The state facilities that were so carefully targeted with bombs and shells have now to be reconstructed, but this time under the aegis of private firms, preferably American, though Blair and Berlusconi, and perhaps plucky Poland too, will not be forgotten at handouts time. Meanwhile, Dick Cheney's old firm, Halliburton, awarded a contract (without any competition) to rebuild Iraq's oil industry, is happily boosting profits by charging the US government $2.64 a gallon for the fuel it trucks into Iraq from Kuwait. The normal price per gallon in the region is 71 cents, but since the US taxpayer is footing the bill, nobody cares.

The secret plan to privatize the country by selling off its assets to western corporations was drafted in February this year and surfaced in the Wall Street Journal, which helpfully explained that "for many conservatives, Iraq is now the test case for whether the United States can engender American-style free-market capitalism within the Arab world". Worried by the leaks, Bush and Blair issued a user-friendly joint statement on April 8, stressing that Iraq's oil and other natural resources are "the patrimony of the people of Iraq, which should be used only for their benefit". But who decides on behalf of the Iraqi people - Bremer/Chalabi or Chalabi/Bremer?

Iraq's state-run health service, which, prior to the killer sanctions, was the most advanced in the region, is now being privatized, courtesy of Abt Associates, a US firm specializing in privatizations that has clearly been forgiven its record of "invoice irregularities" by its Washington patron. Its first priority is instructive. It has demanded armoured cars for its staff. Khudair Abbas, the orthopedic surgeon from Ilford and "minister for health" in the puppet government, was recently in London boasting of the state-of-the-art hospitals they would soon build to create a "two-tier health system". Sound familiar?

This week Bush amplified US policy by insisting on the time-honoured norm: to the victor, the spoils. Why should those countries (Germany, France, China, Russia, etc) that had refused to make the necessary blood sacrifice expect a share of the loot? The EU is screaming "foul", and its bureaucrats are suggesting that by denying the non-belligerent states equal opportunities to exploit an occupied Iraq, the US is withdrawing itself from the groove of capitalist legality. These arguments won't carry much weight in Washington, but if China, Russia and France insist that, as the occupying powers, the US and Britain should immediately meet the debts incurred by the former Iraqi regime, there might be some basis for negotiation. A few bones in the shape of juicy subcontracts could be thrown in the direction of China and the EU, but only if they stop whingeing and behave themselves in public.

On its own, the privatization plan, if implemented successfully, would be a disaster for the bulk of Iraqi citizens (as is the case in most of Latin America and central Asia), but the situation here is unique. These "reforms" are being imposed at tank point. Many Iraqis perceive them as a recolonization of the country, and they have provoked an effective and methodical resistance. On the military level, the situation continues to deteriorate, thus remaining the source of numerous internal difficulties and sustaining friction and strife within the west.

In a recent dispatch from Baghdad in the New York Review of Books, Mark Danner reported that in the two months (October and November) he spent in the occupied city, the number of daily attacks on US troops had more than doubled, from 15 to 35, and behind the bombings of other targets "one can see a rather methodical intention to sever, one by one, with patience, care and precision, the fragile lines that still tie the occupation authority to the rest of the world". How will the occupying armies respond? In the only way they can, with the traditional methods of colonial rule. The Israelis are trying their best to help, but they haven't been too successful themselves.

On December 7, the front page of the New York Times carried a report from Dexter Filkins in Baghdad. Its opening paragraph could have applied to virtually any major colonial conflict of the past century: "As the guerrilla war against Iraqi insurgents intensifies, American soldiers have begun wrapping entire villages in barbed wire. In selective cases, American soldiers are demolishing buildings thought to be used by Iraqi attackers. They have begun imprisoning relatives of suspected guerrillas in hope of pressing insurgents to turn themselves in."

During the first phase of European colonization, it was the companies that were provided with a charter to raise their own armies to defend their commercial interests. The British and Dutch East India companies took India and Java. Later, their countries' empires moved in to take control and consolidate the gains. It was different in the Americas. Here it was always a case of "send in the marines". General Smedley Butler, a much-decorated and celebrated US war hero of the late 19th and early 20th centuries, with 34 years' military service, later reflected on his campaigns and produced a telling volume entitled War as a Racket. He explained his central thesis thus: "I spent most of my time being a high-class muscle-man for Big Business, for Wall Street and for the Bankers. In short I was a racketeer, a gangster for capitalism... I helped make Honduras 'right' for American fruit companies in 1903. I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long."

The 21st-century colonial model appears to be a combination of the two approaches. Specialist companies are now encouraged to provide "security". They employ the mercenaries, and their profits are ensured by the state that hires them. They are backed up by the real army and, more importantly, by air power, to help defeat the enemy. But none of this will work if the population remains hostile. And large-scale repression only helps to unite the population against the occupiers. The fear in Washington is that the Iraqi resistance might attempt a sensational hit just before the next presidential election. The fear in the Arab east is that Bush and Cheney might escalate the conflict to retain the White House in 2004. Both fears may well be justified.

Tariq Ali is a critically acclaimed novelist and film-maker. He is most recently author of Bush in Babylon: Re-colonising Iraq (Verso, 2003) and The Clash of Fundamentalisms: Crusades, Jihads and Modernity (Verso, 2002). Email: tariq.ali3@btinternet.com. This essay first appeared in The Guardian of London. Posted with author's permission.

Other Articles by Tariq Ali

* Tariq Ali vs. Christopher Hitchens on the Occupation of Iraq

* Resistance is the First Step Towards Iraqi Independence
* Bush in Babylon: The Recolonization of Iraq -- An Interview with Tariq Ali
* The UN Has Capitulated

* Re-Colonizing Iraq

* A Second Resolution is Not Enough

* Doing as the Romans Did

Audio Lectures by Tariq Ali

* Poetry in Turbulent Times: The Role of Poetry in Political Struggles in the Muslim World

* War, Empire and Resistance