The US-led effort to rebuild Iraq was facing more criticism yesterday after the Texan businessman installed to run the country's oil industry admitted having financial links to a company bidding for reconstruction work.

Philip Carroll acknowledged in an interview with the Los Angeles Times that he could be accused of a conflict of interest because of his relationship with Fluor. The disclosure will pile more pressure on to the Bush administration for its handling of the rebuilding program.

The secret process of awarding multi-billion-dollar contracts to reconstruction companies, many with links to the administration, has proven contentious in the US and Europe.

Mr Carroll said he could "absolutely" see that his business interests with Fluor could cause controversy. The Californian company has formed a joint venture with the British construction company Amec to bid for work estimated to cost about $6bn (£4bn).

Mr Carroll, 65, receives more than $1m a year from Fluor in retirement benefits and bonuses pegged to the company's performance. He also owns about 1m of its shares, worth about $34m.

He said he would distance himself from any future contracts to ensure that there would be no appearance that he had influenced any decisions. He also said that he had fully disclosed his financial interests to the defense department.

"I know at this stage of my life I don't want my reputation tarnished," he said.

"And I will stay so far away from any consideration of the bidding process, evaluation process or even the administration and arbitration of things associated with any of those companies in which I have a financial interest.

"Believe me, I will have absolutely nothing to do with it."

Fluor is well connected. Kenneth Oscar, the vice-president of the firm, is a former army secretary and oversaw the Pentagon's $35bn procurement budget while he was in office.

USAID, which has earmarked an initial $2.4bn for reconstruction and humanitarian work, expedited the normal tendering process and invited only six American companies to bid for the main contract, eventually awarded to Bechtel.

The army awarded a separate contract, which could be worth up to $7bn, to Kellogg, Brown & Root, a division of Halliburton, the company once run by Vice-President Dick Cheney. Mr Cheney receives $180,000 a year in deferred income from Halliburton.

The European Commission, which had vowed to examine the tendering process, said yesterday that its investigators had so far found no reason to challenge the contracts awarded.

Mr Carroll will lead an advisory board largely made up of international oil experts and exiled Iraqis. Most of the people running the industry on a day-to-day basis will be Iraqi technocrats, a deliberate move by the Pentagon to avoid the accusation that the US has taken over the industry.

But it remains to be seen how much power Mr Carroll will wield. He has launched a review of the options for the industry, which could include privatizing the state-run business and opening up the oil to foreign investors and oil companies.

© Guardian Newspapers Limited 2003

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