Iraq

Iraq Hoarding Oil Revenue While U.S. Pays For Reconstruction

| Tue Apr. 8, 2008 2:53 PM EDT

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Ambassador Ryan Crocker, the top U.S. diplomat in Iraq, in testimony (.pdf) this morning before the Senate Armed Services committee, heralded increased Iraqi investment in its own reconstruction, noting $18 billion in pending budget allocations by the government in Baghdad and assuring lawmakers that "the era of U.S. funded major infrastructure projects is over." This would surely be welcome news to committee chairman Carl Levin, Democrat of Michigan, if only he could bring himself to believe it.

Levin, along with Senator John Warner (R-Va.), has for months been expressing concern that the U.S. continues to shoulder the majority of Iraq's reconstruction costs at a time when Iraqi oil exports are finally producing sufficient revenue for the Baghdad government to begin shouldering a greater part of the financial burden. Last month, the senators asked the GAO to conduct a study of Iraq's oil business to determine just how much reconstruction spending should be transferred to the Iraqi side. Indeed, basic details such as total Iraqi oil revenues since 2003, how much of it has been spent on reconstruction and security, and how much the Iraqi government has deposited in banks around the world remain unclear, as do projections for expected revenues from oil exports for the coming year.

In their letter to the GAO's David Walker, Levin and Warner cite pre-Iraq invasion assurances from the Bush administration that Iraq would be able to pay for its own reconstruction. "The oil revenues of that country could bring in between 50 and 100 billion dollars over the course of the next two or three years," Paul Wolfowitz told Congress in March 2003. "We are dealing with a country that can really finance its own reconstruction and relatively soon." This, of course, like almost every other Bush administration contention, turned out to be untrue. But today, five years after the invasion, Iraqi oil revenues may finally be reaching the levels required to finance major projects. According to Levin and Warner, Iraq is estimated to have netted $41 billion from oil exports in 2007 and is on track to make $56 billion for the current year, for a total exceeding $100 billion over two years—not exactly chump change.

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This morning, in his prepared statement at the opening the Petraeus/Crocker hearing, Levin emphasized Iraq's lack of investment in its own reconstruction as evidence of how continued, unending U.S. involvement in the country may only be delaying the day when the Baghdad government will become self-sufficient. At the very least, Levin contended, Iraq has shown itself content to rely on U.S. handouts for as long as they continue to be offered.

From Levin's statement:

Iraq now has tens of billions of dollars in surplus funds in their banks and in accounts around the world, including about $30 billion in U.S. banks. But Iraqi leaders and bureaucrats aren't spending those funds. The result is that, far from financing "its own reconstruction" as the administration promised five years ago, the Iraqi government has left the U.S. to make most of the capital expenditures needed to provide essential services and improve the quality of life of Iraqi citizens.

American taxpayers are spending vast sums on reconstruction efforts. For example, the U.S. has spent at least $27.6 billion to date on major infrastructure projects, job training, education and training and equipping of the Iraqi Security Forces. On the other hand, according to the Special Inspector General for Iraq Reconstruction, the Iraqi Government budgeted $6.2 billion for its capital budget in 2006 but spent less than a quarter of it. As of August 31, 2007, the Iraqi Government had spent somewhere between 4.4 percent (according to the GAO) and 24 percent (according to the White House) of its $10.1 billion capital budget for 2007. As of last Thursday, the U.S. government is paying the salaries of almost 100,000 Iraqis who are working on reconstruction.

To add insult to injury, in addition to spending tens of billions of U.S. dollars on reconstruction, American taxpayers are also paying three to four dollars a gallon on gas here at home, much of which originates in the Middle East, including Iraq. The Iraqi government seems content to sit by, build up surpluses and let Americans reconstruct their country and foot the bill. But the American people surely aren't content with that, and the Bush administration shouldn't be either.

Iraq possesses the world's third largest oil reserves, behind Saudi Arabia and Canada, totaling 115 billion barrels. According to the AP, by February of this year, average daily production had reached 2.4 million barrels, with exports averaging 1.93 million barrels per day.

Photo used under a Creative Commons license from James Gordon.

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