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September 9, 2004

Halliburton and Iraq: The Purloined Letter


by Juan Cole

Why was Dick Cheney so eager to invade Iraq? Why did he repeatedly link Saddam Hussein to al-Qaeda after Sept. 11, and why did he maintain that not only did Iraq have weapons of mass destruction but that he, Cheney, knew exactly where they were?

Cheney clearly came into office wanting a war on Iraq, as revealed by former Treasury Secretary Paul O'Neill.

Cheney was the CEO of Halliburton in 1995-200. Halliburton is a corporation that does a number of things, including energy, oil and military contracting.

In 2001, Halliburton won a contract from the Department of Defense to provide "emergency services" to the Pentagon. The contract was above-board. Bids were taken from five competitors, and Halliburton won with the low bid. There was nothing illegal or irregular about such a process. But that contract may explain Cheney and his gang on Iraq.

In Edgar Allan Poe's "The Purloined Letter," the blackmail note that the police are looking for is in plain sight. It isn't hidden, just crumpled as though it were trash. The police don't bother to examine it for that reason.

It is the contract itself that is the scam. It is quite simple. A standing contract to provide "emergency services" to the Pentagon is a potential gold mine under exactly one circumstance. If a major war breaks out, the need for "emergency services" will inevitably be enormous. The contract was worth billions. But only if there was a war. If there was peace, the need for "emergency services" would be small. Halliburton was not doing that well. It needed the big bucks.

In 1998, when Cheney was CEO, Halliburton secretly changed its accounting techniques to show a higher level of profit. Without the change, it would have come in below expectations, which would have hurt its price. The change was unorthodox and "aggressive," and should have been communicated to the stockholders, which only happened after a long and quite improper delay. Halliburton finally settled this case with the Securities and Exchange Commission, by paying a paltry $7.5 million fine.

Part two of the scam is also in plain view. It is the very idea that "emergency services" should and could be supplied to the U.S. military by a private company.

The fact is that civilian employees of private firms cannot be ordered into a war zone. Halliburton, and its subsidiary Kellogg, Brown and Root, was to supply air-conditioned Quonset huts to the U.S. troops for summer 2003. It did not do so. It could not do so. Once the guerrilla war broke out, it was impossible to get enough civilian workers out to the troop positions to build the Quonset huts and put in air conditioning. As a result, U.S. troops "looked like hobos and lived like pigs" in the words of one, with their shaving cream cans exploding in the 140 degrees heat.

If, on the other hand, U.S. troops had been assigned to build the Quonset huts and put in the air conditioning, that could easily have been accomplished.

So, the "emergency services contract" was a boondoggle only in the case of a war, but in case of a war, many of the services contracted for could not actually be supplied, at least in a timely manner.

Of course, other sorts of work could be done, including in the oil fields. The Iraq war has been worth billions of dollars to Halliburton. Additional Pentagon work was thrown its way once the war began, on the grounds that it was the only corporation with the necessary experience to undertake certain tasks. Halliburton subsidiary Kellogg, Brown and Root has been accused of not being able to account for some charges it sent to the Pentagon, and of overcharging for some services it did provide.

And now Halliburton's $13 billion contract with the Pentagon is being re-bid. There are not, however, very many companies that can do what Halliburton and its subsidiaries do, and which have a long association with the Pentagon and its various bureaucratic techniques, such that they know how to fit in with the Department of Defense bureaucracy.

What was in it for Cheney? I don't think it was a matter of money. At least I hope it wasn't. Cheney sold half his Halliburton stock options in 2000 for $5 million, and it is hard to imagine a man taking his country to war to increase the other half in value by a few million.

I suspect it is political. Not all corporations make money on war. Some actually lose money. But Halliburton, Bechtel and a few other components of the military industrial complex do benefit from war. Strengthening that sector of the American economy strengthens the political Right. Turning the republic into a praetorian state would permanently yield profits for the military industrial complex in such a way as to create a permanent Republican dominance of all the branches of the U.S. government.


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    Juan Cole is Professor of History at the University of Michigan. Visit his blog.

     

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