COMMITTEE ON FOREIGN RELATIONS RICHARD G. LUGAR, Indiana, Chairman CHUCK HAGEL, Nebraska JOSEPH R. BIDEN, JR., Delaware LINCOLN CHAFEE, Rhode Island PAUL S. SARBANES, Maryland GEORGE ALLEN, Virginia CHRISTOPHER J. DODD, Connecticut SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts MICHAEL B. ENZI, Wyoming RUSSELL D. FEINGOLD, Wisconsin GEORGE V. VOINOVICH, Ohio BARBARA BOXER, California LAMAR ALEXANDER, Tennessee BILL NELSON, Florida NORM COLEMAN, Minnesota JOHN D. ROCKEFELLER IV, West Virginia JOHN E. SUNUNU, New Hampshire JON S. CORZINE, New Jersey KENNETH A. MYERs, JR., Staff Director ANTONY J. BLINKEN, Democratic Staff Director (II) 2 PRIORITIES AND RECOMMENDATIONS The U.S. Government should emphasize the following as urgent, inter-connected priorities: • Security: Deploy sufficient forces to subdue Iraqi resistance and continue the hunt for former leaders of the regime, espe- cially Saddam Hussein. • Law and Order: Must be established in Baghdad and throughout Iraq. The U.S. should intensify its efforts to recruit and retrain Iraqi police officers, and immediately seek inter- national assistance for this process. • Re-establish Services: In Baghdad and throughout Iraq as soon as possible. Especially electricity and telecommunications. • Get the Message Out: Through the establishment of world class radio and TV broadcasting, support for independent media, and possibly the opening of local public information centers where Iraqis can more readily access CPA officials. • Generate Employment: For the estimated 60% of the working age population that is unemployed. • Share the Burden: By seeking a broader role for the United Nations, the North Atlantic Treaty Organization, and our Arab allies to allow other countries to contribute troops and funds for stabilizing and rebuilding Iraq. POLITICAL ATTITUDES AND EXPECTATIONS Most Iraqis we interviewed were thankful to the United States for removing Saddam Hussein's regime from power; hopeful of a new relationship with the United States; and supportive of U.S. troops staying until Iraq is stabilized. Yet Iraqis remain a proud people. Gratitude over the removal of Saddam mixes with a strong strain of nationalism. Military occupation elicits complex reactions, and Iraqis, citing their long history of civilization, believe that they are capable of running their own affairs. The United States is dealing with a huge expectations gap in Iraq. Following our rapid military success, Iraqis expected that the United States could dramatically improve almost overnight living conditions that had declined precipitously for more than a decade. Iraqis today are preoccupied with the economy, personal security, and the absence of services. Most of them told us that current con- ditions in Baghdad since the liberation have made life harder than it was even under the regime of Saddam Hussein. They also ex- pressed uncertainty and fear that the present situation in Baghdad and throughout Iraq would not get better. A failure to improve con- ditions in Iraq would contribute to greater resentment of the CPA, undermine the Iraqi Governing Council, and increase risks to coali- tion forces. An independent public opinion survey of 1,090 Baghdad residents by the Iraq Center for Research and Strategic Studies (ICRSS) con- ducted on June 19, 2003, reinforced many of our own observations. According to the poll, while only 17% of those surveyed wanted coa- lition forces to leave immediately, 74% described the current secu- rity situation as bad; 74% described the economy as bad; and 94% i. that efforts to rebuild key sectors of the economy had so far ailed. 3 ESTABLISH SECURITY AND LAW AND ORDER Establishing security and law and order are the most pressing priorities for the transition in Iraq. American and coalition forces have so far done a heroic job, and at great risk, to root out the remnants of Saddam's regime, guer- rillas, and terrorists who have no place in the new Iraq. But the United States cannot continue to shoulder most of this burden alone. America must reach out for military support from our allies, preferably our NATO allies, to grant greater legitimacy to our secu- rity role in Iraq. The Baghdad Police Academy. Re-establishing a police force in Iraq is a separate and equally urgent priority. Coalition forces are not trained to police Iraq, al- though they have done precisely that during the transition. Polic- ing must be done by Iraqis, but rebuilding Iraq's police force is a big job, and here, too, we cannot do it alone. The absence of law and order for Iraqis must be immediately addressed. Baghdad has experienced an unprecedented crime wave since Iraq's liberation— reports of carjackings, armed robberies, murders, and rape are rampant. The problem has been exacerbated by the widespread availability of arms and the mass release of prisoners—including .. hardened criminals—by Saddam Hussein in the run up to the War. 4 The CPA’s Iraq Police Assessment team would like to imme- diately enlist over 5,000 international police forces to train and pa- trol with Iraqi police," but as of early July commitments from other countries were scant and only a handful of personnel had arrived. Fully training a competent and professional force of 73,000 Iraqis, which could effectively police the entire country, will take more than 5 years, according to the CPA’s Iraq Police Assessment Team. In the interim, law and order can only be restored by a combina- tion of international police forces, military police, and coalition troops working with a rough-and-ready force of Iraqis even as a more professional force is being trained in parallel. Ambassador Bremer has made providing security his most imme- diate priority for Iraq. By the end of September, the CPA and the Iraqi Governing Council plan to recruit and train the first battalion of the new Iraqi army, and eight battalions for an Iraqi civil de- fense corps, and open a new police academy.” These efforts should be supported with the urgency and resources required for the task. They also should be augmented by an aggressive diplomatic strat- . to recruit international police forces, which can assist in this effort. DELIVER, ESSENTIAL PUBLIC SERVICES As temperatures approach 120 degrees during the summer, Baghdad and other areas continue to have inadequate supplies of electricity and water. It is critical that the CPA be given the nec- essary resources and the authority to deploy them as it sees fit to increase the supply of electricity. Ambassador Bremer has esti- mated that rebuilding Iraq’s electricity sector could cost as much as $13 billion.3 The CPA budget for July-December 2003 provides only $294 million for “electrical improvements.” (See Annexes, pages 22–25.) There is a large gap between supply and demand in the Iraqi electricity sector, a condition that pre-dates Iraq's liberation. Cur- rent demand for electricity in Iraq is estimated to be approximately 6,000–7,000 megawatts (MW) nationwide and approximately 2000– 2200 MW for Baghdad.4 The pre-war total electricity generation for Iraq was estimated at 4000 MW, a 33% shortfall in supply. The electricity situation in the months following Iraq's liberation was worse than it was prior to the war—as of July 14, generation na- tionwide was 3200 MW for Iraq and 1150 MW for Baghdad.* Reaching the pre-war generation level of 4000 MW is expected to take until the end of September. One CPA official said that contracting delays, sabotage, looting, and security risks to key personnel have combined to keep elec- tricity supplies insufficient in Baghdad and other locations. The de- struction of a single transmission tower in late June caused elec- tricity generation in Baghdad to fall to zero for four days. It took * “Police Development Plan, Iraq Police Assessment & Recommendations,” Iraq Police Assess- ment Team, Coalition Provisional Authority. (See Annexes, page 19.) * Ambassador L. Paul Bremer III, Speech to the National Press Club, Washington, DC, 23 July 2003. (See Annexes, pages 34–43.) * Ambassador L. Paul Bremer III, Speech to the National Press Club, Washington, DC, 23 July 2003. (See Annexes, pages 34–43.) One CPA official said the costs could reach $3.5 billion per year over 6 years, or $21 billion. Interview with CPA official, July 2, 2003. * Interview with CPA official, July 2, 2003. 5 Interview with CPA official, July 2, 2003 and a telephone follow-up, July 14, 2003. 12 between $500 and $700,” which would rank it near countries such as Yemen, Bhutan, and Angola.” Since the establishment of the UN oil-for-food program in December 1996, 60% of Iraq's popu- lation has relied upon oil-for-food program to meet its most essen- tial needs. The private sector was operating at a fraction of capac- ity. No Oil Bonanza Although Iraqi's oil reserves are estimated to be the second larg- est in the world, Iraq's economy and infrastructure is in dire straits. There is no oil windfall on the horizon. Oil revenues for July–December 2003, based on estimated ex- F. of 1.5 million barrels per day by December, are expected to e only $3.455 billion. Iraq's oil exports and revenues are projected to be only 2 million barrels per day and $14 billion, respectively, for 2004.14 To achieve those results, Iraq's oil infrastructure will require $2.5 billion in investment by December 2004.15 The July— December 2003 Iraqi budget includes $825 million for rebuilding Iraq’s oil infrastructure through the Restoration of Iraqi Oil Pro- gram. (See Annexes, pages 22–25.) An expansion of Iraq’s oil exports beyond these levels cannot be considered in a vacuum. Such a decision would probably require an increase in international demand for oil and further investments in Iraq’s oil infrastructure. Under Secretary of State Alan Larson said in testimony before the Senate Foreign Relations Committee that, “Any significant expansion of baseline oil product capacity would need to be accommodated by increased demand in the international marketplace and in my view would most likely be privately fi- nanced.”* The Independent Task Force of the Council on Foreign Relations on “Iraq: The Day After” estimated that restoring produc- tion to its peak of 3.5 million b/d would require an investment of $5–7 billion over 2 years.17 A Shoestring Budget in the Red The interim budget for Iraq for July–December 2003 prepared by the CPA and Iraq's Ministries of Finance and Planning projects a total expenditure of close to $6.1 billion and a deficit of $2.2 billion. (See Annexes, pages 22–25.) The deficit will be funded from “com- mitted financial assets, without the need for borrowing.” The budg- et, while appropriately conservative in some respects, does not make the dramatic investments that may be ſurgently needed to bring about immediate improvement in the lives of ordinary Iraqis. Ambassador Bremer has so far predicted a deficit of almost $4 bil- lion for FY 2004.18 12 The Reconstruction of Iraq. A Preliminary Background Briefing Paper, prepared by the UN Development Group, June 23, 2003. 13 The World Bank, World Development Indicators for 2000 and 2001. 14 Iraq exported 1.7 mil b/d of oil in 2002. Testimony of Hon. Alan P. Larson, Under Secretary of State for Economic, Business and Agricultural Affairs, before the Senate Foreign Relations Committee, June 4, 2003. 15 Phil Carroll, CPA Senior Adviser to Iraq's Ministry of Oil, Baghdad, June 23, 2003. *Testimony of Hon. Alan P. Larson, Under Secretary of State for Economic, Business and Agricultural Affairs, before the Senate Foreign Relations Committee, June 4, 2003. 17 Iraq: The Day After, Report of an Independent Task Force Sponsored by the Council on For- eign Relations, 2003, p. 35. 18Ambassador Paul L. Bremer III, National Press Club, Washington, DC, 23 July 2003. (See Annexes, pages 34–43.) 18 :!ºſſ* √∞feſo! :ae | 88ſ - uoffiſeop |---- ·|wae， £8+ 's'n ſeſon :• podsuwur （~1 ſae - saenudº º ·ºpaeum §§- ºsnuºpo :5 ſae• Sod■** 89，- ſue)|||W.wogaeº，ųjnº） |-***，suæ， { Zºº}§§|-* kaen，smo faeſøg |(801|ſiloſe) geſs WHO ;Þaesne， | T.******qnae uæºn*wººn，saegy øoueuraa oorexon*****repos pueroqen (ſºwał rouxe ao9}*owevu **ºd ~ ~eeoqsmº |ſœaeſºx|-suosqapy*ųoſ nºs vontaeuum H ,ºſae!|sºos apyquae quºtuºoºop，3-------------ſeuoſºg*wºgræn，æ：veurºnoº wołºwę woo wojewoyu; ）suxo|snoſºț¢shp&#rºpueuxuoso uononn suooºº*****saev |pavođđns- uðſaxoa winm：：~*~haewo| wins， ruſſiwowomp3 -----：-| }------_|_ | ſººººººº !№ 1 ***** │ ├─────────────────| ·|| ſosomupeaucºols || !wn) wedresa || ſon， waenn || ||||ſaesaeoſb | | ! suae unuae·Åſ| 1ºda i|-| || koſod| ae|- |ſae|-suaenſ-suonae- |-~♥~ſodsuſeſ， * I - waewaes H ≤ 1| ov H ≤ – ºººººwºo |— | | ºſſeſſºrøsunoo|-yųðſsroao reſoueuſa* dnorogoddns reuopelado vaeſenſueuinaeſeºwºsoyeſwehºuxºs • annºexa+þeſs ſeuos rºd i søppy krewnae ×××ſøju!|-|- ſeºsſaewºº | |-|| SO2| |oſo &ndºo|-*ONT Åreųſtw ----uðuðug ºduv（if （! (pueroa) exºg----soºsunoo– uomºu proporevoaeuºmuſ ſonounooºueuſeųoJoyeuq sſuquupv Å LIÈHOHLOV TVNOISI/\OHd NOI LITVOO łąo |ſouro ſºnpåho · 21 ORDER OF THE ADMINISTRATOR OF THE COALITION PROVISIONAL AUTHORITY DE-BAATHIFICATION OF IRAQI SOCIETY—MAY 16, 2003 On April 16, 2003 the Coalition Provisional Authority disestab- lished the Baath Party of Iraq. This order implements that declara- tion by eliminating the party's structures and removing its leader- ship from positions of authority and responsibility in Iraqi society. By this means, the Coalition Provisional Authority will ensure that representative government in Iraq is not threatened by Baathist elements returning to power and that those in positions of author- ity in the future are acceptable to the people of Iraq. Full members of the Baath Party holding the ranks of ‘Udw Qutriyya (Regional Command Member), ‘Udw Far' (Branch Mem- ber), ‘Udw Shu’bah (Section Member), and ‘Udw Firqah (Group Member) (together, “Senior Party Members”) are hereby removed from their positions and banned from future employment in the public sector. These Senior Party Members shall be evaluated for criminal conduct or threat to the security of the Coalition. Those suspected of criminal conduct shall be investigated and, if deemed a threat to security or a flight risk, detained or placed under house arrest. Individuals holding positions in the top three layers of manage- ment in every national government ministry, affiliated corporations and other government institutions (e.g., universities and hospitals) shall be interviewed for possible affiliation with the Baath Party, and subject to investigation for criminal conduct and risk to secu- rity. Any such persons determined to be full members of the Baath Party shall be removed from their employment. This includes those holding the more junior ranks of ‘Udw (Member) and ‘Udw “Amil (Active Member), as well as those determined to be Senior Party Members. Displays in government buildings or public spaces of the image or likeness of Saddam Hussein or other readily identifiable mem- bers of the former regime or of symbols of the Baath Party or the former regime are hereby prohibited. Rewards shall be made available for information leading to the capture of senior members of the Baath party and individuals complicit in the crimes of the former regime. The Administrator of the Coalition Provisional Authority or his designees may grant exceptions to the above guidance on a case- by-case basis. - By order of: - - L. PAUL BREMER, III Administrator, Coalition Provisional Authority 22 REPUBLIC OF IRAQ BUDGET REVENUES AND EXPENSES-JULY-DECEMBER 2003 Budget Summary Ministry of Finance, Ministry of Planning, Coalition Provisional Authority Interim Budget for the period July to December 2003 This interim budget provides authority for the commitment and expenditure of money by the Interim Government of Iraq for the period July to December 2003. It sets the groundwork for the prep- aration and authorization of the budget for 2004. It was prepared using the existing systems, forms and formats that have traditionally been used in Iraqi budgets. Each Iraqi Min- istry and Kurd region prepared a budget with their Coalition Sen- ior Advisor. That budget was discussed with the Coalition Finance Advisor. The proposed Budget was then reviewed by appropriate of ficials from the Iraqi Finance and Planning Ministries, briefed to AID and UN representatives and approved by the CPA Program Review Board. The Budget balance for July to December 2003 shows a deficit of around $US2.2 billion. This will be funded from committed fi- nancial assets, without the need for borrowing. Budget Summary ($USm) Expenditures perating 2,002.1 Capital 352.7 Reconstruction 256.8 Other Expenditures 3,488.0 Total 6,099.6 Revenues Oil revenues 3,455.0 Fees, charges and taxes 59.1 Returns from State Owned Enterprises 373.6 Total 3,887.7 Budget Balance (Deficit) –2,211.9 The Budget ensures fiscal discipline in the use of budgetary re- sources in order to rebuild the confidence necessary for the inter- ºnal donor and investment community to support the country's efforts. Oil revenues totaling around $3.4 billion are fully committed to programs that benefit the Iraqi people. Major priorities addressed include the reconstruction and res- toration of essential facilities and services such as water, elec- tricity, education and health care to meet the basic needs of the Iraqi people; restoring and revitalizing the banking system, produc- tive enterprises, agriculture and trade to reintegrate Iraq into the world economy. 23 Key Initiatives of This Budget Include ($US millions) • “Special programs” and “transfers” redirected to Iraqi people $900 • Electrical improvements $294 • Subsidies to state owned enterprises reduced by: $269 • Reconstruction $257 • Security and Justice improvements $233 • Defense funding $225 • Public Health improvements $211 • Communications improvements . $150 • Water and Sewerage improvements $73 Table 1: Net Budget Position ($USm) Revenues 3,887.7 Expenditures 6,099.6 Budget Balance (Deficit) –2,211.9 Table 2: Budget Financing ($USm) Vested Assets 1,700.0 Seized Assets 795.0 Development Fund for Iraq 1,192.0 Iraq Relief (appropriated) 2,475.0 Natural Resource Risk Remediation Fund 489.0 less spending before 1 July 200 31,248.0 Net Positionas at 1 July 2003 5,403.0 less: Budget Deficit 2,211.9 Central bank currency support 2,100.0 Net Position as at 31 December 2003 1,091.1 Table 3: Expenditures by Organization Operational Capital Expenditure Expenditure Organization ($USm) ($USm) Total ($USm) Ministry of Agriculture 9.4 10.0 19.4 Baghdad Mayoralty 12.1 4.3 16.4 Board of Supreme Audit 0.4 0.0 0.4 Central Organization of Standards 0.0 0.0 0.0 Ministry of Culture 1.2 61.6 62.8 Ministry of Defense 45.0 120.0 165.0 Ministry of Education 9.7 0.0 9.7 Electricity Commission 24.0 77.6 101.6 37 To date we have implemented several thousand such projects all across Iraq. We recognize the importance of having both a carrot and a stick. Additional steps that will be taken over the next 60 days to im- prove security include, first, recruiting and training the first bat- talion of the new Iraqi army. Recruitment commenced this week- end. And I’m told in conversations with Baghdad this morning that there were mobs of people volunteering to join the new Iraqi army. It will be a volunteer force, not a conscripted force. Secondly, we will raise eight battalions of the new Iraqi civil de- fense corps in the next 60 days. We will open the new police acad- emy, which is even now recruiting for police. We will re-establish the border guard. We will start trials before the central criminal court, which I established a month ago, and we will start judge- training seminars. But we need to be realistic. There will be bumps in the road. Total security is not possible. Continued success on our overall re- construction plan will probably be met by bitter-enders who target OUII" SUICCéSSeS. If you look at some of the most disruptive and symbolic attacks in recent weeks, it turns out that what they do is attack our suc- cess stories. I’ll give you three examples. On July 6, in the early afternoon, a young infantry man pro- viding security to our people at the Baghdad University was mor- tally wounded in an assassination. This tragic event, however, could not obscure the reality that all 22 universities in Baghdad have been open since late May. The universities have begun recon- struction with the assistance of coalition forces and our authority. The vast majority of undergraduates throughout Iraq, something like 90 percent, are now completing their final exams, and there- fore bringing to conclusion—to a successful conclusion—the school year. On July 5, a bomb exploded killing several Iraqis at a ceremony marking their graduation from a police training course in Al- Fallujah. This, too, was an attack on our success, demonstrating the attackers opposition to the efforts of Iraqis to bring safety and security to their own streets, and showing the same disdain for their own people that Saddam showed for 35 years. Just this past weekend there was a fatal attack on a U.S. soldier guarding a bank. Today, over 72 percent of the banks in Iraq are open. In Baghdad all customers and depositors are being served. If their branch is closed, another branch is covering for them. Banks have been a success for the coalition and the Iraqi people, and that's why this young infantry man was targeted. And as we have more successes across the board, we should be prepared for more desperate attacks against our forces and the Iraqi people, but we will not be deterred. The second element of our strategy is working with Iraqis to put their country on the right economic path. The immediate situation is daunting, but it could have been much worse. And it's important to remember what did not happen. We did not have a humanitarian crisis. There was no refugee crisis. Early operations by the coalition prevented attacks or destruction