Dems to follow the money from Iraq back to K Street

Senior Democrats are starting to discuss ways to target Washington-based lobbying firms whose clients include the Iraqi government as part of their election-year strategy to seize on the costs of the five-year-old war.

After repeatedly failing to bring troops home from Iraq, Democrats recognize they might have a better chance of winning politically if they continue to hammer away at how money for the war is being spent amid the country’s economic slowdown.

{mosads}Supporters of Sen. Barack Obama’s (D-Ill.) presidential campaign say that an emphasis on Iraq and how tax dollars might have been channeled back to K Street also feeds into his campaign theme of attacking the role of lobbyists in Washington. Sen. Charles Schumer (N.Y.), the vice chairman of the Democratic Conference, said Tuesday that Congress might target the firms by adding language to the wartime supplemental spending bill now being developed behind closed doors. The language is still being drafted, but it could entail a State Department investigation into the use of the funds or language prohibiting Iraq from using U.S. dollars to hire Washington lobbyists, according to aides and senators briefed on the proposal.

“It is something we’re looking at,” Schumer said Tuesday, declining to comment further.

Schumer plans to call attention to the issue this week, according to an aide.

A key supporter of Sen. John McCain (Ariz.), the GOP’s presumptive presidential nominee, said countries hire lobbyists all the time, and at least one Democrat cautioned against the precedent of limiting who can hire an advocate in Washington.

But others are more inclined to take a closer look.

Claire McCaskill (D-Mo.), who sits on the Senate Armed Services Committee and is a key Obama supporter, said examining the issue would “absolutely” fit in with Obama’s campaign theme.

“Frankly, Iraq has got the best lobbyist in the world — it’s called President Bush and Vice President Cheney,” McCaskill said. “If we can determine that our money is hiring lobbyists for Iraq, that is really going to make me angry, and I think it would make most Americans really angry.”

Since the war began in 2003, major lobbying firms have quietly accepted clients that represent Iraqi interests, pushing lawmakers to make sure that Congress does not approve legislation running counter to their objectives in the country.

{mospagebreak}According to Justice Department records, there are 12 active contracts for lobbyists representing a range of interests in Iraq, including the Finance Ministry, the Kurdish Democratic Party, former interim prime minister Ayad Allawi, the Kurdistan Regional Government, the Republic of Iraq and the office of Prime Minister Nouri al-Maliki — totaling more than $20 million since 2003.

The firms enlisted include major Washington firms, such as Cleary, Gottlieb, Steen and Hamilton, Fulbright and Jaworski and American Business Development. Patton Boggs, one of Washington’s biggest firms, has represented the Trade Bank of Iraq, the main financial institution in the country.

Last August, Allawi hired the influential GOP firm Barbour Griffith and Rogers, which promoted him as an alternative to al-Maliki, according to press reports at the time. A spokeswoman for the firm could not be reached immediately for comment.

{mosads}There is nothing unusual about foreign countries hiring Washington lobbyists, but the fight comes amid a fierce election-year debate over the war and campaign promises of reining in Washington lobbyists.

Iraqi officials insist that no American dollars have been used to hire lobbyists, saying their country’s money has been used to settle legal issues in Washington and for help reducing the national debt incurred after the fall of Saddam Hussein.

Samir Sumaidaie, the country’s ambassador in Washington, said in an interview that Iraq “absolutely” has not spent any U.S. dollars on lobbying activities in Washington.

“If we retained a lobbying firm, that would be totally within our rights and nothing extraordinary at all, provided that we pay for them ourselves,” Sumaidaie said.

For instance, Sumaidaie said that the government spent money on lobbyists last year to urge Congress to remove a provision in a defense bill that it claimed would have exposed Iraq to massive liability because of wrongdoings by the Hussein regime.

Lawyers from Iraq warned that the country would withdraw $25 billion worth of assets from capital markets if the provision went into law.

“The money that is being spent is aimed at defending Iraq interests in American courts,” Sumaidaie said.

Sumaidaie said the services have been used for Cleary, Gottlieb, Steen and Hamilton, which helped enlist the Treasury Department to reduce the country’s national debt.

But Democrats are skeptical. They say that currency is fungible and that the billions of U.S. tax dollars intended to rebuild Iraq are essentially bankrolling lobbyists on K Street.

“My personal feeling is that it shows how much money the Iraqis have, passing out money to everybody — why do we keep paying all their bills?” Senate Majority Leader Harry Reid (D-Nev.) said in a brief interview.

Senate Armed Services Committee Chairman Carl Levin (D-Mich.) says that a slowing U.S. economy is forced to shoulder the costs of reconstruction of Iraq.

Still, there may be resistance within the Democratic Conference.

Schumer’s office has reached out to a number of Senate Democrats, including Sen. Dianne Feinstein (Calif.), who sits on the Appropriations Defense subcommittee.

But Feinstein has reservations, saying it would set a dangerous precedent of limiting the activity of lobbyists representing countries in disputes with the United States.

“I think it’s a mistake to limit who can use a lobbyist, so the next thing is to limit the next country with whom we have a difference of opinion,” Feinstein said. “I just don’t believe that’s the way to do it.”

Republicans are likely to pound the proposal as well.

“A lot of governments have people hired to lobby for them,” said Sen. Lindsey Graham (R-S.C.), McCain’s biggest ally in the Senate. “Our Democratic friends since last April have had Iraqi policies tied around the next election. I think that’s short-sighted and dangerous.”