Order Code RS21867
Updated October 10, 2007
U.S. Embassy in Iraq
Susan B. Epstein
Specialist in Foreign Policy and Trade
Foreign Affairs, Defense, and Trade Division
Summary
Concerns about the U.S. Embassy in Iraq have surfaced regarding the potential
rising cost, delay in opening, quality of construction, and reported assertions of
trafficking-like labor practices by First Kuwaiti General Trade and Contracting
Company, the primary builder of the U.S. Embassy in Baghdad. On October 4, 2007,
the Chairman of the House Foreign Affairs Committee, Representative Tom Lantos, sent
questions to Deputy Secretary of State, John Negroponte, regarding concerns about the
embassy construction defects, possible increasing costs, and delays.
Construction costs for the U.S. Embassy in Iraq have been met through
supplemental appropriations. Embassy operations also have been met primarily through
supplemental appropriations, with some embassy operation funding provided by the
regular appropriation process. This year, the Bush Administration’s FY2008 budget
request includes $65 million for base funding for operations in Iraq. In addition, the
Administration requested $823.9 million for mission operations in an FY2007
supplemental request and another $1.9 million for mission operations in an FY2008
emergency request. On May 24, 2007, Congress passed a compromise supplemental
appropriation (H.R. 2206), which the President signed into law (P.L. 110-28) on May
25. The enacted law included $750 million for State Department operations in Iraq.
As recently as September 2007, the Department of State claimed that the $592
million from a previous emergency supplemental appropriation (H.R. 1268/P.L. 109-
13), signed into law on May 11, 2005, was all that was needed for construction of the
U.S. Embassy in Baghdad. In addition, administration officials claimed that completion
of the embassy was still expected soon. This report will be updated as information
becomes available.
Background
From July 17, 1979, when Saddam Hussein first came to power in Iraq, until just
prior to the beginning of Operation Desert Storm in January 1991, the United States had
full diplomatic relations with Saddam Hussein’s government. On January 12, 1991, four
days before Operation Desert Storm, the United States closed its embassy doors in

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Baghdad. At the time of its closing, the U.S. Embassy in Baghdad maintained a staff of
approximately 50 and an annual budget of $3.5 million. From 1991 until 2004, the
United States did not have diplomatic relations with Iraq.
With Saddam Hussein removed from power and the United States and its partners
militarily occupying the country, the Bush Administration handed over government self-
rule to the Iraqis on June 28, 2004. Part of the transition toward self-rule for Iraq is also
a transition for the United States from being a military occupier to reestablishing normal
diplomatic ties with an independent Iraq.
Organizational Structure
The U.S. Ambassador to Iraq (currently Ambassador Ryan Crocker) has full
authority for the American presence in Iraq with two exceptions: 1 — military and
security matters which are under the authority of General Patraeus, the U.S. Commander
of the Multinational Force-Iraq (MNF-I), and 2 — staff working for international
organizations. In areas where diplomacy, military, and/or security activities overlap, the
Ambassador and the U.S. Commander cooperate to provide co-equal authority regarding
what is best for America and its interests in Iraq.
The U.S. Embassy in Baghdad is among the largest American embassies in both staff
size and budget. According to the State Department, the U.S. Mission in Baghdad is
staffed with about 1,000 Americans representing various U.S. government agencies and
between 200 and 300 direct hires and locally engaged staff (LES, formerly referred to as
foreign service nationals, or FSN). As Secretary Rice stated in a January 11, 2007, House
Foreign Affairs hearing, “I think it’s perfectly logical that we will want to have a large
diplomatic presence, a large aid presence, a large presence to engage the Iraqi people in
one of the most important countries in one of the world’s most important regions, and
that’s the reason for the large embassy there.”
Americans representing about 12 government agencies are providing the face of
America in the embassy and regional offices in Iraq. The agencies include the
Departments of State (DOS), Defense (DOD), Agriculture (USDA), Commerce (DoC),
Homeland Security (DHS), Health and Human Services (HHS), Justice (DoJ), Labor
(DoL), Transportation (DoT), Treasury, and the Agency for International Development
(USAID). Agencies that did not recommend staff for an Iraq presence include
Departments of Energy, the Interior, and Veterans Affairs, as well as NASA, Peace Corps,
Secret Service, and Social Security.
The United States has a number of experts from the various agencies on the ground
in Iraq working as teams (Provincial Reconstruction Teams — PRTs) to determine such
needs as security, skills, expenditures, contracting and logistics, communications/
information technology, and real estate. The State Department has established 10
Embedded PRTs (EPRTs, embedded with U.S. military combat brigades) and are
expected eventually to have a total of 15. Additionally, the United States has consultants
from the agencies working on an ongoing basis with the various Iraqi ministries such as
the Iraqi Health Ministry, Education Ministry, Foreign Ministry, and Ministry of Oil to
help Iraq gain a strong foothold on democracy and administrative skills.

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In addition to the current level of U.S. personnel in Iraq, the Bush Administration
announced its intention to establish a Civilian Reserve Corps of skilled civilians to send
overseas. According to Secretary Rice’s testimony before the House Foreign Affairs
Committee on February 7, 2007, the President’s plan includes sending a “surge” of
another 350 civilians to Iraq. Secretary Rice went on to say that DOD has agreed to fill
many of those positions with military Reservists until the State Department can recruit
civilians for the long-term Civilian Response [Reserve] Corps.
Location, Security, and the Role of U.S. Diplomatic Posts in Iraq
The State Department has been using three sites for embassy-related needs. The sites
are the Chancery, formerly a Baathist residence which was later occupied by the U.S.
Army; the Annex (the Republican Palace) previously used by the Coalition Provisional
Authority (CPA); and the Ambassador’s residence, once occupied by Ambassadors
Bremer, Negoponte, and Khalilzad. The U.S. government is not paying Iraq for the use
of property and buildings, according to the State Department. The Iraqi government has
reportedly requested that these facilities be returned to it, with improvements, which State
Department officials say will happen when the New Embassy Compound (NEC) is
completed in 2007. On October 31, 2004, the United States and Iraqi Ministry of Foreign
Affairs signed an agreement on diplomatic and consular property. Among other things,
this agreement transferred to the United States title to a site for the new American
Embassy compound and future consulate sites in Basra and Mosul. State’s Overseas
Buildings Operations (OBO) identified a 104-acre site for a NEC on a site adjacent to the
Tigris River in the Green Zone. Until September 2007, OBO claimed that the NEC was
on schedule to open in late summer, 2007.
First Kuwaiti General Trading and Contracting Company (a Kuwaiti company with
ties to Kellogg, Brown, and Root [KBR] in some Defense Department activities) was
selected through a competitive bidding process to build the U.S. Embassy in Baghdad,
according to State Department officials. Current controversy surrounding construction
of the embassy involves news accounts of First Kuwaiti’s construction defects, using
improper labor practices, and possibly trafficking in people to build the embassy.
According to a State Department official, a recent Inspector General report determined
that reports of improper labor practices by First Kuwaiti are unfounded.1
Regional teams are located in Mosul, Kirkuk, Basrah, and Hillah; each consists of
limited staff representing DOS, as well as other agencies and contractors in designated
locations. Altogether, about 46 people are spread among the regional offices. Each
regional team’s mission is primarily advising and coordinating with local officials and
interacting with citizens to better understand the attitudes of the Iraqi people toward
America. Both in Baghdad and in the regional offices, American Foreign Service Officers
are conducting public diplomacy — promoting American values and policies in Iraq.
Beyond the official consulate posts in Iraq, the Department of State has Foreign
Service Officers embedded in major U.S. military commands located outside of Baghdad.
DOS and DOD civilian employees also are at these locations. The State Department
1 Telephone conversation with a State Department official in the Office of Acquisition
Management, July 12, 2007.

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reportedly plans to have a total of 50 personnel in the Iraq provinces, including diplomatic
security personnel.
Security is key to establishing diplomatic relations. The current facilities used by
DOS in Baghdad have been subject to attacks, some of which have injured and killed
Americans. According to the Department of State, Diplomatic Security (DS) is
responsible for embassy security. Overall security in the country, however, continues to
be the responsibility of the commander of the multinational forces; DOD and contractors
play a major role in attaining a secure atmosphere. Regarding funding of security
activities, the Administration has determined that security for the embassy will come from
a combination of DOD’s budget, as well as State’s Diplomatic Security funds.
Funding
For embassy construction: As recently as September 2007, Department of State
officials continued to say that the funding is sufficient and the NEC is on track to being
completed soon.2 Reportedly, however, State Department documents indicate that the
cost could increase by as much as $144 million and completion could be many months
behind schedule.3 Earlier, Congress had authorized $20 million (P.L. 108-287) for
housing and other expenses incurred prior to construction of the new compound in
Baghdad and $592 million (P.L. 109-13) for construction of the NEC on the 104-acre site.
For U.S. operations in Iraq: The FY2008 budget request includes $65 million for
regular funding for operations in Iraq. In addition, the Bush Administration requested
$823.9 million in its FY2007 supplemental request for operations in Iraq and in the
FY2008 emergency request the Administration is seeking an additional $1.9 billion for
operations in Iraq. If Congress were to approve all three requests, it would provide a total
of about $2.8 billion for U.S. State Department operations in Iraq within a year.
Congress passed its FY2007 supplemental appropriation (H.R. 2206) with $750
million for State Department operations in Iraq, $73.9 million less than requested. The
funding is for mission security, logistics support, overhead security (reinforcing roofs and
ceilings to protect against bombs), and information technology. Congress has not yet
considered the FY2008 supplemental request. Some funding for State Department
operations in Iraq also is included in the State, Foreign Operations Appropriation for
FY2008 (H.R. 2764, H.Rept. 110-197, S.Rept. 110-128).
Congressional Responsibilities
While conducting foreign policy is the constitutional prerogative of the President,
Congress maintains three important responsibilities with respect to U.S. foreign policy:
(1) confirmation of political appointees (held by the Senate), (2) appropriations, and (3)
2 Telephone conversation with a government official at Department of State’s Overseas Building
Operations Bureau, September 27, 2007.
3 CNN.com, “Huge U.S. Embassy compound delayed,” October 5, 2007,
[http://www.cnn.com/2007/WORLD/meast/10/05/iraq.embassy.ap/index.html] and Washington
Post, “Iraq Embassy Cost Rises $144 Million Amid Project Delays,” by Glenn Kessler, October
7, 2007, p. A01.

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oversight. Congressional opportunities to have input on U.S. diplomatic relations with
Iraq and the embassy can occur within the nomination confirmation process, the annual
State Department appropriation legislation, and biennial foreign relations authorization.

The position of Ambassador to Iraq was initially filled by John Negroponte,
previously the first Director of National Intelligence (DNI) and currently Deputy Secretary
of State, who served as Ambassador from May 2004 to March 2005. Zalmay Khalilzad
(currently the Permanent U.S. Representative to the United Nations and formerly the
Ambassador to Afghanistan) was the U.S. Ambassador to Iraq from March 2005 to early
2007 when President Bush nominated the current U.S. Ambassador to Iraq, Career
Ambassador Ryan Crocker. The Senate Foreign Relations Committee held a nomination
hearing for him on February 15, 2007, and he was confirmed on March 7, 2007.
Appropriations for the new U.S. Mission in Iraq have come from a variety of
sources. To date, no funds for either the interim buildings or new embassy construction
have come from the regular appropriations process, according to the Department of State.
The initial phase of establishing the U.S. post in Baghdad involved the Administration
finding funds without specific appropriations for the embassy. Subsequently, much of the
total required funding appeared in emergency supplemental requests, CPA funds, and
DOD appropriations rather than in the regular budget. Many have had difficulty in
discerning exactly what the Administration has already received and what is still needed;
what has been spent and what is in the pipeline; what is available for operational activities
of the Mission versus activities related to construction of the new compound.
Oversight includes congressional monitoring of how the embassy represents
American foreign policy and cultural and commercial interests. The 108th and 109th
Congresses were criticized in the media for doing too little oversight in general, and
specifically for transferring supplemental funds from Afghanistan to Iraq. The 110th
Congress asked administration officials questions about the embassy in appropriation
hearings and held an oversight hearing on First Kuwaiti’s labor issue and its quality of
construction of the U.S. Embassy in Iraq. Only since early October 2007 have cost
overruns and delays in opening the embassy come to light.

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