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Halliburton unit expands war-repair role

They travel like foreign dignitaries, their SUVs escorted by two US Army Humvees and a security detail led by a master sergeant.

''We don't need KBR,'' says Dathar Al Khashab, general manager of Baghdad's Daura Refinery Co., which like Iraq's other refineries badly needs new equipment after a generation of sanctions. ''I can work with any other company to do this job.''
Halliburton unit expands war-repair role

By Stephen J. Glain and Robert Schlesinger, Globe Staff, 7/10/2003

BAGHDAD -- They travel like foreign dignitaries, their SUVs escorted by two US Army Humvees and a security detail led by a master sergeant. No Iraqi official is too busy to meet them and when it comes to Iraq's most precious resource, oil, they are granted total and instant access.

Officials from Kellogg, Brown & Root Services, a subsidiary of oil-services giant Halliburton Co., are using a broadly worded contract to evaluate and repair Iraq's petroleum infrastructure, ''as directed'' by the US government, to gain a huge head start over potential competitors in redeveloping the country's vast, outdated oil industry. With much of Iraqi reconstruction bogged down by sabotage, chronic looting, and bureaucratic mire, KBR -- which also is supposed to repair war-damaged oil wells and provide general logistical support to the US Army -- has expanded its role to include everything from gasoline imports to laundry services.

Some Iraqi oil officials say KBR is using what appears to be an open-ended mandate to effectively corner a market coveted by its rivals and to win business Iraqis can do themselves.

''We don't need KBR,'' says Dathar Al Khashab, general manager of Baghdad's Daura Refinery Co., which like Iraq's other refineries badly needs new equipment after a generation of sanctions. ''I can work with any other company to do this job.''

KBR's work in Iraq comes under two different contracts. In 2001 the company was awarded a 10-year contract under the Army Logistics Civil Augmentation Program, known as Logcap, that calls for the company to provide a wide range of logistical services to the US Army. By the end of May, KBR had received $425 million under that contract, according to correspondence between Representative Henry A. Waxman of California, the ranking Democrat on the House Government Reform Committee, and the Department of the Army.

Through that contract, KBR had prepositioned personnel and equipment in the Iraq region -- deployments that in the Army's eyes made the company the logical choice for an oil infrastructure contract that was awarded soon after the war in Iraq began.

That KBR contract -- according to Waxman, who is investigating the deal -- has ''no set time limit and no dollar limit and is apparently structured in such a way as to encourage the contract to increase its costs and, consequently, the costs to the taxpayer.''

It took Waxman's investigation to uncover key details of the KBR contract, which was awarded by the Army Corps of Engineers as part of a secret process by US government agencies charged with rebuilding postwar Iraq. Several of the companies involved in the closed-door bidding, allowed in times of a national crisis under federal procurement laws, have close ties to the White House or were major contributors to the Bush presidential campaign.

In addition to KBR, the winning bidders included San Francisco-based Bechtel/Parsons Brinckerhoff, which was awarded a $780 million contract to supervise Iraqi reconstruction. Bechtel, together with Halliburton, donated more than $2 million in campaign contributions, primarily to Republican candidates, according to the Center for Responsive Politics. From 1995 to 2000, Halliburton was headed by now-Vice President Dick Cheney.

KBR, according to an Army Corp of Engineers official responding in early April to Waxman's written queries, was awarded a two-year, $7 billion contract to put out oil well fires and evaluate the state of petroleum fields in postwar Iraq.

By early July, five ''task orders'' had been issued under the infrastructure contract worth more than $282 million, according to a website set up by the Army Corps of Engineers. The orders included training and advice for safely shutting down equipment and assessing damage, repairing facilities, building base camp facilities, and bringing oil into Iraq while indigenous distribution systems are still being repaired.

The contract was designed to cover a ''worst-case estimate'' of possible damage, wrote Lieutenant General Robert Flowers, and ''those services necessary to support the mission in the near term.''

Flowers gave Waxman his written assurance that ''no other contractor could satisfy the mission requirements.''

That's not how many Iraqis see it. They say KBR's preponderant role in postwar reconstruction reinforces local suspicion that the invasion of Iraq was more about promoting American corporate interests than removing Saddam Hussein. At a time when US officials in Iraq have been criticized for employing American companies to do what Iraqis are capable of doing on their own, KBR manages laundry services and a hair salon at US occupation headquarters.

''KBR is performing tasks as directed by our clients to provide for the continuity of operations of the Iraqi oil infrastructure, as well as the logistical support services required as part of the Logcap contract,'' Cathy Gist, a KBR manager of public and community relations, wrote in response to e-mailed queries.

Iraqi and US officials offer different interpretations of KBR's core business in Iraq. Philip Carroll, US adviser to the Iraqi oil ministry, says the terms of KBR's contract limits the company to a survey of war-related damage and recommendations on how to fix it. The survey should not cover equipment damaged or worn out during the 13-year-old UN embargo imposed on Iraq after Baghdad's 1990 invasion of Kuwait, he said.

By year's end, according to Carroll, KBR will submit its report for evaluation by the oil ministry, which will use it as a blueprint for the repair of Iraq's oil infrastructure. ''When they come up with a plan they will submit it to the ministry, and we will review it and compare it with the terms of their contract,'' he said.

To hear Iraqi oil officials tell it, the rebuilding process has already begun, with KBR as both consultant and supplier.

Khashab of the Daura refinery said there is little war damage to evaluate, because the facility survived the war unscathed. ''We can go straight'' into rebuilding, he said. ''The refinery is very old, and KBR is happy to help us. We're sitting down with them, and they're working to get what we need.''

Khashab says he and KBR are discussing ways to upgrade Daura's capacity to develop light-oil products, such as lubricating oil. It is a procurement job Khashab says he is perfectly capable of doing without KBR's help. ''But since KBR is here,'' he said, ''why not work with them?''

KBR's Gist said that the company is conducting ''emergency repairs'' of the infrastructure.

''KBR personnel continue to assess the situations and inspect the oil infrastructure, performing repairs as directed by the Corps of Engineers,'' she wrote. ''However these assessments and reviews are not complete, and it is too early to speculate on an overall condition or course of action.''

Waxman, when informed of the scope of the company's activities in Iraq, expressed reservations about KBR's expanding role.

''It's important that we provide essential services to our servicemen and women, but some of the services Halliburton is providing go beyond that and certainly give the appearance of a `Full Halliburton Employment Act,' '' Waxman said. ''There may be good reasons why taxpayers are paying a multinational corporation like Halliburton to cut hair and wash shirts, but it would be helpful to know why.''

KBR has also been tasked to arrange overland shipments of gasoline to ease fuel shortages following waves of postwar looting that crippled Iraqi oil production. Thousands of tanker trucks are entering Iraq each week from Syria, Saudi Arabia, Turkey, and Jordan, nearly all of which are fixed by KBR agents. It is a business with which the Iraqis have years of experience; since the 1991 Gulf War, Iraq provided Jordan with discounted oil in return for Amman's support of Baghdad's invasion of Kuwait. Those shipments ended with the coalition assault in March, and Iraqi truckers have been out of work since then. KBR agents have hired foreign truckers, not Iraqi ones, say Iraqi transport companies.

''We have enough trucks to do this ourselves,'' says Shahab Ahmed Hamid, a member of a local truckers' union. ''We were promised subcontracts from the Americans, but no Iraqi trucks have been employed.''

Stephen J. Glain can be reached at  glain@globe.com.

This story ran on page A1 of the Boston Globe on 7/10/2003.

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