Fears for reconstruction as contractors flee Baghdad

The beheading of an American by militants on videotape has sent a wave of fear through Western contractors working on the reconstruction of Iraq.

The beheading of an American by militants on videotape has sent a wave of fear through Western contractors working on the reconstruction of Iraq.

In the wake of the killing of Nick Berg, 26 who was working on restoring communications towers, there are fears that Western staff and companies may flee Iraq, and the already slow reconstruction effort may grind to a complete halt.

It is a far cry from the bonanza of lucrative reconstruction contracts envisaged before the war, that were supposed to make the invasion and occupation of Iraq a self-financing affair. Today the American group Bechtel employs two security staff for every one of its Western employees in Baghdad. The biggest American contractor, Halliburton, has seen 34 of its employees killed in Iraq.

There is little sign of reconstruction. Electricity is still only available for 12 hours of the day in Baghdad, a city of 5 million people. There is no sign of road building, and Baghdad's sewer system is collapsing.

Just hours before the gruesome videotape of Mr Berg's death emerged on Tuesday, two Russian engineers were taken hostage on their way back to Baghdad, and a third Russian engineer was killed in the same incident. Since the end of March, as many as 50 civilians have been kidnapped in Iraq.

When the kidnappings began in April, Western staff fled Iraq, but when the majority were released unharmed, nerves began to calm. Mr Berg's killing has changed all that. This was no kidnapping for ransom: Mr Berg was killed for political effect, and every Westerner in Iraq is a target now. Those from countries not involved in the occupation are targets too, after a militant group in Basra said it would consider all foreigners in Iraq as if they came from occupation countries and target them for kidnapping or assassination.

The Russian government has advised its nationals to leave - but many are warning that if they do, the electricity network which Russian engineers are keeping running may collapse altogether.

Some say the only contractors making money now are security companies. But Ahmet Ersavci, a Turkish contractor, says the truth is rather different. "There is still huge competition for every contract that the CPA [coalition provisional authority] announces," he says. "I know because I'm bidding for them. It's dangerous, but it's still very lucrative."

Mr Ersavci claims the reason Iraq's reconstruction is going so slowly is not because of the personal danger to Western contractors and staff, but because the Americans aren't handing out contracts fast enough.

But the instability is a factor. Few companies want to make any long or even medium-term investment in a country whose future is so uncertain. That affects contract work, too, because it means a lot of basic infrastructure is not being built, because companies don't know if they'll get any return on it.

And the spectre of more beheadings of Western contractors is not going to help.