability of a conscious plan on the part of the Bush
administration. With the goal of maintaining U.S. control over the
resources of Iraq after the occupation, installing Wolfowitz  a
leading member of the Project for a New American Century and already
on record as an advocate of expanding U.S. influence and dedicating
foreign policy to the service of U.S. interests  at the head of the
World Bank makes perfect sense.

      It is clear that the consequences of the U.S. occupation, and of the
subsequent economic occupation and restructuring of the country in
the interests of foreign investors by the IMF and World Bank, will
last well after the withdrawal of U.S. troops. Getting US troops out
of Iraq, while an important first step towards winning
self-determination for Iraq, is exactly that  a first step. If the
U.S. anti-war movement is serious about standing in solidarity with
the people of Iraq, and challenging the deep-rooted economic
motivations of an interventionist U.S. foreign policy in Iraq and
around the world, then it needs to make resistance to the neoliberal
economic agenda of so-called international institutions a central
plank of its campaign.


         *A Joint Statement Concerning the Programs of the World Bank and
International Monetary Fund in Iraq by Iraqi Trade Unions*

            The Iraqi economy has been severely affected by decades of
sanctions, wars and occupation. The Iraqi trade unions and
federations believe in the capacity of the country with all
its oil and mineral resources to provide a decent living
standard for Iraqis.

            The federations and unions consider that the wars and
occupation have caused a dramatic decrease in the living and
social standards of Iraqis and especially of workers.

            The federations and unions stress the importance of complete
sovereignty for Iraq over its petroleum and natural resources
so as to develop them in a way that assures a complete
reconstruction of the country. We wish to stress the following
points in regard to the policies of the IMF and World Bank in

              1.. Increasing transparency and additional representation
for Iraq in the decision-making structures of the IFIs.A
Joint Statement Concerning the Programs of the World Bank
and International Monetary Fund in Iraq by Iraqi Trade

              2.. To stop imposing structural adjustment conditions for

              3.. Agreeing to provide funding for public services and
state-owned enterprises without demanding their

              4.. Canceling debts owed by Iraq that have resulted from the
policies of the former regime.

              5.. Rejecting the reduction of spending on social services
especially the elimination of government support for the
food distribution system or the reduction of the number of
items covered.

              6.. Strongly rejecting the privatization of publicly owned
entities and especially of the oil, education, health,
electricity, transportation and construction sectors.

              7.. Rejecting the increase in the price of petroleum
products, considering the negative impact of the increase on
the living standards of Iraqis.

              8.. Adopting a new labor law and a pension and social
security law that assure workers' rights and are in
conformity with international labor standards and human
rights conventions. The World Bank and the IMF must also
respect these standards.

            The unions and federations that have signed this statement
announce the formation of a permanent coordinating committee
that will make its positions known to the Iraqi Government and
to the IFIs. They also demand that the IFIs engage in
dialogue, discussion and negotiations with the trade union
federations regarding their policies in Iraq.

            Finally, they request the assistance of international trade
union organizations to provide all possible support to the
above-mentioned demands.


            General Federation of Iraqi Workers

            Oil Unions Federation in Iraq / Basra

            Federation of Workers Councils and Unions in Iraq

            Kurdistan General Workers Syndicate Union / Erbil

            Iraqi Kurdistan Workers Syndicate Union

            Amman, 16 January 2006


      An earlier version of this article appeared in Economic Justice News
(50 Years is Enough newsletter), Volume 8 No. 3, September 2005.



      Basav Sen works with the Mobilization for Global Justice.

      Hope Chu works with the 50 Years is Enough Network.

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