House of Paine

jungle jim and madam all-blight

  check out 

this  sheik shake down

bob morris would love ya guyz


================================ 


by Naomi Klein 
The Nation 
posted October 12, 2004

When President Bush appointed former Secretary of State
James Baker III as his envoy on Iraq's debt on December
5, 2003, he called Baker's job "a noble mission."


 that mission
 to meet with heads of state 
and persuade them
 to forgive the debts
owed to them by Iraq


Until now, there has been no
 concrete evidence that
Baker's loyalties are split
 or that his power as
Special Presidential Envoy
an unpaid position

has been used to benefit
 any of his corporate clients 
or
employers

 But according to documents 
obtained by The Nation
 that is precisely what has happened

his colleagues at the infamous
 Carlyle buccaneer outfit 
where jimbo is a major equity partner
have
 sought to secure
 an extraordinary $1 billion
investment from the Kuwaiti government
of course
 Baker's
influence as special presidential debt envoy
is being used as a crucial lever.
----------------------------------------
The secret deal involves a complex transaction to
transfer ownership of as much as $57 billion in unpaid
Iraqi debts
 under the proposed scheme
debts, now owed to 
the government
 of
Kuwait
 would be assigned
 to a foundation 
created and
controlled by a consortium 
in which the key players are
the Carlyle Group
 the Albright Group
 (headed by
another former Secretary of State, Madeleine Albright)
and 
several other well-connected firms.
 Under the deal,
the government of Kuwait
 would also give the consortium
$2 billion up front
 to invest in a private equity fund
devised by the consortium
 with half of it going to
Carlyle.

The Nation has obtained a copy of the confidential
sixty-five-page
 "Proposal to Assist the Government of
Kuwait in Protecting and Realizing Claims Against
Iraq," 
sent in January
 from the consortium 
to Kuwait's
foreign ministry
 as well as letters
 back and forth
between the two parties
 In a letter 
dated August 6,
2004
 the consortium informed 
Kuwait's foreign ministry
that the country's 
unpaid debts from Iraq 
"are in imminent jeopardy."
 World opinion
 is turning in favor
of debt forgiveness
 another letter warned
 as evidenced by 
"President Bush's appointment...of former
Secretary of State James Baker as his envoy to
negotiate Iraqi debt relief."
 The consortium's proposal
spells out the threat
 Not only is Kuwait
 unlikely to
see any of its $30 billion 
from Iraq in sovereign debt,
but
 the $27 billion in war reparations
 that Iraq owes
to Kuwait from Saddam Hussein's
 1990 invasion
 "may well
be a casualty of this U.S. [debt relief] effort."

In the face of this threat
 the consortium offers its
services.
 Its roster of former 
high-level US and
European politicians have
 "personal rapport with the
stakeholders in the anticipated negotiations" 
and are
able to
“reach key decision-makers  in the United
Nations and in key capitals,"
 If
Kuwait agrees to transfer the debts 
to the consortium's
foundation, 
the consortium will use these personal
connections 
to persuade world leaders
 that Iraq must
"maximize" its debt payments to Kuwait,
 which would be
able to collect the money 
after ten to fifteen years.

And the more the consortium 
gets Iraq to pay during
that period,
 the more Kuwait collects,
 with the
consortium taking a 5 percent commission .
----------------------------

The goal of maximizing Iraq's debt payments directly
contradicts the US foreign policy aim of drastically
reducing Iraq's debt burden.
 Baker is in a  classic conflict of interest.
he is  on both  sides of this transaction


 It's influence peddling of
                    the crassest kind

. Immediately after
listing the powerful players associated with Carlyle--
including former President George H.W. Bush, former
British prime minister John Major and Baker himself--
the document states: "The extent to which these
individuals can play an instrumental role in fashioning
strategies is now more limited...due to the recent
appointment of Secretary Baker as the President's envoy
on international debt, and the need to avoid an
apparent conflict of interest."

Yet it goes on to state that this will soon change

 "We believe that with Secretary Baker's retirement from his
temporary position [as debt envoy], that Carlyle and
those leading individuals associated with Carlyle will
then once again be free to play a more decisive
             role..."



Iraq is the most heavily indebted country in the world,
owing roughly $200 billion in sovereign debts and in
reparations from Saddam's wars. 
 "This debt endangers Iraq's long-term
prospects for political health and economic
prosperity," President Bush said when he appointed
Baker last December.


Baker's law firm, Baker Botts (which is currently
defending them in a $1 trillion lawsuit filed by the
families of September 11 victims). 

The White House brushed off calls for Baker to choose
between representing the President and representing
Carlyle investors. "I don't read those editorials,"
President Bush said when asked by a reporter about the
Times piece.
 Bush assured reporters that "Jim Baker is
a man of high integrity.... We're fortunate he decided
to take time out of what is an active life...to step
forward and serve America." 
============================

 on July 16, 2003,
Carlyle had attended
 a high-level London meeting with
Kuwaiti officials about the deal.
 According to the
document, the Kuwaitis asked Carlyle and the other
consortium members to 
"prepare a detailed financial
proposal for the protection and monetization" of
reparation debts from Iraq.

 

Just  days before Baker's
appointment,
 the consortium reached out to another
high-profile Washington firm, the Albright Group, which
eventually signed on as the leading political
strategists and lobbyists for the consortium.




Baker occupies a complicated place in the consortium's
January proposal--he is both problem and solution,
stick and carrot.
 In the documents, Baker's name comes
up repeatedly, usually in tones of high alarm.
 "Mr.Baker's new role  and the likely emergence of what will
be understood as a new round of global negotiations
over Iraqi debt--casts all of these issues in a new
light and gives them a new, perhaps even intense, sense
of urgency,"  .

But after establishing Baker's envoy job as the
embodiment of the threat that Kuwait will lose its
reparations payments, the proposal goes on at length
about the powerful individuals connected to the
consortium who will 
"have the ability to gain access to
the highest levels of the United States Government and
other Security Council governments for a hearing of
Kuwait's views." 
the consortium
proposed to  undercut Baker's mission
on behalf of kuwait 
by  using their connection with Baker to do


On January 21, 2004, James Baker's dual lives
converged. That morning Baker flew to Kuwait as George
Bush's debt envoy. He met with Kuwait's prime minister,
its foreign minister and several other top officials
with the stated goal of asking them to forgive Iraq's
debts in the name of regional peace and prosperity.

Baker's colleagues in the consortium chose that very
same day to hand-deliver their proposal to Foreign
Minister Mohammad Sabah Al-Salem Al-Sabah--the same man
Baker was meeting.
 The proposal 
"takes into account the
new dynamics that have developed in the region," states
the cover letter, signed by Albright, Huebner and
Sheikh--dynamics that include "Secretary Baker's
negotiations" on debt relief.
 If Kuwait accepts the
consortium's offer, they explain,
 "we will distinguish
Kuwait's claims--legally and morally--from the
sovereign debt for which the United States is now
seeking forgiveness."



Shahameen Sheikh, the consortium head who made the
delivery, says the timing was a coincidence. "It had
nothing to do with Mr. Baker's visit.... I was in the
region so I thought I would stop over on the way to
Europe and deliver the proposal."

We do know this: After meeting with Baker on January
21, Kuwait's foreign minister told reporters that Baker
had shown "understanding of Kuwait's position on war
reparations," 
Three days later, when Baker was back in Washington
giving a speech, he made this distinction for the first
time. 
"My job is to deal with Iraqi debt to sovereign
creditors, not with war reparations," 
 

Baker's statement on reparations  placed him at
odds with several other members of the Bush
Administration, including former chief envoy to Iraq
Paul Bremer. 
"I think there needs to be a very serious
look at this whole reparations issue," 
 Bremmer compared the Iraq situation to that
of Germany after World War I, when the 1921 Reparations
Commission forced the Weimar Republic to pay $33
billion. The massive reparations "contributed directly
to the morass of unrest, instability and despair which
led to Adolf Hitler's election," 

Yet Iraq continues to make regular reparations payments
for Saddam's 1990 invasion of Kuwait. 
In the eighteen
months since the US invasion
 Iraq has paid out a
staggering $1.8 billion in reparations--substantially
more than the battered country's 2004 health and
education budgets combined, and more than the United
States has so far managed to spend in Iraq on
reconstruction.

Most of the payments have gone to Kuwait, .

This arrangement dates back to the end of first Gulf
War. As a condition of the cease-fire, Saddam Hussein
agreed to pay for all losses incurred as a result of
his invasion and seven-month occupation of Kuwait.

Payments started flowing 1994 and sped up in 1996, with
the start of the UN's oil-for-food program. According
to UN Security Council Resolution 986, which created
the program, Iraq could begin to export oil as long as
the revenue was spent on food and medicine imports, and
as long as 30 percent of Iraq's oil revenues went to
the United Nations Compensation Commission (UNCC), the
Geneva-based quasi-tribunal in charge of Gulf War
reparations.

Some of the claims that have been awarded by the UNCC
are huge: the cost of cleaning up Kuwait's and Saudi
Arabia's coastlines from oil spills and fires, or the
Kuwait Petroleum Corporation's controversial award for
$15.9 billion in lost oil revenues. So far, the UNCC
has paid out $18.6 billion in war reparations and has
awarded an additional $30 billion that has not been
paid because of Iraq's shortage of funds. There are
still $98 billion worth of claims before the UNCC that
have yet to be assessed, so these numbers could rise
steeply. That's why there are no accurate estimates of
how much Iraq owes in war reparations--the figure
ranges from $50 billion to $130 billion.

But the fate of these debts is now highly uncertain. On
May 22, 2003--two months after the United States
invaded Iraq--the Security Council decided to cut the
percentage of Iraqi oil revenues going to war
reparations to 5 percent. 

This is where the Carlyle/Albright consortium comes in.

The premise of its proposal is that Iraq's unpaid debts
to Kuwait are not just a financial problem but a
political and public relations problem as well.
 Global
public opinion is no longer what it was when Kuwait was
promised full reparations.
 Now the world is focused on
reconstructing Iraq 
and forgiving its debts.
 If Kuwait
is going to get its reparations awards, 
the cover
letter argues, 
it will need to recast them not as a
burden on Iraq but 
"as a key element in working toward
regional stability and reconciliation."

Several parties involved in the consortium emphasized
that the proposal concerned only reparations debts.

but  The consortium’s proposal  asks the government of Kuwait
to give the consortium control
over $30 billion in defaulted sovereign debts to be
used as political leverage to secure reparations
claims

 the consortium proposed
a three-pronged strategy of 
aggressive backroom
lobbying
 clever public relations 
and creative
investing and financing.
 "Any solution for payment of
the Unpaid Awards...must be politically sellable as
reinforcing stability and growth in the Gulf and in
Iraq. This Proposal provides the strategy, the
architecture, and the talent to achieve this goal,".

Lobbying:

Since the UNCC exists entirely at the
discretion of the Security Council, which can vote to
reduce, suspend or eliminate reparations at any time,
the part of the proposal dealing with power-brokering
is straightforward:
 It suggests a full-on lobbying
offensive directed at Security Council members, using
Albright's connections, but also other "eminent" people
associated with the consortium like former US Senator
Gary Hart and former US ambassador to the UN Jeane
Kirkpatrick. 
"We will first seek to preserve the five
percent of the revenues from Iraqi oil allocated as
funding for payment of the UNCC awards,"
To achieve this, the consortium will make

"discreet contacts at top levels in key capitals of
Security Council member states and with influential
representatives," 
and
 "interventions with United Nations senior staff 
to shape presentations to the
Security Council." 


Public Relations:

 The consortium also has a detailed
plan to address the perception that reparations are

"diverting resources from rebuilding Iraq to a more
wealthy neighbor."
 First, Kuwait must assign its unpaid
debts from Iraq to a private foundation controlled by
the consortium. 
The foundation will manage an
investment fund that will invest a portion of
reparations payments from Iraq to Kuwait back into
Iraq.
 As examples of the types of investments the
foundation would make, Albright, Huebner and Sheikh
suggest in their letter that the reparations funds
could be used to buy Iraq's state-owned companies
. "In the near future, 40 state-owned Iraqi enterprises in a
range of sectors will be available for leasing and
management contracts,"
 By demonstrating
that Kuwait is investing part of its reparations
proceeds back into Iraq's economy, the consortium-run
foundation 
"establishes a humanitarian rationale for
the United States and other counties to continue their
support"
 The consortium appears to
see “privatization” as part of a humanitarian mission.

The proposal also suggests more direct public relations
strategies.
 It calls for Kuwait to dedicate $1 billion
of the reparations awards  it has already been paid by
the UNCC to a Kuwait Environmental Restoration Fund,
which the consortium would create. 
The purpose of this
fund would be to remind the world of 
"the gravity of
the environmental legacy facing Kuwait" 
and to

"position Kuwait as the region's environmental leader."

The fund would be headed by Carol Browner, former head
of the US Environmental Protection Agency and a
principal in the Albright Group.

Investment/Financing:
 The proposal predicts that on
their own, lobbying and PR will not be sufficient to
secure the amounts that the Kuwaiti government hopes to
receive in reparations.
 For the consortium to
 "maximize the value of Kuwait's compensation," 
Kuwait will have
to part with even more of the reparations payments it
has received.
 In addition to the $1 billion for the
environmental fund,
 the proposal calls for another $2 billion of Kuwaiti money 
to be invested in a Middle East Private Equity Fund.
 Of that $2 billion
 "$1 billion would be invested  by way of special agreement,
in The Carlyle Group equity funds" 
for a period of at least twelve to fifteen years
. At the end of that
period Kuwait will get the return on these investments,
as well as whatever the consortium has been able to
negotiate in reparations payments.

For the consortium, it is an excellent deal: Its
members get to manage a $2 billion investment
portfolio, collecting healthy management fees as well
as a percentage of interest. They also will be paid a
"retainer" and 5 percent of any debts the consortium
gets repaid, and "a negotiated percentage of the value
returned to Kuwait exceeding" the pre-arranged amount.

Other consortium members sharing in these benefits
include
 Fidelity Investments
 BNP Paribas, a European
bank embroiled in the IRAQI oil-for-food scandal;
 Gaffney,
Cline & Associates, an energy company specializing in
oil and gas privatization; 
Nexgen Financial Solutions,
a financial engineering firm partly owned by the
government of France;
 and Emerging Markets Partnership,
an AIG affiliate headed by a former senior vice
president of the World Bank, Moeen Qureshi.
------------------------------------------------------

 The consortium estimated that if Kuwait tried to sell those
debts on the market, its $27 billion would be worth
only $1.5 billion. 





As Secretary of State, Baker played a role in running
up Iraq's foreign debts in the first place, personally
intervening in 1989 to secure a $1 billion US loan to
Saddam Hussein in export credits.
 He was also a key
architect of the first Gulf War, as well as of the
cease-fire that required Saddam to pay such sweeping
reparations. 

 As Secretary of State and Ambassador to the
UN, Madeleine Albright participated personally in
drafting UN Resolution 986, which created the oil-for-
food program, diverting 30 percent of Iraq's revenue
from oil sales to war reparations.
enforcement of the  sanctions campaign against Iraq,
 hobblied  Iraq's state companies
. Now, madam  Allblight 
 is part of a plan to use
Iraq's reparations payments to buy the very firms that
her sanctions program helped to debilitate.


the file that President Bush handed to Baker is in disarray--ten
months on, there is significantly less goodwill toward
forgiving Iraq's debt than when Baker arrived. 
When
President Bush appointed him, he praised Baker's 
"vast economic, political and diplomatic experience."

today 
 the negotiations are not only stalled,
 they seem to be going backwards
. Kuwait, for its part, has
hardened its position
. "Debts remain debts,"
it has intensified its demands for Gulf
War reparations, joining with Saudi Arabia, Iran,
Jordan and Syria to claim an additional $82 billion
from Iraq in “environmental damages”.



Baker's position as envoy has certainly been useful to
his colleagues in the consortium. Whether Baker has
helped solve Iraq's debt crisis is far less clear.

==========