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IRAQ: Payments Being Witheld on Coaltion-Awarded Contracts

Iraq's interim government is refusing to make payments on some contracts with foreign companies because they overcharged or failed to deliver everything they promised, an official said. "It's a problem all ministries are dealing with because of the lack of paperwork provided by the U.S.-led administration on contracts they signed before handing over power in June."

by Andy CritchlowBloomberg News
March 22nd, 2005

Iraq's interim government is refusing to make payments on some contracts with foreign companies including Raytheon Co. and A.P. Moeller-Maersk A/S because they overcharged or failed to deliver everything they promised, an official said.

``It's a problem all ministries are dealing with because of the lack of paperwork provided by the U.S.-led administration on contracts they signed before handing over power in June,'' Iraq's deputy transport minister, Atta Nabil Hussain Auni Atta, said in a telephone interview from Amman, Jordan, on March 21.

Atta, 63 and a 30-year veteran at the ministry, said Raytheon hasn't delivered an air-traffic control system to Baghdad airport, and the government is withholding a $19 million payment. James Fetig, a spokesman for the Waltham, Massachusetts- based defense contractor, declined to comment on the matter.

The Coalition Provisional Authority, led by U.S. Ambassador Paul Bremer, awarded billions of dollars of contracts to foreign companies including Halliburton Co. during the 14 months it administered Iraq after the U.S.-led invasion that toppled Saddam Hussein's regime.

The refusal of interim Prime Minister Ayad Allawi's government, which took power June 28, 2004, to pay bills may discourage foreign companies from working in the country, said analysts including Youssef Ibrahim, managing director of Strategic Energy Investment Group, a consulting firm in Dubai, United Arab Emirates.

`Holding Back'

While Iraq has the world's third-largest oil reserves, any financial risk would be on top of the security risk posed by daily attacks by insurgents, said Ibrahim and executives of Dubai companies that have done business in Iraq.

``We are glad that we didn't win a big contract in Iraq, because the bureaucracy has become impossible to navigate,'' said Karim Dirneka, managing director of Dubai-based Global Trade Network, which won four tenders from the Coalition Provisional Authority to supply uniforms to Iraq's new police force. ``We are holding back until things settle down and get a little more transparent.''

``Contracts we took over from the CPA aren't always transparent,'' said Abdul Jabbar al-Wagga'a, Iraq's deputy oil minister with responsibility for production, in a telephone interview from Baghdad yesterday.

U.S. Help

The U.S. and its coalition partners are working with companies including Raytheon, Copenhagen-based A.P. Moeller and Global Risk Strategies of London to help secure money owed by Iraqi ministries for contracts, the U.S.-led Iraq Reconstruction Management Office said March 16 in an e-mailed response from Baghdad to Bloomberg News questions.

Atta said the government is withholding a $17 million payment to Global Risk. The U.K. company said March 20 in an e- mailed statement that it recognized payments may sometimes be delayed as the country is redeveloped.

A.P. Moeller was forced to cease operating from Khor Az Zubayr, Iraq's second largest port, after rioters seized control of the site. The company, which abandoned most of its equipment, said it's owed fees by the Iraqi government for running the site on a rolling contract.

Atta said A.P. Moeller ``won't be invited back.'' He said the Danish company took 93 percent of all revenue from port fees, as well as charging the ministry $15,000 a day for operating the port, and didn't provide documentation on traffic.

A.P. Moeller's Middle East manager, Jesper Kjaedegaard, declined to comment on Atta's remarks. ``We would only return to Khor Az Zubayr with the cooperation of the Iraqi government and the local community,'' he said in a phone interview from Dubai.

`Excessive Profits'

Transparency International, a Berlin-based organization with offices in 80 countries, said in its annual report March 16 that foreign contractors in Iraq had been ``wasteful'' and some had made ``excessive profits.'' Individual employees of U.S. contractors had been accused of taking kickbacks from companies seeking subcontracts, the anti-corruption lobby group said, without giving details.

U.S. President George W. Bush's administration has pledged more than $20 billion to help rehabilitate industries in Iraq, including oil. Japan, Kuwait and other countries collectively pledged as much as $18.5 billion in October 2003 to help rebuild the nation.





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