[NYTr] Iraq awards contracts to Iran and China

[All the News That Doesn't Fit]

[Juan Cole has also reported that Iranian companies would be
hired by Iraq to rebuild its electrical grid, and predicted that the US
would of course claim they were spies, saboteurs or terrorists. The US
has already arrested several Iranian electrical engineers who were
visiting Iraq. The addition of China, and the fact of contracts
worth over a billion dollars, and that Iran is going to be providing
electricity from its own power grid to southern Iraq makes it all the
more difficult for the US to object. Especially since the US has
failed utterly to complete any of its promised reconstruction projects.]


The International Herald Tribune - Oct 18, 2007
http://www.iht.com/bin/printfriendly.php?id=7938736


Iraq awards contracts to Iran and China

By James Glanz

BAGHDAD: Iraq has agreed to award $1.1 billion in contracts to Iranian
and Chinese companies to build a pair of enormous power plants, the
Iraqi electricity minister said Tuesday. Word of the project prompted
serious concerns among American military officials, who fear that
Iranian commercial investments can mask military activities at a time
of heightened tension with Iran.

The Iraqi electricity minister, Karim Wahid, said that the Iranian
project would be built in Sadr City, a Shiite enclave in Baghdad that
is controlled by followers of the anti-American cleric Moktada al-Sadr.
He added that Iran had also agreed to provide cheap electricity from
its own grid to southern Iraq, and to build a large power plant
essentially free of charge in an area between the two southern Shiite
holy cities of Karbala and Najaf.

The expansion of ties between Iraq and Iran comes as the United States
and Iran clash on nuclear issues and about what American officials have
repeatedly said is Iranian support for armed groups in Iraq. American
officials have charged that Iranians, through the international
military wing known as the Quds Force, are particularly active in
support of elite elements of the Mahdi Army, a militia largely
controlled by Sadr.

An American military official in Baghdad said that while he had no
specific knowledge of the power plant contracts, any expansion of
Iranian interests was a concern for the military here.

"We are of course carefully watching Iran's overall presence here in
Iraq," the military official said. "As you know, it's not always as it
appears. Their Quds Force routinely uses the cover of a business to
mask their real purpose as an intelligence operative."

"This is a free marketplace, so there's not much we can do about it,"
the official said.

At the same time, it is possible to view Iranian and Chinese investment
as giving those countries a stake in Iraqi stability. The power plants
could also boost a troubled reconstruction effort in Iraq. An American
Embassy spokesman said, "We welcome any efforts to help develop Iraq's
energy infrastructure."

"These proposals reflect the ongoing business opportunities that are
arising in Iraq that American firms should be competing for," said the
spokesman, who asked not to be named because of standard protocol at
the embassy.

It was unclear whether any American firms had tried to win the work,
although Wahid said the projects had been submitted for bids. The
embassy spokesman said, "We are unaware of any violations of principles
of open and fair bidding."

The agreements between Iraq and Iran come after the American-led
reconstruction effort, which relied heavily on large American
contractors, has spent nearly $5 billion of United States taxpayer
money on Iraq's electricity grid. Aside from a few isolated bright
spots, there was little clear impact in a nation where in many places
electricity is still available only for a few hours each day. Because
the power plants are in largely Shiite-controlled areas, it is possible
they may not face the same sectarian violence that crippled so many
American rebuilding projects.

Wahid did not say how much the plant between Karbala and Najaf would
cost, but at standard international prices a plant of the scale he
described would be worth roughly $200 million to $300 million.

The outlines of all three agreements were confirmed by Thamir Ghadban,
an expert on energy who is also director of the committee of advisers
to Prime Minister Nuri Kamal al-Maliki. But Ghadban said that the
granting of the huge projects to rivals of the United States was not an
indication that American companies were being excluded from
consideration now that Iraqi oil revenues, which provide the basis for
the Iraqi government's budget, are largely paying for the
reconstruction of the grid.

"There is no preference to the Iranians," Ghadban said, citing the most
obvious potential point of sensitivity for the United States. "There is
no opposition or stance from the Iraqi government to bar American or
Western companies. It is the other way around," Ghadban said,
indicating that he urged American contractors to bid for work in Iraq.

Of the two new projects Iraq has agreed to finance, Wahid said, the
largest is a $940 million power plant in Wasit to be built by a Chinese
company, which he said was named Shanghai Heavy Industry. That project
would pump some 1,300 megawatts of electricity into the Iraqi grid. For
comparison, all of the plants currently connected to Iraq's grid
produce a total of roughly 5,000 megawatts.

He said that Iraq had already spent $12 million leveling the ground in
preparation for the Chinese plant. The Sadr City project, which will
include a small refinery, will cost $150 million and be built by an
Iranian company, Sunir, Wahid said. That plant is expected to produce
about 160 megawatts of electricity.

The Iraqi Electricity Ministry, which Wahid heads, is one of the few in
the central government that has received praise for successfully
spending much of the money allocated to it in the Iraqi budget for
reconstruction projects. Because of security problems, a shortage of
officials who are skilled at writing and executing contracts, and
endemic corruption, many of the ministries have either left their
rebuilding money unspent or poured it into projects that have had a
marginal impact on the quality of life for Iraqi citizens.

Asked how he had managed to make progress within the bureaucratic
morass of much of the Iraqi government, Wahid said he had simply
learned to go it alone. Aside from financing, his main need from the
central government was guarantees that Iraqi security forces would
protect his workers and the electricity infrastructure.

"Do not annoy me," Wahid said was his main message to the government.
"Let me do my work."

Whether officials outside his government will be entirely pleased with
the deals is a separate question. An international energy expert
involved in Iraq's electricity sector said he understood that the Sadr
City project had originally been an Iranian initiative and that the
Electricity Ministry had shown little interest at first.

The expert also said that the Iraqi Commission on Public Integrity,
which investigates corruption, had already signaled that it would be
investigating the project. Officials at the commission could not be
reached for comment on Wednesday evening.

Wahid said the new power plants were part of a sweeping plan to
increase electricity production on the grid, whose output has been
creeping upward in recent weeks. He said that the ministry was in
discussions on building another large power plant, one that would
produce 600 megawatts, within the city of Karbala.

And the minister said that the first installment of another initiative
he had long discussed, bringing diesel-powered generators into selected
Baghdad neighborhoods, was close to having an impact.

Some 14 of the generators, each expected to produce 1.75 megawatts,
should be arriving in the capital within weeks, Wahid said.

Copyright © 2007 The International Herald Tribune