[R-G] Iraq oil circus came to town

[Anthony Fenton]

Commentary: Iraq oil circus came to town
Published: April 11, 2008 at 4:50 PM
http://www.upi.com/International_Security/Energy/Analysis/2008/04/11/commentary_iraq_oil_circus_came_to_town/3626/
By BEN LANDO
UPI Energy Editor
WASHINGTON, April 11 (UPI) -- This week the circus came to town. Not  
Ringling Bros. and Barnum & Bailey, but Gen. David Petraeus and  
Ambassador Ryan Crocker, and with it the three rings of a five-plus  
year war and occupation, politicians in their populist best pitches  
and the media echo of what's going on with Iraq's oil revenue.

Petraeus, the commander of coalition forces in Iraq, and Crocker, the  
top U.S. diplomat in the country, were obliged to lead what was for  
this week the greatest political show on Earth: explaining the meaning  
of the war a year after the "surge" in U.S. troops led to a decrease  
in violence (aside from the massive uptick over the past two weeks).

The two said Iraq is improving its ability to spend money on  
reconstruction and most new U.S. spending, outside of security, would  
be on capacity-building needed to spend the funds.

The five years have meant hundreds of billions of dollars in U.S.  
taxpayer spending -- mostly on military -- and Congress is asking now  
"for what?" And Congress -- armed with a failed "benchmark" of passing  
an oil law, the inclusion of which may have added a fracture in the  
polarized Baghdad political scene -- breathed fire on Iraq's  
leadership for how it uses its oil revenue and turned the snake  
charmer onto Americans and the media.

Iraq's government "has not secured the confidence of most Iraqis or  
demonstrated much competence in performing basic government functions,  
including managing Iraq's oil wealth," Sen. Richard Lugar, R-Ind.,  
said in a hearing this week.

The reality is Iraq has actually increased oil production and exports  
despite an active and ongoing warzone. But the political leadership is  
stuck on a key and controversial issue of privatizing the oil sector,  
one that a nascent and tumultuous country might be expected to be  
stuck on, considering how important Iraq's oil is for its future.

Iraq has the third-largest oil reserves in the world and both  
increased exports at higher oil prices -- not the $100 plus per barrel  
level, though -- has gone beyond covering its budget but giving it  
extra funds.

All of the money Iraq makes goes to one bank account. It's in the  
Federal Reserve Bank of New York. That's required as part of a 2003  
U.N. Security Council resolution aimed at both ensuring transparency  
of Iraq's earnings and expenditures, and making sure various creditors  
from Saddam Hussein's time don't bleed the new Iraq dry.

But the new Iraq has had a hard time spending all its budgeted funds,  
especially on capital projects, aka reconstruction. Be it because of  
violence, being accused of corruption, or plain old lack of  
institutional capacity, only a small percentage is spent each year.

"The result is that far from financing its own reconstruction as the  
(Bush) 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," said Sen. Carl Levin, D-Mich., in a separate hearing this  
week.

Levin is referring to then-Deputy Defense Secretary Paul Wolfowitz'  
claim that Iraq's oil sales would be able to fund reconstruction.  
Instead Congress has appropriated more than $20 billion for  
reconstruction.

While criticizing Iraq's government wouldn't necessarily be misguided  
-- especially if you ask the millions of Iraqis still in need of fuel,  
electricity, clean water and food -- a look in the mirror might be  
good about now.

"U.S. efforts to date have not resulted in key Iraqi ministries having  
the capacity to effectively govern and assume increasing  
responsibility for operating, maintaining, and further investing in  
reconstruction projects," former chief U.S. auditor David Walker  
testified before a Senate committee last month.

Indeed, investigations by U.S. departments and agencies have  
discovered billions of dollars in U.S. funds, including reconstruction  
funds, either missing, mismanaged or misspent in Iraq. And that's  
after more than 200 years of a (mostly) stable government here.

But Congress this week, having mostly kept from holding accountable  
those funds it appropriated over the past five years, lashed out at  
Iraq in what appears to be frustration of an unpopular war spiraling  
ever expensive and without end.

This, perhaps, is what led to such a series of factually incorrect  
statements by lawmakers, and then media. To recap, Iraq would not make  
$100 billion in oil sales this year -- as talk show host Ed Schultz  
told Larry King Live this week -- unless the price of oil went  
substantially higher, like nearing $200 per barrel. And the "surplus"  
would be anything beyond the $50 billion 2008 budget, which at current  
oil prices will give it just about a $10 billion surplus.

Iraq's funds are kept only in one bank in the United States, not banks  
"around the world," aside from the Central Bank of Iraq in Baghdad  
which allocates the funds to the Finance Ministry.

"U.S. lawmakers publicly are asking why the Iraqis themselves can't  
pick up the tab for their own reconstruction. Privately, several of  
them are going one step further — asking whether they Iraqis actually  
are playing the U.S. taxpayers for suckers," CNN's Wolf Blitzer wrote  
in a blog post following an episode of "The Situation Room."

"Why is the U.S. government, American taxpayers, still paying the  
lion's share of what's needed to rebuild Iraq?" he asked one guest,  
Sen. Lindsey Graham, R-S.C.

They're not, Graham basically explained to Blitzer. (The host and CNN  
reporter Michael Ware also botched the discussion on the "benchmark,"  
confusing an oil law with a revenue-sharing law. Iraq is  
redistributing oil revenues, though the law itself hasn't been passed,  
despite what Ware told Wolf.)

Anthony Cordesman, Iraq expert at the Center for Strategic and  
International Studies, points to a Special Inspector General for Iraq  
Reconstruction report published in January that between 2003 and 2008,  
$50.6 billion of Iraq's money was spent on reconstruction, $47.5  
billion was spent in U.S. funds and nearly $16 billion in other  
donations.

"In short, we used more of their money for reconstruction than ours,"  
he told United Press International.

Lou Dobbs on CNN, along with guests Mark Simone of WABC Radio in New  
York and Mildred Gaddis of WCHB in Detroit, moved forward the idea of  
forcing Iraq to pay back America for its reconstruction and military  
expenses (repeating the $100 billion profit inaccuracy).

This was a major development this week, where a number of U.S.  
Senators and Representatives from both parties talked about  
legislation or binding deals forcing Iraqis to spend a certain amount  
of money in the way Washington sees fit, repay the United States for  
its expenses thus far in the war, or force Iraqis to take as a loan  
all future U.S. spending there.

This begs the question as to whether a country can invade another  
country – which inherently destroys the capital, political and  
societal infrastructure – poorly spend both occupying and occupied  
funds, unilaterally create conditions of chaos requiring ongoing  
security and reconstruction funds, and then bind the occupied country  
to make reparations and take out loans from the occupying country?

Sen. Ben Nelson, D-Neb., asked Crocker if fund Congress appropriated  
earlier this year were structured as loans.

No, Crocker answered, and said to do so would mean a "halt" in  
reconstruction.

"Well, I think that's all well and good, but I wish we'd have thought  
more carefully earlier and got this set, such as back in 2003."

Perhaps, senator, et al. Perhaps, you should have.

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(e-mail: blando at upi.com)

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