U.S. Manages Iraqi Oil Money Sloppily

U.S. Manages Iraqi Oil Money Sloppily - UN Watchdog

Tue Jun 22, 2004 02:47 PM ET

By Irwin Arieff

UNITED NATIONS (Reuters) - The U.S.-led occupation is sloppily managing billions of dollars of Iraqi oil money and moving at a glacial pace to guard against corruption, an international watchdog agency charged on Tuesday.

The Coalition Provisional Authority has yet to award contracts for equipment to meter Iraq's oil production, leaving a door open to smuggling, despite earlier saying it had awarded the contracts, the International Advisory and Monitoring Board said.

The U.S.-led administration also has delayed completing audits of the State Oil Marketing Organization, the state-owned firm that markets Iraqi oil, the U.N.-mandated agency said.

In addition, authorities in Baghdad have put off for three months a request by the board that it turn over U.S. audits of sole-source contracts funded with Iraqi oil money and awarded to Halliburton last year without competitive bidding, the watchdog agency said.

Halliburton, the Texas oil services firm once headed by Vice President Dick Cheney, has been accused by some Democrats of war profiteering after winning billions of dollars in sole-source contracts from the U.S. military in Iraq.

The U.S. audits of the Halliburton contracts paid with Iraqi oil money, initially requested in March, had not yet been handed over despite repeated requests, the board said.

As a result, the board said it was ordering its own audit "to determine the extent of the sole-sourced contracts."

AUDIT DUE AFTER SHUTDOWN

The U.N. Security Council set up the monitoring board in May 2003 to ensure the U.S.-led civil administration was not engaged in dubious practices in marketing Iraqi oil and was using the money for reconstruction.

The board issued its criticism after a two-day meeting in Paris and just days before the Coalition Provisional Authority is due to shut down after handing power to an interim Iraqi government on June 30.

Under a May 2003 council resolution, all the proceeds of Iraqi oil and gas exports are deposited into a special account called the Development Fund for Iraq

Accounting giant KPMG is auditing the fund, but its initial audit -- covering the first six months -- will not be ready until July 14, two weeks after the June 30 shutdown of the occupation authority, the board said.

A KPMG interim report, presented to the board in Paris, said occupation authorities had left the fund vulnerable to fraud and said coalition officials had resisted cooperating with the auditors, the Financial Times reported on Tuesday.

Since the war, $10.8 billion in Iraqi oil money has been deposited in the development fund, more than half of total deposits of $20.2 billion for the period.

The rest comes from sources including leftover funds from the now-defunct U.N. oil-for-food program and Iraqi overseas deposits dating back to the Saddam Hussein regime.

The occupation has spent $11.2 billion from the fund, primarily for development projects and ministry budgets.

Another $4.6 billion has been committed but not yet spent, leaving $4.4 billion, according to the latest Coalition Provisional Authority figures.

After June 30, the interim government will resume full control of Iraqi oil resources under a Security Council resolution adopted this month.