Buying American

Is America monopolizing the business of rebuilding Iraq? In recent weeks Washington has handed out initial contracts for fighting oil fires and reconstructing roads, bridges and waterways--all to American firms, which could end up earning millions or even billions for their efforts. The Bush administration has justified the "Buy American" approach by saying U.S. firms have the necessary experience in war zones--and the security clearances to work alongside U.S. troops. So the contracts have gone to U.S. firms that include Bechtel and Halliburton, which was once headed by Vice President Dick Cheney. The Texas oil firefighters of Boots & Coots are already at work in their orange suits in the southern Iraqi oilfields of Rumailah, all of which alarms American allies, who are suffering an acute case of deja vu. "The concern is that the U.S. has all the contracts sewn up," says Colin Adams, head of the British Consultants and Construction Bureau, a trade body representing more than 300 U.K. firms.

After the first gulf war, many foreign firms lost out to American counterparts, who took the lion's share of reconstruction contracts in Kuwait. This time the job is expected to be much larger and more lucrative, worth upwards of $100 billion. In Europe, politicians who opposed going to war are doubly angry to be left out of postwar reconstruction; British Eurocrat Chris Patten recently called the Buy American aspects of the Bush plan "exceptionally maladroit." Still hoping to land a piece of the action, most European businesses are much less outspoken, but in private they are quick to challenge the prospect of an American monopoly.

European business leaders point out that they have sent hundreds of firms to war zones all over the world, and even to the United States. The British construction firm AMEC helped rebuild energy-supply lines in Bosnia and Kosovo, and worked on the Pentagon and the World Trade Center site after 9-11. From France, Alcatel rebuilt phone networks in Kosovo, and Technip-Coflexip has partnered with both Halliburton and Bechtel on energy projects in the Middle East. Siemens of Germany is currently rebuilding Afghanistan's decrepit fixed-line phone system, and clearly has the experience to do the same in Baghdad.

Europeans say Americans can hardly claim special knowledge of Iraq, either. Many European firms have done recent work in Iraq under the United Nations' Oil-for-Food Program. Adams says more than 50 BCCB members have experience in Iraq. French construction firms like Bouyges nabbed scores of Iraqi building contracts through the '70s and '80s. Alcatel and Siemens helped build Iraqi power and communications grids, some of which are built to European standards. Claude Valluy, who heads Middle East exports for the French electrical-equipment company Sicamex, says the standard for electrical --wires that power most Iraqi neighborhoods is French, and should remain so, because the French system is safer and more reliable. "Having an American company come in to replace the network would be completely stupid," he says.

That, of course, is a very French view. But the early U.S. bidding process was closed even to its chief war ally, the British, which came as something of a shock to all of Europe. British Trade Secretary Patricia Hewitt complained to the United States Agency for International Development in Washington; since then, several Brit- ish trade officials have been seconded to USAID, and the way is open for British firms to bid for subcontract work. One international firm based in Britain, Crown Agents, has won a subcontract to help manage the flow of goods into Iraq. Non-Brits are even more concerned. Playing off those who call British Prime Minister Tony Blair "Bush's poodle," the German NEWSWEEKly Stern asked last week: "If not even the poodles get their reward, who's going to listen to the weasels?"

Most Europeans seem to expect that Washington will deny contracts to foes of the war, but it's not that simple. USAID head Andrew Natsios has taken pains to point out that officially, any foreign firm can bid for subcontract work. And the U.S. Defense Department has recommended that GSM, the current mobile technology standard in both Europe and the Middle East, be used in postwar Iraq, too. Julian Watson, a telecom analyst at the World Markets Research Center in London, says this could benefit the likes of Nokia of Finland and Ericsson of Sweden (countries that have been antiwar).

Importantly, too, the biggest job in postwar Iraq will be rebuilding the oil industry. It is now standard practice for oil firms to form multinational consortiums to share the expense and risk of this kind of megaproject. Arguably, the firm best placed to anchor such an effort in Iraq is Total- FinaElf of France, which in the 1990s negotiated deals to develop the massive Iraqi oilfields of Majnoun and Bin Umar. While no paperwork was ever signed, the company is a year ahead of others on the research for rebuilding those fields, analysts say. TotalFinaElf refuses to speculate on the future of the contracts. But for the United States, it will be of paramount importance to rebuild quickly and repair relations with allies after this unpopular war. In this case at least, American interests might well be served best by--horrors!--the French.

With Tracy McNicoll in Paris and Stefan Theil in Berlin