Where Did The Iraq Oil Money Go?

By- Suzie-Q @ 6:00 PM MST

Senate Committee Seeks Audit of Iraq Oil Money

The Baiji oil refinery, Iraq’s largest. Although Iraq’s oil profits have soared, it is unclear how much of the money has been spent on critical reconstruction projects.

By JAMES GLANZ

Published: March 9, 2008

Two senior members of the Senate Armed Services Committee have requested a full accounting of how Iraq is spending its soaring oil revenues, amid starkly conflicting estimates of how much the country has invested in rebuilding its broken infrastructure and providing basic services to its citizens.

The request, sent Friday to David M. Walker, the top official at the United States Government Accountability Office, estimates that Iraqi oil revenues could skyrocket above $56 billion in 2008, largely because of the rising price of oil.

This enormous influx of cash comes as the United States has been reducing spending on the reconstruction effort. Since the invasion in 2003, the United States has invested close to $50 billion in reconstruction, but the effort has achieved at best mixed results when measured by improvements in the lives of Iraqi citizens.

Still, the American military and State Department continue to finance a wide range of relatively small reconstruction projects as well as training and equipment for Iraqi military forces.

But in spite of the dire need for better health care, more electricity and clean water, a functioning sewage system and other services, the accountability office has previously estimated that Iraq spent only 22 percent of the oil money set aside for reconstruction in 2006. And in January, the office, which is charged with overseeing the Iraqi government’s finances, reported that Iraq had spent a meager 4.4 percent of its 2007 reconstruction budget by August of that year, the most recent figures available at the time.

As a result, the letter from the Armed Services Committee says, “we believe that it has been overwhelmingly U.S. taxpayer money that has funded Iraq reconstruction over the last five years, despite Iraq earning billions of dollars in oil revenue over that time period that have ended up in non-Iraqi banks.”

The letter was signed by Senator Carl Levin, the Michigan Democrat who is the committee chairman, and Senator John W. Warner, a Virginia Republican who is a former chairman. Senator John McCain of Arizona, the ranking Republican on the committee and the presumptive Republican nominee for president, did not sign the letter.

Iraqi officials say that they face many obstacles in what might seem to be a straightforward task: spending their plentiful money. Workers are attacked, engineers and contracting experts have fled government ministries, construction companies refuse to take jobs in risky areas and building materials are not available.

And if all of those factors were not daunting enough, the various Iraqi and American government entities involved cannot even agree on how much the notoriously opaque Iraqi bureaucracy has in fact spent on reconstruction.

Last fall, as Gen. David H. Petraeus, the top American commander in Iraq, and Ryan C. Crocker, the American ambassador to Iraq, reported to Congress on the state of the war, the Bush administration provided figures that contrasted sharply with those of the accountability office. The administration reported that by July 2007, Iraq had spent 24 percent of the $10 billion in oil revenue set aside for reconstruction that year.

The accountability office disputed those figures, saying they were based in part on projections that proved inaccurate. But in a recent phone interview, a senior Iraqi official gave even more bullish estimates of the expenditures. Citing official Iraqi Finance Ministry figures, the official, who spoke on condition of anonymity in order to provide information that had not yet been publicly released, said by the end of last year, Iraq had spent 63 percent of its capital budget, a leap over the previous year that would indicate rapid progress in governmental efficiency.

“It’s totally unacceptable that there’s no decent accounting for their money,” Senator Levin said in a telephone interview Saturday. “But the problem is our money. Why are we spending our money five years later when they have a surplus? That’s just extraordinary.”

In order to resolve some of these discrepancies and track down where the oil money has gone, the letter by Senators Levin and Warner asks the accountability office to answer a series of basic questions.

The senators requested detailed information on the amount of Iraqi oil revenues from 2003 to 2007, how much of that money has gone unspent, and “how much money does the Iraqi government have deposited, in which banks, and in what countries?”

Finally, Senators Levin and Warner ask the question looming over the entire rebuilding effort: “Why has the Iraqi government not spent more of its oil revenue on reconstruction, economic development and providing essential services for the Iraqi people?”

Also on Friday, Iraqi security forces discovered a mass grave containing the remains of about 100 people in Diyala Province, said Maj. Winfield Danielson, a spokesman for Multinational Forces-Iraq. The remains were skeletal, indicating that they had been there for some time, Major Danielson said, adding that no information was yet available on who was responsible for the killings.

In the southern provincial capital of Basra, an estimated 2,000 residents marched peacefully on the local police headquarters, protesting the inability of security forces to prevent the killings that are increasingly frequent there as Shiite militias and other groups vie for power.