The first day on the job at the defense contractor DGC International involves an unusual orientation. In the contractor’s offices in McLean, Virginia, some new hires were asked to watch War Dogs, a 2016 blockbuster based on the true story of two kids who got arrested after cheating the Pentagon. For most viewers, the movie is a cautionary tale, but DGC International’s executives seem to have taken its plot as a war-profiteering instruction manual. As one of the film’s would-be protagonists, David Packouz (played by actor Miles Teller), says: “War is an economy. Anybody who tells you otherwise is either in on it or stupid.”
The United States invaded Iraq in the name of fighting terrorism and promoting democracy. But the contractors the Pentagon has hired continue to undermine these justifications. Contracts granted to two of the major companies vying to fuel U.S. bases in Iraq expose the hypocrisy of America’s military mission abroad.
While stiffing the U.S. military with high prices, these contractors are empowering nefarious actors whose interests run counter to stated American policy. DGC International has enriched Kurdish officials who regularly commit atrocities. And DGC International’s main competitor, the Baghdad-based contractor Jamal al-Aalem, faces allegations that in violation of U.S. sanctions it has been supplying U.S. bases with fuel purchased from Iran, as first reported by the trade publication Intelligence Online.
The U.S. military could not conduct operations in Iraq and neighboring Syria without fuel delivered by DGC International and Jamal al-Aalem. Both companies, but especially DGCI, have made tremendous amounts of money on these contracts. Prices for gasoline have ranged from $3.50 to over $4 a gallon, a considerable markup over market price, which is in the $2 range. At one point in early 2020, DGC International’s rates even spiked above $10 a gallon on short-term deliveries. That price-gouging helped make the contractor the 11th-fastest-growing company in America in 2018.
These contracts are fiercely contested by local and international companies, and contractors frequently break the law to get an edge on their competition. But as long as the fuel continues to arrive to American bases in Iraq, the Pentagon looks the other way.
The contractor DGC International won its Kurdish contracts through a secret partnership with companies owned by Mansour Barzani, the brother of Kurdistan’s prime minister and a member of Kurdistan’s oligarchic ruling family. To protect the dirty cash flowing in from corrupt contracts like the one with DGC International, security forces in Kurdistan have murdered anti-corruption protesters and arrested journalists as spies. “The core of the corruption lies with those who control the security forces,” in Iraqi Kurdistan, a U.S. diplomat wrote in a 2006 cable, which WikiLeaks later published. “They keep the game running because controlling the guns means they can enforce their illegal contracts.” These soldiers and the wealth from dirty contracts have allowed the Barzani family to cement their control of Iraqi Kurdistan and quash dissent.
Now, the U.S. Department of Justice is investigating DGC International for corruption related to its deals in Iraqi Kurdistan. Last summer, FBI agents showed up at employees’ houses, according to leaked messages from company leadership. “We are not telling you not to speak to anyone,” DGC International lawyers wrote in a July 2020 email to staff about the federal corruption investigation. “That said, we can tell you that you do not have to speak to anyone if you do not wish to.”
This investigation, and the sky-high prices, appears to have given the Virginia-based contractor’s competitors the upper hand. In April 2020, the Pentagon opted not to renew contracts for $200 million in fuel deliveries that DGC International had previously controlled. The lost contracts included some of the company’s most lucrative work: supplying the Pentagon base at the airport of Iraqi Kurdistan’s capital city, Erbil, which serves as a hub for higher-margin shipments to American forces in Syria.
Still, DGC International won renewals on major Pentagon contracts, worth over $250 million, despite scrutiny from Justice and the FBI. “DGCI stands by its record of performance for the United States military and will proudly continue to support our troops abroad where and when our critical energy infrastructure skills and background are needed,” the company said, in a statement to the Prospect.
But the work of DGC International’s main competitor, Jamal al-Aalem, is potentially as scandalous. The shadowy Iraqi company, per U.S. government databases, has delivered about ten million gallons of fuel to the American military over the last year. And documents appear to show that Jamal al-Aalem is importing illegal fuel refined by a bitter enemy.
Over a dozen leaked trucking manifests, allegedly photographed by a guard on the Iran-Iraq border and provided to the Prospect, record Jamal al-Aalem accepting fuel from Iran’s Arak refinery. The documents show illegal fuel being shipped through the Haji Omran border crossing, which is controlled by the Barzani family’s political organization, the Kurdistan Democratic Party. The Intelligence Online identified Jamal al-Aalem as backed by the Barzani government through an intermediary.
The manifests also exposed other potential financial ties to the Iranian regime. The nonprofit Center for Advanced Defense Studies (C4ADS) analyzed the Iranian shipping companies listed on the manifests and identified a broad corporate network in which several affiliates of those shipping companies are also owned by sanctioned entities.
“The Pentagon is more concerned with completing its immediate missions than considering the long-term consequences of its decisions.”
Jamal al-Aalem disputed the authenticity of these manifests, which were stamped with the Baghdad-based company’s seal and that of a California affiliate. It alleged that the stamps were fakes and had been added to the manifests after the fact to make them look bad. The Pentagon also said it was unable to identify any Iranian fuel delivered by the company. “We have no reason to question the traceability documents provided by Jamal al-Aalem,” said a Defense Logistics Agency spokesperson.
Ultimately, without banking records, the provenance of these manifests is nearly impossible to determine. But other independent sources add weight to the allegations. One insider in Iraq’s fuel industry said contacts at Arak refinery in Iran confirmed that fuel had been sold to Jamal al-Aalem, and an employee of a middleman company listed on the manifests appeared to confirm the deal before realizing they were talking to a journalist.
“The source of the fuel is still undetermined but local sources have suggested some barrels stored in the outskirts of Erbil come from Iran,” reported Intelligence Online. Photos and videos, showing fuel trucks with Iranian plates at this alleged fuel storage facility, have been circulating. If Jamal al-Aalem is purchasing Iranian fuel, it is a violation of the U.S. Treasury Department’s sanctions. Companies commit to not buying Iranian fuel when taking on federal government contracts. This is because, according to the U.S. government, the Iranian energy sector is used to fund terrorism, including the Iranian Revolutionary Guard, which directs sectarian militias that the Pentagon is fighting in Iraq.
But once it’s in American planes, Iranian or human rights abuser fuel works just as well as fuel from anywhere else. Contractors know that the U.S. military will keep buying from them, no matter whether they break the law or finance the enemy, because the Pentagon is more concerned with completing its immediate missions than considering the long-term consequences of its decisions. In fact, the impunity is so obvious that other companies, like DGC International, are looking to bring back the original War Dogs.
In an interview with the Prospect, the real David Packouz explained that a ban on his ability to win military contracts had almost expired and companies were trying unsuccessfully to recruit him to re-enter the field. “Tell everyone to stop asking me for lessons on how to be an arms dealer,” he said.
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