Kofi Annan declared earlier this month: "As long as there's an occupation, the resistance will grow". Yesterday's attacks in Iraq bear out his solemn warning and are a cruel reminder of the problems at the heart of the US and British occupation.
This increasingly emerges as a war we should never have started and now do not know how to end. Despite positive work by British forces in southern Iraq, many of our current policies in the country are creating further resentment among Iraqis, and providing stimulus for the growing violence.
There always was a contradiction at the core of this government's Iraq war. We were going to war "to uphold the authority of the United Nations", the government said, meanwhile rubbishing the objections of other security council members and initiating military force without any UN Resolution specifically to authorize it.
It claimed that it had no quarrel with the Iraqi people but fought a war with cluster bombs and depleted uranium; now between 7,000 and 9,000 Iraqi civilians are dead. It said it would liberate Iraqis from suffering; but there have already been 1,500 additional violent deaths registered in the Baghdad city morgue alone. It promised that expenditure on Iraq would not threaten our overseas aid elsewhere; but last week announced that £100m will be cut from our global aid budgets for poor people to fund the aftermath of its military adventure. Six months on, no weapons of mass destruction have been found at all.
We were urged into war on a misleading prospectus and we surrendered the sovereignty of our foreign policy decisions to President Bush's neo-conservative cabal in Washington. All this deserves condemnation. But we cannot allow our attention to waver from the current situation in Iraq. Even while serious fighting continues, the economic destiny of the country is being decided - not by the Iraqis themselves, but by the occupying powers and the US-appointed governing council, almost half of whom are exiles.
On the initiation of Paul Bremer, the US head of the Coalition Provisional Authority, a new law, order 39, came into force last month. It permits complete foreign ownership of Iraqi companies and assets (apart from natural resources) that have hitherto been publicly owned, total overseas remittance of profits and some of the lowest corporate tax rates in the world. In short, Iraq's economy has been put up for sale.
The reforms are inconsistent with the undertaking at the UN to promote "the right of the Iraqi people freely to determine their own political future". Nor do they sit well with international law. The Hague regulations require that occupying powers respect the laws in force in a country "unless absolutely prevented". The attorney general himself warned the prime minister in March that this would rule out "major structural economic reforms". But that is exactly what is now being imposed.
It is extraordinary to hear a Labour (albeit New Labour) government endorsing such economic shock therapy. An extreme market model proved disastrous in post-Soviet Russia, where half the population fell below the poverty line. In Iraq, the effects are already being felt. Rather than repair the Baghdad telephone exchange, which the coalition bombed, the elitist decision has been made that Iraqis should rely on foreign-owned mobile phone networks. Press reports indicate that Iraqi hospitals, once famed as the best in the region, now face plans for privatization.
The government is plainly on the back foot. Hilary Benn, the international development secretary, claimed last week that "Iraq's assets are not for sale". Paul Bremer himself contradicted that assertion this week, saying "if the economy is going to grow, it's going to have to happen". Valerie Amos, the leader of the House of Lords, claimed that the economic reforms were the inspiration of Iraqis. But the Iraq governing council, some of whose members have declared their outright opposition, only endorsed the order after Bremer had signed it. Iraqi unemployment is running at 60-70%, and privatization. by foreign companies would lead inevitably - according to Rubar Sandi, a leading Iraqi adviser to the US state department - to yet more lay-offs, crime and social unrest.
Reforms that change the face of the Iraqi economy should wait until the Iraqi people can be consulted and a democratic government established. Iraqis must feel they have ownership over what is happening in their country, and this cannot happen while fundamental policies determining their future are imposed by foreign occupiers - occupiers that have shown little consideration for the needs of ordinary Iraqis. The British government, with its American partner, must stop to think whether it is sowing the kind of resentment which is the seedbed of future terrorism.
· Baroness Williams is leader of the Liberal Democrats in the House of Lords
© Guardian Newspapers Limited 2003