WASHINGTON/ BAGHDAD, 2 January 2004 — The Bush administration has decided, after weeks of infighting, to defer about $4 billion in Iraq reconstruction work until the US cedes political control to an interim Iraqi government this summer.
The decision substantially lowers the amount of work to be handled by a special Pentagon-run office in Baghdad that was originally created to manage most of the $18.6 billion set aside for Iraq reconstruction. But US officials said they wanted to postpone some work until after the June 30 transfer of sovereignty, in part to help maintain leverage over the next Iraqi government. There are also indications that the administration might, in the later round of spending, become open to awarding contracts to companies from countries such as France, Germany and Russia, which are now barred from the process. Administration officials have hinted that they are looking for ways to reward countries that agreed to forgive large amounts of Iraqi debt, as those three countries have.
The spending compromise was struck at a White House meeting yesterday morning. It is meant to end nearly a month of confusion that has delayed plans to award as many as 26 huge contracts by early February to rebuild Iraq’s battered infrastructure and government. The recent feud over Iraq spending within the State Department, the Pentagon and parts of the White House highlights the difficulties resulting from a change in US strategy from long-term occupation to a much quicker turnover of sovereignty to the Iraqis.
The administration’s top reconstruction official in Baghdad, Ret. Adm. David Nash, threatened to resign at the height of the infighting earlier this month. He has now agreed to stay on with a reduced workload.
Under the new arrangement, Adm. Nash’s Program Management Office will now directly oversee work valued at about $5 billion to be awarded in coming months, according to several US officials. Money being held back until the second half of 2004 will be siphoned from projects originally earmarked for the Baghdad office, known as the PMO. That $4 billion then will be doled out by agencies within a newly opened US Embassy in Baghdad, where Adm. Nash is expected to work once the transfer of authority is completed.
In an interview, Adm. Nash said the plan now is to issue fewer contracts in the near term but make sure that each is substantial enough to entice international contractors.
