Maureen Lorenzetti
Washington Editor
WASHINGTON, DC, June 23 -- Past and present management of Iraq's oil revenue continues to be questioned by international watchdog groups.
The International Advisory and Monitoring Board (IAMB), the United Nations-mandated agency charged with monitoring how the US spends Iraq's oil revenue, criticized the Coalition Provision Authority (CPA) Tuesday for not furnishing information in a timely manner to its independent auditor KPMG International.
The Development Fund for Iraq (DFI) uses petrodollars to fund rebuilding projects; CPA manages revenues, disbursements, and account balances in consultation with the Iraqi Governing Council, the Iraqi Minister of Finance, and the Governor of the Central Bank of Iraq.
"The IAMB regrets, despite its repeated requests, the delay in receiving reports on audits undertaken by various agencies on sole-sourced contracts funded by the DFI. In the light of these delays the IAMB decided to commission a special audit to determine the extent of sole-sourced contracts," the group said after meeting in Paris earlier this week.
"The IAMB was also informed by the CPA that contrary to earlier representations the award of metering contracts have been delayed and continues to urge the expeditious resolution of this critical issue."
IAMB also complained about the CPA dragging its feet on information needed to complete audits of the State Oil Marketing Organization (SOMO).
KPMG expects to issue a final audit report by July 14. That's nearly 2 weeks after CPA formally transfers control to a US-endorsed interim government that will remain in place until elections are held, possibly next year. Some government agencies, most notably the oil ministry, have already been under Iraqi control for several weeks.
IAMB is tentatively scheduled to meet July 14-15 and again 2 months later, on Sept 7-8.
IAMB's comments come about a week after a human rights group Open Society Institute criticized how the US is spending oil revenues before the June 30 government transition date. OSI had specific worries about a DFI board approving nearly $2 billion in Iraqi funds for reconstruction projects this month.
"With so much money available for cash giveaways, and so little planning on how the process will work, it will be all but impossible to avoid corruption and waste" said Svetlana Tsalik, director of OSI's Revenue Watch.
Tsalik alleged that the money coming out of DFI is going to the same places the US Congress has already earmarked US taxpayer funds. For example, DFI allocated $500 million for Iraqi security forces, even though Congress allocated $3.2 billion for the same purpose; and $315 million for the electricity sector despite a $5.5 billion US appropriation for the same sector. OSI also has serious reservations about a $460 million disbursement toward oil projects that appears to mirror the $1.7 billion allocated by Congress for the same purpose.
As of presstime, CPA officials could not be reached for comment.
A June 8 UN Security Council resolution requires the new interim government to satisfy all outstanding obligations against the DFI made before June 30. But OSI said that leaves the new interim Iraqi government "with no choice but to honor the program review board's questionable expenditures."
Scrutiny of UN
Concerns by IAMB and others over the US's current oil revenue management come at a time the UN is coming under its own scrutiny for past involvement in the Oil-for-Food program. The UN established the relief effort in 1996 to allow former Iraqi President Saddam Hussein's government to use oil sales to pay for food, medicine, and infrastructure maintenance while international sanctions remained in place.
A recent General Accounting Office report said the program appeared to accomplish one of its main goals: to keep the population from starving. During 1996-2001, the average food intake increased to 2,300 cal/day from 1,300 cal/day. But during 1997-2002, the agency estimates that the former Iraqi regime acquired $10.1 billion in illegal revenues, including $5.7 billion from smuggled oil exports, and $4.4 billion from oil sale surcharges and other illicit commissions from suppliers selling goods to Iraq under the UN program.
The UN's Security Council, which includes the US, allowed the Iraq government to negotiate oil contracts directly with oil companies and traders but a UN office was responsible for examining the contracts for price and value. GAO said it remains unclear how that function was performed; UN external audits have found no evidence of program fraud.
Meanwhile other investigations continue.
The US Attorney for the Southern District of New York is in the process of issuing subpoenas to companies that bought oil from the now defunct UN program. Companies have not been accused of wrongdoing but have been asked to supply documents related to those oil sales. About half of the oil sold under the UN program went to US refiners. There are also concerns that UN officials themselves participated in fraud but that as yet has been unproven. Companies who have already been issued subpoenas include ExxonMobil Corp., ChevronTexaco Corp., Valero Energy Corp., and Premcor Inc.
US lawmakers have also expressed an interest in holding hearings on the subject although no hearings have been scheduled for the summer.
Contact Maureen Lorenzetti at [email protected].
