Iraqi oil profits should foot reconstruction bill, lawmakers say

By SHANNON BOND   |   Aug. 13, 2008 at 1:54 PM   |   Comments

WASHINGTON, Aug. 13 (UPI) -- Congressional leaders are calling for Iraq's government to contribute more to rebuilding the country, following a report that Iraq actually spent only 14 percent of key reconstruction funds in the last three years, while accumulating a massive budget surplus.

The problem might seem unexpected. Oil revenues are pouring into Iraq, buoyed by soaring prices, and the country is still rebuilding five years after the toppling of Saddam Hussein. But faced with ongoing violence and an inexperienced and understaffed bureaucracy, Baghdad is finding it hard to spend that wealth and relies on the United States to fill the gaps.

Staff shortages, weak systems to combat corruption and sectarian strife are the main factors limiting the Iraqi government from spending more on reconstruction, said the report, issued last week by the Government Accountability Office, the investigative arm of Congress.

Spending in four key areas illustrates the gap between what the United States is doing and what the Iraqi government has undertaken, said Joseph Christoff, the GAO's director of international affairs and trade.

While Iraq has budgeted $28 billion for security, oil, water and electricity since 2005, it has spent just under $4 billion, the report said. In contrast, since 2003 the United States has provided $33.4 billion for those needs in Iraq and spent $23.3 billion, or 70 percent of the total.

The unspent Iraqi funds combined with resurgent oil exports have fed a budget surplus in Baghdad that could reach $79 billion by the end of this year, Christoff said.

"Iraq, with the third-largest oil reserve in the world, has benefited from the recent rise in oil prices and generated billions of dollars in revenue," the report said. "This substantial increase in revenues offers the Iraqi government the potential to better finance its own security and economic needs."

Iraq's total allocation for relief and reconstruction reached $50 billion this year, "equaling the cumulative U.S. investment," according to a July report from the Pentagon's special inspector general for Iraq reconstruction.

"Completing Iraq's relief and reconstruction is now an Iraqi-led mission driven by Iraqi-developed and Iraqi-funded solutions," the report said.

But the inspector general noted that the Iraqi government's spending rate is "still well under expectations."

Comparing amounts that the U.S. and Iraqi governments have budgeted, "it would appear as if the Iraqi government is on par with the United States," Christoff said. "But budgeting doesn't mean that you actually spend the money and make investments in your infrastructure."

Existing reconstruction projects also have been underfunded. The GAO found that Iraq spent $947 million -- just 1 percent of the government's $67 billion total budget from 2003 to 2007 -- on maintaining roads, bridges, buildings and other infrastructure, some of which was originally paid for by the United States.

Iraq's low rate of spending drew criticism from several members of Congress.

Sen. Norm Coleman, R-Minn., said he plans to introduce legislation to rescind $1 billion appropriated for Iraqi reconstruction by an emergency war supplemental funding bill.

"With the Iraqis sitting on a massive budget surplus, we need to return American tax dollars to the U.S. Treasury," Coleman said in a statement.

Rep. Henry Waxman, D-Calif., who chairs the House Oversight and Government Reform Committee, wrote Friday to Secretary of State Condoleezza Rice asking what the government is doing to ensure equity in the effort to rebuild Iraq.

The United States has bought between $70 billion and $74 billion worth of Iraqi oil since 2003, Waxman said, citing Department of Energy data.

"Based on this information, it appears that U.S. taxpayers are paying twice -- once through their taxes to pay for Iraq's reconstruction and a second time at the pump to help build Iraq's massive surplus," he wrote.

But State Department spokeswoman Nicole Thompson said the idea that "the U.S. taxpayer is footing the bill to rebuild Iraq while the government of Iraq sits on its billions" is a misconception.

"The truth is that we spent a lot of money right after liberation to help get that country back on its feet after years of dictatorship, and when we did that, the government of Iraq was not capable of undertaking its reconstruction projects."

In 2007, she said, U.S. aid shifted from capital projects to "capacity building." That term includes training Iraqi civil servants in information technology, anti-corruption and management, and developing Iraq's police force and military, according to the special inspector general's report.

But even that training should be funded primarily by Baghdad, said Senate Armed Services Committee Chairman Carl Levin, D-Mich.

"It makes no common sense for a country that has that kind of wealth and that kind of surplus in our banks and their banks to be sending us the tab or for us to pay the tab for the infrastructure and some of the training costs that we're now paying for," Levin said in May.

Meanwhile, lawmakers are also threatening to cut back on financing Iraqi reconstruction, having committed nearly $50 billion to help rebuild Iraq since the war began five years ago.

Even before the GAO issued its latest report, Congress took steps to shift a greater share of rebuilding costs to Iraq.

The House defense bill for 2009, which passed in May, curbs the amount that can be spent under an emergency fund that allows soldiers to give cash to Iraqis for all matter of expenses. While the Commander's Emergency Response Program's 2008 budget is $3.5 billion, the legislation would limit spending to twice what the Iraqi government provides for its own version of the program.

The U.S. Commander's Emergency Response Program has spent $2.8 billion since 2003, The Washington Post reported Monday. While the fund is meant for short-term, small-scale projects, about $1 billion went to projects costing more than $500,000, and $880 million was spent on projects lasting more than six months.

The Senate's defense bill, which has not yet come up for a vote, includes a provision that would prohibit the Pentagon from funding any Iraqi reconstruction projects that cost more than $2 million.

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(Medill News service)

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