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by Lorenzo Nencioli Friday, Oct. 08, 2004 at 1:55 AM

The United States spends Iraq's money - with little accountability.


The United States spends Iraq’s money – with little accountability

By Lorenzo Nencioli

[This article was published in: Dollars and Sense, July/August 2004. Lorenzo Nencioli is a freelance writer living in Boston. He writes frequently on U.S. foreign policy.]

As the war in Iraq looks increasingly like an imperialist quagmire, so does the Bush administration’s handling of Iraqi oil wealth.

Shortly after the U.S. invasion in March 2003, the Coalition Provisional Authority (CPA) appropriated billions of dollars of Iraqi wealth, including frozen Iraqi assets in the United States and abroad and new oil revenues. The funds were to be spent on reconstructing Iraq; they are in addition to the .4 billion in U.S. taxpayer dollars that Congress appropriated last year for Iraq reconstruction.

Expenditure of these funds has been beset by secrecy, nepotism, and an absence of minimally acceptable accounting practices. As a result, the Iraqi people may never know how the U.S. occupiers have spent their wealth. They do know that their money is being monitored under at best a far more casual regime than the already weak accounting standards that track U.S. dollars spent in Iraq.

In May 2003, the United Nations and other international bodies formed an oversight body, the International Advisory and Monitoring Board (IAMB), to audit the CPA’s expenditures of Iraqi oil revenues via the Development Fund for Iraq (DFI). The DFI was created by the United Nations as the main repository of Iraqi oil revenue, since last May, the fund has taken in over billion and has committed over billion for various projects and purchases, from school renovations to combat boots and body armor.

The IAMB and a number of nonprofit organizations in Iraq maintain that the board’s attempt to oversee those expenditures have been thwarted by an uncooperative and secretive CPA. “It has been impossible to tell with any accuracy what the CPA has been doing with Iraq’s money,” notes the U.K.-based agency Christian Aid, whose June 2004 report estimates that billion of Iraqi oil revenue has been not been accounted for by the CPA. Another group that has closely monitored the CPA, Iraq Revenue Watch, cautioned as early as last fall that, in its estimate, over billion of DFI money was being spent without any independent management or supervision. Both groups, as well as the IAMB, have noted that the CPA does not meter Iraqi oil extraction-a standard industry practice-making it impossible to accurately track production or to determine how much oil has been smuggled prior to refining and shipping.

Despite the fog surrounding CPA business practices, there is at least one clear example of how the CPA has been spending Iraqi oil revenue; it used DFI money to award three no-bid contracts worth .4 billion to Halliburton Corp. Although Congress has prohibited the awarding of noncompetitive contracts with federal funds, the DFI was under no similar legal constraint-and its administrators in the CPA evidently did not see a need to apply the same standard to the outlay of Iraqi funds. Halliburton, the energy services company once headed by Vice President Dick Cheney, has recently come under fire for a number of potentially criminal business practices, including overcharging the federal government by million for fuel delivery services.

Such bloated contract awards are particularly galling given the many Iraqi construction companies that were waiting for their fair share of DFI contracts. Though these companies charge about a tenth of what their American counterparts do, according to Christian Aid, the CPA allowed Iraqi companies to compete only for contracts of under 0,000, and not until this past April-eleven months after the authority took power and two months before it left.

With such questionable contract awards receiving little scrutiny from the Bush administration, the IAMB audit of the CPA is critical. But both Christian Aid and Iraq Revenue Watch have criticized the CPA for its slow pace in turning over financial reports to the IAMB. Though the United Nations elected to transfer operating authority over the DFI to the new Iraqi interim government and to extend the IAMB’s monitoring mandate past the June handover of sovereignty, Stuart Halford of Christian Aid told me via email that the extended mandate would mean little. “The CPA are not around to be held accountable for what they spent the money on, and they granted themselves immunity while they were there anyway.”

It’s unlikely that a proper audit based on full disclosure will ever be carried out. With the U.S. military occupying a country that is home to the world’s second largest quantity of known oil reserves, the potential for further corruption in the oil industry-friendly Bush administration is acute. As Halford told me via email: “Many people said this war was all about oil. Well, the CPA’s lack of proper accounting about Iraq’s oil revenue”-not to mention the long list of well-connected U.S. corporations to whom that revenue has been funneled-“certainly won’t dissuade many who follow that argument.”

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