Iraq Is Failing To Spend Billions In Oil Revenues

Team Infidel

Forum Spin Doctor
New York Times
December 11, 2006
Pg. 1

By James Glanz
BAGHDAD, Dec. 10 — Iraq is failing to spend billions of dollars of oil revenues that have been set aside to rebuild its damaged roads, schools and power stations and to repair refineries and pipelines.
Iraqi ministries are spending as little as 15 percent of the 2006 capital budgets they received for the rebuilding — with some of the weakest spending taking place at the Oil Ministry, which relies on damaged and frequently sabotaged pipelines and pumping stations to move the oil that provides nearly all of the country’s revenues. In essence, the money is available — despite extensive sabotage, the oil money is flowing — but the Iraqi system has not been able to put it to work.
The country is facing this national failure to spend even as American financial support dwindles. Among reasons for the problems — like a large turnover in government personnel — is a strange new one: bureaucrats are so fearful and confused by anticorruption measures put in place by the American and Iraqi governments that they are afraid to sign off on contracts.
The inability to spend the money raises serious questions for the government, which has to demonstrate to citizens who are skeptical and suspicious of government corruption that it can improve basic services, and that at a time when American funds for reconstruction are being reduced, it can prove to other foreign donors that it can quickly put to use the money they may be willing to commit.
After the expenditure of roughly $22 billion in American taxpayer dollars on Iraq reconstruction, the increase of the Iraqi capital budget was seen by many as a sign that oil revenues could finally begin paying for the rebuilding, four years after Bush administration predictions that the country could afford the program on its own.
Iraq’s overall capital budget in 2006 was nine trillion Iraqi dinars, or about $6 billion, said Abdulbasit Turki Saeed, president of the Iraqi Board of Supreme Audit and a member of the Iraqi cabinet’s economic committee.
But Mr. Saeed said that across the entire government, only about 20 percent of the capital budget had been spent, according to the committee’s recent figures. A senior Western official agreed with that estimate.
“It’s slow. It’s disappointing,” the Western official said, speaking on the condition of anonymity because he was not authorized to discuss the subject publicly. “In general, they have had trouble getting projects started.”
The problem was briefly acknowledged in the report last week by the bipartisan Iraq Study Group, which gave similar figures for capital expenditures and said that “many ministries can do little more than pay salaries.”
In interviews, alarmed Western and Iraqi officials sought to put the best face on the problem, saying they thought that the pace of spending had picked up in the last two to three months as the government began taking steps to improve its performance.
Those officials said that in a nation with reconstruction needs around every corner, the puzzling phenomenon of unspent money was partly explained by the rapid turnover in governments, security woes, endemic corruption and a lack of technocrats skilled at jobs like writing contracts and managing complex projects. In short, nearly all the ills that have undermined the American rebuilding program seem to be plaguing the Iraqi one.
Hussain al-Shahristani, the Iraqi oil minister, said he thought that he could spend substantially more of this year’s budget if he could resolve administrative bottlenecks, like Finance Ministry delays in authorizing payments.
“It’s the bureaucracy,” Mr. Shahristani said. “Particularly financial people take too long to change their old habits.”
But some American and Iraqi officials here are also saying that the stringent measures they had favored to slow the rampant corruption may be especially daunting for bureaucrats who have little experience with Western-style regulations and oversight. Those officials say that Iraqis who have seen their colleagues arrested and jailed in anticorruption sweeps are reluctant to put their own name on a contract.
“As it’s applied right now, this new thing scares the hell out of everybody,” one Western official here said.
The colliding priorities of oversight and spending have left American and Iraqi officials in a quandary as they work behind the scenes on the so-called “Compact with Iraq” — the centerpiece of the American Embassy’s effort to create economic and political milestones that this nation promises to meet in exchange for pledges of foreign investment and support.
Anticorruption officials themselves are facing a loss of support, with the most serious impact felt by Rathi al-Rathi, the head of Iraq’s Commission on Public Integrity, who has been privately accused by Western and Iraqi officials of zealotry, political bias and other failings.
A previously undisclosed letter to Mr. Rathi from prime minister Nuri Kamal al-Maliki, dated Sept. 6, is close to an accusation that Mr. Rathi himself is guilty of corruption. The letter, a copy of which was provided to The New York Times, directs him to account for what the prime minister asserts are hundreds of thousands of dollars of undocumented expenses by the commission.
Ali al-Shabot, a spokesman for Mr. Rathi, who was traveling last week, at first insisted that the letter was secret and that he could not discuss it. But finally he dismissed its charges as based on bad information. Mr. Shabot indicated there was at least one good reason that, despite the pressure, the commission would remain in business. He confidently pointed out that international donors who provide financing to Iraq do so “with the guarantee that there are institutions to oversee the money.”
While it is clear that new financial support is unlikely without a strong anticorruption campaign in place, Iraq’s inability to spend its own money undermines the message that the country will actually be able to use the support if provided.
“People we are trying to deal with and obtain additional funds for Iraq will come back and say, ‘Iraq is not spending its own resources,’ ” said Yahia Said, a research fellow at the London School of Economics who is working as a consultant to the United Nations on the compact.
Mr. Shahristani, the oil minister, who has put new anticorruption measures in place on top of those imposed from the outside, said the solution was to teach the bureaucrats how to cope with the new rules.
“Obviously I’ve heard of these complaints,” he said of the criticisms of the anticorruption organizations. “I don’t think that they have gone too far. I think this is necessary given the level of corruption that we have inherited.”
Iraq’s total budget is about $32 billion in 2006 and is projected to be more than $40 billion in 2007, said Bayan Jabr, the Iraqi finance minister, in an interview. Most of the budget, which comes almost entirely from oil revenues, is consumed in operating expenses, including roughly $8 billion for ministry salaries and pensions and $6 billion for Iraq’s socialist-style food and fuel subsidies.
The nation has spent those funds much more easily than it has spent the $6 billion for capital improvements — a number that by some projections could roughly double next year in view of Iraq’s vast infrastructure needs.
According to a report by the Oil Ministry, about half of the money was to go for repair of pipelines, building refineries, improving oil fields, repairs on export terminals, and other improvements to the oil industry. The remainder was to be spent on projects ranging from improving the electrical system to irrigation systems to roads and government buildings of various types.
I think that most of the problems in settling Iraq comes from this subject. Once you show people that they are becoming independant and they can take care of themselves, boost their self-esteem so to speak, you will have fewer places in which a negative influence can find their way in.

Unfortunately the Iraqi government is trying to dump all the old ways and adopt a totally new way. Kind of like a Marine Drill Instructor transferring to the Air Force with no cool down time. (No offense). The way things are done are almost totally different and the price for failure or mistakes is incredibly high.