[stop-imf] Update: IMF/World Bank in Iraq

[robert weissman]

 From 50 Years is Enough:

/An earlier version of this article appeared in Economic Justice News,
Volume 8 No. 3, September 2005
<http://www.50years.org/cms/ejn/story/272>. We've updated it in advance
of the 3rd anniversary of the US-led invasion and occupation of Iraq. /

/For more on the specifics of a new IMF stand-by agreement with Iraq, go
to: http://brettonwoodsproject.org/article.shtml?cmd[126]=x-126-507685
<http://brettonwoodsproject.org/article.shtml?cmd%5B126%5D=x-126-507685>/

*Operation Corporate Freedom: The IMF and World Bank in Iraq*

By Basav Sen, Mobilization for Global Justice
<http://www.globalizethis.org>, and Hope Chu, 50 Years is Enough Network
<http://www.50years.org>

While the three-year U.S. occupation of Iraq faces a quagmire in
operations, the economic forces of the International Monetary Fund (IMF)
and the World Bank are moving full speed ahead implementing various
economic reforms that will cause U.S.-based corporations - Bechtel,
Halliburton, and others - to proclaim, "Mission Accomplished!" As the
Bush administration touts its rhetoric of freedom and liberation, the
IMF and World Bank are busily "liberating" Iraq's resources - oil and
labor - and "freeing" Iraq's markets. The recent rise in fuel prices in
Iraq and the subsequent riots are just a glimpse of what the future
holds for Iraq under IMF and World Bank plans.

*Stage One: Debt cancellation for Iraq, increased control for the IMF*

Shortly after the start of the US occupation of Iraq, the Bush
administration sent former Secretary of State James Baker on a
pilgrimage to the capitals of other wealthy countries to seek
cancellation of Saddam Hussein's odious debts. In a move that seemed
inexplicable at first, the Bush administration was using the principle
of odious debt to ask for cancellation of Iraq's Saddam Hussein-era debt.

Now, the political motivations behind this unexpected move are clear.
The cancellation of Iraq's debt is a Trojan horse for the IMF, World
Bank, and WTO to enter Iraq and start restructuring the economy further,
continuing where Paul Bremer's Coalition Provisional Authority (CPA)
left off. In a move reminiscent of the Heavily Indebted Poor Countries
(HIPC) program, not only debt but debt relief is being used as a tool to
restructure Iraq?s economy.

The Paris Club of Creditors, a cartel of most of the world?s major
creditors (including all the G8 governments and the governments of other
wealthy countries), agreed on November 21, 2004, to cancel 80% of Iraq's
debt of about $39 billion to Paris Club members, in three steps. The
terms of the cancellation are that:
* 30% of the debt would be cancelled outright;
* 30% would be cancelled "as soon as a standard IMF programme is
approved," according to the Paris Club press release announcing the
move, essentially conditioning debt cancellation on the subjugation of
Iraq's economic policy to the IMF;
* Another 20% would be cancelled after three years, subject to the IMF
Board?s review of Iraq's implementation of the terms of the agreement,
further binding Iraq to IMF conditions.

Two things about the Paris Club "deal" are noteworthy. First, Iraq's
debt to the IMF is only about 1% of its total Paris Club debt, and yet
the IMF gets to determine the conditions for most of the debt
cancellation being offered to Iraq. This shows that the political clout
of the IMF is way out of proportion to its financial clout.

Secondly, the Paris Club made it clear that the offer of debt
cancellation was because of "the exceptional situation of the Republic
of Iraq and... its limited repayment capacity over the coming years."
While the initial rhetoric of the Bush administration had focused on the
principle of odious debt, the Paris Club was careful not to set a
precedent for acknowledging this principle, lest they face pressure in
the future to cancel the debts of other repressive regimes such as the
apartheid regime in South Africa, the Suharto dictatorship in Indonesia,
the notorious Duvaliers of Haiti, or the Mobutu regime in Congo. Denying
the odious nature of the debt also provides the Paris Club political
cover to keep 20% of Iraq's debt off the table. Even the Iraqi National
Assembly, a body that rarely contradicts the United States, has publicly
condemned the Paris Club deal for failing to recognize the odious nature
of Iraq's debt and consequently requiring Iraq to repay a fifth of it.

In this manner, a move that appears on the surface to be beneficial for
Iraq - debt cancellation - is being used as a tool of control by the
World Bank, the IMF and the wealthy creditor countries. What is more, it
is a tool of control that will last long after the withdrawal of U.S.
combat forces.

*Stage Two: The rule of the Coalition Provisional Authority*

In this context, it is worthwhile to review how the Coalition
Provisional Authority restructured Iraq's economy. (See /World Bank
Brings Market Fundamentalism to Iraq,
<http://www.50years.org/cms/ejn/story/169>/ Economic Justice News,
September 2004) Paul Bremer passed a series of Executive Orders (without
any accountability to Iraqi people) that, among other things:
* /Laid off 500,000 government workers/ ? 400,000 of them employees of
the Iraqi Armed Forces ? in a country with a workforce of 6.5 million.
This lay-off thus represented nearly 8% of the workforce.
* /Changed laws governing foreign investment/ to "make Iraq one of the
most liberalised economies in the developing world and go beyond even
the laws in many rich countries," according to the Financial Times. (CPA
Order No. 39)
* /Made it illegal for Iraqi farmers to plant saved seeds and to
exchange knowledge freely/. Now they are allowed to plant only
"protected" crop varieties which remain the property of the
multinational seed companies. Previously, the Iraqi constitution did not
allow patenting of plants. The CPA, however, changed the law to allow
"intellectual property" control over plant varieties. (CPA Order No. 81)

Every single one of these policies fit the neoliberal framework, and
sound as if they were World Bank and IMF conditions. But they aren't.
Even before the IMF and World Bank made their entry into Iraq to any
significant extent, the US occupation was unilaterally coercing Iraq to
conform to policies identical to what these institutions would have
required - and at a more accelerated pace. There are more ways to
restructure economies than through loan conditions. What Iraq has
undergone under the CPA can best be described as a structural adjustment
program imposed at gun-point.

*Stage Three: Economic occupation by the IMF and World Bank*

Not content with the extent to which Iraq's economy has already been
restructured on neoliberal lines by the U.S., the IMF and World Bank
have more designs for the Iraqi economy, and are using debt cancellation
as leverage to compel Iraq to comply with their conditions. In addition,
they have begun normalizing their relations with Iraq, thereby
strengthening their hand in the country.

The IMF made its first-ever loan to Iraq in September 2004. In July
2005, the World Bank made its first loan to Iraq since 1973. This was
followed by a $100 million World Bank loan for the education sector last
November, and an IMF Standby Arrangement in December. The cancellation
of Iraq's debt under the Paris Club plan, referred to earlier, is
conditioned on Iraq entering into this Standby Arrangement, and
implementing it to the satisfaction of the IMF.

Timing the IMF deal immediately after the elections is a move that
appears designed to prevent Iraqis from having a say in the deal. If the
deal had been signed before the elections, it would have been an
election issue. "The timing of the decision spared politicians from
voters' wrath," the Washington Post pointed out in a December 28 story.

The recent increase in domestic fuel prices was a requirement of the
Standby Arrangement with the IMF, under which prices of petroleum
products are to rise to the levels of corresponding products in other
countries of the region by 2007. The price increases required by the IMF
are staggering: the initial increases implemented in December on the eve
of signing the Standby Arrangement were 400% for regular gasoline and
kerosene (from 20 dinars to 100 dinars per liter, and from 5 dinars to
25 dinars per liter, respectively), and 800% for diesel (from 10 dinars
to 90 dinars per liter), with further quarterly increases planned
through September 2006. The IMF makes clear its intentions of keeping
tabs on the price increases: "Progress in adjusting petroleum product
prices will be assessed in the context of the programs? (quarterly)
reviews," according to the language of the Standby Arrangement.

Fuel is an input to the retail price of most goods, since they need to
be transported. Inevitably, the prices of most goods, including food,
have risen sharply as a consequence of the increase in fuel prices.

Other conditions imposed by the IMF and World Bank on Iraq include the
following:

* /Privatization of all state-owned enterprises in Iraq except oil./
This IMF-imposed condition will lead to the lay-offs of an estimated
145,000 workers. It will also provide foreign corporations with control
of vital sectors of Iraq?s economy. As for the oil industry, while it
will not be totally privatized, legal changes are underway to provide
for partial foreign ownership. Former Finance Minister Adel Abdul Mehdi
(who is now one of Iraq?s two Vice-Presidents) admitted that these legal
changes would be "very promising to the American investors and to
American enterprise, certainly to oil companies." The IMF calls for
"expanding the participation of the private sector in the domestic
market for petroleum products" in its press release announcing the
Standby Arrangement.

* /An end to food subsidies./ Subsidized food rations have been a
lifeline for 60% of Iraq's population, and often their only protection
against starvation, but the IMF and World Bank want to eliminate them.
The elimination of subsidized food distribution will facilitate the
control of Iraq's market for food by corporate agribusiness.

* /Liberalization of food prices./ The World Bank wants to eliminate
regulations that keep food prices under control. "Liberalization" of
food prices has led to severe food shortage, even famine, in many
countries, most recently in Niger and Mali.

* /Further layoffs and/or wage and benefit freezes in the public
sector./ The Standby Arrangement requires a ceiling on the Iraqi
government's non-security/defense wage bill, as a "performance
criterion" (i.e. a criterion that will be used by the IMF to evaluate
Iraqi compliance with its conditions). It is significant that the only
sector of government expenditure that is exempted from the IMF payroll
budget ceiling is defense! The IMF celebrates the fact that the Iraqi
government withdrew legislation in the National Assembly requiring
pensions to be set at 80% of final salary ? making it clear that neither
the existence of a democratic process in Iraq, nor retirement security
for senior Iraqis, are any concern to the IMF.

The Iraqi reaction to IMF and World Bank policies in general, and to the
recent fuel price increases in particular, has been one of
near-unanimous disapproval. Thousands have demonstrated against the fuel
price increases throughout the country; the Oil Minister, Ibrahim
Bahr-al-Uloum, resigned in protest in early January (and has been
replaced by the notoriously corrupt Ahmed Chalabi); and some provinces,
including oil-rich Basra, have refused to implement the price increase.
A number of Iraqi labor unions issued a joint statement on January 16
(see below), condemning the oil price increase, and unequivocally
rejecting the entire IMF and World Bank agenda of privatization and
deregulation.

*Paul Wolfowitz: Master and Commander*

The economic restructuring of Iraq to benefit foreign investors was most
likely one of the main motivations for the U.S. invasion and occupation
of Iraq ? or at least a highly profitable windfall. The fact that Paul
Wolfowitz, the newly appointed president of the World Bank, was one of
the major architects of the invasion only heightens the probability of a
conscious plan on the part of the Bush administration. With the goal of
maintaining U.S. control over the resources of Iraq after the
occupation, installing Wolfowitz ? a leading member of the Project for a
New American Century and already on record as an advocate of expanding
U.S. influence and dedicating foreign policy to the service of U.S.
interests ? at the head of the World Bank makes perfect sense.

It is clear that the consequences of the U.S. occupation, and of the
subsequent economic occupation and restructuring of the country in the
interests of foreign investors by the IMF and World Bank, will last well
after the withdrawal of U.S. troops. Getting US troops out of Iraq,
while an important first step towards winning self-determination for
Iraq, is exactly that ? a first step. If the U.S. anti-war movement is
serious about standing in solidarity with the people of Iraq, and
challenging the deep-rooted economic motivations of an interventionist
U.S. foreign policy in Iraq and around the world, then it needs to make
resistance to the neoliberal economic agenda of so-called international
institutions a central plank of its campaign.

*A Joint Statement Concerning the Programs of the World Bank and
International Monetary Fund in Iraq by Iraqi Trade Unions*

The Iraqi economy has been severely affected by decades of sanctions,
wars and occupation. The Iraqi trade unions and federations believe in
the capacity of the country with all its oil and mineral resources to
provide a decent living standard for Iraqis.

The federations and unions consider that the wars and occupation have
caused a dramatic decrease in the living and social standards of Iraqis
and especially of workers.

The federations and unions stress the importance of complete sovereignty
for Iraq over its petroleum and natural resources so as to develop them
in a way that assures a complete reconstruction of the country. We wish
to stress the following points in regard to the policies of the IMF and
World Bank in Iraq:

1. Increasing transparency and additional representation for Iraq in the
decision-making structures of the IFIs.

2. To stop imposing structural adjustment conditions for loans.

3. Agreeing to provide funding for public services and state-owned
enterprises without demanding their privatization.

4. Canceling debts owed by Iraq that have resulted from the policies of
the former regime.

5. Rejecting the reduction of spending on social services especially the
elimination of government support for the food distribution system or
the reduction of the number of items covered.

6. Strongly rejecting the privatization of publicly owned entities and
especially of the oil, education, health, electricity, transportation
and construction sectors.

7. Rejecting the increase in the price of petroleum products,
considering the negative impact of the increase on the living standards
of Iraqis.

8. Adopting a new labor law and a pension and social security law that
assure workers' rights and are in conformity with international labor
standards and human rights conventions. The World Bank and the IMF must
also respect these standards .

The unions and federations that have signed this statement announce the
formation of a permanent coordinating committee that will make its
positions known to the Iraqi Government and to the IFIs. They also
demand that the IFIs engage in dialogue, discussion and negotiations
with the trade union federations regarding their policies in Iraq.

Finally, they request the assistance of international trade union
organizations to provide all possible support to the above-mentioned
demands.

(Signed)

General Federation of Iraqi Workers
Oil Unions Federation in Iraq / Basra
Federation of Workers Councils and Unions in Iraq
Kurdistan General Workers Syndicate Union / Erbil
Iraqi Kurdistan Workers Syndicate Union

Amman, 16 January 2006