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Subject: Iraqi Oil and the Fed
Iraq not using oil cash to rebuild
Sharon Behn, LATimes
http://www.uruknet.de/?p=m40688hd=size=1l=e
January 30, 2008
Increased Iraqi oil revenues stemming from high prices and improved security
are piling up in the Federal Reserve Bank of New York rather than being spent
on needed reconstruction projects, a Washington Times study of Iraq's spending
and revenue figures has shown.
U.S. officials and outside analysts blame the collapse of the country's
political and physical infrastructure for Baghdad's failure to spend the money
on projects considered vital to restoring stability in the country.
Out of $10 billion budgeted for capital projects in 2007, only 4.4 percent had
been spent by August, according to official Iraqi figures reported this month
by the U.S. Government Accountability Office (GAO). The report cited unofficial
figures saying about 24 percent had been spent.
Meanwhile, some $6 billion to $7 billion from last year's budget is being
rolled over and invested in U.S. treasuries, said Yahia Said, director of Iraq
Revenue Watch, part of the private watchdog group Revenue Watch Institute.
The government is broken, said Mr. Said, speaking by telephone from Baghdad.
The country's midlevel bureaucracy has either fled the country or been purged
in de-Ba'athification, [and] a lot of ministers are politically appointed and
not professional.
The result is that orders go out from the ministers in Baghdad, but there is no
structure or staff at the middle level to carry out the instructions.
It's like they lost the manual for driving the government, said Mr. Said, who
is working to put that blueprint back together. They lost the landing
instructions for landing the airplane.
A quarterly report to be released today by Stuart W. Bowen Jr., the U.S.
special inspector general for Iraq reconstruction, says rising production and
high prices could produce a revenue windfall for Iraq this year, according to
the Associated Press.
Production levels finally are approaching prewar levels of 2.5 million barrels
a day and might reach 2.8 million barrels a day by the end of the year, Iraqi
Deputy Prime Minister Barham Salih told The Washington Times on the sidelines
of the World Economic Forum in Davos, Switzerland.
Acknowledging the need to reform the bureaucracy, Mr. Salih said, Some of us
think we can do a lot better [on production] if we do adequate or proper
management restructuring.
Oil prices, meanwhile, are expected to average $85 a barrel this year, well
above the $57 estimated in the Iraqi budget.
However, the GAO expressed frustration in a report this month at its inability
to get a handle on how these revenues are being spent.
We cannot determine the extent to which Iraq has spent [budgeted capital]
funds due to conflicting expenditure data, the report said.
It said the Bush administration, citing unofficial Iraqi data, reported in
September that Iraqs central government ministries had spent 24 percent of
their 2007 capital projects budget as of July 15.
However, this report is not consistent with Iraqs official expenditure
reports, which show that the central ministries had spent only 4.4 percent of
their investment budget as of August 2007, it said.
U.S. and foreign officials told the GAO that weaknesses in Iraqi procurement,
budgeting, and accounting procedures had stymied the completion of projects.
For example, according to the State Department, Iraqs Contracting Committee
requires about a dozen signatures to approve projects exceeding $10 million,
which slows the process, the GAO wrote.
Capital projects expenditure this year is expected to reach only $4.3 billion,
less than half of the $10 billion spent in 2007, according to a GAO analysis of
Iraqi government data provided by the U.S. Treasury.
Provincial governments, which had little or no control of their finances under
Saddam Hussein, are struggling to spend the money they have under new budget
systems, said Joseph Saloom, an adviser to David Satterfield, the senior
adviser to Secretary of State Condoleezza Rice and coordinator for Iraq.
That budget system includes strict bidding rules and a process of committee
approvals designed to prevent corruption, Mr. Saloom said.
But if a province needs a piece of specialized oil equipment, often there are
not three suppliers who bid, so the process is cut short and the project
cannot go forward, he said.
According to Mr. Said, the situation is slightly better on the local government
level, partly because of U.S. forces who supply protection, logistics,
resources and emergency funds.
There is more [improvement] on the gras-roots level on the back of the surge,
he said.
Reconstruction also has been
