The $87 Billion Money Pit

Numerous allegations of wastage and overcharging have also surfaced. Halliburton, a chief U.S. contractor under intense scrutiny for its ties to Cheney, has been accused of gouging prices on imported fuel--charging $1.59 a gallon to import nearly 200 million gallons of gasoline. SOMO, the Iraqi national oil company, indicated it can buy the same fuel at no more than 98 cents a gallon. "Why they don't have the Iraqis bring it in rather than have Halliburton charge high prices for it, I don't know," says a Democratic official on the Government Reform Committee, which first raised the issue. Wendy Hall, a Halliburton spokeswoman, said that Halliburton's KBR subsidiary had to settle for higher prices because it could negotiate only on a 30-day basis. But oil economist Phil Verleger said that constraint should amount to only a penny or so per gallon difference for fuel. Hall said the company "can't identify our suppliers for security reasons."

Behnam Polis, the Iraqi minister of Transportation, told NEWSWEEK that another American contractor, Stevedoring Services of America, was overcharging in its administration of Umm Qasr. "They're unloading cargo at $12 a ton. That's a lot. Ports in Dubai and Kuwait do it for $3 a ton," he said. "A lot of ships are not coming because it costs too much." Polis said he thinks part of the problem is that the company's contract runs until the end of the year, and it is guaranteed the money no matter how much work it does. That's nonsense, responds SSA spokesman Bob Waters: yes, SSA originally set high cargo tariffs to make the port "self-sustaining." But now, he says, Polis's own ministry is responsible--and hasn't changed the prices.

It is true that Polis and other Iraqis are gaining power over contracts. But the push to hand over things to the new Iraqi Governing Council and its ministries is creating problems of its own. The Iraqi telecom minister, Haider Jawad al-Ibadi, told NEWSWEEK that a lucrative contract to run mobile communications in Iraq's south was given to a consortium that includes Djila, a company run by Mudhar Shawkat and his son Ali. Shawkat is the top aide to Governing Council member Ahmad Chalabi in the Iraqi National Congress, a former opposition group. A senior source with the Iraqi National Congress said: "If we or anyone else can help our companies land a contract, why not?"

How to Make It Work Better

Tamara Dagestani is an Iraqi dissident who has become as fierce a critic of the Americans as she once was of Saddam. Like many Iraqis, she's angry at what she sees as American arrogance and cultural insensitivity. What really raises Dagestani's hackles, though, is the lack of jobs for Iraqi workers, especially skilled ones. Despite L. Paul Bremer's new push to get contractors to hire Iraqis--"We realized that if they're not working for us, they're shooting at us," one administration official said--the Iraqi Governing Council estimates unemployment is still as high as 75 percent. "After the first gulf war, there was no access for foreign workers, no access to spare parts, but bridges were rebuilt, telephone and electricity restored. Quicker than Kuwait rebuilt," Dagestani says. "I feel very sad this is not being accomplished now. We've got the talent, the ability, the brains--give the people the jobs and they'll do it."

They will. Perhaps the greatest failure of America's postwar adventure in Iraq was in not distinguishing between what the Iraqis can and should do and where they need help. On democracy and governance, America can certainly assist: 30 years of totalitarian rule has left Iraqis bereft of that experience. And on security, of course: for another year at least the Iraqi Army will be far from ready; just one battalion so far has been formed. Yet Rumsfeld's Pentagon used to make a point of saying that Iraqis were far more sophisticated and educated than, say, Afghans, and that Iraq's economic recovery would be far more self-sustaining. So why the top-heavy presence of foreign corporations? Even in finance, a six-bank consortium led by J.P. Morgan is accused of crowding out Iraqi banks. This domination by outsiders seems to be crimping the very free-market Iraq that George W. Bush says he wants to create--and requiring far more Americans on the ground. That creates more targets for Iraq's growing numbers of disaffected militants. It's far more expensive to: Iraq's many unemployed engineers get paid less than one tenth what their American counterparts receive.