The Companies that have Profited Most from the Iraq War

Where is the money going? It is estimated that the total cost of the war in Iraq will be about 1.8 trillion dollars to the United States. This price tag includes the amount of lost hours of production by the men and women who are fighting it as well as the impact of increased oil prices on the US economy. Since the end of the cold war there has been a massive push in the direction of privatization in the defense department. Dick Cheney once hired Halliburton as a consultant group while he was secretary of defense and they came to the conclusion that privatizing the logistics, support and maintenance aspects of war was the most cost-effective funding means for the military. If we consider non-bid contracts from the federal government as basic business grants for specific companies, then the actions that the government is taking are essentially patronage to businesses that are already making enormous profits.
Private companies make fortunes on the back of the ordinary soldier. War profiteering has usually been looked at as a modern cardinal sin, yet it occurs now more than ever before. There are at the moment about 60,000 contractors living and working in Iraq at this very moment. Oil companies have made record profits this year all while the US dollar is at its lowest and the economy is stagnant. Again this brings up the question, where is the money going, and who is collecting it. Here are some of the companies that have profited most from the War on Terror.

Exxon-Mobil grossed 40.61 billion dollars last year. This year they have earned a profit in a single quarter of 11.7 billion. That means they will surely surpass their 2007 record breaking year. Currently, their stock is worth about $78.82 per share with a total of nearly 18 million shares available. That means there is about 1.5 billion in capital investment needed by them at the moment. BP’s current price per share is about $56.80, with roughly 2.75 million BP shares available on the New York Stock Exchange. If you are a natural gas or petroleum company right now you basically have a license to print money. Currently Exxon shares are down about $20/share from their 52 week peak a few months ago.
The administration claimed that when they invaded Iraq, gas prices would go down because of a greater amount of fuel made available. Supply, for the most part, has remained the same. There are still massive untouched supplies of oil on the continental United States not to mention the large supplies in Canada, Venezuela, Mexico and Russia. When Katrina hit, the US deployed its 727 million barrels of strategic reserves and then depleted them. It will take years to rebuild the reserves, and the federal government must buy large quantities of petroleum. Oil companies like Exxon will make massive profits since they can dictate oil prices.

NYSE – GD – $91.12 per share with 2.25 million shares available.

GD are the makers of the M1 Abrams main battle tank. A tank that features not only a 120 mm howitzer cannon (something that Donald Rumsfeld remembers clearly when he was a national security advisor, that they would be taking instead of the old 105mm) but also Chobham armour and a jet engine to power it. Each one costs about $4.35 million. That’s not counting fuel, training to the soldiers who use it, ammunition, maintenance and American flag accessories. This has helped general dynamic stock go up by seven percent in the last year. Current revenue for GD is about $29.65 billion from 2007.
Since hostilities in Iraq, the American military needed roughly 80 tanks to be refitted per year. Not to mention that GD also produces a number of the Light Armored Vehicles (LAV) used by the US military as well as being the primary manufacturer of the F-16 Falcon, the most produced western air fighter in the world. Since the Middle East has been destabilized, the Israeli military has essentially been on alert as well as the Egyptian, Jordanian and Pakistani armed forces (all of which use GD equipment, specifically the F-16). The war on terror is proving highly profitable to anyone who can sell a shell or build a bomb.

NYSE – KBR – $23.44/share: up 1.25% total volume of 353,488 shares.
NYSE – HAL – $45.39/share: up 0.73% total volume of 2,538,909 shares.

KBR has been around in on form or another since World War 2. KBR is the largest non-union construction company in the United States and is the primary logistical firm operating in Iraq, with a $12 billion contract with the Department of Defense. At the moment there are $1.8 billion in disputed fees.
Halliburton received a sole source contract from the DoD. A sole source contract is when there was no open bid for the rights to provide the services for the government. The usual process for government contracts is that few companies try to low ball one another and the government would take the lowest acceptable/reasonable bid. This never happened with the Iraq war contract. The $12 billion was given to KBR behind closed doors.
What KBR does besides shipping every piece of mail, every gallon of gas, every bullet, and every supply, is run the military bases. They cook the meals, are air traffic controllers, run the post offices and clean the toilets and latrines. At the current time there are about twenty thousand KBR contractors operating in Iraq. They built the staging bases in Kuwait before the invasion; they built the largest base in Iraq called Camp Anaconda, with air conditioning, a full food court, and an old west themed post office. Another interesting fact is that Halliburton moved its headquarters to Dubai, in a country that has a no extradition treaty with the United States.
The 1.8 billion in disputed fees arises from the fact that many of the services that KBR claims to have provided are unaccounted for. For example, KBR is responsible for cooking the food. They claim that they provided the meals but the meals were never eaten. There is still an ongoing investigation. So far, KBR has lost a total of about 30 truck drivers from terrorist ambushes. KBR receives regular military escorts as opposed to the other 40,000 contractors operating in Iraq who are forced to rely on private security companies and Private Military Firms (PMF).

The average security contractor in Iraq makes about $1,000 per day. The average salary of a private in the US army is about $16,865 per year. It is profitable for an individual to be in Iraq as long as they are not a grunt. Best of all, after you make your fortune you can just leave the conflict and go home. As a mercenary, you are not subject to the rules of the Geneva Convention, nor the regular civilian laws. Blackwater Worldwide was the recipient of a $1.3 billion sole source contract from the US government earlier this year. Since many of the security firms in Iraq are privately held companies, there is little disclosure of their financial records. Along with Aegis Defense Services (three year contract to administer PMFs in Iraq worth $293 million) there is little information available as to how much these companies are earning. Considering that the security services are the largest growth industry in Iraq, it is safe to say that there are several billion up for grabs. With 60,000 contractors currently operating in Iraq, it is obvious that PMFs will continue to prosper and profit during the War on Terror.

On a more financial note, the indicated annual dividend for Halliburton is 0.36. This means that for every dollar invested in Halliburton you receive 36 cents back. Since the average share is about 45.39 you receive a return of $16.34 per share you own. If you own 1000 shares then you make an annual return of $16,340. Not a bad investment, when you think about it. Compare this with GD’s dividend rate. For every dollar you invest in GD you receive a return of $1.40. That is a huge return on investment. The average dividend return in the defense sector investment is about 0.69%. They used to say that safest investment was always land. “You ain’t no kind of man unless you got land” as they used to say. At the moment, the only region in the United States where land values are still appreciating is North Dakota since they never issued subprime mortgages (saving their economy). Looks like the only safe investment in the United States is War.