Posted on 29-6-2004

Fuelling suspicion: Iraq's Missing Oil Billions
From Christian Aid

Ed. Information is needed for accountability. Provision of information so
that Iraqis can see how their oil revenue has been earned and exactly how
it is being spent. The NZ Government needs to go straight and ask the USA
to do the same if there is any expectation of Iraq going anywhere but to
social and economic hell.

............

28 June 200 4 – The US-controlled coalition in Baghdad has handed over
power to an Iraqi government without having properly accounted for what it
has done with some $20 billion of Iraq's own money, says a new report
published by Christian Aid.

An interim, critical, audit of the Coalition's handling of Iraqi revenues
is only being delivered this week - the same week in which the CPA will
cease to exist. Christian Aid believes this situation is in flagrant
breach of the UN Security Council resolution that gave control of Iraq's
oil revenues and other Iraqi funds to the Coalition Provisional Authority
(CPA). "For the entire year that the CPA has been in power in Iraq, it has
been impossible to tell with any accuracy what the CPA has been doing with
Iraq's money," said Helen Collinson, head of policy at Christian Aid.

Resolution 1483 of May 2003 said that Iraq's oil revenues should be paid
into the Development Fund for Iraq (DFI), that this money should be spent
in the interests of the Iraqi people, and be independently audited. But it
took until April 2004 to appoint an auditor - leaving only a matter of
weeks to go through the books. Early reports of the audit indicate strong
criticisms of the CPA's handling of Iraq's money. But the CPA is not going
to be around to be held accountable.

In the run-up to the handover, nearly $2 billion of Iraq's money has been
hastily allocated. The new Iraqi government will be committed to these
spending decisions. The lack of anything more than basic information about
the CPA's spending of Iraq's funds is in stark contrast to the information
on the US$18.4 billion of US taxpayers' money that is also being spent in
Iraq. No less than four separate audits of the US funds are underway.

All this sets a very bad precedent for the incoming Iraqi government. "Too
many oil-rich countries go down the road of unaccountable government,
riches for the few, and poverty for the many. Iraq can avoid this route,
but only by ensuring transparency," said Ms Collinson.

Iraq's oil represents huge potential wealth. With half of the population
still unemployed, the Iraqi people need to be able to see that the oil
revenues are being spent to alleviate poverty and to improve their lives.

In October 2003 Christian Aid revealed that an astonishing $4 billion of
Iraq's oil revenues and other funds were unaccounted for. That report,
Iraq: The Missing Billions, called for much greater clarity and for a
thorough audit - which even at that time was months overdue. Since then,
the CPA has provided more information about what it is doing with Iraq's
oil revenues. But it is still woefully inadequate. We still do not know
exactly how Iraq's money has been earned, which companies have won the
contracts that it has been spent on, or whether this spending was in the
interests of the Iraqi people.

A senior UN diplomat told Christian Aid: "We only have the total amounts
and movements in and out of the DFI. We have absolutely no knowledge of
what purposes they are for, and if these are consistent with the security
council resolution."

Iraqi construction companies charge about a tenth of what their US
counterparts do. It was only in April 2004 - almost a year after the CPA
took control of Iraq's oil revenues and started awarding contracts - that
it belatedly began to reserve any contract from the DFI worth less than US
$500,000 for Iraqi companies. "What has the coalition got to hide by not
making such information available for Iraq's own money? Is it putting the
cash to the best use for the people of Iraq? Or is it still rewarding US
companies with lucrative contracts?" said Ms Collinson.

Experts agree that it is almost impossible to work out what Iraq is
earning from oil. Two different CPA documents give different figures for
the oil revenue in the year to the end of May. One says $10 billion. The
other says $11.5 billion. Christian Aid attempted its own calculation of
Iraq's oil revenue using publicly available figures and came up with $13
billion.

Assessing Iraq's oil revenue is made so difficult because Iraq's oil
production is still not being metered, as is standard industry practice.
The CPA appears to have failed to prioritise a task that should form the
bedrock of transparency over oil revenues.