Months before the
United States military showered Iraq with bombs and
missiles, the Department of Defense was secretly working
with Vice President Dick Cheney's old company, Halliburton
Corp., on a deal that would give the world's second largest
oil services company total control over Iraq's oil fields,
according to interviews with Halliburton's most senior
Moreover, classified Halliburton documents
obtained over the past month prove that the war in Iraq was
as much about controlling the world's second largest oil
reserves as it was about overthrowing the regime of Iraq's
President Saddam Hussein.
The deal between the Department
of Defense and Halliburton unit Kellogg, Brown & Root to
operate Iraq's oil industry, which was hatched as early as
October 2002, according to the documents, and could
ultimately be worth $7 billion, couldn't have come at a
better time for Halliburton.
Back in October of last
year, Halliburton was saddled with a multibillion-dollar
asbestos liability and the company was also suffering
through a slowdown in domestic oil production. Halliburton's
stock price responded swiftly, plummeting to $12.62 in
October 2002, from a high of $22 the year before. Rumours
began to swirl that the company would be forced to file for
But news of a pending war in Iraq meant that
Halliburton's financial troubles would, like Saddam
Hussein's regime, be history. Classified documents from
November 2002 show that the Department of Defense
recommended that The Army Corps of Engineers award a
contract to Brown & Root to extinguish Iraqi oil well fires
in addition to "assessing the condition of oil-related
infrastructure; cleaning up oil spills or other
environmental damage at oil facilities; engineering design
and repair or reconstruction of damaged infrastructure;
assisting in making facilities operational; distribution of
petroleum products; and assisting the Iraqis in resuming
Iraqi oil company operations."
"The fact that the
Department was planning for the possibility that it would
need to repair and provide for continuity of operations of
the Iraqi oil infrastructure was classified until March
2003," the agency said on its web site. "This prevented
earlier acknowledgement or announcement of potential
requirements to the business community."
The Army Corps of
Engineers has declassified portions of some documents
related to its deal with Brown & Root. The deal memo can be
October, when Halliburton was awarded the contract to repair
Iraq's oil industry, the company's stock has nearly doubled.
On Tuesday, the stock closed at $23.90.
Publicly, when the
Army Corps of Engineers was criticized by Washington
lawmakers earlier this year for awarding the no-bid contract
to Brown & Root because of the company's strong ties to
Cheney, the agency said Brown & Root would do nothing more
than extinguish oil well fires. Brown & Root was chosen,
according to the Army Corps of Engineers, because Brown &
Root could be "deployed" on short notice.
according to interviews with Halliburton executives, company
employees were working out of a hotel room in Kuwait City as
far back as November assessing the Iraq's oil infrastructure
and mapping out plans for operating Iraq's oil industry.
A report in the magazine Business 2.0 from April 2003
makes this point clear.
"From behind the obsidian mirrors
of his wraparound sunglasses, Ray Rodon surveys the vast
desert landscape of southern Iraq's Rumailah oilfield. A
project manager with Halliburton's engineering and
construction division, Kellogg Brown & Root, Rodon has spent
months preparing for the daunting task of repairing Iraq's
oil industry. Working first at headquarters in Houston and
then out of a hotel room in Kuwait City, he has studied the
intricacies of the Iraqi national oil company, even
reviewing the firm's organizational charts so that
Halliburton and the Army can ascertain which Iraqis are
reliable technocrats and which are Saddam loyalists," the
Halliburton, in a March news release, said it
first began working on a plan to repair Iraq's oil
infrastructure at the request of the Defense
"The DoD, through its US Army Logistics Civil
Augmentation Program (LOGCAP) III contract with KBR, tapped
the company in November 2002 to develop the contingency
plan. Implementation of the plan is being executed through a
separate contract KBR now holds with the US Army Corps of
Engineers," the news release says.
Halliburton employees said that they don't believe Cheney
played any role in the company securing the lucrative
contract from the government, but they noted that the Army
Corps of Engineers purposely downplayed the company's role
in repairing Iraq's infrastructure because of Halliburton's
ties to Cheney and the criticism that would likely come from
Congressional Democrats who claim the government is playing
"Halliburton has been working with the United
States government since the 1940s," said one executive who
supplied documents and requested anonymity. "But because
Vice President Dick Cheney used to run the firm everyone
automatically assumes that he had something to do with the
government contracts we now get."
Halliburton's Brown & Root division is the only company that
has profited from the so-called war on terror.
its performance providing U.S. troops in the Balkans with
housing, food, water, mail, laundry, and heavy equipment (a
job for which Halliburton has been paid $3 billion so far),
the company won an unprecedented ten-year deal in December
2001 to supply similar logistical support to U.S. military
operations around the world.
"The Pentagon's Logistics
Civil Augmentation Program pays Halliburton through what's
called a cost-plus arrangement, meaning that KBR is
guaranteed to recover its expenses, plus receive a set
profit, provided the contract terms are met. To date, KBR
has received $830 million from the program. The company is
also helping to run Incirlik Air Base and other U.S.
military facilities in Turkey (where an initial contract,
set to expire in September, was worth $118 million) and
received $65 million to support bases in Afghanistan and
Uzbekistan. What's more, it earned $33 million building
cells for suspected al Qaeda members at Guantanamo Bay,
Cuba. Overall, Halliburton's backlog of government revenue
expanded 40% in the last three months of 2002 alone,"
Business 2.0 reported.
What is most troubling about the
sweet deals Brown & Root has been awarded and what has
lawmakers like Congressman Henry Waxman, D-California, up in
arms is how the company ripped off the government to the
tune of $2 million on several occasions while Cheney was
chief executive of Halliburton and the company's long
history of supporting terrorist regimesincluding Iraq, Iran
and Libyadespite U.S. sanctions on such countries.
year, KBR agreed to pay the U.S. government $2 million to
settle allegations it defrauded the military while Cheney
was chief executive of parent company Halliburton. KBR was
accused of inflating contract prices for maintenance and
repairs at Fort Ord, a now-shuttered military installation
near Monterey, Calif. The lawsuit, filed in Sacramento,
alleged KBR submitted false claims and made false statements
in connection with 224 delivery orders between April 1994
and September 1998.
KBR and Halliburton has also paid
out settlements to end investigations and lawsuits on
half-a-dozen other occasions.
In 1978, a grand jury
indicted KBR on charges that it colluded with a competitor
on marine construction work. KBR paid a $1 million fine to
settle the charges. In 1995, the U.S. fined Halliburton $3.8
million for violating a ban on exports to Libya. Four years
later, a Halliburton subsidiary opens an office in Iran,
despite a U.S. ban on doing business in that country. In
2001, Halliburton shareholders lashed out at company
executives for its pipeline project in Burma, citing that
country's human-rights abuses. Also in 2001, watchdog groups
blasted Cheney for placing 44 Halliburton subsidiaries in
foreign tax havens.
Halliburton's dealings in six
countries - Azerbaijan, Indonesia, Iran, Iraq, Libya and
Nigeria - show that the company's willingness to do business
where human rights are not respected is a pattern that goes
beyond its involvement in Burma.
So how does the company
continue to win such lucrative contracts with the
government, as in the case of Iraq, in spite of its shady
"KBR was selected for the award based on the fact
that KBR is the only contractor that could commence
implementing the complex contingency plan on extremely short
notice," Halliburton said in a March news release.
Waxman's criticism of the government awarding the bulk of
the work in Iraq to Halliburton unit Brown & Root, it
appears that the company's role in the country is getting
bigger by the second. And plans to open up the bidding to
other companies appear to be a dead issue.
On Monday, the
Army Corps of Engineers said it awarded Brown & Root another
$24 million contract, this time to distribute gasoline and
cooking fuel in Iraq.
The Army Corps of Engineers said the
delivery order was awarded to Halliburton subsidiary on May
4 as part of the $7 billion umbrella contract awarded to the
company in March for fire fighting services in Iraq.
Army Corps last week said the Halliburton subsidiary had
received about $75 million in orders so far, and the total
amount would likely reach about $600 million, far less than
the worst-case figure of $7 billion estimated before the
Corps spokeswoman Carol Sanders said the new
order fell under the broad terms of the original contract
and rejected criticism from Waxman, who said Halliburton now
appeared to have a more lucrative and direct role in
rebuilding Iraq's oil industry.
She said Iraqi people
urgently needed cooking oil and gasoline as they began
rebuilding their country. Given the need to boil water to
prevent disease, it was not feasible to competitively bid
"We made the contract broad enough so we could
handle issues just like this," she said.
Sanders said KBR was bringing supplies of liquefied national
gas and gasoline to regional storage centers, where Iraqis
were managing its distribution.
KBR spokeswoman Wendy
Hall said the latest contract was part of the broader
contract, which aimed to maintain "the continuity of
operations of the Iraqi oil infrastructure."
Jason Leopold is a freelance journalist based in California,
he is currently finishing a book on the California energy
crisis. He can be contacted at firstname.lastname@example.org.