Armed Madhouse

by Greg Palast

  Getting Better

  But don’t worry, America. Ignore that man on fire. Carlos Arredondo didn’t understand that, when he lost his son, our leaders were still tragically inexperienced at handling the globe and its oil. We can rest assured, as Rumsfeld’s assistant Larry Di Rita explained, the more practice we get at invasions and occupations, the better we’ll do:

  We’re going to get better over time. The future of war is that these things are going to be much more of a continuum…. This is the future for the world we’re in at the moment. We’ll get better as we do it more often.

  More often?

  Oil Wars Bonus Chapter!

  The Best Little Legal Whorehouse in Texas

  © Robert Grossman

  Looking for the real action in Texas? In Houston, stop by “Baker Botts LLP” and ask for “Jim.”

  The law firm of James Baker III, Secretary of State under George Bush the Elder, doesn’t bat an eyelash at the kinkiest client requests. Right now, his stable is working day and night for the Defense Ministry of Saudi Arabia to prevent the families of the victims of the September 11 attack from seeking information on the Defense Ministry’s funding of Al-Qaeda fronts. It’s tough work, but Jim was ready for more when, in December 2003, President Bush the Younger announced that Baker would get the job of “restructuring” the debts of the nation of Iraq.

  And who will net the big bucks under Jim Baker’s plan? Answer: Baker Botts’ client, Saudi Arabia, which claims $30.7 billion due from Iraq plus $12 billion in “reparations” from the First Gulf War.

  Let’s ponder what’s going on here. We are talking about something called “sovereign debt.” And unless George Bush has finally ’fessed up and named himself Pasha of Iraq, he is not their sovereign. Mr. Bush has no authority to seize control of that nation’s assets nor its debts.

  But our President is not going to let something as trivial as international law stand in the way. To get around the wee issue that Bush has no legal authority to mess with Iraq’s debt, the White House crafted a neat little subterfuge. The White House told me the President did not actually appoint Mr. Baker, so Baker can assert that he is not, in fact, a White House employee. Rather, Mr. Bush was “responding to a request from the Iraqi Governing Council.” That is, Bush acted on the authority of the puppet government he imposed on Iraqis at gunpoint.

  The Bush team must have seen the other advantage in having the rump rulers of Iraq pretend to choose Mr. Baker: The U.S. Senate did not have to review nor confirm the appointment. If you remember, when President Bush asked Henry Kissinger to head up a commission to investigate the September 11 attack, U.S. Senators demanded to see Kissinger’s client list, so Henry ran away with his consulting firm tucked between his legs. In the case of Jim Baker, our elected Congress had no chance to ask him who is paying his firm—nor even to require him to get off conflicting payrolls.

  Or maybe there’s no conflict at all. If you see Jim Baker’s White House job as working not to protect a new Iraqi democracy but to protect the loot of the old theocracy of Saudi Arabia, the conflict disappears.

  Fixed

  Why is our President so concerned with the wishes of Mr. Baker’s clientele? What does Bush owe Baker? Let me count the chads, beginning with the 2000 election.

  “I fixed the election in Florida for George Bush,” as Bush’s lawyer Baker told an audience of Russian oil industry oligarchs, bragging about his post-election legal work in 2000. That was reported to me by my somewhat astonished colleague at BBC Television in Moscow. I assume he was referring to his work as consigliere to the Bush family. He came up with the strategy of maneuvering the 2000 Florida vote count into a Supreme Court packed with black-robed politicos he helped appoint. Baker’s claim to have “fixed” the election was not a confession; it was a boast. He meant, says our eyewitness, to dazzle current and potential clients about his Big In with the Big Boy in the White House.

  Over the years, Jim Baker has taken responsibility for putting bread on the Bush family table. For example, among his other titles, Jim is “Senior Counsel” for Carlyle, an arms-dealing investment group that hired both Poppy Bush after he was booted from the White House and Junior Bush while his daddy was still President.

  Bush Sr.’s job with Carlyle was to schmooze the Saudi royal family into buying weapons of major destruction. The sales pitch was made easy as one of the most powerful families in Saudi Arabia, the bin Ladens, were financial backers of the Bush-Baker Carlyle venture.

  Bush Jr. was paid by Carlyle as a board member of its CaterAir unit. Sad for Carlyle, under George W.’s business stewardship, Cater-Air swiftly took a terrifying financial nosedive. Not to worry. It was Carlyle that got President Bush Jr. to pay the “wind-down” money for its Muslim-mauling Crusader tank-and-bulldozer combo.

  Invitation to Invasion

  To Americans, the war in Iraq was sold as bringing democracy to the sands of Arabia. To Jim Baker’s clients, the Saudis, it was more of an armed debt collection action. Saudi Arabia wanted billions in “war reparations” Iraqis owed them for Saddam’s invasion of Kuwait. But who gave Saddam the idea he could get away with invading Kuwait, anyway?

  Answer: Mr. Jim.

  On July 25, 1990, Saddam asked U.S. Ambassador April Glaspie if the U.S. would object to an attack on Kuwait over the small emirate’s theft of Iraqi oil. America’s ambassador told him;

  We have no opinion on… your border disagreement with Kuwait…. The issue is not associated with America. James Baker has directed our official spokesmen to emphasize this instruction.

  We have no opinion?! Glaspie, in Congressional testimony in 1991, did not deny the authenticity of the recording of her meeting with Saddam—which world diplomats took for what it was: Jim Baker’s green light for Iraq to attack Kuwait.

  Why did Baker turn on his buddy Saddam? The Kuwaitis had been sucking up that which wasn’t theirs in the shared oil field on the Kuwait-Iraq border. Oil men Baker and Bush, long familiar with the etiquette of the Wild West oil fields of the Permian in Texas, knew the Texas response to such cheating was the proverbial baseball bat to the knees. Saddam had a right to invade, but, too full of himself, went too far, taking not just the oil fields but all of Kuwait, as Iraq’s “nineteenth province.” And that most certainly upset the fine political balances of OPEC and Saudi control. Baker and Bush suggested Saddam leave Kuwait, and with the 82d Airborne, they made Saddam an offer he couldn’t refuse.

  Who’s Counting?

  Baker was playing with an Iraqi debt totaling $120 billion to $150 billion, depending on who’s counting. And who’s counting is very important. Some of the so-called “debt” owed to Saudi Arabia was given to Saddam to fight a proxy war for the Saudis against their hated foe, the Shia of Iran. Should Iraqis today and those not yet born have to be put in a debtor’s prison to pay off the secret payouts to Saddam?

  James Wolfensohn, when he was president of the World Bank, said “No!” Wolfensohn has never been on my Valentine’s list, but in this case he got it right: The Saudis and partners should be forced to eat their $120 billion “debt.”

  And that might have happened if the World Bank, not Baker, was given the task of dealing with the sheiks’ shakedown of Iraq. In fact, the World Bank has always been put in charge of postwar debt restructurings. That’s why the official name of the World Bank is “International Bank for Reconstruction and Development.” One suspects that Bush rushed Baker in to preempt the World Bank’s sticking with Wolfensohn’s recommendation that Iraq tell the Saudis to take their “debt” and shove it.

  28 Pages Missing

  How did Baker Botts get that lucrative job as lawyer defending the Saudis from Americans? I got a hint in my wanders around the grandiose James Baker III Institute in Houston, checking out Jim’s trophy case. Among Baker’s notable jobs was Chief of Staff to President Ronald Reagan. The only memento of that job on display was Baker’s personally notated tally sheet listing the names of the U.S. Senators he lobbied to vote in favor
of selling “AWACS” to Saudi Arabia. In 1981, that was a big deal. AWACS is an incredibly sophisticated theater-of-war system given only to our most trusted NATO allies. Only through Jim Baker’s arm-twisting did a slim majority of congressmen agree to this plain dangerous scheme to let the Saudis have these murderous machines. (The AWACS will come in handy for Osama when he knocks over the House of Saud.)

  I don’t want any readers thinking Baker’s firm was hired by the Saudis as payback for the AWACS. There are many other tentacles of power worth renting from Jim Inc. and his business chums.

  For example, in July 2003, Congress issued the official report on the September 11 attack. But the report made public was missing, it turns out, twenty-eight pages the White House didn’t want us to see. Apparently, it was all about Saudi Arabians’ “charitable” donations to needy terrorists. Some nasty readers might think Jim Baker had a hand in censoring the info, but that’s not fair. It was purely a U.S. government decision, likely reviewed by our Ambassador to Saudi Arabia, Robert Jordan, formerly partner in, uh, Baker Botts.

  So, if you’ve got the cash and are looking for a good time, but can’t find the little red light out in front of Baker Botts office in Houston, try his satellite office at 1600 Pennsylvania Avenue in Washington, DC. No kidding. Our President has given James III an office in the White House itself. This may be the first time in the history of our Republic that a lawyer in the employ of foreign sovereigns has an office in the presidential residence.

  You’ve got a problem with that? Shouldn’t our Commander-in-Chief have his most trusted advisor near at hand? In fact, I’ve heard, though can’t confirm, that Mr. Bush allows Baker to use the Oval Office desk while the President plays on the rug.

  CHAPTER 3

  THE NETWORK

  The World as a Company Town

  The holistic system of systems, petro-dollars, electro-dollars, the assassination of Hugo Chávez, Euro-nations and Mundell’s Toilet and coming down from Hubbert’s Peak. Mr. Friedman tees off.

  “Am I getting through to you, Mr. Beale?” The Arabs have taken billions of dollars out of this country, and now they must put it back. It is ebb and flow, tidal gravity, it is ecological balance. You are an old man who thinks in terms of nations and peoples. There are no nations. There are no peoples. There are no Russians. There are no Arabs. There are no “Third Worlds.” There is no “West.” There is only one holistic system of systems, one vast and immense, interwoven, interacting, multi-variate, multi-national dominion of dollars! Petro-dollars. Electro-dollars. Multi-dollars. Reichmarks, rins, rubles, pounds and shekels! It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today. That is the atomic, and subatomic and galactic structure of things today. Am I getting through to you, Mr. Beale? You get up and howl about America and democracy. There is no America. There is no democracy. There is only IBM, and ITT, and AT&T, and DuPont, Dow, Union Carbide, and Exxon—those are the nations of the world today. We no longer live in a world of nations and ideologies, Mr. Beale. The world is a college of corporations, inexorably determined by the immutable by-laws of business. The world is a business, Mr. Beale. And our children will live, Mr. Beale, to see that perfect world in which there’s no war or famine, oppression or brutality. One vast and ecumenical holding company, for whom all men will work to serve a common profit, in which all men will hold a share of stock, all necessities provided, all anxieties tranquilized, all boredom amused. And I have chosen you to preach this evangel, Mr. Beale.

  There is really nothing more to add to Paddy Chayevsky’s script from the movie Network to understand The System, the ebb and flow, except to update the details. In the three decades since Network first screened, the “holistic system” has become more holistic: Neither reichsmarks nor Karl Marx exist except in grainy documentaries.

  And “to preach the evangel” of a borderless, interconnected, tranquilized corporate utopian earth in which we all own shares of stock, Mr. Beale has been replaced, of course, by Thomas Friedman.

  Petro-Dollars

  Let’s take the Network economics lesson a step at a time: the “multi-national dominion of dollars”; multi-dollars, electro-dollars and first, petro-dollars.

  The Arabs have taken billions of dollars out of this country, and now they must put it back.

  Indeed they must. In April 2005, when George Bush drove the King-to-be of Saudi Arabia around the Crawford ranch in a golf cart, the President wasn’t playing caddy to Abdullah because we need the Saudis’ oil. OPEC nations will always sell us their oil. After all, they can’t eat the crude nor drink it and there’s only so much Abdullah’s harem can pour on his belly. George Bush’s concern is that, in the first five years of his Administration, Abdullah and the oil-exporting nations sucked up over half a trillion dollars from U.S. consumers—$649 billion for their oil—and our President wants it all back. He needs it.

  Why? Empire isn’t cheap these days. Bill Clinton left office bequeathing a budget surplus projected to total $5.6 trillion for this coming decade. But George Bush blew it all, stone sober. Then Bush went another $4 trillion into the red. It’s not just the Iraq war. We have to add in a trillion dollars over the next ten years to make up for the revenues lost from his repealing the inheritance tax. And will need another $6 billion for filling up the Strategic Petroleum Reserve, and don’t forget his “Marines in a Tube” price tag: $64.7 billion. Then add in the Big One, taking over the pension obligations of U.S. corporations that have, with Bush’s blessing, dumped their commitments on the U.S. Treasury: $142 billion.

  To fund his binge spending, our President could have taxed us directly, say, a dollar a gallon tax on gasoline. But a gas tax is, politically, a no-go. Instead, our leader has arranged an indirect tax on gasoline: OPEC’s $50-plus price for a barrel of crude, which translates roughly into an extra dollar a gallon at the pump.

  Think of the gas pump price spike as a war tax.

  Saudi Arabia and other OPEC nations take our billions and then they lend them back to us to fund Mr. Bush’s deficit. In 2005, $243 billion in petro-dollars was collected from Americans at the pump (and in your heating and electric bills) and left the country. At the same time, it cycled back, and then some, as foreigners bought up nearly a third of a trillion dollars ($311 billion) in U.S. government debts. Mr. Bush spent every penny of it, and more.

  Under the Bush Administration, the sum of Treasury bills on the market rose, by August 2005, to $4.11 trillion, with half of it ($2.06 trillion) lent to us from dollars held by foreigners. In fact, the Bush Administration has, on a net basis, borrowed the entire increase in Treasury debt from foreign sources. The only way to get that much money in is to let it bleed out.

  The Flow Map

  The Arabs took $252 billion in 2005 for OPEC’s oil—and put back $311 billion by purchasing U.S. Treasury bills, Latin America borrowed $227 billion at high interest–while lending the U.S. $379 billion at low interest. Americans bought $243 billion in stuff from China–while China holds an unknown sum (a trillion?) in reserve to buy up the U.S.

  That’s the “petro-dollar cycle,” Mr. Beale. It flows out; it comes back.

  It’s one heck of a deal for this Administration. All the goodies, from nuclear subs to tax cuts to war in Mesopotamia, appear to be “free” to the taxpayer. It’s all just put on the tab, the national debt, including the interest on it. The actual cash needed to pay for these budget busters is first collected from U.S. consumers via the hidden oil tax for which Mr. Bush takes no blame.

  Why would Abdullah give us our money back? Why wouldn’t the Saudi royals and the emirs of the Persian Gulf use their trillion-dollar windfall to invest in the Islamic world, from Morocco to Palestine to Pakistan? Why do the Gulf States just hand the capital back to the banks of New York and London? The answer: protection. The Saudis may love their Islamic brothers, but they fear them more. The sheikdoms know they can count on the Bush family when a Saddam marches into K
uwait or Osama’s cadres try to seize Abdullah’s throne. They know they can count on the USA because they pay for it. The marching song of the Saudi Army is, after all, “Onward Christian Soldiers.”

  Every dictator (or “royal” if you prefer) knows that there’s another advantage to parking their loot in the West. If “regime change” occurs in Saudi Arabia, if the House of Saud caves in, the bulk of its funds will be safely stashed in New York, London and Zurich.

  Our petro-dollars go out, then come back, all of them, but at a high cost. First, there’s the interest. Despite the Koran’s prohibition on the charging of interest, the Saudis and other oil states demand no small pound of flesh. When interest rates rise to lure back our money from King Abdullah, the rest of us must pay higher interest as well. Between June 2004 and November 2005, the Federal Reserve had to hike interest rates twelve times. And, as we’ll discuss further on, we pay the interest “vigorish” not just in higher credit card fees, we pay in jobs.

  Because of Mr. Bush’s deficits, U.S. federal government interest payments for 2002 through 2011 will total about $2.4 trillion. (If we had to pay only the debts Bill Clinton left us, the interest payout would have been just a fourth of that, $622 billion.) Mr. Bush’s interest payments themselves are on the tab as well, rolled into the national debt. We pay a “shadow” cost for that too. Higher borrowing costs for business since the beginning of the Iraq war are bleeding manufacturing investment.