[Senate Prints 109-40]
[From the U.S. Government Publishing Office]


109th Congress                                                  S. Prt.
                            COMMITTEE PRINT                     
 1st Session                                                     109-40
_______________________________________________________________________

                                     


 
                      IRAQ: ASSESSMENT OF PROGRESS
                     IN ECONOMIC RECONSTRUCTION AND
                         GOVERNMENTAL CAPACITY

                               __________

                           STAFF TRIP REPORT

                                 TO THE

                     COMMITTEE ON FOREIGN RELATIONS

                          UNITED STATES SENATE

                       One Hundred Ninth Congress

                             First Session

                             December 2005

                                     




                    U.S. GOVERNMENT PRINTING OFFICE
24-804                      WASHINGTON : 2005
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001


                     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
NORM COLEMAN, Minnesota              JOHN F. KERRY, Massachusetts
GEORGE V. VOINOVICH, Ohio            RUSSELL D. FEINGOLD, Wisconsin
LAMAR ALEXANDER, Tennessee           BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        BILL NELSON, Florida
LISA MURKOWSKI, Alaska               BARACK OBAMA, Illinois
MEL MARTINEZ, Florida
                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                  (ii)
?



                            C O N T E N T S

                              ----------                              
                                                                   Page
Letter of Transmittal............................................     v

Summary/Overview.................................................     1

The Economy......................................................     3

Capacity of Iraqi Institutions and the ``New'' Strategic Plan....     9

The New Embassy Compound.........................................    16

                               Appendixes

Appendix I. Embassy Staffing Summary.............................    23

Appendix II. Meetings and Interviews.............................    26


                                 (iii)
?



                         LETTER OF TRANSMITTAL

                              ----------                              

Dear Colleague:

    The committee recently sent Mr. Patrick Garvey of the 
professional staff to Baghdad to assess progress in the U.S. 
mission to stabilize Iraq.
    We are pleased to share with you his trip report, which we 
believe provides significant insight into several areas--
particularly economic reconstruction and the capacity of Iraqi 
governing institutions--that will be key to a stable and 
democratic Iraq. The report pays significant attention to the 
U.S. strategy to improve Iraqi institutional capacity and 
engender policy reform that often receive less attention in the 
press, providing insight into the successes we have achieved 
and the challenges that lay ahead.
    The report also provides a number of recommendations that 
may be helpful as the Committee on Foreign Relations continues 
its oversight of Iraq and the Department of State whose ability 
to manage complex stabilization and reconstruction missions is 
so critical.
    We look forward to continuing to work with you on these 
issues and welcome any comments you may have on this report.
            Sincerely,

                                          Richard G. Lugar,
                                                           Chairman


                                  (v)



                      IRAQ: ASSESSMENT OF PROGRESS
                     IN ECONOMIC RECONSTRUCTION AND
                         GOVERNMENTAL CAPACITY

                              ----------                              

    From November 4-12, 2005, a member of the professional 
staff from the United States Senate Committee on Foreign 
Relations (SFRC) traveled to Baghdad, Iraq. At the request of 
the Chairman, the purpose of the trip was to examine two 
issues:

  1. Reconstruction progress in the area of economic 
        development.

  2. Capacity of Iraqi ministries and Iraqi governing 
        institutions, including those at the provincial level, 
        to function independently of U.S. assistance.

    These two pillars in the reconstruction effort were chosen 
because of their importance to the long-term stability of the 
country, the relative lack of media attention they receive, and 
their relevance to the oversight responsibilities of the 
committee. This report also explores other areas of concern to 
the SFRC, specifically:

   The ``New'' Joint Strategic Plan, which includes 
        Provincial Reconstruction Teams.

   Construction of the new embassy complex, as well as 
        staffing and security issues.

   The Rule of Law program.

    Staff visited with lead Embassy officials, Iraq 
Reconstruction Management Office (IRMO) leadership, the 
Director of the Gulf Regional Division of the Army Corps of 
Engineers, Project and Contracting Office members, the USAID 
Mission Director, two members of the Iraqi National Assembly, 
and numerous embassy personnel (see Appendix II for complete 
list).
    Staff's movement was restricted to the International Zone 
for security reasons and Ambassador Khalilzad and many senior 
Iraqi government officials were traveling outside the country.

                            Summary/Overview

    Staff found that U.S. and coalition reconstruction 
projects, investments and other program and policy reforms 
implemented since 2003 appear to be having a stabilizing effect 
on the economy. U.S. officials agreed with recent IMF Executive 
Board comments citing Iraq authorities for ``having established 
and maintained a degree of macroeconomic stability under 
extremely difficult circumstances, and for having initiated 
structural reforms.'' \1\ While reliable statistical 
measurements are hard to come by, embassy economic advisors 
cite soaring demand for every type of good and service; 
improvements in salaries--especially for government workers 
that are up ten or twenty times pre-war levels; stabilized oil 
exports; increasingly reliable electricity generation; and 
Iraqi government initiatives to reduce subsidies and re-join 
the IMF. The country's economy, while still vulnerable to major 
disruptions, has progressed despite the ongoing insurgency and 
high demand-driven inflation (measured at 42% from August 2004-
August 2005).
---------------------------------------------------------------------------
    \1\ IMF Survey, Vol. 24, No. 16, August 29, 2005, p. 251.
---------------------------------------------------------------------------
    Iraq's legacy as a controlled economy that further suffered 
the impact of internationally-imposed sanctions and isolation 
from the world financial community looms large in some 
respects, from a lack of natural market mechanisms to a 
business community that is unaccustomed to having the freedom 
to develop their own business solutions. Like the Russians of 
fifteen years ago when the Communist political economic system 
collapsed, Iraqis enjoy their new civic and religious freedoms, 
but some are finding it hard to give up the financial benefits 
of a state-controlled system.
    U.S. policy and governance assistance to date was 
characterized by one official as ``doing and directing.'' For 
example, Iraqi participation in determining spending priorities 
for the Iraq Relief and Reconstruction Fund (IRRF) and even the 
Development Fund for Iraq (DFI) spending has been minimal. This 
practice--by which we make the decisions and then get the 
Iraqis to accept them (described as getting ``Iraqi buy-in'') 
has muted the Iraqi voice and stifled capacity-building. 
Officials interviewed suggest that simply giving grants and 
funding projects outright (hand-outs) should not continue as 
the practice can perpetuate governmental mismanagement and 
laziness. More than one official suggested we could help Iraq 
more by requiring matching funds or funding small business 
loans rather than making grants. Continuing to state the 
obvious: that U.S. funding is finite and designed to jump-start 
the economy is also a useful reminder. As one senior advisor 
stated, ``scarcity sharpens the mind.''
    Among State and DoD officials leading the Iraq mission, 
past frictions seem to have been overcome and State and DoD 
operate and coordinate more closely as a team. Ambassador 
Khalilzad and General Casey are in the final stages of a joint 
strategic plan with numerous metrics and a red-yellow-green 
indicator system to mark progress toward milestones. Officials 
suggest the plan will be finalized by mid-December, but many 
details have already been worked out and discussed. 
Nevertheless, resources to implement the plan in 2006 and 
beyond remain untallied and sources have yet to be identified.
    Although the military and civilian cultures do not always 
understand each other, U.S. government civilians, contractors 
and military officials have formed a team in Iraq and respect 
one another's expertise. On the one hand you have action-
oriented, results-driven individuals with a penchant for Power 
Point; on the other hand you have thoughtful, analytical 
consensus-builders who are used to writing diplomatic cables 
and offering policy options. Style and personality count 
significantly in such an environment, both at the operational 
level and in management. Ambassador Khalilzad and his Charge 
d'Affairs Ambassador Satterfield, paired with General Casey and 
General Vines are a strong and capable leadership team, but 
agreement at the top does not always translate at the 
operational level, where Army veterans and young, inexperienced 
Foreign Service Officers must execute policies.
    Mistakes of the past two years are being dealt with 
directly by Ambassador Khalilzad and his team. There is open 
recognition that disbanding the Iraqi Army and deep level de-
Ba'athification were mistakes. This has gained the Ambassador 
greater credibility and respect among Iraqis and U.S. personnel 
alike. He not only speaks about a long-term U.S. vision for 
Iraq, but he has also demonstrated a personal long-term 
commitment to Iraq, which has further engendered trust among 
Iraqis. When the Iraqi people elect and install a ``permanent'' 
government in the coming months, embassy leadership is 
optimistic that government will be able to provide the type of 
consistent leadership necessary to build lasting, capable 
institutions and a stable, prosperous and democratic Iraq.
    The joint strategic plan mentioned above, contains a one, 
two and four year development strategy. It ties into the clear-
hold-build strategy that Secretary of State Rice set forth in 
testimony to the SFRC on October 19, 2005 and will require 
close collaboration of all the various civilian and military 
elements of the coalition, including: the Multi-National Force 
Iraq (MNFI), USAID, NGO's and contractors.
    The ability to execute the plan is not assured. To be 
successful, it will require (1) firm commitment on the part of 
the Iraqis; (2) top-notch US civilian personnel; (3) properly-
managed and focused resources; and (4) the dedicated 
constructive involvement of the international community and all 
regional actors.

                              The Economy


                         obstacles to progress


    Lack of security and a reliable mercantile infrastructure--
according to embassy analysts and Iraqi business leaders 
alike--are preventing the economy from taking off. Mercantile 
infrastructure includes: power and communications, reliable 
transportation (move goods to/from market); and a free market 
structure to include laws, subsidy elimination and 
privatization of state-owned enterprises. Subsidy elimination 
will also help control aggregate demand, which continues to 
rise unchecked.
    The U.S. Treasury Attache, who notably has held that 
position for two years, suggested that Minister of Finance Ali 
Allawi is taking on many of these issues and has demonstrated 
the necessary acumen, asking for assistance and taking 
initiatives without waiting for direction. The Minister is 
expected to continue in the job after the new government is in 
place, but even if he does not, many of the policy reforms are 
underway and should proceed apace, regardless of who is in that 
job.
    Poverty, as noted in the testimony of Dr. Keith Crane of 
the RAND Corporation appearing before the SFRC on 19 July 2005, 
is a continuing challenge. Embassy officials suggest that an 
estimated 25% of the population lives beneath the Iraq-defined 
poverty level of $1 per day. Saddam dealt with it through a 
complex welfare system that provided free food and jobs that 
may not have required work.


                financial sector and private investment


    Officials explained that the financial sector remains 
constrained. An estimated 90% of all assets are in the two 
state-owned banks, which have ``deeply negative net worth'' 
according to detailed assessments. They are not inter-
connected. There's no electronic funds transfer capacity. 
Salaries are paid in cash (although a direct deposit system for 
government workers will soon come online). Private banks are 
more like family-owned investment companies. There is no 
foreign investment in the Stock Exchange. There is no demand 
for 30-year paper, which could fund long-term liabilities such 
as pensions or large capital investments. There is no credit, 
which could enable short term loans.
    The Senior Consultant for Private Sector Development, who 
has been in that position for 21 months, reported that a 
lending program she has overseen, providing loans of up to 
$25,000 through Iraqi-trained loan officers working in a dozen 
neighborhood offices to provide seed money for small or start 
up local business, has made more than 16,000 loans disbursing 
more than $31 million with no write-offs in two years. Women 
make up 9% of the borrowing pool. A program audit is 
forthcoming.
    She explained that it has been her experience that there is 
tremendous pent-up demand for credit to rebuild and begin 
entrepreneurial endeavors. It is her view that Iraqis respect 
the loan regimen and that she could easily expand the program 
to enable even larger businesses to get on their feet. She 
expressed her frustration with other programs (i.e. USAID) that 
provide public sector grants rather than private sector loans. 
She said her programs were looking for another $70 million, and 
demurred when prompted for further thoughts on the scalability 
of the programs to accomplish large-scale reconstruction.

          Recommendation 1--SFRC should formally request a 
        proposal and feasibility commentary on how aid could be 
        structured to capitalize on the commercial lending 
        concepts the Private Sector Development office has 
        implemented. The question is to what extent these 
        private sector solutions can be expanded effectively in 
        Iraq.

                     IMF STANDBY ARRANGEMENTS (SBA)


    Iraq has been negotiating with the IMF for standby 
arrangements (SBA), which are the second step in Iraq's re-
entry into the IMF and the world economy. The first was the 
Emergency Post-conflict Agreement (EPCA) entered into in 
November 2004, which laid out policy and performance goals to 
develop fiscal and monetary data; financial management and 
information systems; a national payments system; a national 
budget process; a plan to restructure state banks; and a 
subsidies reform plan. The EPCA allowed small IMF borrowings 
and led to the first tranche (30%) of Paris Club debt 
reductions.
    The SBA will govern the Iraq-IMF relationship for the long 
term. It requires Iraq to significantly reduce subsidies. On 18 
December, fuel prices for premium gas at the pump will increase 
from 20-50 ID/liter (about 5 to 13), and according to Embassy 
Baghdad Economic advisors, will step up in 2006 to reach market 
prices (700 ID) for premium by the end of the year. SBA will 
allow larger IMF borrowings (< $1.5 billion) and the 2nd and 
3rd tranches of Paris Club debt reduction on the agreed upon 
schedule of 20% in January 2006, and the final 20% in January 
2007. Of note, black market fuel prices were already at market 
level.
    Embassy Baghdad's Economic section has prepared several 
cables on subsidies and the IMF agreements, which SFRC Staff 
has requested be made available to Members.


                           IRAQ'S OIL SECTOR


    Oil is the lifeblood of Iraq's economy. More than 95% of 
government revenue is derived from oil exports. Oil will 
generate $24 billion in export revenue this year, an estimated 
$27 billion in 2006 and $40 billion in 2007.\2\ Iraq is the 
world's second largest oil reserve, with large upside potential 
from future exploration. The industry, however, remains 
crippled after decades of sanctions and Saddam's mismanagement. 
Current production hovers around 2.3 mbpd (million barrels per 
day), about a half million below existing feasible capacity 
because of insurgent attacks in the North and ``field decline'' 
in the South.\3\ The U.S. government is investing $2.4 billion 
to restore production capacity to meet or exceed pre-war 
capacity. The goal is 3.0 mbpd, and work should be completed in 
2006. Because of steady attacks, money originally allocated for 
this sector is now limited to repairing existing 
infrastructure, helping to sustain operations and set the stage 
for revenue growth. Despite lagging production, the world 
market oil price increases have boosted revenues.
---------------------------------------------------------------------------
    \2\ Numbers provided by IRMO. Oil revenues based on $9 less than 
West Texas Intermediate Reference prices.
    \3\ Post war production levels were about 0.6 mbpd and pre-war 
levels were approx. 2.6 mbpd.
---------------------------------------------------------------------------
    Fuel crises exist in the country on a daily basis because 
refineries produce only 55% of fuel demand, requiring Iraq to 
import the rest at market rates. The Economic section has 
prepared a cable on this subject and staff will provide that 
analysis to Members when it is made available.
    The Project & Contracting Office (PCO) stated that their 
number one priority is to complete the repair on the pipeline 
at Al-Fathah crossing. This bridge crossing in the pipeline 
leading to Turkey has been previously repaired, but has been 
sabotaged. The Corps of Engineers is now proceeding to bury the 
pipeline under the river at that point. This repair will enable 
exports to Turkey once again and improve progress toward a 3.0 
mbpd production capacity.
    U.S. efforts have also improved efficiencies in the Oil-
Natural Gas sector. Iraq continues to flare more than 1,000 
million cubic feet per day (mcfd) of natural gas, which could 
be used to fuel gas turbine electric generators that currently 
burn less efficient liquid fuels. Experts suggest that perhaps 
as much as 100% of Iraq's domestic power could be generated if 
the natural gas that is now being flared was captured and 
distributed.
    Smuggling, corruption and diverted deliveries persist, as 
noted in recent SFRC hearings. See below for more on the 
corruption issue.

        Assessment: In order not to look as if we had designs 
        on Iraqi oil, the United States has foregone meaningful 
        investment in the one area that would have made the 
        biggest difference, namely Iraq's oil-exporting 
        infrastructure. Coupled with economic and subsidy 
        reforms, the Iraqis need to repair the pipeline, 
        install storage tanks at the ports and borders so that 
        a pipeline interruption doesn't mean export 
        interruption, build refineries, and secure the whole 
        system. Capacity in the Oil Ministry is assessed as 
        ``good.'' The ministry managed their budget well this 
        year, unfortunately to the point that the nearly $3 
        billion allocated for capital improvements was not 
        programmed. This is symbolic of the challenges many 
        ministries face in overcoming the command-directed 
        style of Saddam. Deputies still insist that every 
        action be authorized in writing, and there is little 
        delegation of authority.


                              ELECTRICITY


    Since mid-2003, the SFRC has followed closely the 
electricity sector as our aid workers, the US military, 
contractors and the Iraqis have struggled to improve this 
crucial sector that the Saddam regime left in a fragile and 
decrepit state. Our three senior advisors on electricity report 
marked progress against the unchecked tide of demand for power 
from an influx of electrical good--refrigerators, air 
conditioners, washers, dryers, TV's and microwaves--and 
industrial demands such as oil refining.\4\ Electricity remains 
a virtually free commodity, and most Iraqis make little effort 
to conserve. There is metering, but no collection, which is 
further complicated by the lack of a postal service. Without a 
check on demand, Iraq will not be able to meet 100% of its 
power needs (or supply more than 16 hours per day of power) for 
the foreseeable future. Technology is available to govern 
demand through current limiters, whereby a home would only be 
able to use a certain kilo-wattage per day. Bearing Point is 
conducting a feasibility study of this practice.
---------------------------------------------------------------------------
    \4\ Of note, USAID's chief electricity advisor has been in Iraq for 
more than 30 months, and the two advisors from the U.S. Department of 
Energy have been in country for more than 21 months each.
---------------------------------------------------------------------------
    Demand this winter is expected to reach a daily peak of 
9000MW, while current peak generation is 4750MW. IRMO advisors 
stated that even now, further generation would not improve the 
situation as transmission and distribution capacity is weak. 
Transmission projects underway will improve Iraq's ability to 
import power from Iran, Syria and Turkey, and make the grid 
more resilient to sabotage by creating redundant line routes 
and additional substations.\5\
---------------------------------------------------------------------------
    \5\ Figures provided by IRMO.
---------------------------------------------------------------------------
    By the end of 2006, investments managed by the U.S. of 
$7.74 billion in the power sector will have brought Iraq's 
power generation capacity to 6000MW while improving operations 
and maintenance procedures, increasing transmission capacity 
and continuing distribution improvements. Approximately $2.9 
billion worth of projects are underway, with another $955 
million funded and awaiting award.\6\
---------------------------------------------------------------------------
    \6\ $7.74B total includes DFI ($1.8B), Donor ($0.6B), IRRF I 
($0.94B), IRRF II ($4.3B) and CERP ($0.1B); source IRMO. UN and World 
Bank assessments from October 2003 suggest a total of $20 billion is 
needed to reach national targets of 20% over demand.
---------------------------------------------------------------------------
    The capacity of the Ministry of Electricity is improving. 
Policies have improved load-sharing and reduced brownouts, but 
the ministry awaits cabinet or assembly-level decisions on 
subsidy and rate reform. The ministry understands the need to 
invest in operational sustainment, and build redundancy into 
the system, but have fought US advice to run their grid at 
normal frequency. Iraqis run their grid under frequency--at 
49Hz--which the ministry believes saves power, but U.S. 
engineers say is very damaging. The Ministry of Oil has begun 
to cooperate with the MoE to invest in generation requirements, 
which will allow the MoO to pump and refine more oil and take 
some of the pressure off of the budget in the long term.


                           2006 IRAQI BUDGET

                                        Iraq Budget Outlook in Summary\1\
                                                  ($ billions)
----------------------------------------------------------------------------------------------------------------
                                                                                       FY 06(-) FY      2005
                                                            2005 Plan    2006 Draft        05         Actual\2\
----------------------------------------------------------------------------------------------------------------
Revenue                                                          19.3          28.2           8.9          23.4
  Oil                                                            17.1          27.2          10.1          22.2
  Other                                                           2.2           1.1          -1.2           2.2
Expenditures                                                     24.0          33.2           9.2          23.0
Surplus/Deficit                                                  -4.7          -5.0          -0.3           1.4

----------------------------------------------------------------------------------------------------------------
\1\From briefing documents provided by Treasury Attache/IRMO-FFA.
\2\Assumes Oct.-Nov. oil revenues at the 9 month mean, oil product arrears, underpending elsewhere.

    The 2006 Budget draft forecasts a $5 billion deficit. 
Embassy briefers suggested this gap could easily be overcome by 
updated revenue figures or expenditures that will be determined 
once the new government is in place and oil and revenue figures 
are firmed up. The Budget is summarized in the table. The 
nearby pie chart depicts expenditures by category for 2006. 
Note that 21% of the budget is subsidies, and Iraq continues to 
pay 5% of oil revenues into the UN compensation fund. The UN 
Compensation Commission is a subsidiary organ of the UN 
Security Council. It was established by the Council in 1991 to 
process claims and pay compensation for losses resulting from 
Iraq's invasion and occupation of Kuwait. Compensation is 
payable to successful claimants from a special fund that 
receives a percentage of the proceeds from sales of Iraqi oil. 
The Security Council established Iraq's legal responsibility 
for such losses in resolution 687 of 3 April 1991.\7\
---------------------------------------------------------------------------
    \7\ Several UN Security Council Resolutions have amended the 
original terms of UNSCR 687, but the commission continues its work.


                           2006 Expenditures




                               CORRUPTION


    While U.S. efforts have helped put in place several 
institutions to fight corruption and have worked to train and 
empower Inspectors General, corruption has not abated and we 
should not expect that it will for quite some time. As one 
official pointed out, ``it is not only endemic, it is 
systemic.'' The Treasury Attache offered that one cannot just 
fight corruption by itself. He said that the largest source of 
corruption is ``simply the lack of proper modern administration 
and controls.'' Iraq continues to be a cash economy, and there 
are no checks and cross-checks in the system. They are very 
good at record-keeping and receipts, but, ``you can't have the 
guy that wrote the contract paying it too.'' \8\
---------------------------------------------------------------------------
    \8\ Interview with Treasury Attache, 9 Nov. 2005.
---------------------------------------------------------------------------
    Reformed systems are coming online. USAID has developed a 
government-wide strategy to support the automation of planning, 
budgeting and reporting processes across ministries, including 
the creation of a Financial Management Information System 
(FMIS), an accounting and reporting system for all Iraqi 
ministries. Montran, a payment solutions company, is working 
with Treasury and OTA to install a direct deposit system for 
government workers. These and other systems, however, must 
ultimately be paid for by Iraqi banks and the government of 
Iraq; a fact the Ministry of Finance understands.
    Embassy Economic Officers promised to provide the SFRC with 
cables analyzing the effects of corruption.
    In a Fall 2005 survey by Zogby International and the US 
Center for Private Enterprise, 62% of Iraq business leaders 
surveyed said corruption is a serious problem and more needs to 
be done to combat it. Unfortunately, some 32% hold out little 
hope for change. Thirty-eight percent of respondents estimate 
that corruption adds more than 40% to their business costs and 
blame corruption on a combination of weak property rights and 
civil servants who extract bribes.\9\
---------------------------------------------------------------------------
    \9\ ``Business Leader Attitudes Toward Commercial Activity, 
Employee Relations, and Government in Iraq.'' a Fall 2005 survey by 
CIPE and Zogby International, p. 11.
---------------------------------------------------------------------------


                    FOOD, AGRICULTURE & AGRIBUSINESS


    In many sectors of Iraq's economy, the forces of supply and 
demand do not act normally. Food is a good example. Most of the 
country continues to rely on the free food provided by the 
government through the Public Distribution System (PDS), a 
legacy of the UN Oil-for-Food program now managed by the 
Ministry of Trade, which no longer employs advisors from the 
World Food Program (WFP) to help manage this complex system. At 
an annual cost of approximately $4.5 billion, the government 
buys these staples off-shore, undercutting and virtually 
eliminating the domestic market for wheat, vegetable paste and 
cooking oil. Despite these expenses, because of poor management 
and dissipated stockpiles, most Iraqis did not receive rations 
for the months of August, September and October.
    USAID and IRMO advisors state that there is significant 
room for development in agriculture, and the wider aspects of 
agribusiness. USAID's $100 million contract for agricultural 
revitalization has restored veterinary clinics, introduced 
improved cereal grain varieties, repaired equipment, and 
trained farmers and ministry staff. USAID has also invested 
significantly in rehabilitating the Mesopotamia Marshlands. The 
Marshlands and its people were the object of many an atrocity 
under the Saddam regime. Food subsidy reform and further 
private sector agribusiness development would have significant 
sector-wide and economic impact and help cut poverty, reduce 
the significant budget burden and revitalize the country's 
third largest value sector and the country's largest employer.
    Embassy Baghdad Economists and the WFP assess that Iraq 
could easily face a food crisis in the coming months. Staff has 
requested cables prepared by the Econ Section and will provide 
further information and analysis when they are received.

          Recommendation 2: Our policies should continue to 
        encourage Iraqi government officials to make the bold 
        moves necessary to remove the subsidies, reduce the PDS 
        to a means-tested entitlement for the poorest Iraqis, 
        and provide the commercial legal framework to stimulate 
        not only agriculture, but canning and other 
        agribusiness.

                   Capacity of Iraqi Institutions and
                       the ``New'' Strategic Plan


                             NATIONAL LEVEL


    Whether or not Iraqi ministries and Iraqi governing 
institutions, including those at the provincial level, are 
capable of functioning independently of U.S. assistance depends 
upon a combination of stability, planning, leadership, 
resources and dedicated personnel at all levels of the 
particular organization.
    Stability has not been helped by the various iterations of 
Iraqi governments in the past two years, and by changes in U.S. 
leadership and emphasis. Charge d'Affairs Satterfield expressed 
the expectation that the election and installation of a new 
``permanent'' government will provide leadership committed to 
the serious tasks at hand. (More than one U.S. official 
expressed their frustration with the interim governments' 
inability to focus on basic governing necessities.) Ambassador 
Satterfield emphasized the importance of the next year becoming 
a collective effort led by the Iraqis with strong participation 
by the Coalition, regional nations and the international 
community. He further highlighted the outreach the Iraqis are 
leading to generate regional and international support, such as 
the Arab League organized conference held 19-21 November in 
Cairo.
    Although it is unfair to compare a coalition government 
operating in a parliamentary system to U.S. politics, as yet, 
no one Iraqi leader has emerged with a vision for Iraq that has 
captured the imagination or provided a rallying point for the 
people. This will be a challenge for whoever is elected in 
December to lead the country for the next four years.


                       MINISTERIAL LEVEL CAPACITY


    The right formula appears to be in place, with excellent 
relations established between experienced U.S. advisors and 
their respective Ministers at the Ministry of Electricity, the 
Ministry of Oil, the Ministry of Finance, the Ministry of 
Planning and International Cooperation and the Minister of 
Municipalities and Public Works. A great deal of controversy 
surrounds management and advisement at the Ministry of 
Interior, which is perhaps the most critical to establishing 
law and order. Recent news stories about abused prisoners in 
MOI jails and the comments of Minister Bayan Jabr presage 
challenges that lie ahead. The Ministry of Transportation--run 
by a Sadrist who has literally thrown the American advisors out 
of his office--is also struggling.
    Under Saddam Hussein, the Ministry of Interior leadership 
was 100% Ba'ath and the enforcer of Saddam's rule. Purged of 
its senior Ba'ath party elements, the MoI faces great 
challenges in building capacity to handle not only the 
insurgency and law and order challenges but also the routine 
business of training and discipline, providing pay and 
benefits, writing regulations and managing personnel. Staff 
visited the Ministry and met Assistant Deputy Minister Ayden 
Qadir to discuss Elections Security, Deputy Minister Ali Ghalib 
to discuss police training and policy matters, and General 
Ghazi who led a tour of his National Joint Operations Center. 
Staff also visited the Karida-Marium District Police Station in 
the International Zone.
    Deputy Minister Ayden Qadir had a solid grasp of the 
mission of elections security. He described with pride, and 
with nodding heads of the U.S. advisors, the progress the Iraqi 
Security Forces demonstrated from January to October and looks 
forward to December elections for which they have a solid plan 
to maintain control with greater autonomy from U.S. forces.
    Other Ministry leaders fail to grasp the basics of problem-
solving, management, programming and budgeting. The deputy 
minister in charge of the Iraqi Police spent the better part of 
an hour listing the problems in his forces, but when asked what 
he was doing to remedy the problems, he had no answer. He did 
not seem to grasp that problem-solving and policy direction was 
his responsibility, not this staff member's or the U.S. 
advisors.
    Finally, because ministers were not appointed by the Prime 
Minister, but rather by the Presidential Council, most do not 
owe their allegiance and are not accountable to him, but rather 
to their party. This creates management challenges that are 
likely to continue in the new government.


                          RULE OF LAW PROGRAM.


    The Rule of Law program should be operated in partnership 
with the Ministries of Interior, Justice and Defense. Because 
of the recent shift that placed MNF-I in the lead advisor roles 
at MOI and MOD, the Rule of Law Program is now the lead 
civilian program designed to build understanding and capacity 
in the wider concepts of rule of law.
    The embassy provided a briefing slide that summarizes the 
challenges:

   Where we started: A police state that ignored the 
        rule of law, and used police and other security forces 
        as instruments of oppression.

   Where we are now: Relatively advanced legal 
        framework. Human rights--improved, but abuses persist 
        at unacceptable rate. Judiciary--most capable 
        institution in the justice system, but lacks adequate 
        security and productive working relations with police 
        and prisons.

    Rule of Law program officials remain concerned about the 
level of effort and commitment to these challenges. They have 
$380 million in unfunded requirements for the next two years, 
and hope that the international community will step up in these 
areas where they have been traditionally very strong. The Rule 
of Law Coordinator also expressed concern that the military and 
even U.S. Department of Justice officials ``think that Rule of 
Law is simply Rule of Law and Order,'' or, in other words, 
arresting people and putting them away. Many other elements of 
an appropriate Rule of Law program are not being resourced or 
emphasized at all, she said. In a complex civil society, and 
one emerging from conflict and tyranny perhaps more so, a Rule 
of Law program must cut across the entire spectrum of capacity-
building, access to legal aid and information about human 
rights, commercial and civil law-making, legal professional 
training, etc.
    SFRC staff inquired of embassy officials about the decision 
to put the military in charge of advising the MoI. Training and 
developing civilian police is a traditional State Department 
rather than a Defense Department mission. Nevertheless, embassy 
leadership defended the decision as making sense at this time 
because of logistical challenges that DoD was better equipped 
to handle. Staff expressed concern that DoD had neither the 
interest nor the expertise to pursue overarching rule of law 
issues. Embassy leadership assured staff that the Chief of 
Mission maintains overall policy oversight. Nevertheless, 
several embassy and State Department personnel shared their 
concern over this move with staff. They worry about the long-
term stability of perhaps the most crucial ministry in the law-
and-order equation, especially once the military withdraws. One 
advisor to the Ministry of Interior told staff that the ``The 
MOI situation with DOS/DOD is screwed up . . .'' He said, 
``There are a lot of good DOD people working on it but they 
have their own faults, and now they don't have any interference 
from people who can provide oversight, policy and long term 
direction .  .  . '' He shared further his view that `` .  .   
. the military is developing solutions that cost a lot of 
money, which dramatically change the way that the Iraqis do 
things and in my opinion won't last when we leave.''
    Staff also raised questions about the findings made in OIG 
Report No. ISP-IQO-06-01 of October 2005 regarding the Rule of 
Law program.\10\ Everyone indicated that a strategy had been 
put together to address the first major finding that ``a fully 
integrated approach to justice sector reform in Iraq does not 
exist at the present.'' Time limitations prevented a more 
extensive inquiry, so progress in addressing the serious 
shortcomings found in the IG report was difficult to assess. It 
is important to note, however that neither the new senior Rule 
of Law coordinator nor the INL program chief have any prior 
experience in Rule of Law or INL programs.
---------------------------------------------------------------------------
    \10\ United States Department of State and the Broadcasting Board 
of Governors Office of Inspector General, Report of Inspection, Rule-
of-Law Programs, Embassy Baghdad, Report Number ISP-IQO-06-01, October 
2005.

          Recommendation 3: (a) To ensure success in this area, 
        the Department of State must put in place experienced 
        INL experts whom the Iraqis will respect and seek out. 
        They must engage actively with the military and Iraqis 
        to provide long-term policy guidance. (b) International 
        donors must be pressed harder for contributions in this 
        area, not only financially, but also with experienced 
        trainers and programs. (c) The SFRC should follow-up 
        with Embassy Baghdad officials for details on the 
        corrective measures undertaken to address the OIG's 
        findings about the Rule of Law program.


                       PROVINCIAL LEVEL CAPACITY


    According to embassy officials, the capacity of Iraqi 
provincial governments, with the exception of the Kurdish 
territories, has not been developed. Their legal mandate is not 
clear, they lack experience and resources, and many have been 
officially in position only since January 2005. Nevertheless, 
their capacity is essential to the long-term success of the 
Iraqi mission and the stability of the country. This is where 
the Provincial Reconstruction Team plan announced 11 November 
by Secretary Rice in Mosul is intended to play a strengthening 
role.


                          THE ``NEW'' STRATEGY


    USAID officials provided information regarding their 
portion of the plan (see graphic). In the first year (or the 
third year of the U.S. reconstruction mission) the emphasis 
will continue to be on restoring essential services through 
fulfilling the IRRF commitments, completing construction 
projects, re-establishing social services, building governance 
and stabilizing the economy. From now through 2008, efforts 
will be on ``building and sustaining systems.'' The idea is to 
accelerate Iraqi ownership and develop capacity at the national 
level. USAID and PCO will lead the capacity-building effort at 
key ministries, with a two-year focus beginning once the 
permanent government is in place. The provincial and local 
level plan involves Provincial and Regional Reconstruction 
Teams. The third phase for 2008 and beyond suggests a more 
traditional relationship among U.S. government, Iraqi 
government and the international community and will seek to 
``consolidate national sovereign capacity.'' 


           PROVINCIAL/REGIONAL RECONSTRUCTION TEAMS (PRT/RRT)


    One of the significant elements in the strategy is the 
implementation of PRTs. The plan calls for 15 PRTs and one RRT, 
which will cover the Kurdish region. The emphasis will be on 
partnering with local government officials to build security, 
improve governance and bring about economic development. By 
recasting the Regional Embassy Offices (REO's) that have been 
in place for 18 months, the first three are already formulated 
in Ninewa (Mosul), Babil (Hillah) and Tamim (Kirkuk). The next 
three will rollout following the December elections, and the 
remaining ten will be in place by the end of Spring 2006.
    Program lead for the PRTs will lie with the Chief of 
Mission and Department of State, who will provide central 
management via a National Coordination Team, as well as through 
the PRT Leader, who will be Officer Counselor level Foreign 
Service Officers from either the Department of State or USAID. 
PRTs will be made up of from 97-140 personnel, broken down as 
follows: 28-30 U.S. civilians, 49-85 U.S. military and 20-30 
locally employed staff.

          Analysis: On paper, the concept appears to be a 
        substantive and logical follow-through on the 
        reconstruction mission. Many of the lessons identified 
        from Afghanistan have been incorporated in this plan; 
        for example, the PRTs are comprised of a significant 
        civilian component and there is a central command 
        element. It is worth noting, however, that the first 
        three PRTs are re-cast Regional Embassy Offices that 
        have been in place for 18 months, and it appears that 
        subsequent PRTs will envelop the State Embedded Teams 
        or SETs that work with the Major Subordinate Commands. 
        It appears to be more an evolution than a change in 
        strategy, but without a visit to the regional offices, 
        further assessment was difficult. Nevertheless, other 
        than among those involved directly with the planning, 
        the Iraq PRT concept is discussed with a healthy degree 
        of skepticism.

    Robert M. Perito of USIP has looked at the use of PRTs and 
post-conflict reconstruction missions. In a recent publication 
that the Staff Delegation shared with IRMO leaders who briefed 
the plan, Mr. Perito draws a comparison to the Vietnam-era 
CORDS program:

          Much could be achieved if the military component of 
        the PRT was matched with a robust staff of civilian 
        personnel. The Civil Operations and Rural Development 
        Support (CORDS) program in Vietnam might provide a 
        model for such a program. CORDS was an integrated 
        civilian-military organization, but USAID was the lead 
        agency and its personnel were overwhelmingly civilian. 
        Even in the hotly contested I Corps area of Vietnam, 
        only 750 of 2,000 CORDS personnel were military. The 
        State Department assigned several hundred FSOs to serve 
        on CORDS Provincial and District Advisory Teams, 
        according to a veteran FSO who served in CORDS and in a 
        PRT in Afghanistan. These officers received four to six 
        months of Vietnamese language and area training prior 
        to eighteen-month to two-year assignments. CORDS 
        received funding for development assistance and was 
        provided its own transport and logistical support. 
        CORDS was developed when it became apparent that U.S. 
        military operations were alienating the rural 
        population they were trying to protect. \11\
---------------------------------------------------------------------------
    \11\ Perito, Robert M., ``The U.S. Experience with Provincial 
Reconstruction Teams in Afghanistan, Lessons Identified.'' United 
States Institute of Peace Special Report 152, October 2005, p. 14.

    CORDS may provide a better model for Iraq than the 
Afghanistan PRT program, which has worked well in some areas, 
but has struggled in others because of lack of qualified 
civilian personnel, lack of central coordination and inadequate 
resources.


                       CONCERNS WITH THE PRT PLAN


   Collaboration: The PRT concept appears again to be a 
        large-scale U.S.-imposed solution. It was not developed 
        in concert with the Iraqi Interim Government, 
        provincial governments or coalition partners. Although 
        no resistance has been met, further calibration may be 
        needed when the New Iraqi Government takes office in 
        January.

   Personnel: The list of more than ten ``task focused 
        activities'' is extensive and far-reaching. This will 
        require a robust complement of qualified civilian 
        experts. The Iraq reconstruction mission has, from the 
        General Garner days, been challenged to recruit and 
        retain qualified civilians to serve lengthy tours of 
        duty. There is no evidence that this challenge has 
        abated. Stability operations, capacity building and 
        reconstruction are not military missions and should not 
        be left to the MNF-I. There is no surge capacity in the 
        civilian agencies. USAID, whose expertise is essential, 
        has had trouble filling the seats it has in Baghdad 
        (see Appendix I). The Army's ready supply of Civil 
        Affairs Teams, which have been hard hit by serial 
        recalls to Kosovo, Afghanistan and Iraq, is another 
        potential problem.

   Security/Force Protection: The Mission Regional 
        Security Officer demonstrated a clear understanding of 
        the risks involved in this plan. On one hand, the 
        challenge is to protect people outside the Forward 
        Operating Bases, where they will be living and having 
        offices. On the other hand, if people are protected 
        such that they travel around like a squad of storm 
        troopers, how can they interact directly, humanely and 
        in a culturally-sensitive manner? Extending the reach 
        extends the risk.

   Mission Integration: The PRT design includes a Rule 
        of Law Coordinator. Is this piece integrated with the 
        P3 - Police Training Program?

          Recommendation 4: The SFRC should continue to press 
        the Department of State and USAID for the substance of 
        this joint strategic and PRT plan, including how it 
        will be funded and how personnel will be identified to 
        fill positions. The SFRC should also inquire of State/
        USAID and DoD about training they are providing PRTs 
        before they deploy.


                  FUNDING FOR THE JOINT STRATEGIC PLAN


    Mission leadership is concerned about the lack of funding 
for 2006. During the visit to Baghdad, word arrived that the 
Conference on Foreign Operations Appropriations had allocated 
$60 million in Economic Support Funds (ESF) for Iraq in 2006. 
The President's had requested $360 million. IRMO and USAID 
leaders were unanimous in their disappointment at this news.
    Ambassador Khalilzad recently directed a review team to see 
what money had not yet been obligated that could be fenced off 
to fund some projects and seed money for the New Iraqi 
Government come January 2006. Between $750 million and $1 
billion has been identified for these purposes. But this figure 
does not include money for the PRT strategy, USAID's programs, 
IRMO initiatives (which extend until June 2007 when IRMO will 
officially sunset), or embassy operations.
    An IRMO deputy stated ``it would be a real shame if we were 
to risk failure in this mission for a lack of a billion dollars 
or two.'' It was difficult to pin down a figure backed up by 
hard data, but $2 billion was mentioned by more than one 
official, or as they indicated, the amount that was re-
programmed from the IRRF to pay for army and security force 
training. Others compared the figure to the MNF-I expenditure 
rate of about $1 billion per week or annual foreign aid figures 
in the billions for Egypt and Israel, suggesting that $1 or $2 
billion per year in assistance for Iraq would not seem a 
unreasonable investment, recognizing the investment that has 
been made thus far.

          Recommendation 5: Ensuring a steady funding stream 
        for civilian reconstruction missions, many of which 
        require contract negotiations and long lead time 
        planning, as well as military operations is essential. 
        The SFRC should continue active oversight of 
        reconstruction funding, engage foreign officials to 
        make good on their pledged contributions, and encourage 
        the Department of State and DoD to share plans for 
        funding Iraq operations for 2006 and beyond.

                        The New Embassy Compound

    The 104-acre construction site of the New Embassy Compound 
is on the edge of the International Zone, on the banks of the 
Tigris, west of the 14th of July bridge and approximately \1/2\ 
mile south of the Festival and Parade Grounds and the Unknown 
Soldier Monument. The ambitious project with 21 structures is 
slated to be completed in 24 months.\12\ Underway for four 
months, it is on schedule and approximately 16% complete. The 
Senior Project Director stated, ``We have every confidence that 
we will be completed by June 2007.''
---------------------------------------------------------------------------
    \12\ The 21 Structures are: the NOB (New Office Building), 
containing the classified portions of the embassy and the unclassified 
areas that support those functions; the NOX (New Office Annex) an 
unclassified office building containing such sections as Public 
Diplomacy, Consular Affairs, USAID; the IOB (Interim Office Building) 
designed for future use as a school (the core and shell will be 
completed now and used as office space for many of the functions now in 
the Palace); the GSO Annex--offices for facilities management, break 
areas and locker-room facilities for warehousemen, maint. staff, local 
guard force, etc.; Staff Housing--6 apartment buildings containing 619 
one-bedroom (700SF) apartments; CMR (Chief of Mission Residence); the 
DCMR (Deputy Chief of Mission Residence); the MSGQ (Marine Security 
Guard Quarters); CAC's (Compound Access Control buildings) two service 
CAC's, a Consular CAC, two main CAC's, an emergency exit/entrance CAC; 
a Recreation Building--gym, exercise room, swimming pool, locker-rooms, 
the American Club, commissary, food court, barber/beauty shop; a 
Warehouse; a Motorpool/Maintenance building for vehicle maintenance, 
facilities management shops; the Utility Building--power generation; a 
Water treatment plant--water storage, fire pump, water treatment; and a 
Waste water treatment.



---------------------------------------------------------------------------
                Embassy Baghdad Construction 11/06/2005



                           Four Tower Cranes

    All excavation has been completed and more than 10,000 m\3\ 
of concrete have already been poured from concrete batch plants 
erected on the premises. A great deal of effort has been made 
to secure the site and to pre-load materials to alleviate work 
stoppages due to waylaid deliveries, as materials make the 
journey from outside Iraq. The third-country national workforce 
of more than 900 men is housed on the premises.
    The Overseas Building Office staff collaborates closely 
with Diplomatic Security personnel. They have incorporated into 
the design additional set-backs, additional perimeter clearance 
areas, structures are reinforced to 2.5 times the standard and 
they will build systems to allow 100% independence from city 
utilities, including wells, electric generation and sewerage.
    First Kuwaiti is the lead contractor for the project that 
is budgeted at the Congressionally-appropriated level of $592 
million. $483, 202,966 has been awarded to date.
    The progress that has been made in only four months is 
impressive, reflecting a high level of planning to allocate and 
distribute risk in this unprecedented effort to build an 
embassy in a war zone on time and on budget. Most major 
construction projects undertaken in Iraq since 2003 have not 
met these standards. The Senior Project Director stated that 
the Iraqi government has reacted very positively to the 
building efforts, as they demonstrate that the U.S. is 
committed to staying and seeing the Iraq mission through. It 
also shows that that we are committed to returning properties 
to the Iraqis, such as the Republican Palace, that we have been 
occupying.

          Recommendation 6: The SFRC should maintain its close 
        scrutiny of this program. No large scale, US-funded 
        construction program in Iraq has yet met its schedule 
        or budget. First Kuwaiti, the lead contractor, should 
        be encouraged by the Department of State's Overseas 
        Building Office to consider hiring more local nationals 
        as personnel screening and security conditions allow.


                   CIVILIAN PERSONNEL SECURITY ISSUES


    This SFRC staff member was not permitted to travel outside 
the International Zone (IZ), which may say more about the 
security situation in Iraq than anything. Interactions between 
US officials and their Iraq counterparts do not occur 
frequently, and when they do, Americans travel in five-vehicle 
convoys with a very heavy complement of security. Many Foreign 
Service Nationals, Iraqi Assembly members and other government 
officials live in the IZ, either in homes or apartments or in 
the al-Rasheed Hotel, because they have been threatened 
directly or fear that their association with the government or 
the Americans endangers them or their families. The brother of 
one of the deputy ministers staff met during this trip was 
assassinated, and one of the Iraqi National Assembly members 
interviewed said that members of his family have been 
threatened.
    The Regional Security Officer (RSO) has 44 permanent 
officers and 2237 contractors providing security for the 
Embassy and its personnel. The RSO is very engaged in working 
to manage the risks embassy personnel face every day. He told 
staff that he challenges the necessity of meetings outside the 
International Zone that appear overly risky, noting that almost 
all Iraqi officials have U.S.-issued cell phones to facilitate 
communications. Most embassy and USAID staff said they go 
outside the IZ rarely if at all. Staff and the RSO discussed 
the net worth of having an Embassy when it is so isolated, 
because of the risk avoidance posture he enforces, the ability 
of its personnel and the USAID team to carry out their 
responsibilities, and the challenges of working with the 
military who operate under different regulations. It causes 
friction and challenges the mission's effectiveness when the 
civilian advisor cannot go to a meeting, but military advisors 
can.
    The RSO stated candidly that there are no rules for this 
mission--ensuring the safety of civilian personnel and securing 
an embassy in a war zone. Normally, there is an Emergency 
Action Plan that outlines the tripwires that would lead to a 
closure and evacuation of an embassy. And, he said, ``We cross 
those tripwires every day. EVERY day.''
    The Assistant Secretary of State for Diplomatic Security 
confirmed that there is not a clearly defined arrangement for 
operating an embassy in a war zone. Safety of the Mission and 
its personnel is delegated to the Ambassador and his principle 
security advisor, the RSO.
    U.S. Embassies have been the target of large scale attacks 
as recently as the 1998 al-Qaeda bombings in Kenya and 
Tanzania. The Department of State makes considerable efforts to 
manage the risks undertaken by diplomats living in dangerous 
places around the world. Unlike the U.S. military, it does not 
``accept'' casualties. Iraq embassy personnel, all of whom are 
volunteers and who receive limited crisis reaction training to 
deploy to Iraq, are not expected to sacrifice their lives for 
the mission. State will need to become an even more effective 
risk manager to be truly effective in an environment like Iraq. 
Officials in Baghdad and Washington recognize that these issues 
will be compounded by the ``PRT'' plan.

          Recommendation 7: The SFRC should continue active 
        dialogue with Diplomatic Security personnel on these 
        challenging issues, which are not unique to Iraq. 
        Funding improved telecommunications, such as video-
        teleconferencing systems in countries where risks are 
        high, can save lives and improve interaction.


                     PERSONNEL AND EMBASSY STAFFING


    Embassy management, staffing and personnel issues were 
raised with the Embassy's Management Counselor, Ambassador Greg 
Engle, with respective section heads and with the Charge 
d'Affairs. In short, State Department personnel are out-gunned 
by the military. Ambassador Engle joked that when he has 
meetings with the military, a half-dozen colonels will file 
into the room and wonder why there is only one official on his 
side of the table. There is no redundancy in embassy staffing. 
An empty position or vacationing official means that work is 
left undone. It also means that Foreign Service Officers find 
themselves at their desks for long hours, often spending as 
much time keeping up with Washington as with Iraq.
    One year ago, following a trip to the region, SFRC staff 
reported:

          There are too few civilian and military civil-affairs 
        personnel available for the scope of Iraq 
        reconstruction efforts. Those available reportedly do 
        not have the right expertise and language skills and 
        the duration of their assignments are too short (90-120 
        days) with few incentives available to encourage the 
        civilians to continue to serve in Iraq. Several people 
        who had or were serving in Iraq expressed astonishment 
        at the responsibilities they were given for which they 
        felt unprepared. For example, personnel with no budget 
        or program management experience were overseeing 
        enormous budgets and developing technical assistance 
        programs. Learning on the job took time. Civilian and 
        military linguists, budget and contracting specialists 
        are also in too short supply to adequately support the 
        mission.\13\
---------------------------------------------------------------------------
    \13\ SFRC Staff Inquiry Report, December 2004.
---------------------------------------------------------------------------
    Some of the problems found a year ago have been addressed. 
In their place, however, new challenges constantly present 
themselves. Reconstruction and stabilization missions such as 
Iraq and Afghanistan are a new paradigm that require a 
combination of innovative incentives to bring in the right 
people. So-called ``directed assignments'' is one solution that 
may be considered but has been thus far resisted by the 
civilian agencies. In a directed assignment a civilian employee 
whose contract stipulates worldwide availability, such as a 
Foreign Service Officer, is directed to serve in a particular 
post and risk promotion or their career in refusing the 
assignment.
    As mentioned above, to staff the Provincial Reconstruction 
Teams, State will be challenged not only to find the senior 
FSOs that are indicated in the briefed plans, but also to find 
those with the necessary skills. Reconstruction and 
stabilization missions demand program management skills and 
hands-on field experience, rather than the policy management 
and analytical skills needed in traditional embassy positions, 
a point with which Ambassador Engle agreed. Several Foreign 
Service Officers shared that many who enter the Foreign Service 
today are eager for the chance to engage in such missions when 
they join the service, but they quickly find themselves working 
the visa window and staffing embassy desk jobs. By the time 
many FSOs have developed the seniority to lead such a mission, 
they have not engaged in running programs or spent much time 
operating outside embassy confines.
    These challenges are not unique to Iraq. The Department of 
State has over 600 positions in `unaccompanied' posts (where 
spouses and family are not allowed because of the risk).\14\ 
While Iraq and Afghanistan are the highest priority, getting 
staff to the priority areas is increasingly difficult due to 
security issues and the absolute quantity of these needs 
relative to the size of the entire Foreign Service corps.\15\
---------------------------------------------------------------------------
    \14\ Unaccompanied posts include Kabul, Afghanistan; Algiers, 
Algeria; Banja Luka, Bosnia-Herzegovina; Bujumbura, Burundi; Bangui, 
central African Republic; Brazzaville, Republic of Congo; Abidjan, Cote 
d'Ivoire; Baghdad, Iraq; Pristina, Kosovo; Beirut, Lebanon; Monrovia, 
Liberia; Islamabad, Karachi, Lahore, and Peshawar, Pakistan; Riyadh, 
Jeddah, Dhahran, Saudi Arabia; Khartoum, Sudan; and Sanaa, Yemen.
    \15\ There are 12,666 members of the U.S. Foreign Service. Of 
those, 11,066 are at the State Department, 1131 are at USAID, 255 serve 
in the Foreign Commercial Service, 170 serve in the Foreign 
Agricultural Service, and 44 serve with the International Broadcasting 
Bureau.
---------------------------------------------------------------------------
    Charge D'Affairs Ambassador Satterfield stated that the 
Department made some mistakes in staffing the Embassy on the 
first rotation. In too many cases, positions were filled with 
junior personnel, instead of FS-02s, and FS-03s. In some cases 
there were Ambassador and Minister Counselors heading sections 
with no one in between them and the first tour officers. Like 
any organization, mid-grade officers carry the load, mentor, 
and convey essential on-the-job training. They are also needed 
to interact competently and authoritatively with seasoned Iraqi 
and US military personnel. USAID has done better, but is facing 
a challenge filling positions for its next rotation.

                                         U.S. Mission Staffing Summary*
----------------------------------------------------------------------------------------------------------------
                                                        Authorized U.S.
                       Agency                              positions         U.S. onboard         Percentage
----------------------------------------------------------------------------------------------------------------
State Department                                                    157                 145                92.5
IRMO/Other State                                                    348                 286                82.2
Defense                                                             245                 210                85.7
Agriculture/FAS                                                       2                   2                 100
Commerce/FCS                                                          2                   2                 100
HHS                                                                   2                   2                 100
DHS                                                                  21                   1               4.8**
Justice                                                              62                  26              41.9**
Labor                                                                 1                   0                   0
Treasury                                                              4                   2                  50
Transportation                                                        3                   3                 100
USAID                                                                99                  62                62.6
Other                                                                --                  --                  --
  Baghdad Total                                                     946                 739                78.1
----------------------------------------------------------------------------------------------------------------
* See Appendix I for full staffing summary, as of 4 November 2005.
** This summary table does not reflect TDY personnel. DHS and DoJ fill many positions TDY.


    Staffing challenges will intensify with the new initiative 
to build Iraqi governing capacity in the regions. The first 
three PRTs have been manned, but 11 of the remaining 12 and the 
one Regional Reconstruction Team destined for the Kurdish 
region, will be headed by as yet unnamed Officer Counselor 
(flag equivalent) Foreign Service Officers.
    Satterfield reported that the entire Department--all the 
way up to the Secretary--had committed to making personal 
appeals to individual candidates to fill the positions with the 
right people. The Iraq desk at State indicated that bids were 
not coming in for the PRT positions that had been posted. Staff 
asked if ``directed assignments'' were being considered. 
Feelings were mixed on this issue. The Management Counselor 
suggested that would have far-reaching effects in the Foreign 
Service and that the union (American Foreign Service 
Association) would react loudly. Ambassador Satterfield told 
Staff that directed assignments made sense if it were up to 
him. Others agreed, saying that the only way State can show it 
means business and is committed is to ``call up its best FSOs 
and put them in charge of the PRTs.''
    Traditional State Department positions in Iraq are filled 
to 92% (145 of 157). But, it is worth noting that six of those 
unfilled permanent positions are allotted to the Office of 
Inspector General who currently has no staff in Baghdad. Asked 
about this shortfall, State OIG Howard Kroengard stated that 
although he has been able to inspect the Rule-of-Law Program as 
mentioned above, he has received no funding to do Baghdad work. 
Most of the work the OIG does is mandated by Congress, and to 
do program audits or inspections of reconstruction efforts, he 
would have to surge and probably hire additional people.

          Recommendation 8 (Staffing):

          (a) The SFRC should initiate an inquiry into State 
        Department staffing patterns at post-conflict 
        reconstruction and stabilization missions, including a 
        review of the training received prior to deployments 
        specific to the mission.

          (b) The SFRC should inquire as to whether the State 
        Department, USAID and other cabinet agencies are 
        willing to go to ``directed assignments'' to fill 
        positions with persons of appropriate rank.

          (c) The SFRC should ask the State Department 
        management experts to suggest what other options are 
        available--long and short-run--to remedy these 
        challenges. This complex environment demands not only 
        people who can live on adrenaline and cope with some 
        level of chaos, but also that have experience.

          (d) The State Department should consider recruiting 
        more mid-level personnel with skill sets appropriate to 
        leading PRT-like missions.

          (e) The SFRC should continue to push the State 
        Department to establish a Ready Response Corps within 
        the Department of State (the so-called ``Lugar Corps'') 
        made up of 250 experienced civilians trained to work in 
        hostile environments as detailed in Title VII of S. 
        600.


                          A P P E N D I X E S

                              ----------                              


                 Appendix I.--Embassy Staffing Summary

                                       U.S. Mission Iraq Staffing Summary
                                               (As of 11/04/2005)
----------------------------------------------------------------------------------------------------------------
                                                                               Locally     Locally    Estimated
                                                  U.S.     U.S. on    TDY    Eng. Staff     Eng.     Contractors
                Agency                  Notes  Authorized   board     (13)                Staff on   (supporting
                                                             (12)            Authorized     board      COM) (9)
----------------------------------------------------------------------------------------------------------------
 1. Embassy Baghdad NSDD-38 positions
              under COM

State................................     (1)
  Consular...........................                   7        6
  Econ...............................                  10        8
  Executive Office...................                  12       10                                            50
  Executive Secretariat..............                   4        4
  Management.........................    (14)          37       36                                            13
  Political Section..................                  18       17
  Pol-Mil............................                   6        6
  INL................................     (2)           3        3                                           500
  Public Affairs.....................                   7        7
  Security...........................     (3)          44       44                                          2237
  OBO................................                   9        4
                                              ------------------------------------------------------------------
    State Subtotal...................                 157      145       16         155          75         2800
                                              ------------------------------------------------------------------
Temporary/Other State Units..........     (4)
  Iraq Reconstruction Mgt Office                      219      163
   (IRMO)............................
  Legal Office.......................                   3        3                    3           1
  ORA................................                 120      120
  State OIG..........................                   6        0
                                              ------------------------------------------------------------------
    Temp/Other State Unit Subtotal...                 348      286                    3           1            0
----------------------------------------------------------------------------------------------------------------
Agriculture/FAS......................                   2        2                    4           1
----------------------------------------------------------------------------------------------------------------
Commerce/FCS.........................                   2        2        8           2
----------------------------------------------------------------------------------------------------------------
Defense..............................
  PCO/JCC-I (requested)..............                 134      123                                           419
  Def. Contract Audit Agency (DCAA)..                  20       19        0
  SIGIR (requested)..................                  45       45                    0           2
  MSG Det............................                  14       14
  DCMA...............................                  32       28
  DIA................................                                     4
                                              ------------------------------------------------------------------
    DoD Subtotal.....................                 245      210       23           0           2          419
----------------------------------------------------------------------------------------------------------------
DHS..................................
  DHS Headquarters...................                   2        1                    1
  TSA................................                   1        0        2           1
  CBP................................                  18        0       17           6
                                              ------------------------------------------------------------------
    DHS Subtotal.....................                  21        1       19           8                        0
----------------------------------------------------------------------------------------------------------------
HHS..................................                   2        2        1           0
----------------------------------------------------------------------------------------------------------------
Justice..............................     (2)
  Justice............................                   2        1                    0
  Alcohol, Tobacco, & Firearms (ATF).                   4        0        3           0
  CRIM/OPDAT.........................                   2        3                    0
  FBI................................                   9        6       67           0
  Int. Criminal Invest. Training Asst                   2        1                    0         259
   Pgm. (ICITAP).....................
  Regime Crimes Liaison Office                         41       15       33           0           3
   (requested).......................
  U.S. Marshals (requested)..........                   2        0        4           0           1
                                              ------------------------------------------------------------------
    Justice Subtotal.................                  62       26      107           0           4          259
----------------------------------------------------------------------------------------------------------------
Labor................................     (5)           1        0                    0
----------------------------------------------------------------------------------------------------------------
Transportation.......................                   3        3        2           1
----------------------------------------------------------------------------------------------------------------
Treasury.............................
  Treasury...........................                   2        1                    1
  Treasury/IRS-CID...................                   2        1                    0
----------------------------------------------------------------------------------------------------------------
USAID................................
  USAID..............................     (6)          68       37       14         134         100           76
  Army Corps of Engineers............                  23       18                   14           7
  RIG................................                   8        7                    2           1
                                              ------------------------------------------------------------------
    USAID Subtotal...................                  99       62       14         150         108           76
----------------------------------------------------------------------------------------------------------------
Baghdad TOTAL:.......................                 946      739      182         330         193         3554
================================================================================================================
  2. REO/SET NSDD-38 positions under
               COM (11)

State................................    (10)          38       32                   14          14
                                      --------------------------------------------------------------------------
Temporary/Other State Units..........
  IRMO...............................                  30       11                    2           2            2
  ORA................................                                    28
----------------------------------------------------------------------------------------------------------------
Defense..............................
  JCC-I (requested)..................                  20       11
  DCMA...............................     (7)          36       35
  DIA................................     (8)                             4
----------------------------------------------------------------------------------------------------------------
USAID................................
  USAID..............................     (6)          25        8        1          12          10
  Army Corps of Engineers............                   0        0                    0           3
Support Contractors..................                                                                        738
----------------------------------------------------------------------------------------------------------------
REO/SET Total:.......................                 149       97       33          28          29          740
----------------------------------------------------------------------------------------------------------------
Total Baghdad + REO/SET:.............                1095      836      215         358         222         4294
----------------------------------------------------------------------------------------------------------------
Total positions under COM authority:.                                              1453
Grand Total Positions:...............                                                                       5747
----------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------
                                    U.S.         LES        Contractors
------------------------------------------------------------------------
  3. Not under COM located at
            Embassy

Defense (in Support of COM)...
  MNF-I in Embassy............         487
  MNSTC-I.....................          15            6
  MNF-I Legal Office..........           3
  MNF-I Area Support Group....         130
  FAST Marines................         151
------------------------------------------------------------------------
Special Tribunal (Contract)...       50-70
------------------------------------------------------------------------
NOTES:

(1) Baghdad State phasing FSN: up to 155 in FY06.

(2) INL/DOJ contractors are Police Trainers, Advisors, and Corrections
  (IPLO; IPT; PSD, Static, Support, Dog Teams).

(3) Contractors include PSDs in Direct Support of RSO, USAID, PCO; also
  includes Fixed Security Guards at Five Sites.

(4) Other State units--all numbers are estimates, except for Ministry
  Advisors; phase in and out depending on need, normally 3161 or TDYers.
  This category includes all functions previously performed by CPA.

(5) Labor Falls under Econ Section.

(6) USAID authorized includes 69 PSCs. USAID FSN numbers include 7 TCNs.
  On Board Count includes Irbil.

(7) DCMA has teams outside Baghdad in 18 locations.

(8) DIA under Commander at this time.

(9) Estimated number of contractors in support of COM as of Aug. 1.

(10) REO/SET Security positions and on-board personnel are Baghdad FTE--
  thus they are already counted in the Baghdad Security section.

(11) REO/SET authorized and on-board numbers for IRMO, USAID and DCMA
  include some personnel in other regional locations in Iraq.

(13) TDY staff data is estimated except for State numbers. Because many
  TDYs are augmenting US authorized positions, they are not included in
  the total position count to avoid double-counting.

(14) Information Management contractors include Northrop Gruman, SPAWAR,
  USIS, BE, and Global Sat.


                 Appendix II.--Meetings and Interviews


New Embassy Compound Briefing and Tour
    Mary French, New Embassy Senior Project Director

Discussion of Embassy Operations and Structure
    Clarke Cooper, Legislative Affairs Advisor

Discussion of Human Resources, Staffing & Mission Management
    Ambassador Greg Engle, Management Counselor

Discussion of Inspector General Issues
    State Department Inspector General Howard J. Krongard

SIGIR discussion
    Mike Boisvenue, Chief of Staff; James Connolly, Special 
Agent-in-Charge; Brian Flynn, Assistant IG for Special 
Operations

Privatization, Private Sector Development, Stock Exchange and 
Securities Commission
    Ms. June Reed, Senior Consultant for Private Sector 
Development (IRMO)

Iraq Reconstruction Management Office Briefing
    David C. Harris, Chief of Staff and Director of 
Development; MG Robert Heine, Deputy Director Civil-Military 
Regional Operations; Mr. Brad Higgins, Deputy Director and CFO

Essential Services Briefings
    Oil: Mr. Robert Todor, Senior Consultant Iraqi Ministry of 
Oil
    Electricity: Mr. Scott Hutchins, Senior Ministerial Advisor
    Water: Dr. Linda Allen, Water Resources Advisor
    Water: Mr. Wayne Curry, Senior Consultant

Reconstruction Management Briefing (PCO/GRD)
    BG McCoy, Commander of Gulf Regional Division Army Corps of 
Engineers (and staff)

International Republican Institute
    Richard Hougton, IRI Resident Governance Program Director

Discussion on Human Rights and the Rule of Law
    Dr. Ellen Klein, Human Rights Officer

Rule of Law Program Briefing & Discussion
    Ambassador James Yellin, Senior Justice and Rule of Law 
Coordinator; Ms. Karen Hanrahan, Rule of Law Coordinator; Mr. 
Robert Witajewski, Director International Narcotics, Law 
Enforcement

Ministry of Interior Visit and Briefings (Adnan Palace)
    Assistant Deputy Minister Ayden Qadir (Elections Security); 
Deputy Minister Ali Ghalib (Police Capabilities and 
Challenges); Mr. Thomas Bishop, National Security Advisor to 
the Ministry of Interior; Mr. Jerry Burke, International Police 
Liaison Officer; Mr. John Bozicevich, International Police 
Liaison Officer

Police Station Visit (Karida-Marium District Station)
    Capt Faiz; Mr. Jerry Burke, International Police Liaison 
Officer; Mr. John Bozicevich, International Police Liaison 
Officer

Saddam Trial Brief & Courthouse Visit
    Regime Crimes Liaison Office Staff; Mr. Michael Kulstad, 
U.S. Department of Justice
Public Diplomacy Discussions
    Public Affairs Counselor Jim Bullock; Cultural Officer Ilya 
Levin; Ms. Fatima Fleifel (Political Section FSN); Political 
Officer Vince Campos

Daily MNF-I Battle Update Assessment Briefings
    MNF-I Corps Staff

Meeting with Treasury Attache
    Mr. Kevin Taecker, Department of the Treasury

Meeting with Iraqi National Assembly (INA) members
    Dr. Saad Jawad Qindeel; Ms. Wijdan M. Salim

Roundtable with Iraqi-Americans working in Iraq

Regional Security Officer Interview
    Mr. Mark Hunter, Regional Security Officer; Mr. John Flynn, 
Deputy RSO

Economic Section Meeting
    Mr. Thomas Delare, Minister Counselor; Ms. Martha 
Patterson, Economic Officer

Meeting with Charge d'Affaires
    Ambassador David Satterfield; Ambassador Dan Speckhard, 
Director of IRMO; Ambassador James Yellin, Senior Justice and 
Rule of Law Coordinator

USAID meeting
    Ms. Dawn Liberi, Country Director

Visit to the Joint International Police Training Center in 
Amman, Jordan.
    Note: this event was cancelled due to Nov. 10 bombings in 
Amman hotels.

After-action/follow-up meetings:
    Ambassador Richard J.Griffin, Assistant Secretary of State 
for Diplomatic Security; Mr. Bob Perito, USIP; Ms. Carina 
Perelli, UN Elections Chief; Mr. Jengahir Khan, UN Iraq Desk 
Officer

    Note: this list is not all-inclusive. Additional 
conversations were held in Washington in advance of the trip 
and with other members of the Embassy team that contributed to 
this report.

