In the statement, Ingrid Harrison, an official with the Pentagon’s contracting management agency, disclosed that an electrical fire caused by poor wiring in a nearby building two weeks before Sergeant Maseth’s death had endangered two other soldiers.

“The soldiers were lucky because the one window that they could reach did not have bars on it, or there could have been two other fatalities,” Ms. Harrison said in the statement. She said that after Sergeant Maseth died, a more senior Pentagon contracting official in Baghdad denied knowing about the fire, but she asserted that “it was thoroughly discussed” during internal meetings.

Ms. Harrison added that KBR officials also knew of widespread electrical problems at the Radwaniya Palace Complex, near Baghdad’s airport, where Sergeant Maseth died. “KBR has been at R.P.C. for over four years and was fully aware of the safety hazards, violations and concerns regarding the soldiers’ housing,” she said in the statement. She added that the contractor “chose to ignore the known unsafe conditions.”

Ms. Harrison did not respond to a request for comment.

In another internal document written after Sergeant Maseth’s death, a senior Army officer in Baghdad warned that soldiers had to be moved immediately from several buildings because of electrical risks. In a memo asking for emergency repairs at three buildings, the official warned of a “clear and present danger,” adding, “Exposed wiring, ungrounded distribution panels and inappropriate lighting fixtures render these facilities uninhabitable and unsafe.”

The memo added that “over the course of several months, electrical fires and shorts have compounded these unsafe conditions.”

Since the United States invaded Iraq in 2003, tens of thousands of American troops have been housed in Iraqi buildings that date from the Saddam Hussein era. KBR and other contractors have been paid millions of dollars to repair and upgrade the buildings, including their electrical systems. KBR officials say they handle the maintenance for 4,000 structures and an additional 35,000 containers used as housing in the war zone.

The reports of shoddy electrical work have raised new questions about the Bush administration’s heavy reliance on contractors in Iraq, particularly because they come after other high-profile disputes involving KBR. They include accusations of overbilling, providing unsafe water to soldiers and failing to protect female employees who were sexually assaulted.

Officials say the administration contracted out so much work in Iraq that companies like KBR were simply overwhelmed by the scale of the operations. Some of the electrical work, for example, was turned over to subcontractors, some of which hired unskilled Iraqis who were paid only a few dollars a day.

Government officials responsible for contract oversight, meanwhile, were also unable to keep up, so that unsafe electrical work was not challenged by government auditors.

Several electricians who worked for KBR have said previously in interviews that they repeatedly warned KBR managers and Pentagon and military officials about unsafe electrical work. They said that supervisors had ignored their concerns or, in some cases, lacked the training to understand the problems.

The Army documents cite a number of recent safety threats. One report showed that during a four-day period in late February, soldiers at a Baghdad compound reported being shocked while taking showers in different buildings. The circumstances appear similar to those that led to Sergeant Maseth’s death.

Another entry from early March stated that an entire house used by American troops was electrically charged, making it unlivable.

Since the Pentagon reports were compiled, more episodes linked to electrical problems have occurred. In late June, for example, an electrical fire at a Marine base in Falluja destroyed 10 buildings, forcing marines there to ask for donations from home to replace their personal belongings.

On July 5, Sgt. First Class Anthony Lynn Woodham of the Arkansas National Guard died at his base in Tallil, Iraq. Initial reports blamed electrocution, but his death is being investigated because of conflicting information, according to his wife, Crystal Woodham, and a spokesman for the Arkansas National Guard.

LDNEWS

Cost spirals to $22b; crushing debt sidetracks other work, pushes agency toward insolvency
Price of Boston's Big Dig project continues to rise (NECN: Latoyia Edwards, Boston, Mass.) - The cost of Boston's massive Big Dig highway project is going up, again. The interest is adding billions of dollars to the price tag and it will be years until the state pays off the debt. The Big ...

In Boston, Red Line trains on the Longfellow Bridge are forced to a crawl, trucks are prohibited, and the volume of passenger cars is restricted. On the South Shore, the Fore River Bridge between Quincy and Weymouth is awaiting replacement while motorists squeeze over a temporary span. And in Southeastern Massachusetts, Fall River motorists are frustrated with the pace of work on replacing the Brightman Street Bridge.

"It's a mess," said Fall River resident Muriel Pomprowicz.

Other such signs of neglect include a fleet of rusty trucks, some of them 12 years old, that are still on the road.

From the start, the Big Dig was supposed to be paid for jointly by the federal and state governments. When the project was unveiled in the early 1980s, Massachusetts residents were told by transportation officials that the federal government would pick up 90 percent of the cost. Based on cost and borrowing estimates made at that time, state residents were expected to spend around $345 million, interest payments on debt included.

But the federal government ruled that the project was not eligible for that level of federal support. As costs mounted over the next two decades, it was the state's responsibility to make up the difference. Ultimately, the federal government paid just 27 percent of the construction costs, or about $4 billion.

As a result, the Globe analysis of state and federal data shows, state taxpayers and toll-payers are responsible for a staggering $18 billion of the total $22 billion in construction and debt costs.

The Massachusetts Turnpike Authority, which was brought in to oversee the Big Dig construction in 1996 as part of a financial rescue plan, borrowed $1.8 billion, but will have to pay back almost $5 billion, including interest. Its borrowing was so expensive because it was financed over 40 years, twice as long as the vast majority of government debt, with no principal due for the first 10 years.

It is now unable to keep up with its share of the state's debt payments and is in desperate need of a bailout. Alan LeBovidge, the turnpike's new executive director, estimates a yawning deficit next year in the authority's operating budget, $70 to $100 million.

"There is a funding gap," said LeBovidge. "It's a large number, and I don't have a magic wand."

"It's outrageous that toll-payers wind up footing the bill when others get a free ride," said Mary Z. Connaughton, a Turnpike Authority board member.

Quantifying the amount of money that was diverted to the Big Dig from statewide road and bridge repair and construction programs is difficult. A Globe analysis of data maintained by the Federal Highway Administration shows spending for state roads and bridges lagged behind other states. If Massachusetts had kept pace, it would have spent an additional $851 million.

"The Big Dig drained funding away," Cohen said. "I can't tell you exactly how much, but it's been in the billions of dollars."

There are two sources of state highway funds: state borrowing and reimbursement to the state on federal gasoline taxes collected in Massachusetts. The Big Dig, which makes up 7.5 miles of an 11,000-mile system, gobbled up about 40 percent of those funds during the last 17 years, data show.

Since planning for the Big Dig began, the state gas tax was raised only once, in 1991, to help pay for the Big Dig. That two-cent-per-gallon increase contributed a modest amount to the project.

"The state didn't want to pay the cost as we went along, so now it is time to pay the piper," said Alan Altshuler, former state transportation secretary. "It's quite a bind, and there is no obvious way out. It's something the politicians have to figure out."

So far, the answer adopted by Governor Deval Patrick and his administration is a familiar one: Borrow more money to meet current transportation needs. The administration has gained legislative approval for $5 billion in new borrowing for transportation projects and is asking for $4 billion more in a plan to get the state's 3,000 bridges into top condition over the next eight years.

Asked why the state doesn't raise taxes to help pay for its burgeoning costs, Cohen said no such course was necessary.

"We can afford these borrowings within the income stream we have today," Cohen said. "Raising taxes is not on the table."

Since taking office, Patrick has proposed merging the Turnpike Authority with other transportation agencies to increase efficiency and save money. He also has begun to reduce the number of workers being paid with borrowed money.

There have been high-level discussions about adding tolls on Interstate 93, as well, though Cohen insists only as a last resort.

"What is on the table is reform and reorganization to show people we are serious about sound policy," he said. "We need to turn things around before we ask people to dig in deeper in pocket."

Cohen said eliminating consulting contracts, reducing senior staff, and curtailing overtime at the turnpike have contributed to $14 million in savings in the last year.

But more is needed, said Michael Widmer, president of the Massachusetts Taxpayers Foundation. It simply avoids the nasty reality by borrowing deeper and longer into future, he said.

"They are not addressing the situation, they are just shifting billions of dollars of debt to future generations," Widmer said.

"Nobody wants to be the one to increase taxes," he said. "But without taxes, it means the next generation will face a deep hole."

Sean Murphy can be reached at smurphy@globe.com.

Thu Jul 17, 2008 9:23am EDT

LONDON (Reuters) - The United States will announce in the next month that it plans to establish a diplomatic presence in Tehran for the first time in 30 years, a British newspaper said on Thursday.

In a front-page report, the Guardian said Washington would open a U.S. interests section in the Iranian capital, halfway towards opening an embassy.

The unsourced report by the newspaper's Washington correspondent said: "The Guardian has learned that an announcement will be made in the next month to establish a U.S. interests section in Tehran, a halfway house to setting up a full embassy.

"The move will see US diplomats stationed in the country."

Senior U.S. diplomat William Burns said in testimony to Congress last week the United States was looking to opening up an interest section in Tehran but had not made a decision yet.

The Guardian said the development was "a remarkable turnaround in policy by President George Bush who has pursued a hawkish approach to Iran throughout his time in office".

Washington said on Wednesday it was sending Burns to join atomic talks with Iran this weekend to signal to Tehran and others that Washington wanted a diplomatic solution to their nuclear impasse.

Iran says its nuclear work is for peaceful power generation, and not for the development of nuclear weapons as the West suspects, and has rejected conditions it give up uranium enrichment.

On Sunday, President Amhmoud Ahmadinejad suggested Iran would consider any proposal by the United States for a U.S. interests section in the Islamic Republic, should one be forthcoming.

U.S. media have reported that the State Department is considering opening an interests section that could mean U.S. diplomats returning to Tehran but operating under another country's flag.

The United States cut off diplomatic ties with Tehran during the 1979-1981 hostage crisis, in which a group of militant Iranian students held 52 U.S. diplomats hostage at the American embassy for 444 days.

Iran maintains an interests section at the embassy of Pakistan in Washington. Mottaki said it serves the large Iranian community in the United States.

(Reporting by Andrew Dobbie; additional reporting by Sue Pleming in Washington; editing by Ralph Boulton)

By Anthony Faiola and Jill Drew

Washington Post Staff Writers
Thursday, July 17, 2008; Page D01

The global slowdown stemming in part from the deepening U.S. financial crisis is hitting the world's richest nations the hardest even as emerging nations, some with once-fragile economies, are proving relatively resilient.

Employees work at a garment factory in China. Many factories have closed as demand has slackened and costs for labor and materials have risen. (China Photos -- Getty Images)

Consider, for instance, Britain. A severe housing slump and credit crunch sparked a 63 percent drop in new home mortgages in May compared with May 2007. Mirroring losses in the United States, the average home price in Britain fell to $344,704 in June, down 6.3 percent compared with June 2007, according to the Nationwide Building Society. The stock market in London slipped into bear market territory, joining New York's.

"It affects everybody, and you need not be a home owner, or have credit or be a consumer," said Martin Slaney, head of derivatives at GFT Global Markets in London. "People are getting used to a new terminology; they know all sorts of credit-crunch-related terms. Money can be made now, but generally it's a hugely unfortunate economic time. There's a lot of talk about how bad it is."

Contrast that with oil-fat Russia -- a red-hot emerging market. As in many commodity-driven economies in the developing world, soaring energy revenue has largely insulated Russia, the world's second-largest oil exporter, from the turbulence in global markets. Its gross domestic product is expected to grow 8 percent this year, and consumer spending continues to boom, with a 13 percent increase so far this year, according to Troika Dialog, a Moscow investment house.

It marks a global economic role reversal of sorts. When financial crises hit the Asian markets in the 1990s and Argentina in 2001, the aftershocks spread to other emerging economies, plunging several into recession while wealthy countries went relatively unscathed. Rather than taking its toll largely on residents of developing countries, this economic downturn may cause the greatest damage to those living in the wealthiest countries on earth.

The U.S. economy and financial system are more closely linked to those in other wealthy nations, particularly in Europe, where rising inflation and the weak dollar are adding to growing trouble. The United States and Europe have "similar economies and share the potential problems of industrialized nations in terms of property price fluctuations and financials," said Simon Johnson, chief economist at the International Monetary Fund. "And they find themselves sharing variable degrees of vulnerability."

As global wealth has shifted during the past decade, emerging markets have become not only increasingly stable but they have also been claiming a larger portion of the world's riches than ever before. If Californians are rushing to withdraw money from banks there, the situation in Kenya is just the opposite: People are flocking to banks to open accounts. The Nairobi exchange, which lists mostly Kenyan companies and a handful of multinational firms, posted 10 percent gains in the three months ended in June as local and foreign investors flocked to the initial public offering of the cellphone giant Safaricom.

"I don't think there has been any impact," said Peter Wachira, a manager with AIG Global Investment in Nairobi, referring to the market turmoil. "Where markets in developed countries have been going down, ours has been going up."

That does not mean the emerging world is buffered completely, particularly if both the United States and Europe slip into recession or if the financial crisis in the United States claims more and bigger financial institutions. And without question, sectors of emerging economies are already being stung.

There is growing fear especially in the fastest-growing Indian technology markets, which include outsourcing, back-office operations and call centers. Those sectors are 70 percent dependent on the United States. Several Indian technology companies have slowed their hiring because of the U.S. economy's slowdown. In May, industrial output was up 3.3 percent, half the 6 percent increase in May 2007.

Exports in China -- the darling of the 21st-century economy -- are also being hammered by slackening demand caused by the global slowdown and rising labor and material costs. Chen Gong, who runs a factory that makes plastic cleaning devices in Ningbo, a manufacturing city near Shanghai in the Yangtze River delta, has seen profits slip partly from the yuan's controlled but steady rise against the dollar. It has slashed profit margins for many mid-size manufacturers from 15 to 3 percent. Many factories in nearby Guangdong province have closed their doors, and thousands of workers have lost their jobs.

"We'll just see who can survive this," Chen said. Experts predict as many as one-third of export manufacturers will close in the next three years.

Chinese exports to the United States have been flat this year and will likely experience a rare, overall decline by year-end, said Arthur Kroeber, managing director at Dragonomics, a research firm in Beijing. Yet experts said that might be exactly what China needs. A global slowdown -- if tempered -- could help China stage a soft landing for its breakneck economic growth.

"In some ways, this is not only welcome but desired by the Chinese," said Vikram Nehru, the World Bank's chief economist for East Asia and the Pacific.

In Europe, which analysts once hoped would be a pillar of economic strength in the event of a U.S. recession, analysts are now warning of possible recession. The weakening dollar has made German chemicals and cars exceedingly expensive overseas -- particularly in the United States -- stinging the manufacturing industry in the euro zone's largest economy. Spain, Ireland and Britain are mired in painful housing slumps with their financial institutions squeezed by the U.S.-sparked global credit crunch.

British consumers, in particular, are tightening their belts. Marks & Spencer, a bellwether of Britain's retail sector, has reported declining sales in recent weeks. The latest survey by the British Chambers of Commerce showed confidence among businesses at its lowest since the most recent British recession in the early 1990s.

"The credit crisis, runaway inflation, mind-blowing energy crisis, falling confidence, housing prices -- they have created a perfect storm," said Henk Potts, equity strategist at Barclays Wealth. "It's currently a market for the brave."

Drew reported from Beijing. Correspondents Peter Finn in Moscow, Blaine Harden in Taipei, Emily Wax in New Dehli, Stephanie McCrummen in Nairobi, special correspondent Karla Adam in London and researcher Lui Songjie contributed to this report.