Imperial Life in the Emerald City (25 page)

“Kimadia was filled with thieves and incompetents,” said Scott Svabek, an army procurement officer on the CPA's health team. “It was corrupt and dysfunctional.”

To Haveman, the answer was to privatize it. But before he sold off Kimadia, he wanted to attempt something he had done in Michigan. When he was the state's director of community health, he sought to slash the huge amount of money Michigan spent on prescription drugs for the poor by limiting the medicines doctors could prescribe for Medicaid patients. Unless they received an exemption, physicians could order only drugs that were on an approved list, known as a formulary.

Haveman figured the same strategy could bring down the cost of medicine in Iraq. The country had 4,500 items on its drug formulary, meaning that Kimadia was supposed to stock 4,500 different products. If private firms were going to bid for the job of supplying drugs to government hospitals, they needed a smaller formulary. A new formulary would also outline new requirements about where approved drugs could be manufactured. It would be a way to get Iraq to stop buying medicines from Syria, Iran, and Russia, and to start buying from the United States.

He asked the people who had drawn up the formulary in Michigan if they wanted to come to Baghdad. They declined. So he beseeched the Pentagon for help. His request made its way to the Defense Department's Pharmacoeconomic Center in San Antonio. A few weeks later, three formulary experts were on their way to Iraq. They arrived eleven days before the November 15 Agreement.

The group was led by Ted Briski, a balding, middle-aged pharmacist who held the rank of lieutenant commander in the navy. Haveman's order, as Briski remembered it, was: “Build us a formulary in two weeks and then go home.” By his second day in Iraq, Briski had come to three conclusions: First, the existing formulary “really wasn't that bad.” Second, his mission was really about “redesigning the entire Iraqi pharmaceutical procurement and delivery system, and that was a complete change of scope—on a grand scale.” Third, Haveman and his advisers “really didn't know what they were doing.”

Haveman “viewed Iraq as Michigan after a huge attack,” said George Guszcza, an army captain who worked on the CPA's health team. “Somehow if you went into the ghettos and projects of Michigan and just extended it out for the entire state—that's what he was coming to save.”

Briski and the two other experts nevertheless set about designing a modern formulary. They took the 4,500-item list and slimmed it down to about 1,600 entries. But simply creating a new list wasn't sufficient for Briski. The Iraqis, he decided, needed a way to manage the formulary, so he drew up plans to form a committee of pharmacists that would update the list every few months. By choosing which drugs should be purchased, the committee would wrest a little power from Kimadia. Briski viewed his work as part of a larger plan to improve drug distribution. For the new formulary to succeed, Kimadia would have to be privatized or it would need a complete overhaul.

Haveman told him not to worry. He had big plans for Kimadia. He was going to create an efficient, market-based system to distribute drugs. It was part of his strategy to refashion Iraq's socialist health-care system into one that looked more American, with co-payments and primary-care clinics. Making it happen would require a fundamental redesign of health policy in Iraq, but it was the CPA's mission, as he saw it, to tear down the old and build anew.

Then came November 15, and the announcement that the United States would hand over sovereignty to the Iraqis by the following June. Everyone in the palace would be going home by then, if not sooner.

Bremer held an all-hands meeting of CPA staffers on November 16. He didn't mention that, in the name of political expediency, he had torpedoed his grand plans to have the Iraqis write a constitution and hold elections before a transfer of power, but everyone knew what had happened. CPA staffers, Bremer said, now needed to focus on “building capacity” among Iraqis to run their government. It was time to scale back plans and expectations. Put Iraqis in charge, he said, and pursue only those projects you can accomplish by June.

Haveman stopped talking about privatizing Kimadia. There was no way the CPA could pull it off by June. With an outright sale off the table, Haveman and his loyalists decided not to pursue other ways to restructure Kimadia. Haveman wanted his ministry to be the first one handed back to the Iraqis.

When Scott Svabek, the procurement officer, asked for $8.4 million to renovate Kimadia's offices and to purchase telecommunications equipment for the headquarters in Baghdad to communicate with warehouses across the country, Haveman's chief of staff denied his request. Haveman did endorse a suggestion from his subordinates to strip Kimadia of its drug-purchasing function and give it to a new procurement team established within the Health Ministry. The reorganization was intended to reduce opportunities for corruption: if Kimadia's venal managers weren't in charge of buying, they'd have fewer chances to take kickbacks. But by the time the CPA implemented the new structure, the handover of sovereignty was just a few months away. Members of the procurement team, who had been selected from within Kimadia, never left their old offices, and they continued to take orders from their old bosses.

“They did not believe that it would last, and [believed] that if they were somehow associated with these procurement teams above and beyond attending meetings, they would be forced out,” Briski said. “A big chunk of what was going on was this whole idea that the Americans are not here forever. We're going to wait them out and they're going to leave and… so we're going to end up going right back where we were before.”

Briski and others who worked for Haveman paid little attention to the political winds. They had come to Iraq to fix things, and they came to conclude that the United States needed to devote more resources and stay longer to get the job done. “How could we have fixed Kimadia?” Briski said a year after returning from Iraq. “We needed dozens of pharmacists, procurement experts, and logisticians working for two years.”

To Haveman, that was a nonstarter. “Do you bring in another fifty people to run Kimadia? No. It might take another seven years to fix it, but it will be the Iraqi way,” he said. “Is it perfect? No. Can they handle it? Yeah.”

But Haveman's critics, including more than a dozen people who worked for him in Baghdad, contend that more could have been done with the resources at hand during the fifteen-month occupation. Rewriting the formulary was a distraction, they said. Instead, the CPA should have focused on restructuring Kimadia, but not privatizing it, and on ordering more emergency shipments of medicine to address shortages of essential drugs. The first emergency procurement did not occur until early 2004, after the Americans had been in Iraq for more than eight months.

But Haveman did meet one big goal. Health was the first ministry to be handed over. When Bremer did so, in March 2004, three months before the transfer of sovereignty, he praised Haveman for his “real, practical accomplishments.”

The new Iraqi minister of health, Aladdin Alwan—a talented and eloquent former World Health Organization official selected by UN envoy Lakhdar Brahimi—didn't share Bremer's assessment. Alwan's staff told him that 40 percent of the nine hundred drugs deemed essential by the ministry were out of stock in hospitals. Of the thirty-two drugs used in public clinics for the management of chronic diseases, twenty-six were unavailable.

Alwan beseeched the United Nations for help, and asked neighboring nations to share what they could. He sought to increase production at a state-run manufacturing plant in the city of Samarra. And he put the creation of a new formulary on hold. To him, it was a fool's errand.

“We didn't need a new formulary. We needed drugs,” he said. “But the Americans did not understand that.”

THE GREEN ZONE, SCENE IX

From afar, it seemed like a funeral. But there were no funerals in the Green Zone. The dead were sent home aboard giant C-17 Globemasters.

The sound of a bagpipe wafted from a white tent in the palace's front garden. Guests sat on folding chairs and engaged in small talk. Jerry Bremer was there, as were a score of Iraqi staffers. White roses and yellow carnations adorned the center aisle. More flowers, and brass candelabras, decorated the altar.

Three Western women wearing floor-length Kurdish dresses walked in, one after another, followed by a fourth woman in a shimmering white gown, escorted across the lawn by a Halliburton construction foreman. “Here Comes the Bride” flowed from an electronic piano. It was the Emerald City's first—and only—wedding: George Adair and Sheryl Lewis, junior staffers in the Governance Office, were tying the knot.

George and Sheryl were an item before they arrived in Baghdad. They'd met while studying for their master's degrees at George Mason University, in Virginia. A few months into the occupation, they decided to apply for jobs with the CPA. It seemed like an adventure.

When they got to the palace, they were assigned bunks in the north wing, in a communal room with two hundred other staffers. They pushed their twin beds together, but they couldn't be intimate. One middle-aged man regularly walked around the room in nothing more than his tight white briefs, snapping photographs of sleeping women. Sheryl didn't want to get caught in a compromising position.

So they skulked around the palace, looking for discreet places to get busy.

“We found plenty,” Sheryl said.

“Unoccupied offices with a locking door,” George said.

“And bathrooms,” Sheryl said.

“And automobiles,” George said.

“And the women's locker room at the gym,” Sheryl said. “It had a locking door.”

Taking Sheryl out of the Green Zone for a night on the town was out of the question, so George escorted her to the al-Rasheed. To the sports bar. To the coffee shop. To the disco.

Sometimes they went to the army base at the airport to shop at the PX and eat at the Burger King. At the palace, they strolled by the pool, on the roof, in the garden. And they went to Moe's, the bar at the Halliburton employee trailer park named after Homer's watering hole on
The Simpsons.
The Halliburton guys had all sorts of booze you couldn't find anywhere else in the Green Zone: tequila, vodka, Budweiser. They were the logistics guys. They could get anything into the Emerald City.

When he decided to propose, George asked a friend to send him a ring from the United States, which the friend shipped by DHL. The next day, a DHL plane was struck by a missile as it took off from the Baghdad airport. All future cargo flights, including the one with the ring on board, were put on hold. George asked Sheryl to marry him in the courtyard of the al-Rasheed—without the ring.

Iraqi staffers in the palace were so excited by the prospect of a Green Zone wedding that they did whatever they could to help. One woman loaned Sheryl a gown. Another purchased the invitations. A third arranged for the flowers.

Still ringless as their December 3 wedding date approached, the couple found a jeweler in the al-Rasheed's shopping arcade who had two silver wedding bands for sale.

They had wanted to have the ceremony in the palace chapel, the room with the giant mural of a Scud missile, but it had been converted into a dormitory after the attack on the al-Rasheed. The chapel had been moved to the white tent. They settled for a garden wedding.

At the ceremony, one of their colleagues from the gover
nance team read Robert Frost's “The Road Less Traveled.” After they were pronounced man and wife, and had kissed, they walked out under an arch of crossed Nepalese kukri knives held by the Gurkhas who guarded the palace. The newlyweds then climbed into a Humvee with the words
JUST MARRIED
scrawled on the hood in shaving cream. They rode to the al-Rasheed, where they hosted a reception complete with cake and open bar, before retiring to a suite next to the pool normally reserved for dignitaries. The next day, they left to honeymoon in Dubai.

The day after they returned to Baghdad, they received the package with Sheryl's engagement ring.

12

We Cannot Continue Like This

EIGHT GUNMEN WAITED ON EITHER SIDE
of the Sajjad Mosque in southwestern Baghdad. Their prey wasn't a big shot politician, a businessman, or a religious leader, but a humble, fifty-three-year-old factory director. When he drove by on his way to work at eight in the morning, the gunmen cut off his white Isuzu Trooper, shot his driver in the chest and leg, then dragged the factory director out of the vehicle. They threw him to the ground and fired five times, ending with a bullet to his head.

Iraq's largest newspaper had printed a small story identifying the victim as Faez Ghani Aziz, the director-general of the State Company for Vegetable Oils. I had met Aziz just a few weeks earlier, after Tim Carney had urged me to visit the company's decrepit factory. Why, I wondered, would someone want to rub out a factory director? It was late July 2003, a little more than three months since the fall of Baghdad, and well before people working for the government were being marked for assassination.

Then it struck me: Aziz had been wading into treacherous waters. He had been talking, albeit quietly, about privatization.

I had recently traveled with Jerry Bremer to a special meeting of the World Economic Forum in Jordan, where he outlined his vision for a free-market Iraq before hundreds of business executives. “Markets allocate resources much more efficiently than politicians,” Bremer said in his keynote address, delivered inside a giant tent erected on the grounds of a posh resort at the Dead Sea. “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.”

As we returned to Baghdad aboard a U.S. military transport plane, he discussed with such fervor the need to privatize government-run factories that his voice cut through the din in 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.”

A couple of days later, I went to the vegetable oil factory to ask Aziz what he thought of Bremer's strategy. He wholeheartedly agreed. “We need outside investors,” he told me. “We cannot continue like this.”

Aziz never shared those views with his colleagues at the factory—he knew it was dangerous to talk about laying off employees—but he drew the line at expanding the already bloated workforce. Dozens of men who had been dismissed before the war had been demanding their jobs back, but Aziz refused to rehire them. Two days before his death, a man walked into Aziz's office with a grenade and threatened to pull the pin if his job was not reinstated. Although Aziz managed to restore calm, scores of job seekers held a protest the next day in front of the ministry's temporary headquarters.

“These people were saying, ‘Either you let us back to work or we're going to do something,'” recalled Luay Ali, the ministry's security director. Ali had no doubt that Aziz was killed because he had opposed rehiring the workers. “There is a very clear connection,” he said.

Aziz's killing sent a wave of panic through the Ministry of Industry. The Iraqi interim minister and his advisers had been eager to start the process of privatization, figuring it would be a quick way to enrich themselves. They had, for a while, been far more aggressive in promoting privatization than Tim Carney, Glenn Corliss, or Brad Jackson, the American advisers to the ministry. But Aziz's death changed all that. If one of their own could be killed for simply refusing to hire new workers, what would happen if they allowed tens of thousands of workers to be fired by private investors? All of a sudden, no one in the ministry wanted to talk about privatization.

Two weeks after Aziz was killed, Tom Foley arrived in Baghdad to head up a new CPA department: the Office of Private Sector Development. Foley's mission, as he defined it, was to privatize all of Iraq's state-owned enterprises within thirty days.

The first resistance he encountered was in the Republican Palace itself. His aides and the CPA's legal department informed him that selling off Iraqi government assets, such as factories, would likely violate the Hague Convention of 1899, the treaty governing “the laws and customs of war on land.” Article 55 of the treaty states that an occupying power “shall be regarded only as administrator and usufructuary of public buildings, real estate, forests, and agricultural estates belonging to the hostile State” and must “safeguard the capital of these properties.”

When Foley approached Iraqis at the Ministry of Industry about privatization, they recoiled. Aziz's death had made the issue radioactive. Mehdi Hafedh, the minister of planning, who was regarded as one of the most forward-thinking Iraqi leaders, told Foley that inefficient state-run firms had to be sold, but not right away. “It will be too destabilizing,” Hafedh said to Foley.

Foley was undaunted. He hit the phones, trying to persuade his friends on Wall Street to invest in Iraq's industrial sector. They were no more enthusiastic than the Iraqis. He turned to the Governing Council. They, too, turned him down.

Then came November 15 and the announcement that sovereignty would be returned to the Iraqis by June. There was no way to privatize that quickly. Even if some firms could be sold before the handover, Bremer and his keepers in Washington had lost their appetite to do so. They didn't want anything to derail the transfer of power.

A contractor from BearingPoint, the consulting firm hired to assist the CPA with economic reconstruction, gave Foley a white paper suggesting that he lease the factories to private investors instead of selling them outright. “That's what we did in Kosovo,” the consultant told Foley. “It could work here, too.” Foley grudgingly agreed to the leasing scheme, and so did the Governing Council. The Ministry of Industry announced in February 2004 that it would accept bids to lease thirty-five separate factories. But the investors had to promise not to fire a single employee.

The response was tepid. The insurgency was gathering strength. Electricity was inadequate. The airport wasn't open to commercial flights. And who knew if a new Iraqi government would uphold deals made by the CPA? By the time Bremer left, not a single factory had been leased.

After Foley had been in Baghdad for a few months, Bremer concluded that he wasn't the right guy for the job, but he was a friend of the president. Bremer told people in the palace that Foley was “untouchable.”

Finally, in early 2004, Bremer came up with a new job for Foley. He would travel the world with former secretary of state James Baker III to persuade other nations to forgive Iraq's debt.

Once Foley left, he was replaced by his deputy, Michael Fleischer, a businessman from New Jersey. Although Fleischer had served as a State Department officer in Africa in the 1970s, he had no previous experience in promoting free enterprise in a socialist economy. But he had connections: his brother Ari was Bush's press secretary.

         

The November 15 Agreement was the writing on the wall for the neoconservative experiment in Iraq. But several senior CPA staffers refused to succumb as Jim Haveman and Tom Foley had. They clung to their pet projects. There were seven and a half months until the end of June, enough time to make a few big changes.

The collective to-do list was long. The Strategic Communications team wanted to establish an Iraqi Federal Communications Commission. Advocates for gender equality wanted to open women's centers across the Shiite south. The governance team wanted new members to be appointed to the mini–governing councils in each province. The security policy team wanted to ensure that all militias were demobilized. Bremer wanted to appoint inspectors general to root out corruption in every ministry. And everyone, it seemed, wanted Bremer to promulgate another law.

The neoconservatives who succeeded economics czar Peter McPherson weren't willing to give up on everything. If they couldn't sell off state-run firms, they figured they could at least try to eliminate the pervasive subsidies across the economy. Why sell gasoline for five cents a gallon? Why distribute electricity for free? Why offer fertilizer so cheaply that farmers would smuggle it into Syria and Jordan to resell it instead of using it on their fields? Why give everyone monthly food rations, regardless of need? Subsidies accounted for more than half of Iraq's annual budget—the food rations alone cost $5 billion a year—and resulted in a grossly inefficient, Soviet-style system of economic allocation. The CPA's economists realized that reducing subsidies, which would result in higher prices, would be unpopular and would likely trigger unrest, but they also were convinced that it was the CPA's responsibility to wean Iraqis from government handouts. They figured that the Iraqi government that would take over from the CPA wouldn't have the intestinal fortitude to take such steps.

Instead of doubling the price of fuel or fertilizer, the economists came up with what they thought would be a far less risky strategy to start cutting back on subsidies. Every month, Iraqis received government food rations: sacks of rice, beans, flour, sugar, tea, and other staples. Under the CPA plan, the government would get out of the business of ordering and distributing food and instead offer people cash payments equivalent to the cost of the food. The private sector, they believed, would distribute food far more efficiently, saving the government hundreds of millions of dollars a year. A sovereign Iraqi government could decide to go even further and cut back on payments to the wealthy through a means test.

As with privatization, the economic rationale was sound, but the practical concerns were enormous. Six days after the November 15 Agreement, the CPA's senior adviser for labor and social affairs told Bremer that the plan had “the possibility of huge humanitarian problems.” Bremer was a strong advocate of monetizing the monthly rations, and opposing the change was regarded as career suicide in the palace, but the adviser was Jim Otwell, the feisty firefighter who had earlier clashed with Bernie Kerik. Although he was a rank-and-file firefighter—he rode on Engine 32 in Buffalo—he became the senior adviser for labor and social affairs by the fall of 2003 because the U.S. Department of Labor failed to send anyone to Baghdad to fill the post. Otwell's experience with the firefighters' union in Buffalo made him the closest thing to a labor expert in the Green Zone.

Otwell told Bremer that the responsibility for collecting the rations and apportioning them was typically handled by Iraqi women. If the CPA switched to cash, there was the possibility that men would pick up the payments and then squander the funds on other things. There also was the margin of error, not an insignificant factor in a country of twenty-five million people. “Let's say we get this ninety-nine percent right and only one percent don't get their payments,” he told Bremer. “Now we've got two hundred fifty thousand hungry, mad Iraqis who used to get something. We thought we had a problem before.”

The CPA's economic team had no shortage of ambition. They began studying the feasibility of giving each family a debit card loaded with the cash value of all the rations they were due. The cards would be automatically replenished each month. Otwell was aghast. Nobody in Iraq used credit cards. There were no automated teller machines. Phone service and electrical power were unavailable for much of the day. How did the CPA expect merchants to process debit cards? Who would purchase the processing equipment? To Otwell, it was another crazy ivory-tower scheme invented in the Emerald City.

Bremer was unmoved by Otwell's warnings. Monetization made sense, he decided, and it would be enacted by June 1—thirty days before the handover of sovereignty. But Otwell didn't back down. He sought out senior members of the British contingent in the CPA. They were receptive to his concerns and began lobbying Bremer and the American military. In the end, it was the U.S. military command that shot down the plan. The troops were already stretched thin fighting the insurgency. They couldn't handle food riots, too. If changing the ration system wasn't a prerequisite for relinquishing power, it didn't need to happen. Members of the economic team saw it differently: a little pain now would prevent bigger problems in the future. But expectations had changed. What was best for Iraq was no longer the standard. What was best for Washington was the new calculus.

         

A few weeks after he arrived in Baghdad, twenty-four-year-old Jay Hallen realized he'd never meet his goal of reopening the stock exchange by December 31. He had become infected with the same pre–November 15 ambition, as had almost everyone else in the palace. Hallen had decided to build what he called “a whole new stock exchange from the ground up,” with a computerized trading system, a board of directors, a securities and exchange commission, licensed brokers, and a revised financial markets law. Despite American enthusiasm for the plan, Iraqis had cringed. Their top priority was reopening the exchange, not setting up computers or enacting a new securities law. Brokers and traders wanted to go back to work. Investors wanted to buy and sell. “People are broke and bewildered,” broker Talib Tabatabai had told Hallen. “Why do you want to create enemies? Let us open the way we were.”

Tabatabai, who held a doctorate in political science from Florida State University, believed that Hallen's plan was unrealistic. “It was something so fancy, so great, that it couldn't be accomplished,” he said. “But he didn't listen to us.”

Hallen was convinced that major changes had to be enacted. “[Iraqi] laws and regulations were completely out of step with the modern world,” he said later. “There was just no transparency in anything. It was more of a place for Saddam and his friends to buy up private companies that they otherwise didn't have a stake in.”

Hallen turned to the Financial Services Volunteer Corps, a nonprofit American organization that helps build stock markets in developing nations. The FSVC, comprising government and private-sector specialists, agreed to send a six-person delegation to Baghdad in November to meet with Hallen and a group of Iraqis. At the meeting, which was relocated to Jordan after the attack on the al-Rasheed Hotel, the American volunteers agreed to help Hallen with his to-do list. One of the participants took up the task of rewriting the securities law. Others offered assistance with training brokers and purchasing computers.