It's 8:40 am and the Sheraton Hotel ballroom thunders with the sound of

plastic explosives pounding against metal. No, this is not the Sheraton in

Baghdad, it's the one in Arlington, Virginia. And it's not a real terrorist

attack, it's a hypothetical one. The screen at the front of the room is

playing an advertisement for "bomb resistant waste receptacles": This trash

can is so strong, we're told, it can contain a C4 blast. And its

manufacturer

is convinced that given half a chance, these babies would sell like hotcakes

in Baghdad--at bus stations, Army barracks and, yes, upscale hotels.

Available

in Hunter Green, Fortuneberry Purple and Windswept Copper.

This is ReBuilding Iraq 2, a gathering of 400 businesspeople itching to get

a

piece of the Iraqi reconstruction action. They are here to meet the people

doling out the cash, in particular the $18.6 billion in contracts to be

awarded in the next two months to companies from "coalition partner"

countries. The people to meet are from the Coalition Provisional Authority

(CPA), its new Program Management Office, the Army Corps of Engineers, the

US

Agency for International Development, Halliburton, Bechtel and members of

Iraq's interim Governing Council. All these players are on the conference

program, and delegates have been promised that they'll get a chance to

corner

them at regularly scheduled "networking breaks." 

By now there have been dozens of similar trade shows on the business

opportunities created by Iraq's decimation, held in hotel ballrooms from

London to Amman. By all accounts, the early conferences throbbed with the

sort

of cash-drunk euphoria not seen since the heady days before the dot-coms

crashed. But it soon becomes apparent that something is not right at

ReBuilding Iraq 2. Sure, the organizers do the requisite gushing about how

"nonmilitary rebuilding costs could near $500 billion" and that this is "the

largest government reconstruction effort since Americans helped to rebuild

Germany and Japan after the Second World War."

But for the undercaffeinated crowd staring uneasily at exploding garbage

cans,

the mood is less gold rush than grim determination. Giddy talk of

"greenfield"

market opportunities has been supplanted by sober discussion of sudden-death

insurance; excitement about easy government money has given way to

controversy

about foreign firms being shut out of the bidding process; exuberance about

CPA chief Paul Bremer's ultraliberal investment laws has been tempered by

fears that those laws could be overturned by a directly elected Iraqi

government.

At ReBuilding Iraq 2, held on December 3-4, it seems finally to have dawned

on

the investment community that Iraq is not only an "exciting emerging

market";

it's also a country on the verge of civil war. As Iraqis protest layoffs at

state agencies and make increasingly vocal demands for general elections,

it's

becoming clear that the White House's prewar conviction that Iraqis would

welcome the transformation of their country into a free-market dream state

may

have been just as off-target as its prediction that US soldiers would be

greeted with flowers and candy.

I mention to one delegate that fear seems to be dampening the capitalist

spirit. "The best time to invest is when there is still blood on the

ground,"

he assures me. "Will you be going to Iraq?" I ask. "Me? No, I couldn't do

that

to my family."

He was still shaken, it seemed, by the afternoon's performance by ex-CIAer

John MacGaffin, who had harangued the crowd like a Hollywood drill sergeant.

"Soft targets are us!" he bellowed. "We are right in the bull's-eye.... You

must put security at the center of your operation!" Lucky for us,

MacGaffin's

own company, AKE Group, offers complete counterterrorism solutions, from

body

armor to emergency evacuations.

Youssef Sleiman, managing director of Iraq Initiatives for the Harris

Corporation, has a similarly entrepreneurial angle on the violence. Yes,

helicopters are falling, but "for every helicopter that falls there is going

to be replenishment."

I begin to notice that many of the delegates at ReBuilding Iraq 2 are

sporting

a similar look: Army-issue brush cuts paired with dark business suits. The

guru of this gang is retired Maj. Gen. Robert Dees, freshly hired out of the

military to head Microsoft's "defense strategies" division. Dees tells the

crowd that rebuilding Iraq has special meaning for him because, well, he was

one of the people who broke it. "My heart and soul is in this because I was

one of the primary planners of the invasion," he says with pride. Microsoft

is

helping develop "e-government" in Iraq, which Dees admits is a little ahead

of

the curve, since there is no g-government in Iraq--not to mention

functioning

phones lines.

No matter. Microsoft is determined to get in on the ground floor. In fact,

the

company is so tight with Iraq's Governing Council that one of its

executives,

Haythum Auda, served as the official translator for the council's Minister

of

Labor and Social Affairs, Sami Azara al-Ma'jun, during the conference.

"There

is no hatred against the coalition forces at all," al-Ma'jun says, via Auda.

"The destructive forces are very minor and these will end shortly.... Feel

confident in rebuilding Iraq!"

The speakers on a panel about "Managing Risks" have a different message:

Feel

afraid about rebuilding Iraq, very afraid. Unlike previous presenters, their

concern is not the obvious physical risks, but the potential economic ones.

These are the insurance brokers, the grim reapers of Iraq's gold rush.

It turns out that there is a rather significant hitch in Paul Bremer's bold

plan to auction off Iraq while it is still under occupation: The insurance

companies aren't going for it. Until recently, the question of who would

insure multinationals in Iraq has not been pressing. The major

reconstruction

contractors like Bechtel are covered by USAID for "unusually hazardous

risks"

encountered in the field. And Halliburton's pipeline work is covered under a

law passed by Bush on May 22 that indemnifies the entire oil industry from

"any attachment, judgment, decree, lien, execution, garnishment, or other

judicial process."

But with bidding now starting on Iraq's state-owned firms, and foreign banks

ready to open branches in Baghdad, the insurance issue is suddenly urgent.

Many of the speakers admit that the economic risks of going into Iraq

without

coverage are huge: Privatized firms could be renationalized, foreign

ownership

rules could be reinstated and contracts signed with the CPA could be torn

up.

Normally, multinationals protect themselves against this sort of thing by

purchasing "political risk" insurance. Before he got the top job in Iraq

this

was Bremer's business--selling political risk, expropriation and terrorism

insurance at Marsh & McLennan Companies, the largest insurance brokerage

firm

in the world. Yet in Iraq, Bremer has overseen the creation of a business

climate so volatile that private insurers--including his old colleagues at

Marsh & McLennan--are simply unwilling to take the risk. Bremer's Iraq is,

by

all accounts, uninsurable.

QUOT-The insurance industry has never been up against this kind of exposure

before," R. Taylor Hoskins, vice president of Rutherford International

insurance company, tells the delegates apologetically. Steven Sadler,

managing

director and chairman at Marsh Industry Practices, a division of Bremer's

old

firm, is even more downbeat. "Don't look to Iraq to find an insurance

solution. Interest is very, very, very limited. There is very limited

capacity

and interest in the region."

It's clear that Bremer knew Iraq wasn't ready to be insured: When he signed

Order 39, opening up much of Iraq's economy to 100 percent foreign

ownership,

the insurance industry was specifically excluded. I ask Sadler, a Bremer

clone

with slicked-back hair and bright red tie, whether he thinks it's strange

that

a former Marsh & McLennan executive could have so overlooked the need for

investors to have insurance before they enter a war zone. "Well," he says,

"he's got a lot on his plate." Or maybe he just has better information.

Just when the mood at ReBuilding Iraq 2 couldn't sink any lower, up to the

podium strides Michael Lempres, vice president of insurance at the Overseas

Private Investment Corporation (OPIC). With a cool confidence absent from

the

shellshocked proceedings so far, he announces that investors can relax:

Uncle

Sam will protect them.

A US government agency, OPIC provides loans and insurance to US companies

investing abroad. And while Lempres agrees with earlier speakers that the

risks in Iraq are "extraordinary and unusual," he also says that "OPIC is

different. We do not exist primarily to generate profit." Instead, OPIC

exists

to "support US foreign policy." And since turning Iraq into a free-trade

zone

is a top Bush policy goal, OPIC will be there to help out. Earlier that same

day, President Bush signed legislation providing "the agency with

enhancements

to its political risk insurance program," according to an OPIC press

release.

Armed with this clear political mandate, Lempres announces that the agency

is

now "open for business" in Iraq, and is offering financing and

insurance--including the riskiest insurance of all: political risk. "This is

a

priority for us," Lempres says. "We want to do everything we can to

encourage

US investment in Iraq."

The news, as yet unreported, appears to take even the highest-level

delegates

by complete surprise. After his presentation, Lempres is approached by Julie

Martin, a political risk specialist at Marsh & McLennan.

"Is it true?" she demands.

Lempres nods. "Our lawyers are ready."

"I'm stunned," Martin says. "You're ready? No matter who the government is?"

"We're ready," Lempres replies. "If there's an expro[priation] on January 3,

we're ready.... I don't know what we're going to do if someone sinks a

billion

dollars into a pipeline and there's an expro."

Lempres doesn't seem too concerned about these possible "expros," but it's a

serious question. According to its official mandate, OPIC functions "on a

self-sustaining basis at no net cost to taxpayers." But Lempres admits that

the political risks in Iraq are "extraordinary." If a new Iraqi government

expropriates and re-regulates across the board, OPIC could be forced to

compensate dozens of US firms for billions of dollars in lost investments

and

revenues, possibly tens of billions. What happens then?

At the Microsoft-sponsored cocktail reception in the Galaxy Ballroom that

evening, Robert Dees urges us "to network on behalf of the people of Iraq."

I

follow orders and ask Lempres what happens if "the people of Iraq" decide to

seize back their economy from the US firms he has so generously insured. Who

bails out OPIC? "In theory," he says, "the US Treasury stands behind us."

That

means the US taxpayer. Yes, them again: The same people who have already

paid

Halliburton, Bechtel et al. to make a killing on Iraq's reconstruction would

have to pay these companies again, this time in compensation for their

losses.

While the enormous profits being made in Iraq are strictly private, it turns

out that the entire risk is being shouldered by the public.

For the non-US firms in the room, OPIC's announcement is anything but

reassuring: Since only US companies are eligible for its insurance, and the

private insurers are sitting it out, how can they compete? The answer is

that

they likely cannot. Some countries may decide to match OPIC's Iraq program.

But in the short term, not only has the US government barred companies from

non-"coalition partners" from competing for contracts against US firms, it

has

made sure that the foreign firms that are allowed to compete will do so at a

serious disadvantage.

The reconstruction of Iraq has emerged as a vast protectionist racket, a

neocon New Deal that transfers limitless public funds --in contracts, loans

and insurance--to private firms, and even gets rid of the foreign

competition

to boot, under the guise of "national security." Ironically, these firms are

being handed this corporate welfare so they can take full advantage of

CPA-imposed laws that systematically strip Iraqi industry of all its

protections, from import tariffs to limits on foreign ownership. Michael

Fleisher, head of private-sector development for the CPA, recently explained

to a group of Iraqi businesspeople why these protections had to be removed.

"Protected businesses never, never become competitive," he said. Quick,

somebody tell OPIC and Paul Wolfowitz.

The issue of US double standards comes up again at the conference when a CPA

representative takes the podium. A legal adviser to Bremer, Carole Basri has

a

simple message: Reconstruction is being sabotaged by Iraqi corruption. "My

fear is that corruption will be the downfall," she says ominously, blaming

the

problem on "a thirty-five-year gap in knowledge" in Iraq that has made

Iraqis

"not aware of current accounting standards and ideas on anticorruption."

Foreign investors, she said, must engage in "education--bring people up to

world-class standards."

It's hard to imagine what world-class standards she's referring to, or who,

exactly, will be doing this educating. Halliburton, with its accounting

scandals back home and its outrageous overbilling for gasoline in Iraq? The

CPA, with its two officers under investigation for bribetaking, and

nonexistent fiscal oversight? On the final day of ReBuilding Iraq 2, the

cover

headline in our complimentary copies of the Financial Times (a conference

sponsor) is "Boeing linked to Perle investment fund." Perhaps Richard

Perle--who supported Boeing's $18 billion refueling-tanker deal and

extracted

$20 million from Boeing for his investment fund--can teach Iraq's

politicians

to stop soliciting "commissions" in exchange for contracts.

For the Iraqi expats in the audience Basri's is a tough lecture to sit

through. "To be honest," says Ed Kubba, a consultant and board member of the

American Iraqi Chamber of Commerce, "I don't know where the line is between

business and corruption." He points to US companies subcontracting huge

taxpayer-funded reconstruction jobs for a fraction of what they are getting

paid, then pocketing the difference. "If you take $10 million from the US

government and sub the job out to Iraqi businesses for a quarter-million, is

that business, or is that corruption?"

These were the sorts of uncomfortable questions faced by George Sigalos,

director of government relations for Halliburton KBR. In the hierarchy of

Iraqi reconstruction, Halliburton is king, and Sigalos sits onstage, heavy

with jeweled ring and gold cufflinks, playing the part. But the serfs are

getting restless, and the room quickly turns into a support group for jilted

would-be subcontractors.

"Mr. Sigalos, what are we going to have to do to get some sub-contracts?"

"Mr. Sigalos, when are you going to hire some Iraqis in management and

leadership?"

"I have a question for Mr. Sigalos. I would like to ask what you would

suggest when the Army says 'Go to Halliburton' and there's no response from

Halliburton?"

Sigalos patiently instructs them all to register their companies on

Halliburton's website. When the questioners respond that they have already

done so and still haven't heard back, Sigalos invites them to "approach me

afterward."

The scene afterward is part celebrity autograph session, part riot. Sigalos

is swarmed by at least fifty men, who elbow each other out of the way to shower

the Halliburton VP with CD-ROMs, business plans and résumés. When Sigalos

spots a badge from Volvo, he looks relieved. "Volvo! I know Volvo. Send me

something about what you can achieve in the region." But the small, no-name

players who have paid their $985 entrance fees, here to hawk portable

generators and electrical control paneling, are once again told to "register

with our procurement office." There are fortunes being made in Iraq, but it

seems they are out of reach to all but the chosen few.

The next session is starting and Sigalos has to run. The serfs wander off

through the displays of shatterproof glass and bomb-resistant trash cans,

caressing Sigalos's red-and-white business card and looking worried.