[casi] Changes to ration system on hold

[info@DELETETHISuncoverIraq.com]

Hi Hadani and others,

<re: Rations -- "Does anyone know to what extent the old ration system has been
maintained by the Americans and to what degree they control the distribtion of
rations?">

Ideologues within the CPA had planned to rapidly replace the legacy-OFF food
rationing system, offering monthly cash payments instead.  However, these plans
are on hold according to the following WashPost article (which makes rations
seem like a nefarious Hussein scheme, rather than a humanitarian exception to
sanctions).  Says the Post:

"An unwillingness to assume other risks has also scuttled, at least temporarily,
plans to overhaul a national food rationing program that was a cornerstone of
Hussein's welfare state. Several senior officials want to replace monthly
handouts of flour, cooking oil, beans and other staples -- received by more than
90 percent of Iraqis -- with a cash payment of about $15. Although the proposal
has the enthusiastic support of economic conservatives in the occupation
authority, concerns about the logistics have put the effort on hold.

'It's a great idea that the academics thought up, but it wasn't in tune with the
political realities,' said a U.S. official familiar with discussions of the
issue. 'We have to look at what we gain versus what we risk. Right now, we don't
need to be adding any more challenges to those we already have.'"

For a growing collection of CPA orders and regulations (and related analysis)
see http://www.casi.org.uk

Oil for Food officially ended on Nov. 21.  Information specifically about the
OFF to CPA transfer is here: http://www.casi.org.uk/info/off.html.

Regards,
Drew Hamre

===
http://www.washingtonpost.com/ac2/wp-dyn/A35053-2003Dec27?language=printer
Attacks Force Retreat From Wide-Ranging Plans for Iraq


By Rajiv Chandrasekaran
Washington Post Foreign Service
Sunday, December 28, 2003; Page A01


BAGHDAD, Dec. 27 -- The United States has backed away from several of its more
ambitious initiatives to transform Iraq's economy, political system and security
forces as attacks on U.S. troops have escalated and the timetable for ending the
civil occupation has accelerated.

Plans to privatize state-owned businesses -- a key part of a larger Bush
administration goal to replace the socialist economy of deposed president Saddam
Hussein with a free-market system -- have been dropped over the past few months.
So too has a demand that Iraqis write a constitution before a transfer of
sovereignty.

With the administration's plans tempered by time and threat, the U.S.
administrator of Iraq, L. Paul Bremer, and his deputies are now focused on
forging compromises with Iraqi leaders and combating a persistent insurgency in
order to meet a July 1 deadline to transfer sovereignty to a provisional
government.

"There's no question that many of the big-picture items have been pushed down
the list or erased completely," said a senior U.S. official involved in Iraq's
reconstruction, who spoke on the condition of anonymity. "Right now, everyone's
attention is focused [on] doing what we need to do to hand over sovereignty by
next summer."

The new approach, U.S. diplomats said, calls into question the prospects for
initiatives touted by conservative strategists to fashion Iraq into a secular,
pluralistic, market-driven nation. While the diplomats maintain those goals are
still attainable, the senior official said, "ideology has become subordinate to
the schedule."

"The Americans are coming to understand that they cannot change everything they
want to change in Iraq," said Adel Abdel-Mehdi, a senior leader of the Supreme
Council for the Islamic Revolution in Iraq, a Shiite Muslim political party that
is cooperating with the U.S. occupation authority. "They need to let the Iraqi
people decide the big issues."

Bremer's plan for Iraqis to write a constitution before he departed had been
intended to prevent extremists from dominating the drafting process. U.S.
officials acknowledge that risk exists, but said it had been outweighed by the
need to end the civil occupation by the summer. The presence of U.S. troops in
Iraq will go on longer, military officials have said.

With goodwill toward Americans ebbing fast, Bremer and his lieutenants have also
concluded that it does not make sense to cause new social disruptions or
antagonize Iraqis allied with the United States. Selling off state-owned
factories would lead to thousands of layoffs, which could prompt labor unrest in
a country where 60 percent of the population is already unemployed.

Food Rationing System

An unwillingness to assume other risks has also scuttled, at least temporarily,
plans to overhaul a national food rationing program that was a cornerstone of
Hussein's welfare state. Several senior officials want to replace monthly
handouts of flour, cooking oil, beans and other staples -- received by more than
90 percent of Iraqis -- with a cash payment of about $15. Although the proposal
has the enthusiastic support of economic conservatives in the occupation
authority, concerns about the logistics have put the effort on hold.

"It's a great idea that the academics thought up, but it wasn't in tune with the
political realities," said a U.S. official familiar with discussions of the
issue. "We have to look at what we gain versus what we risk. Right now, we don't
need to be adding any more challenges to those we already have."

A similar philosophy extends to the disarmament of various militias backed by
political groups. Although the occupation authority wanted to quickly disband
the Kurdish pesh merga militias by moving members into the new army and police
force, U.S. officials have not pressed the issue with Kurdish leaders, who
remain strong supporters of the American occupation. U.S. officials are also
taking a measured approach toward a Shiite militia whose sponsoring party is the
Supreme Council for the Islamic Revolution in Iraq.

At the same time, the occupation authority has substantially decreased the
number of new recruits it intends to put through a three-month boot camp
designed to build an improved, professionally trained army. Instead, the
occupation authority is increasing the ranks of police officers and civil
defense troops, who can be deployed faster but receive far less training and
screening than the soldiers.

Bremer also recently allowed the creation of a new force, comprising former
members of five political party militias, to pursue insurgents with American
training and support.

"The Americans promised to limit our security forces to a professional army and
a professional police," said Ghazi Yawar, a member of Iraq's U.S.-appointed
Governing Council. "They should not tolerate these militias. They should be
dissolving them."

Yawar and his fellow Sunni Muslims, a minority that had long ruled Iraq, are
concerned that Shiites, who make up about 60 percent of the population, and
Kurds, who have lived autonomously for 12 years, will have little incentive to
demobilize their militias after the occupation.

"The Americans have to deal with this issue," he said. "It would be
irresponsible to leave it up to the Iraqis."

Across Iraq, efforts are underway to rebuild after years of war, economic
sanctions and gross mismanagement by Hussein's government. Hundreds of schools
have been refurbished with funds from the U.S. Agency for International
Development. Extensive rehabilitation and expansion of the country's electrical,
water and sewage systems are slated to begin next year, paid for by an $18
billion U.S. aid package. "We are going to see a massive reconstruction program
that will further demonstrate the depth of American commitment to Iraq," Bremer
said in a recent interview.

But there has also been a noticeable dampening of some early ambitions to remake
Iraq. In June, as he returned to Baghdad aboard a U.S. military transport plane
after speaking at an international economic conference, Bremer discussed the
need to privatize government-run factories with such fervor that his voice cut
through the din of the cargo hold. "We have to move forward quickly with this
effort," he said. "Getting inefficient state enterprises into private hands is
essential for Iraq's economic recovery."

Asked recently about privatization, he said it was an issue "for a sovereign
Iraqi government to address."

The administration's decision to shift privatization and the drafting of a
constitution to the provisional government has been generally well received by
Iraqi political leaders, who want to deal with those subjects themselves. But a
small, quiet minority of political figures, including a few members of the
Governing Council, contend that aggressive market-oriented policies must be
enacted by the occupation authority. The provisional government, they fear, will
not be willing to assume the risk of revamping the ration system or shutting
down a factory with thousands of workers.

"The Americans are the only ones who can implement these changes," one of the
council's 25 members said. "If they leave it up to Iraqis, it will never get
done."

Bremer and his aides voiced similar concerns until Nov. 15, when he agreed to
abandon his insistence that a constitution be written before a transfer of
sovereignty. A few weeks before the new arrangement was announced, a top
American official here stated that requiring the drafting of a "constitution
before sovereignty is the only way to guarantee we'll get a constitution."

By handing over sovereignty first, the administration has ceded veto power over
the final document and is forcing Iraqis to confront a raft of contentious
issues, from Kurdish demands for autonomy to Shiite demands for Islamic law,
without a referee. In September, Bremer warned that electing a government
without a constitution "invites confusion and eventual abuse."

Under the Nov. 15 agreement, Iraqi political leaders are to draft a "basic law"
that will serve as an interim constitution until a permanent one is written.
Bremer has said that the basic law will include a bill of rights, recognition of
an independent judiciary and other "guarantees that were not in Saddam's
constitution." His aides contend that discussions about federalism and the
relationship between religion and government that will occur during the writing
of the basic law will ease the process of drafting a permanent constitution, but
other American officials are more skeptical.

"We're requiring a country that lacks a democratic tradition and the
institutions of civil society, but has plenty of ethnic and religious tension,
to sort out a lot of very challenging things," the senior American official
said. "It's not ideal, but what choice do we have? Nobody wants us to extend our
stay here."

Privatization, the official said, illustrates the dilemma well: It is a step
that needs to be taken -- and that Bremer wanted to take -- but it has been
deemed too difficult and dangerous to accomplish now.

Reversal on Oil Factory


With a bloated workforce, decrepit factories and goods that cannot compete with
imports, the State Company for Vegetable Oils is the sort of government-run
business that economists working for the occupation authority had wanted to
shove into the private sector as soon as possible.

One of 48 companies owned by the Ministry of Industry, the enterprise was a
flagship of Hussein's socialist economy. Its six factories produced consumer
goods -- from partially hydrogenated cooking oil to shampoo and detergent --
that filled the domestic market and were cheaper than imported products.

Although the company posted impressive profits, they were illusory. The
government subsidized imports of raw materials, charging the company only $1 for
each $6,000 worth of materials brought in.

American experts who examined the company over the summer believed it would be
foolish for Iraq's new government to continue the subsidies. What was needed,
they concluded, was a private owner who would buy raw materials and sell
finished products at market prices. In exchange for investing in new
manufacturing equipment and modernizing the product line to better compete with
imports, they decided the new owner should have the right to shut down older
factories and reduce the number of employees to bring costs under control.

In late June, Bremer outlined his vision for a free-market Iraq before hundreds
of business executives attending a meeting of the World Economic Forum in Jordan.

"Markets allocate resources much more efficiently than politicians," Bremer
said. "So our strategic goal in the months ahead is to set in motion policies
which will have the effect of reallocating people and resources from state
enterprises to more productive private firms."

The vegetable oil company's director at the time, Faez Ghani Aziz, agreed with
Bremer. "We need outside investors," he said shortly after the speech. "We
cannot continue like this."

Bremer's chief economic adviser over the summer, Peter McPherson, advocated a
speedy move toward privatization, citing studies of the economic transformations
in Eastern Europe in the 1990s. "This needs to be done quickly," McPherson,
president of Michigan State University, said in July. "Experience shows us that
the faster you do it, the more beneficial it is for the economy."

But as resistance attacks grew more intense, security worries quickly trumped
economic ambitions in Bremer's office. No one wanted to do anything that would
increase the number of jobless Iraqis who might be recruited to fight the
occupation. Practical concerns also surfaced: The closure of Baghdad's airport
to commercial flights meant few investors could travel to Iraq.

Iraqi officials expressed further doubts about fast privatization. They argued
that waiting for a year or two for Iraq to stabilize would increase the prices
at which the government could sell factories. They also raised fears that former
Baathists would use ill-gotten money to buy up state firms.

In late July, the debate took a grim turn. After refusing to rehire dozens of
workers who had been dismissed before the war, Aziz, the director of the
vegetable oil company, was gunned down on his way to work. His killing sent a
wave of panic through the Ministry of Industry. All of a sudden, no one wanted
to talk about privatization.

Faced with growing reluctance among officials at the ministry and on the
Governing Council, Bremer and his advisers stopped advocating a fast sell-off of
state firms. "It's just disappeared from the agenda," an official with the
occupation authority said. "It was just too risky."

The Ministry of Industry recently decided to lease 35 factories to Iraqi and
foreign investors on the condition that they not fire a single employee. "The
Americans first thought with the easy change of regime in Iraq there should be
parallel drastic decisions on the economic front," said Mehdi Hafedh, Iraq's
interim minister of planning. "But now they realize they cannot be too
aggressive."

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