Team Infidel
Forum Spin Doctor
Wall Street Journal
April 30, 2008
Pg. 4
Report Urges Nation To Spend More Cash On Reconstruction
By Yochi J. Dreazen and Chip Cummins
WASHINGTON -- A new U.S. government report projects Iraq's oil revenue will top a record $70 billion this year, adding fuel to a congressional push to force the Iraqi government to assume more responsibility for rebuilding the country.
The report from Special Inspector General for Iraq Reconstruction Stuart Bowen, which will be released Wednesday, highlights the windfall Iraq stands to reap this year because of soaring oil prices. The cost of a barrel of Iraqi oil has increased by 250% since 2003, and Iraq earned more than $18 billion from oil sales in the first quarter of 2008, the report found.
If Iraq is able to maintain its current levels of production and exports for the entire year, its oil revenue will be double what the Iraqi government had anticipated even a few months ago. "Iraq's oil income, forecasted in 2003 to be the primary pool of capital for post-war reconstruction, now has become the chief funding source," the report found.
The report comes as lawmakers from both parties push measures designed to force Baghdad to spend more of its oil money on reconstruction. Sens. Susan Collins (R., Maine), Ben Nelson (D., Neb.) and Evan Bayh (D., Ind.) are drafting legislation requiring future U.S. reconstruction aid to Iraq to come in the form of loans, rather than grants.
"The time has come to end this blank-check policy and require the Iraqis to invest in their own future," the senators wrote in a letter to Defense Secretary Robert Gates.
Rep. Ike Skelton (D., Mo.), who chairs the House Armed Services Committee, said Tuesday he would support efforts to restrict further U.S. aid to Iraq unless Baghdad began spending more of its oil money.
"They could put that money into reconstructing their own country," he told reporters. "There's going to have to be some sort of honest to goodness pressure like redeploying our troops and or cutting back our aid."
In a letter released Tuesday, Mr. Gates said he heard Congress "loud and clear" on the need for Iraq to assume more of the reconstruction burden, and said he was cutting $171 million in Pentagon funding for police station construction in Iraq in response.
Still, the move represented only a modest retrenchment, and Mr. Gates said he wanted to carry through with $419 million in other reconstruction projects designed to aid the Iraqi security forces.
It is far from clear that the Iraqi government will be able to overcome the structural problems that have long hampered its ability to spend its oil money. Iraq has no system for electronically transferring cash and few officials trained in basic budget procedures. Many Iraqi officials are afraid of authorizing large expenditures and then being accused of corruption.
The report noted Iraqi ministries in Baghdad spent 51% of their capital budgets for 2007, or about $4 billion. The figures were even lower at the provincial level, where local officials spent an average of 31% of their capital budgets.
Still, the report offered a generally positive assessment of Iraq's oil industry, which has struggled for years to return output to the prewar levels of about 2.5 million barrels a day.
Late last year, the industry appeared to reach a turning point. Security improvements along a northern export-pipeline route and new drilling by Iraqi engineers in the south boosted production markedly. The gains appear to have held, unlike a short-lived rally in 2004.
The inspector general's report, based on data from American officials monitoring the industry in Baghdad, highlighted two records: Exports for March averaged slightly more than two million barrels a day, the highest average since the start of the war. And production for February hit a high of 2.5 million barrels a day, according to the U.S. data. (Iraqi estimates tend to be higher.)
The report also found Iraq's output in the last two quarters held steady at 2.38 million barrels a day.
U.S. officials in Baghdad attribute much of the recent gains to a drop in attacks on Iraq's northern pipeline system, which is now being patrolled by Iraqi security forces. The pipes, including a crucial export line from the country's northern fields to Turkey, had been hit regularly in the past by insurgents and smugglers.
April 30, 2008
Pg. 4
Report Urges Nation To Spend More Cash On Reconstruction
By Yochi J. Dreazen and Chip Cummins
WASHINGTON -- A new U.S. government report projects Iraq's oil revenue will top a record $70 billion this year, adding fuel to a congressional push to force the Iraqi government to assume more responsibility for rebuilding the country.
The report from Special Inspector General for Iraq Reconstruction Stuart Bowen, which will be released Wednesday, highlights the windfall Iraq stands to reap this year because of soaring oil prices. The cost of a barrel of Iraqi oil has increased by 250% since 2003, and Iraq earned more than $18 billion from oil sales in the first quarter of 2008, the report found.
If Iraq is able to maintain its current levels of production and exports for the entire year, its oil revenue will be double what the Iraqi government had anticipated even a few months ago. "Iraq's oil income, forecasted in 2003 to be the primary pool of capital for post-war reconstruction, now has become the chief funding source," the report found.
The report comes as lawmakers from both parties push measures designed to force Baghdad to spend more of its oil money on reconstruction. Sens. Susan Collins (R., Maine), Ben Nelson (D., Neb.) and Evan Bayh (D., Ind.) are drafting legislation requiring future U.S. reconstruction aid to Iraq to come in the form of loans, rather than grants.
"The time has come to end this blank-check policy and require the Iraqis to invest in their own future," the senators wrote in a letter to Defense Secretary Robert Gates.
Rep. Ike Skelton (D., Mo.), who chairs the House Armed Services Committee, said Tuesday he would support efforts to restrict further U.S. aid to Iraq unless Baghdad began spending more of its oil money.
"They could put that money into reconstructing their own country," he told reporters. "There's going to have to be some sort of honest to goodness pressure like redeploying our troops and or cutting back our aid."
In a letter released Tuesday, Mr. Gates said he heard Congress "loud and clear" on the need for Iraq to assume more of the reconstruction burden, and said he was cutting $171 million in Pentagon funding for police station construction in Iraq in response.
Still, the move represented only a modest retrenchment, and Mr. Gates said he wanted to carry through with $419 million in other reconstruction projects designed to aid the Iraqi security forces.
It is far from clear that the Iraqi government will be able to overcome the structural problems that have long hampered its ability to spend its oil money. Iraq has no system for electronically transferring cash and few officials trained in basic budget procedures. Many Iraqi officials are afraid of authorizing large expenditures and then being accused of corruption.
The report noted Iraqi ministries in Baghdad spent 51% of their capital budgets for 2007, or about $4 billion. The figures were even lower at the provincial level, where local officials spent an average of 31% of their capital budgets.
Still, the report offered a generally positive assessment of Iraq's oil industry, which has struggled for years to return output to the prewar levels of about 2.5 million barrels a day.
Late last year, the industry appeared to reach a turning point. Security improvements along a northern export-pipeline route and new drilling by Iraqi engineers in the south boosted production markedly. The gains appear to have held, unlike a short-lived rally in 2004.
The inspector general's report, based on data from American officials monitoring the industry in Baghdad, highlighted two records: Exports for March averaged slightly more than two million barrels a day, the highest average since the start of the war. And production for February hit a high of 2.5 million barrels a day, according to the U.S. data. (Iraqi estimates tend to be higher.)
The report also found Iraq's output in the last two quarters held steady at 2.38 million barrels a day.
U.S. officials in Baghdad attribute much of the recent gains to a drop in attacks on Iraq's northern pipeline system, which is now being patrolled by Iraqi security forces. The pipes, including a crucial export line from the country's northern fields to Turkey, had been hit regularly in the past by insurgents and smugglers.