Haliburton Planned for Oil Rewards from War

By Jason Leopold
Scoop Media
May 14, 2003


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 executives.

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
bankruptcy.

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 viewed at:
http://www.hq.usace.army.mil/cepa/iraq/factsheet.htm

Since 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.

However, 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 story
says.

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
Department.

"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.

A half-dozen 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 favorites.

"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."

Since 9-11, Halliburton's Brown & Root division is the only company that
has profited from the so-called war on terror.

Based on 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.

Last 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 record?

"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.

Despite 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.

The 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 Iraq war.

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 the work.

"We made the contract broad enough so we could handle issues just like
this," she said.

Specifically, 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 jasonleopold@hotmail.com.





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