'Old Europe' feels business impact of opposing war

In boardrooms in France and Germany, businesses play catch up, trying to cash in on Iraqi reconstruction.

The two shiny pipe welding tractors that fill most of the space in Eginhard Vietz's production hall here might be German industry's first casualties of the Iraq war.

Shipment of the two massive machines, approved under the United Nations oil-for-food program in 2002, was called off four weeks before the first rockets began falling on Baghdad.

Now, Mr. Vietz is stuck with almost $600,000 worth of expensive equipment that was the first part of a $5 million order placed by Iraq's now-defunct South Oil Company.

"What can I do?" Mr. Vietz wonders. "I can't send them anywhere!"

In Europe's boardrooms - from Vietz's modest operation to France and Germany's powerful business associations - the economic future of postwar Iraq and its estimated $30 billion reconstruction needs have become topic A.

Fears among French and German companies that the antiwar stance taken by Prime Minister Jacques Chirac and Chancellor Gerhard Schröder would cost them business have come true - at least in the first round of contracts awarded by USAID.

All of the initial money the government development agency will give out in primary contracts for immediate postwar reconstruction has gone or will go to US companies. Up to now, only two foreign firms - both of them British - have been brought on, as subcontractors.

Siemens' telecommunications know-how or Hochtief's construction cranes have not been in demand. Nor will they be, says Vietz.

German corporate jitters

"Because of the chancellor's political slip-up, German business has no chance," says Vietz, echoing the concerns of other German executives.

Chancellor Gerhard Schröder's tough antiwar position, which he made clear as a promise to voters while battling for reelection in September, rankled the Bush administration. While his public stood behind him, Germany's business leaders implored Schröder to soften his tone.

"I was also against the war," says Vietz. "But I would have said it differently."

The postwar business front is already quite different in European countries that supported the US-led invasion. Companies in Britain and Denmark have already had contact with US officials interested in their services.

US diplomats in Denmark, which has offered 360 soldiers to help maintain stability in postwar Iraq, have already sent word through the defense minister that they would like to talk with Danish shipping company A.P. Moller/Maersk Group regarding its expertise in the region, the company says.

London-based Crown Agents has been providing logistical support to the USAID mission in Kuwait ever since the Washington-based International Resources Group received a $7.1 million contract in February.

Bechtel announced last week that the British firm Olive Security and the British part of Florida-based ArmorHoldings will provide security services and survey unexploded ordnance in Iraq.

A British business invasion

The British expect more contracts to follow soon. "We know that [Trade and Industry Secretary Patricia] Hewitt has been to the states and lobbied on behalf of British companies, and we know that the major British companies in the area ... have been asked to stand by," said David Claridge, an analyst at Janusian Security Risk Management in London.

Still, after initial doom-and-gloom predictions, French and German industrial organizations are beginning to exercise patient optimism.

The two countries are hoping that historic ties to Iraq and their good reputation in the region will help their chances in the future, when the US has less of a presence and an international organization like the United Nations might have more say.

"The reconstruction of Iraq is such a major project that no one country can or would want to undertake it alone," says Peter Kreutzberger, the head of the North African Middle East Business Initiative at the BDI, German industry's lobbying organization.

With an eye toward snapping up some subcontracting opportunities in the near future, French and German business leaders have started preparing.

Kreutzberger met with other members of the BDI as well as government officials last week for a "fact-finding" discussion. Similar steps are being taken in Paris, where the Finance Ministry and the trade group Medef have organized workshops on the topic. French trade experts say it is only a matter of time before French companies are back in the mix.

"I might be underestimating the Bush administration's anger with France," says Pierre Noel, at the French Institute for International Relations. "But it's a different thing once you are on the ground with engineers, with lower-level officers in charge. They will get backed to their well-entrenched relationships."

Nostalgia for a contract past

Between sips of green tea, Vietz reminisces fondly about the work ethic and drive of the Iraqis he met during the six trips he's taken to the country since 1999. "They are like Germans," he says.

Now the Baghdad office he opened in 1999, just 492 feet from the German embassy, lies in ruins.

Of his 14-member staff, one woman died in the American bombing raids. Thieves made off with most of his equipment.

The $5 million contract for the tractors, which would have totaled 14 in all, was going to make up one fourth of his sales this year.

In a letter to the German Foreign Ministry, Vietz wrote that the situation threatens the existence of the pipeline and construction maintenance firm he built up over nearly three decades. He hopes a giant like Bechtel, which has received one of the USAID contracts, might purchase his tractors once headed for Iraq.

"Please help us in this very difficult situation," Vietz says, reading from his letter.

The businessman then places the document on his desk and says he already knows what the response will be: "We cannot."

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