Profiling Bechtel Group, Inc.

Against the Current, No. 34, September/October 1991

Patti McSherry

AT THE CLOSE of the Gulf War, the name of Bechtel Group, Inc briefly surfaced in the news. In fact, the story of Bechtel is a striking example of the interdependent relationship of state and capital. Decisions that affect the lives of millions of people are made by non-accountable officials in the upper echelons of business and government, assured that their self-interests are synonymous with world order and prosperity, and at times contemptuous of laws that bind ordinary citizens. While this is hardly a startling revelation, it is one often seemingly forgotten in these days of the triumph of U.S. capitalism and democracy.

Bechtel is one of the companies with a contract for work in Kuwait, specifically for managing the rebuilding of that country’s oil industry. In other words, Bechtel is one of the privileged few in the corporate scramble for Kuwait In fact, this secretive corporation is no stranger to the Middle East nor to the business of oil. And oil has long been considered a vital U.S. national security interest and the foundation of U.S. post-war hegemony, as graphically demonstrated from the 1953 CIA-sponsored coup against Iran’s Mossadegh to the recent Gulf War.

Bechtel’s long and intriguing history dramatically illustrates the confluence of U.S. “national interests” and corporate global strategies. For years Bechtel has acted as a sovereign entity in world affairs, negotiating with states, capturing and utilizing global capital reserves, maintaining a grip upon engineering and construction mega projects throughout the world, and participating in secretive projects that overlap with “national security” objectives of the U.S. government Bechtel operates in the upper reaches of world capitalism.

Familiar figures such as George Shultz, Caspar Weinberger, Richard Helms, and Nicholas Brady have been associated with Bechtel. And there are links to the CIA, usually obscured, but occasionally exposed; for example, by an explosive article in a 1978 issue of Mother Jones, which described how Bechtel and the CIA shared intelligence information on Middle East affairs. More recently, there was the murky Iraqi pipeline project, which came to light in l987in the course of a Special Prosecutor’s investigation of the Wedtech scandal, and involved then-Attorney General Edwin Meese 3rd.

The pipeline project offered glimpses of links to the Iran-contra affair, and involved Bechtel, top officials of the Reagan administration, the CIA, the Israeli government, and the Iraqi government. U.S. officials sought to withhold information on the project for “national security reasons” (more on this below).

What follows is a brief and incomplete sketch of some of the known facts about Bechtel.

Bechtel is one of the largest engineering and construction corporations in the world. Known for its secrecy in business circles, it is a privately-owned firm which does not need to register with the Securities and Exchange Commission. The company has always been controlled by the Bechtel family; it is wholly owned by senior executives, who must sell back their stock upon leaving the firm.

A partial list of Bechtel’s older global projects includes Hoover Dam, the San Francisco Bay Bridge, the Alaska Pipeline, mass transit systems such as BART in the San Francisco Bay Area and the Washington, D.C. Metro, the Trans-Arabian Pipeline, Central America’s first oil refinery (in Panama), the biggest copper complex in the world (in Papua New Guinea), a trade center in Moscow, a copper complex in South Africa, and Egypt’s Suez-Med Pipeline. Bechtel built the Tarapur Reactor in India—the largest in Asia—and the Riyadh airport in Saudi Arabia.

The firm built or designed half of all U.S. nuclear power plants, expanded the Los Angeles Airport, constructed the world’s largest hydroelectric project, and built the entire city of Jubail in Saudi Arabia. Bechtel employs a member of the Saudi royal family (whose name is a closely guarded secret).

In the 1980s, the company came upon hard times. With the decade’s global economic crisis—generated by lower oil prices—large-scale projects in the Middle East dried up. Another formerly lucrative field—the engineering and construction associated with the U.S. nuclear industry—also slowed to a halt The company’s earnings fell from $14.13 billion in 1983 to $655 billion in 1986; Bechtel laid off more than half of its worldwide payroll, which shrank from 45,000 to 18,000.

But business seems to be picking up nowadays: Bechtel recently received a large contract from the U.S.S.R. for construction of a high-tech research park near Moscow and a contract to design a $5 billion airport in Seoul. The firm also recently won a $284 million U.S. Army contract for equipment to dispose of chemical warfare weapons and a $45.7 million U.S. Air Force contract for nuclear weapon storage vaults.

In 1980—as a defense against rising mistrust of the corporation—Bechtel reorganized itself into a holding company and opened the corporation somewhat to public view (e.g. publishing an annual report for employees). The changes were initiated and directed by George Shultz, president of Bechtel from 1974-1982. Shultz left the company to become Reagan’s Secretary of State.

The aforementioned article in Mother Jones detailed the ways in which Bechtel served as a cover for the CIA in Saudi Arabia and Libya. Indeed, ex-CIA and government officials constantly rotate in and out of Bechtel.(1) <#N1> In short, as an active CIA officer told Macleans magazine in 1982, “If Bechtel wants to know what the CIA is doing or what it thinks, or what it knows about tricky areas of the world, you can be sure that it can find out.”

The Reagan administration vowed to revitalize the flagging nuclear industry, and W. Kenneth Davis was an apt choice he had been Bechtel’s vice-president for nuclear development until joining the Reagan administration as Deputy Secretary of Energy. Nicholas Brady was formerly the head of Dillon Read, an investment bank acquired by Bechtel in the 1980s. He stepped down in April of 1982 to fill the Senate seat vacated by Harrison Williams as a result of the ABSCAM scandal. Now he is Bush’s Treasury Secretary.

Caspar Weinberger held positions in the Nixon administration before joining Bechtel in the mid-1970s. The firm created the post of “Special Counsel” for him, made him a vice president, and often sent him to Saudi Arabia to oversee its vast projects there. He joined the Reagan administration in 1981 as Secretary of Defense. Finally, Philip Habib’s links to the firm were revealed in 1982. Habib, a career diplomat who had retired from the State Department in 1978, became a Reagan administration advisor on the Middle East—at about the same time that Bechtel hired him as a consultant.

Corporate Operations

There have been a number of examples of corporate incompetence (leaking nuclear power plants, breakdowns where the company has been sued) and manipulation (bribes and kickbacks, as in 1972, when four Bechtel executives were convicted of bribing a New Jersey mayor). The firm has been sued by its workers for discrimination against women.

In January 1982, Bechtel workers in Indonesia sat in to demand immediate payment for ten months-worth of unpaid food allowance—part of the wages promised. They were ordered to disperse and then attacked and beaten by police. Bechtel was also accused of corruption in connection with a Korean project in 1984.

More recently—in May 1991—Bechtel and Westinghouse were criticized in an Energy Department Inspector General’s report for improper dealings at the Savannah River nuclear weapon plant Westinghouse Savannah River Company has operated the huge complex for the government since 1989, and hired a unit of Bechtel (Bechtel Savannah River) as a subcontractor for engineering and construction. According to the report, the companies concealed huge cost overruns by unlawfully transferring tens of millions of dollars in and out of accounts. Energy Department officials were also unable to find a quarter of $33 million worth of tools and construction equipment bought by the plant in 1990.

The company’s close ties with the Arab states have Ion g proven controversial. In 1973, the Yom Kippur War broke out, resulting in the Arab oil embargo. The oil price hike and the “energy crisis” hit the West hard. Bechtel cooperated with Arab policy; in 1976, the Justice Department sued Bechtel for violating U.S. anti-trust laws through its participation in the Arab boycott of Israel. Secretary of State Kissinger maneuvered to persuade the Justice Department to drop the case, arguing that it would “adversely affect” U.S. foreign policy.

Eventually, Bechtel settled the suit without admitting or denying the charges. Bechtel was also part of a coalition of tight-wing groups that lobbied to secure Congressional approval for the 1981 sale of AWAC planes to Saudi Arabia. Oliver North was “the administration’s point man on the AWACS sale,” according to a recent book, The Iran-Contra Connection, by Jonathan Marshall, Peter Scott and Jane Hunter.

Bechtel has long been able to secure huge resources for its projects through various world financial institutions, an offer many countries can’t refuse. In the 1970s the firm began to move into financing and operations in order to line up investment funds for its megaprojects.(2) <#N2>

The Mother Jones article quoted Christopher Rand (Making Democnzçy Safe for Oil, 1975), who argued that the building of Jubail in Saudi Arabia was a solution to the balance of payments deficit Billions of U.S. dollars were piling up in Saudi Arabia as a result of the OPEC’s quadrupling of oil prices in 1973. Bechtel managed to tap into this pool of “petrodollars” and recycle funds back into the U.S. economy. Bechtel’s assistance was clearly in line with U.S. interests; indeed, according to The Iran-Contra Connection, the CIA actively sought to “sell high-dollar projects surreptitiously” to recoup U.S. funds spent on Mideast oil.

Iraq lost access to its oil shipping ports on the Persian Gulf during the early part of the Iran-Iraq war. In 1982 Syria, an ally of Iran, shut down Iraq’s pipeline carrying oil to the Mediterranean. In 1984, Iraq opened discussions with Bechtel on the construction of a new pipeline—proposed by Bechtel—which would allow Iraq to raise its oil exports and escape the economic stranglehold. Later that year, Bechtel won the contract to build a $1.1 billion Iraqi oil pipeline from Al Haditha to Aqaba in Jordan.

Although early news reports cited “financial hurdles” that needed to be overcome, a greater obstacle was security for the pipeline. Iraq and Jordan were hesitant, concerned about the possibility of an Israeli attack against the pipeline, which would pass close to its territory. Iraq reportedly hoped that the involvement of a U.S. company would elicit a few words of warning from the U.S. government to its Israeli ally; Iraq and Jordan sought protection guarantees from Bechtel, and conditioned their consent to the project on assurances that the pipeline would be secured.

Bechtel began discussions with the Export-Import Bank and the Overseas Private Investment Corporation (OPIC) for insurance for the pipeline. But Eximbank told Bechtel that $500 million-plus aid for the Aqaba project was contingent on “security plans.” OPIC was dubious about the project because it saw no evidence of U.S. government backing.

By 1985, Bechtel embarked upon what Business Week called “a global lobbying blitz” to save the project Bechtel formed a partnership with Bruce Rappaport, a wealthy Swiss businessperson specializing in oil trading, who claimed close ties to the Israeli government Unnamed officials told the New York Tunes of rumors that Rappaport was linked with Mossad, the Israeli intelligence agency.

Other reports noted that Rappaport was a good friend of William Casey. Curiously, when OPIC later asked for a CIA background report on Rappaport, the agency sent back a sanitized version (still classified as secret) which omitted evidence of questionable business deal in as well as Rappaport’s past role in representing Israeli interests.

Rappaport hired E Robert Wallach, longtime Mend and personal lawyer of Attorney General Edwin Meese, to represent him. Wallach was also involved with Wed-tech and later convicted of racketeering; he had received illegal payments from Wedtech for his role in securing huge government contracts through his relationship with Meese. (Ironically, as this article was being finished, Wallach’s conviction was overturned by an appeals court.) Meese, who resigned in 1988 as the Wedtech and pipeline scandals raged around him, was found to be instrumental in helping Wedtech gain the contracts, but the special prosecutor’s investigation found no evidence of criminal wrongdoing (No doubt; just normal operation of the free enterprise system.)

Both Rappaport, with his connections in Israel, and Wallach, with his connections in the United States, were able to obtain signs of support for the pipeline from the two respective governments, breaking the loam in which Bechtel had found itself. In June 1985, Wallach (with Meese’s help) set up a meeting with Robert McFarlane of the National Security Council (NSC). Three days later, McFarlane convened a White House meeting with the dubious OPIC officials (an unusual level of contact for OPIC) and told them that the pipeline was a matter of U.S. national security; William Casey of the CIA and Ronald Reagan also endorsed the project.

According to the New York Times, the NSC began that same month to aggressively push the idea of selling arms to Iran (although recent new revelations about the October Surprise—the “coup” against Carter—suggest that the policy may have had earlier roots). McFarlane and the NSC were involved in both Iran-contra and the pipeline deal; both also operated outside “normal” government channels. Intriguing questions come to mind here was the pipeline to be another conduit for financing the contras—a primary reason for the Iran deal? Or a means of persuading Israel to step up its military aid and training of the contras, as public and Congressional opposition to Reagan’s war mounted at home?

The pipeline project was dropped in 1985, fading from public memory, so the answer to this question may never be known. But possible answers suggest themselves when the role of Israel is examined.

After Rappaport and Wallach came aboard, the Israeli government became positively enthusiastic about the project, even offering to pledge money as insurance that it would not attack the pipeline. Why? The terminal in Aqaba was to be controlled by Rappaport. Rappaport was to get a percentage of the oil, and control its distribution. An aide to former Israeli Prime Minister Shimon Peres disclosed on February 24, 1988 that Bechtel Group offered to sell oil at reduced rates to Israel for ten years in exchange for a security pledge.

The aide’s explosive statement followed the disclosure of a secret memo written by Wallach to Meese on September 25, 1985. Rappaport and Wailach had secured then-Prime Minister Shimon Peres’ support for the pipeline. The secret memo to Meese “confirmed payments to Israel from the pipeline, with part to go directly to the Israeli Labor Party, in exchange for secret financial guarantees. The memo said that Israel was to receive approximately $700 million in profits over ten years from Rappaport’s share of the sale of oil from the pipeline.

Almost certainly, this aspect was to be kept secret from Iraq. Prime Minister Peres denied that any bribes were offered or received; Iraq denied that it had requested guarantees; and a Bechtel spokesperson denied any knowledge of efforts to offer payments to Israel Yet Pares did confirm that his government guaranteed to the U.S. government that Israel would not interfere with the pipeline.(3) <#N3>

The September 25, 1985 secret memo from Wallach to Meese also described how Israel felt the United States owed it help on the pipeline project because it had helped free U.S. hostage Benjamin Weir two weeks earlier This links the hostage crisis, the Iran-contra deal (where Israel supplied arms to Iran, purportedly to free the hostages), and the pipeline, suggesting the possibility that Israel expected to receive some compensation (via the pipeline) for its help with the first two. The Iran-contra panel never learned of this secret memo; the Justice Department failed to provide it to the committee.

The pipeline project fell apart in 1985, a fatality of the suspicions of the Iraqis and the glare of publicity that had ensued. The scandal was eclipsed by the 1986 exposure of the contra connection and the exploding Iran-contra scandal. But the pipeline project provides glimpses of the high-level intrigues and deals that occur in the upper reaches of the political economy, where national security is inextricably interwoven with oil, high finance and corporate profit.

Such vast manipulation of world politics and economies tends to boggle the mind. Consider the elements of the pipeline affair It takes place in the context of the Reagan administration’s obsessive, global machinations to raise extralegal funds for the contras (not subject to democratic checks in the United States) in order to destroy the Nicaraguan Revolution. Arms are sold to Iran, supplied by Israel, ostensibly to free the hostages. In fact funds from the sales are funneled to the secret contra war by way of a Casey-North enterprise that bypasses “normal channels.”

The Justice Department, the CIA, and the NSC all promote and/or protect the pipeline scheme, withhold ing information from various parties. Israel apparently expects to get $700 million in oil in exchange for its top-secret assistance—and better yet, from its old (and unwitting) enemy’s oil wealth, via a Bechtel pipeline. Bechtel is apparently entangled in the tentacles of the Iran-contra scandal, a worldwide conspiracy to make an example of Nicaragua to the Third World.

Considering Bechtel’s longstanding CIA ties—and the profits Bechtel would have made out of the deal—the theory hardly surprises. All in all, the whole convoluted, massive, intricate scheme is something 011ie North might call, with a smirk, “a neat idea.”

In the commanding heights of the global economy, giant corporations can manipulate the world’s supply of capital and utilize it to construct gigantic projects which may serve no other purpose than to enrich the firm or further secret foreign policy objectives. By acting in concert with national security officials, these corporations also collude in political projects to perpetuate U.S. hegemony and crush revolutionary societies attempting to escape it Again, this is nothing new; the role of the United Fruit Company in the CIA-backed coup in Guatemala in 1954, or International Telephone and Telegraph in the CIA-backed coup against Allende’s Chile in 1973 are well-known examples of state-corporate conspiracies to preserve their convergent interests.

U.S. weapons manufacturers—the military-industrial complex—gained a new lease on life via the destruction of Kuwait and Iraq. Now U.S. corporations will gain Windfall profits from rebuilding Kuwait The case of Bechtel reveals the tangled intertwining of state interests such as “national security” with corporate strategies for profitable investment and market share, and provides glimpses of sensitive intelligence and diplomatic dealings at the highest levels—dealings that have affected the course of world history.

Major sources for this article include The New York Times, Business Week, Mother Jones, The San Francisco Chronicle and Examiner, Macleans, and The Iran Contra Connection, Boston: South End Press, 1987.

Notes

1. John McCone, former CIA director and Atomic Energy Commission chairperson, was a partner in a previous incarnation of the company, called Bechtel-McCone. John Simpson—chair of the Bechtel finance committee in 1952—was associated with the CIA’s predecessor, the Office of Strategic Services, and was director of the Schroder Bank, also associated with the CIA. Richard Helms, another former CIA director and Ambassador to Iran, was a consultant to Bechtel.

2. In 1978, the company arranged the largest credit ever granted by the Export Development Corp. of Canada for an Algerian is development project. Bechtel helped arrange financing in 1979 for a $1.2 billion Korean nuclear plant project by getting the largest credit ever granted by the US.-government-owned Eximbank. The Eximbank approved a $100 million loan for an Egyptian oil pipeline project involving Bechtel in 1974 and the World Bank sponsored a 5466 million Bechtel power plant construction project in Egypt in 1979. The Tarapur reactor In India—built by Bechtel and GE—was financed by a United States Agency for International Development loan of ($80 million. This reactor leaked radiation and poorly trained its workers, making it a potential.

3. The special prosecutor investigating Wedtech came across the secret memo, and broadened his investigation; he also examined whether Bechtel had chosen to wink at the possible bribe (one wonders if he considered the possibility of plausible deniability). The Bechtel spokesperson later said that Rappaport had made the offer without the knowledge or consent of the firm.

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September/October 1991, ATC 34

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