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USA: Halliburton -- To the Victors Go the Markets

by Jordan GreenFacing South
February 1st, 2002

The influence of big energy corporations in the Bush Administration is no secret. But the story of Dick Cheney and his former company, Halliburton Co., has received little attention -- and it may be the most important.

Prospects for democracy in post-Taliban Afghanistan appear dimmed by the bare-knuckled oil services deal-cutting overseen by the victor, the United States. Last December, the US Department of Defense made a no-cap, cost-plus-award contract to Halliburton KBR's Government Operations division. The Dallas-based company is contracted to build forward operating bases to support troop deployments for the next nine years wherever the President chooses to take the anti-terrorism war.

"Augmenting our military troops with contractor-provided support has proven to be an invaluable force multiplier," boasted Halliburton CEO Dave Lesar, celebrating the deal in a euphemistic language that is understood both as military triumphalism -- and to Wall Street -- as a cue that the new military mobilization could punch up the company's flagging stocks. In an October press release, the CEO who was compensated $11.3 million last year, had forecasted a good fourth quarter for profits in engineering and construction.

A Jan. 29 Washington Post article drew comparisons between Halliburton and Enron, pointing out that both their stocks plunged last fall, and that they share the same accountant, Arthur Andersen. (Halliburton has been plagued with lawsuits over its use of asbestos, discouraging investor confidence.) Another similarity is that their CEOs both cashed out before fall. In Halliburton's case, Vice President Dick Cheney cashed out $20.6 million in stocks before retiring as CEO. With Halliburton now ailing financially, it's only natural that the Defense Department, over which Cheney presided in the administration of Bush I, would provide the bailout.

The Pentagon posts all contract announcements exceeding $5 million on its Website, but in Halliburton's case declined to disclose the estimated value of the award. A spokesperson for Halliburton gave $2.5 billion as the amount the company earned from base support services in the 1990s, acknowledging that the contract value could exceed that number assuming that the scope of US military actions widens in the next decade.

Though the Pentagon may be wary of admitting its favor towards Halliburton, the British Ministry of Defence shows no such reticence. In the third week of December 2001, the Defence Ministry awarded Halliburton's subsidiary Brown & Root Services $418 million to supply large tank transporters, capable of carrying tanks to the front lines at speeds of up to 50 miles per hour.

The first increment of Halliburton's award is being subcontracted to Oshkosh Truck Corporation in Wisconsin and King Trailers in Market Harborough, England. Because of Prime Minister Tony Blair's invaluable service of persuading Britain's reluctant public to go along with the American campaign and in providing British peacekeepers to secure Afghanistan, America's junior partner has been rewarded with a boost to its manufacturing base.

But the major rewards are reserved for the Texas oil oligarchy. Halliburton Company has close connections with the Bush family. Aside from Cheney, there is Lawrence Eagleburger, a Halliburton director and former deputy secretary of defense under Bush Sr. during the Gulf War.

In its earlier incarnation as Brown & Root Services, the company sponsored Texan and future president Lyndon B. Johnson's stolen election to the US Senate in 1948, building the state's spectacular political-industrial muscle.

As the number-one oil field services company in the world, Halliburton has an active interest in positioning itself to exploit the newly-opened oil and gas fields in adjoining Uzbekistan, where the US Army's 10th Mountain Division already occupies a base.

The Bush Administration's chief corporate interest is in advancing the fortunes of the energy industry. National Security Advisor Condoleeza Rice is a former board member of Chevron, which has been operating the Tengiz oil fields in neighboring Kazakhstan through the past decade. Commerce Secretary Don Evans is the former chairman of the Denver-based oil firm Tom Brown Inc. Houston-based Enron, whose phenomenal implosion has recently brought critical attention, was the single biggest contributor to the Bush campaign last year. Halliburton's nine-year troop-support contract falls under the Logistics Civil Augmentation Program, or LOGCAP, which provides "the warfighter with additional capabilities to rapidly support and augment the logistics requirements of its deployed forces." The company is required to deploy within 72 hours of notification and install forward operating bases for some 25,000 troops within 15 days. The base camp services Halliburton will provide include mess hall, food preparation, potable water, sanitation, laundry, transportation, utilities and warehousing.

Through the past ten years, Halliburton has built bases to support troop deployments in Somalia, Haiti and the Balkans. During the Vietnam War, the company (then as Brown & Root Services) built roads, landing strips, harbors and military bases throughout the areas under US military control. "They drop these boys in and they construct a town," relates retired Special Forces operative Stan Goff. "In no time at all they'll have barracks and latrines. Then they'll put in a club that serves alcohol, soccer fields, and baseball fields."

Halliburton's publicity material boasts of its ability to establish temporary military bases under often hostile conditions -- an invaluable preparation for the second phase of its project: laying the groundwork for oil exploration under often hostile conditions. Vice President Cheney has been famously quoted in reference to the country of Iraq: "The good Lord didn't see fit to put oil and gas only where there are democratic regimes friendly to the United States."

Other oil-rich countries potentially targeted in the US anti-terrorist war in which Halliburton is jockeying for access are Colombia and Venezuela in the Americas. In Colombia, only 20% of the oil reserves have been explored because of political instability. Desperate to increase the country's output, President Andrés Pastrana sweetened the foreign investment terms for multinational oil companies. In 1996, BP Amoco and Occidental joined Enron in the U.S.-Colombia Business Partnership to lobby for more military aid for Plan Colombia.

Venezuela -- though not named as a target so far -- is the third largest oil supplier to the United States and an influential member of OPEC. President Hugo Chávez convinced the OPEC cartel to cut production in order to raise international oil prices. His high-profile visit to Saddam Hussein last August and refusal to allow the US military to fly over Venezuelan airspace has irritated the United States, leading to speculation that the country will soon find itself subject to the wrath of the American anti-terrorist campaign.

But in the immediate future, the key to the United States' energy security and Halliburton's profit enhancement lies in Central Asia. Its chief competitor in oil fields services, Houston-based Baker Hughes, already has a significant head start in exploiting the immense wealth of natural gas in Uzbekistan. Baker Hughes has entered into a partnership with Uzbekneftegaz, the state holding company that controls the oil and gas sector, to develop the country's North Urtabulak project with options on three other fields.

Baker Hughes has its own political connections to aid its muscling in on the Central Asian prospecting game. Board member Edward P. Djerejian served as assistant secretary of state for Near Eastern affairs under both the Bush Sr. and Clinton administrations. His resume cuts across the arenas of corporate strategy and foreign policy as a director of Occidental Petroleum Global Industries Ltd. and as a director of the James A. Baker III Institute for Public Policy at Rice University in Houston.

At stake in Uzbekistan are oil reserves estimated at 600 million barrels. According to the US Energy Information Administration, the country can't modernize its drilling operations fast enough. Despite the fact thatits oil and gas reserves are estimated to be more than that of all the other Central Asian republics combined, Uzbekistan has lagged behind its neighbors in production.

In April 2000, President Islam Karimov announced preferential treatment to foreign investors, including tax exemptions. In what promises to be a phenomenal resource grab, Uzbekistan is opening up 80 oil fields to drilling by multinational oil companies. This year, President Karimov has promised to privatize 49% of the national energy company Uzbekneftegaz.

Chevron, which has successfully developed the Tengiz oil fields in the Caspian Sea in neighboring Kazakhstan, is well poised to expand into Uzbekistan. Shell has recently completed oil explorations in the country. In Turkmenistan, on Afghanistan's northern frontier, ExxonMobil owns a 40% stake in the Burun oil field. UK-based Trinity Energy committed to investing over $400 million for gas exploration in Uzbekistan over the next 40 years.

The proposed Central Asia Oil Pipeline -- through Afghanistan to the deepwater port of Gwadar, Pakistan on the Arabian Sea -- remains Uzbekistan and Turkmenistan's best opportunity to export its oil to western markets.

Now that the country of Afghanistan has been reduced to rubble by US bombs and the American and British militaries have locked in their occupational forces, Halliburton has established a beachhead for a spectacular expansion.

Jordan Green is an Editorial & Research Associate at the Institute for Southern Studies.





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