Leading reconstruction companies operating in Iraq are starting to exit the country. Not only does this indicate just how unstable Iraq has become, but it also has foreboding implications for the United States military.

Bechtel, America’s largest engineering company and one of the leading firms involved in reconstruction in Iraq, announced November 2 that it is concluding its work in Iraq. With 52 of its employees having been killed and 49 injured in the past three years and violence continuing to escalate, Bechtel said it considers the security situation in Iraq too unstable to justify remaining.

Bechtel’s move follows Kroll Security International’s decision to sell its subsidiary that provides security services in Iraq and Afghanistan. Kroll is a U.S. heavyweight in the bodyguard business. Stratfor wrote November 3:

When companies like Bechtel and Kroll begin to withdraw from Iraq, the situation has clearly reached a new level of instability. These firms are used to working in unstable environments, and security threats are simply a part of the business they are in. When they have to start calculating that the threat is greater than the potential profit, the situation is indeed serious.

Of course, the loss of such companies will hinder the reconstruction process in Iraq. But the impact goes deeper than that: The capabilities of the U.S. military itself will be severely diminished.

The U.S. Army, in particular, relies heavily on the private sector to operate in foreign theaters. Stratfor explains that, during the 1990s, the Army was reconfigured in such a way that it could not go into combat without outsourcing support services to the private sector. With military planners perceiving that the world had entered a new age of stability, they did not anticipate being confronted with insurgencies and prolonged warfare. This near-sighted philosophy meant that the U.S. military was streamlined and reorganized to be dependent on Reserves to make up the manpower in periods of combat, and to use private contractors to provided services that the military once took care of itself.

The dangerous results of this policy are now being reaped in Iraq, where the military force is becoming exhausted and support services are starting to leave.

In the course of the Iraq war, the challenges have gone beyond feeding the troops to include rebuilding infrastructure, providing security to the firms doing the rebuilding, and so on. The Army could not provide security to engineering companies, so private companies like Blackwater were bought in. As the situation developed, the dependency on these contractors expanded, until the war effort—understood in the broad sense of nation-building—became enormously dependent on these contractors.But they have a different appetite for risk than the military. They are free to leave, and they are leaving. It is unlikely that a decision reached by Bechtel and Kroll is so unique that others won’t follow. They will. And that now poses a new problem for the U.S. effort: It does not have the military capability of filling in for the contractors. There are just not the numbers or skills. That means that if the security situation worsens, we will see a spiral in which contractors withdraw, the security situation further deteriorates and more contractors withdraw.

Stratfor comments on what this means for the U.S. military:

The combat capability of the U.S. Army is therefore breaking in two ways. First, its manpower base is being exhausted through multiple deployments. Second, it is now going to find that the contracting support it relies on won’t be there if the security risk becomes too extreme. … [T]he Army is not built to operate without them.

The U.S. military has been struggling enough in Iraq. The pressure has been mounting for the troops to leave. If private contractors desert their support roles, it will become even tougher for the U.S. to fulfill its mission.