There are two ways to look at the installation of James Baker, his father’s former secretary of state, in George W. Bush’s White House. Either the president has finally found a temporary assignment attractive enough to persuade his old retainer to come and rescue him from his Middle East hot seat. Or, as the new special envoy in charge of reducing Iraq’s $120 million debt, Baker has found a job that meets his need for a White House cap while he continues private conversations over oil and gas deals in Eurasia. Or both.

You never know with Baker, who may be representing his law firm, Baker Botts, which represents Halliburton; or Baker Hughes, the oil services company that was promised the second tier of oil-field restoration contracts in Iraq after Halliburton’s engineering and construction subsidiary KBR; or the Carlyle Group, the Washington-based global investment firm, of which Baker is senior counsellor. Carlyle is where former top government officials come to roost alongside powerful business leaders, to raise funds and identify takeover targets; a giant hedge fund, if you will, with offices in 12 countries, managing $17.5 billion in assets, mostly in the areas of energy, aerospace and defence.

In any event, the job of Iraq debt emissary cuts close enough to Baker’s business interests for him to have renounced his partnership share of fees in ‘client matters’ with both Carlyle and Baker Botts should they conflict with his official duties. It’s a standard move in such assignments, and irrelevant to the inestimable long-term value for a company like Carlyle of the contacts Baker has established. With his drop-the-debt tour, he has woven an astonishing web covering much of the world: a network of pledges, confirmed at the highest reaches of power. Public attention, however, was swiftly drawn to Paul Wolfowitz’s petulant reminder, issued on the day Baker’s appointment was announced, that Russia, France and Germany had forfeited their access to America’s $18.6 billion in reconstruction contracts. ‘It’s understandable that the Bush team wouldn’t rush to give reconstruction contracts to France, Germany and Russia,’ Thomas Friedman grumbled in the New York Times, ‘but why shove that in their faces while we’re asking them to forgive Iraq’s debts?’ Or was the Wolfowitz directive a bargaining chip placed on the table as part of Baker’s negotiating strategy? Are the two wings of the American eagle, each bending to catch a different breeze, beating in tandem?

In the days before the tour, there was widespread agreement among journalists that Baker had been embarrassed by Wolfowitz, in part because the liberal media are fascinated by the radical right and all too susceptible to the takeover theory: the notion that an alien ideology is subverting the government’s good sense. Various commentators – Joshua Micah Marshall, Jim Lobe and Paul Krugman among them – agreed that Baker had been crossed, with Krugman adding that, when he issued the reminder, Wolfowitz’s hopes of becoming secretary of state in a second Bush term took a nosedive. Marshall wondered whether we are ‘trying to get retribution toward these countries by stiffing them on the contracts’, or ‘trying to come to some sort of agreement . . . to refinance and restructure Iraq’s mammoth foreign debt’? As if these goals, so close to the bad guy/good guy pulse of American diplomacy, were in conflict.

Lobe saw the problem as a continuation of the battle between neocons and realists going back to 1992, when Wolfowitz and Scooter Libby, now Cheney’s chief of staff, co-authored the Defense Department Guidance that so alarmed then secretary of state Baker, not to mention the first President Bush, that only Cheney’s promise to overhaul the text – he was then defense secretary – saved the authors’ jobs. In Lobe’s view, Baker, like other realists, was ‘deeply sceptical, not to say incredulous, about neo-conservative ambitions to "remake the face of the Middle East” by exporting democracy’. He was Big Oil, and would see radical change in the region as ‘unacceptably risky and destabilising’.

Longtime consigliere to the Bush family – his last mission on its behalf was to secure Florida’s votes for George fils in 2000, and thereby win the election for him (something he had failed to do as campaign manager for Bush’s father when he was seeking re-election) – Baker stands for a different Middle East from the neocons and the hawks like Donald Rumsfeld. He made no secret of his opposition to waging unilateral war on Iraq, though he was more discreet than the former national security adviser Brent Scowcroft. But the challenge posed by Baker’s presence in the White House goes beyond personal score-settling. ‘We went into Iraq to overturn the geopolitical dynamics of the region,’ Marshall wrote. ‘Now Baker, an opponent of everything the architects of the war stand for, is being sent in to reach an accommodation with the status quo powers to pave the way for our departure.’

Behind these statements lies the belief that President Bush wants out; that the policy change announced on 15 November is real; that the timetable for ending the civil occupation by July 2004 is genuine. It’s a dangerously wrongheaded view, not only because it ignores the continued presence of America’s 100,000-plus occupation army, bolstered by a new $3 billion Special Forces group, called Task Force 121, whose numbers will not be reflected in troop totals. This secret force run by the CIA, with help from Israeli advisers, includes Iraqi exile groups, Kurdish and Shiite militias, and senior intelligence agents inherited from the Baath regime. As with the Phoenix programme in South Vietnam, the CIA’s cadre are trained to ferret out and assassinate Iraq’s insurgents – ‘manhunting’, Rumsfeld calls it – and thereby enable the US to maintain control over the direction of the country when ‘sovereignty’ is passed to the Iraqis. A loyal secret police, says John Pike, a military expert in Washington, means ‘the new Iraqi political regime will not stray outside the parameters that the US wants to set.’ It will ‘reign but not rule’.

Meanwhile, power will largely remain with what is now called the Coalition Provisional Authority, which, together with its retinue of Republican appointees and lobbyists in Washington and Baghdad, will be absorbed into a 3000-man American embassy in July – minus Paul Bremer, rumoured to be a candidate for Bush’s next cabinet. This is where Baker’s deals will be nailed down, the reconstruction contracts parcelled out, and the privatisation of the Iraqi economy – what’s left after Bremer gave in on state industries and Saddam’s food rationing programme (too risky to change) – implemented. That is, if security can be maintained, a big if over which Baker has no more control than Bush. And Bush, it appears, has even less control since the capture of Saddam – which, far from calming the insurgency, has become a liability for the American leadership, demonstrating just how little influence Saddam had over the galloping resistance to the takeover of Iraq.

While the administration was strong enough to ride roughshod over the cracks in the public argument for war, it’s not strong enough to turn the country into an American client state, even with British help; and however many conferences are convened on the future of Iraq and how to rebuild it and get a piece of the $18.6 billion, they will make little difference. The occupation of Iraq has entered another critical phase, centred on the so-called acceleration of the American withdrawal. ‘Ideology,’ in the words of an American diplomat, ‘has become subordinate to the schedule.’ And the schedule is set by the presidential election.

Nine months ago the administration promised that it would take no more than two years to transform the political system and the security forces. But half of the 40,000 Iraqi soldiers the administration hoped to train by next October have already deserted, citing poor pay and fear of reprisals from insurgents. The US has shifted its attention to the police, who can be deployed much more quickly. ‘If you build a strong police force, you have a republic,’ Steve Casteel, the CPA’s security adviser assures us. ‘If you build a strong military, you have a banana republic’ – which is a good line, but wrong in this instance, even when accompanied by the question: ‘When have you seen the police lead a coup?’

As for the political system, the conversion to a secular, pluralistic, market-driven ‘democracy’, which was the neocons’ contribution, never got off the ground. The closer such ideas came to being put into practice in Iraq, the more ludicrous they appeared. ‘If there’s one thing the Wolfowitz/Baker dust-ups make clear, it’s that the ideology of the Bush White House is not neo-conservatism; it’s old-fashioned greed,’ Naomi Klein said in the Guardian, and she was right. The Bush team never had a serious stake in the politics of postwar Iraq – they just didn’t want it to interfere with their geostrategic goals. ‘Plans for Post-Saddam Iraq’ was the heading on one of Paul O’Neill’s documents from his Bush years: a secret memo discussed early in 2001, months before 11 September, it foresaw peacekeeping troops, war crimes tribunals, and the divvying up of Iraq’s oil wealth. Very little changed as Operation Iraqi Freedom drew closer.

The Bush administration is doing its best to hide the facts. But it can’t keep up with the breaking news except with compromises which concede very little. Most troublesome is the Grand Ayatollah Ali al-Sistani’s demand for direct elections by 1 July. On 16 January, a top aide to al-Sistani warned that ‘in the coming days and months, we’re going to see protests and strikes and civil disobedience, and perhaps confrontations with the occupying force if it insists on its colonial and diabolical plans to design the country’s politics for its own interests.’ Two days later, on the eve of Bremer’s attempt to get the UN to agree to send its people back to Iraq as part of a harebrained scheme to persuade al-Sistani to withdraw his demand, a truck bomb exploded at the CPA’s entrance, killing 23 and wounding 95.

Karl Rove, not Condoleezza Rice – and not Dick Cheney or Donald Rumsfeld – deals this corner of the game, one of whose objectives is to rebrand the president as a man of peace. Thus, the White House has retreated from pre-emptive and preventive war with both Iran and North Korea, and reverted to conventional multilateral diplomacy to persuade Iraq’s former lenders to forgive the country’s debt. The full sums would never have been paid out, but the goal is to invite the nations that bought into Iraq’s prospects when the United States did, to restructure – in other words, reduce – debt repayments. Which is where Baker comes in, with his initial stops in Paris, Berlin, Moscow, London, Rome, Tokyo and Beijing; and now that Bush has extended the list to the Middle East, to Damascus, Kuwait City and Riyadh, when he’s ready. Riyadh, where Baker will be right at home, defending the Saudi sheiks against the 11 September survivors who have sued them, is owed a cartoonish $30 billion from the first Gulf War – for military services rendered to the US, not Iraq.

On the first day, Baker won pledges to reduce Iraq’s debt from both France and Germany as part of a deal with members of the Paris Club, a group of 19 Western creditor nations, including the US, that co-ordinates policy on problem loans made by their governments. (The debt that Iraq owes the US, some $4 billion, is one to which Baker gave critical support in 1989.) Even countries that aren’t in the Paris Club, like China, will abide by its rules, one of which is that negotiation take place only with a sovereign government: i.e. a government elected by the people, not selected, as the US plans for Iraq, by caucuses with the 18 governorates it has set up. No wonder the doors of Old Europe flew open to Baker’s touch. Even Russia promised to forgive 65 per cent of its $8 billion debt (with interest). In exchange, Abdul Aziz al-Hakim, who at the time was president of the Governing Council, announced that Russian business would be ‘welcome’ to invest in Iraq. And the head of the Kurdish PUK, Jalal Talabani, another GC member, then in Moscow, told the press that ‘Russia said it is willing to consider writing off the rest if it receives beneficial treatment in terms of oil contracts.’

Iraqi oil has always been more important than the reconstruction contracts. ‘More important for France than the back debt would be oil contracts . . . The French oil giant Total has been negotiating to explore and develop two sites in Iraq,’ the Washington Post noted on 17 December. In Berlin, the commitment Baker won was vaguer, perhaps because Germany has less interest in oil contracts. Asked about the ‘incentives’ the US was offering, Richard Boucher, a state department spokesman, said that Baker could be ‘very effective in that regard’ because he was ‘working with all the tools at his disposal in the US government’. And so on 22 December the contract bidding was suspended; the administration, the columnist Robert Novak suggested, was actively considering lifting the ban against these three countries. When the bidding restarts (probably in March), the winners are expected to hire hundreds of thousands of Iraqis to work on 2311 construction projects that are to be completed in two years.

Like the military’s news briefings from Baghdad, the new plan is full of numbers. ‘Numbers sanctify,’ Charlie Chaplin says in Monsieur Verdoux, speaking of Bluebeard’s body count, and of the hundreds of thousands killed in World War One; but numbers are used differently now. ‘If you put as much money in as we are,’ David Nash, the retired admiral who heads the rebuilding effort in Iraq, remarked, ‘you can’t help but make a difference.’ Nash, a former top executive with the US construction firm Parsons Brinckerhoff, is in charge of an enormous logistical ballet.

On one level, it’s a formula for disaster. With airports expected to remain off-limits because of security concerns, arriving contractors and supplies will be fighting for the same dock slips and highway lanes as the US military, which will be in the middle of its largest troop rotation since World War Two. Contractors will compete for the same labour pool, the same supplies of concrete and pipes, the same trucking fleets. Slow-moving convoys are fat targets for the Iraqi guerrillas, who are expected to disrupt and discredit the US rebuilding effort, as they have disrupted the military occupation. Contractors have to hire their own private armies, and write the costs into their bids: the US military, busy defending itself, won’t protect them. This will bring more business to private military companies, a sector that has ballooned along with the US oil industry, US engineering and construction, and US transportation and telecommunications. So, on another level, it’s a formula for success. As Naomi Klein says, ‘if it helps our friends get even richer, do it.’

But if the rebuilding effort breaks down, and the renovation of the oil fields is blocked, what will our consigliere have achieved? Given the fragility of the American position, why did so many countries buy in to the US version of Iraq’s future, if indeed they did? In June 1992, Ted Koppel said on ABC’s Nightline that it was becoming increasingly clear that George H.W. Bush, ‘operating largely behind the scenes through the 1980s, initiated and supported much of the financing, intelligence and military help that built Saddam’s Iraq into the aggressive power that the United States ultimately had to destroy’. Not once, but twice. And in the second round there was a comeback: the second Bush entered a country that was ready for him.

One of the last things this administration would publicly consider is the possibility that the resistance might prove successful; that the US will be unable to secure the oil-fields or the construction sites, or protect its own troops. Jetting from one Middle East capital to another, Baker may succeed in building a multilateral consensus, but down below on terra firma, the guerrillas will continue to get the last word.

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