As Congress gears up to debate the Bush administration's latest request for an additional $ 108 bn in war funding for Iraq and Afghanistan, Iraqis are fuming at suggestions being floated by lawmakers that Baghdad should start paying a share of the war's costs by providing cheap fuel to the US military.
"America has hardly even begun to repay its debt to Iraq," said Abdul Basit, the head of Iraq's Supreme Board of Audit, an independent body that oversees Iraqi government spending. "This is an immoral request because we didn't ask them to come to Iraq, and before they came in 2003 we didn't have all these needs."

The issue of Baghdad's contribution to the costs of the war jumped to the forefront early in April during testimony to Congress of the Iraq war commander, Gen. David Petraeus, and the US ambassador to Iraq, Ryan Crocker. Noting that the soaring price of oil is likely to give Iraq a revenue bonanza this year of up to $ 70 bn, senators quizzed the two on why Iraq isn't using its rising oil income to pay more of the costs of reconstruction.
Iraqi and US officials say they are. Iraqis acknowledge the need for Iraq to take on a greater share of its reconstruction costs and say it is doing so. In fact, according to the latest report released by the Special Inspector General for Iraq Reconstruction, the body established by Congress to monitor reconstruction spending, Iraq is now responsible for the majority of the money spent on reconstruction and the Iraqi security forces.

Iraqis say the criticisms in Washington grossly simplify the complexities of Iraq's situation and fail to take into account the vastness of Iraq's needs.
"I think Iraq now is able to depend on its own money. We do not ask for extra aid. We are spending on our own armed forces and reconstruction," Bayan Jabr al-Zubaidi, Iraq's finance minister, said.

$ 20 bn spent
US officials say the $ 20 bn allocated for reconstruction projects has been spent and new money is being sought only for targeted programs to help the security forces, the military effort and projects such as democracy and anti-corruption programs.
"The era of US-funded bricks-and-mortar reconstruction is over, as Ambassador Ryan Crocker noted in his testimony to Congress," said Charles Ries, coordinator for economic affairs at the US Embassy in Baghdad.

The criticisms in Congress that Iraq isn't paying its share are "a bit overplayed," said Stuart Bowen, the inspector general.
"It's an evolving process, but the Iraqi government has now taken over the majority of the funding," he said. "In 2007 the US share dropped below 50 %, and it will drop even more dramatically in 2008."

Behind the controversy lies a giant muddle of misspending, waste, corruption and poor accounting on the part of both Iraq and the US surrounding about $ 100 bn worth of spending on reconstruction and the Iraqi security forces that has barely dented Iraq's needs over the past five years. Of this, $ 46.7 bn came from US taxpayers and $ 50.3 bn from Iraqi oil revenues, including $ 23 bn in Iraqi money that was spent by the US under the occupation administration of Paul Bremer, according to Bowen.
Though it was the Bush administration's original intention that Iraq's oil revenues should be used to finance all the rebuilding of Iraq, the projection that Iraq would earn $ 50 bn to $ 100 bn from oil exports in the first two years proved to be wildly optimistic, as did estimates that the whole war would cost $ 50 bn to $ 60 bn. The Congressional Budget Office now puts the total cost of the war to date at $ 600 bn.

The poor state of Iraq's oil infrastructure, sabotage and smuggling meant exports never reached the 3.3 mm bpd anticipated by the administration -- exports now are averaging around 2.2 mm bpd. Oil export revenues passed the $ 100 bn mark only in the second half of 2007, nearly five years after the invasion.
The soaring price of oil this year means Iraq can expect a windfall of $ 60 bn to $ 70 bn, significantly more than the nation's $ 48 bn budget. Though the price of a barrel of oil hit a peak of $ 119.93 earlier, Iraqi oil fetches a lower level, around $ 90, though that is still higher than the $ 57 a barrel estimate used to draw up the budget. Iraq had earned $ 19.3 bn from oil revenues so far this year, according to the State Department.

Iraq is already planning a bumper year for reconstruction, with a supplemental budget of $ 5 bn to $ 7 bn to be added to the $ 13.3 bn already earmarked for reconstruction, Zubaidi said. There is also an extra $ 10 bn in unspent money left over from previous years in the New York bank account into which all of its oil revenues must be deposited, under the terms of a UN resolution.
But these figures pale in comparison to the size of Iraq's needs, Zubaidi said. The Iraqi government put the total cost of reconstructing Iraq at $ 200 bn in 2005, a figure that is likely to have risen since then. There are no independent estimates for the overall requirements, but the Special Inspector General's report cites estimates of $ 25 bn needed just to repair Iraq's electricity sector and $ 100 bn worth of investment required for its dilapidated oil infrastructure.

One problem is that Iraq's inexperienced ministries have had a hard time spending all the money available to them. Iraq spent only 23 % of its $ 6.2 bn budget for capital investments in 2006 and a little over half of the $ 10 bn allocated in 2007, according to Bowen's report.
Many ministers lack the expertise to properly spend large amounts of money, said Zubaidi, and some of the large-scale infrastructure projects require the participation of major international companies, which are still reluctant to do business in Iraq because of the poor security.

Indeed, pressuring Iraq to spend more of its oil bonanza quickly could result in money being misspent, government officials warn.
"I don't care what America is angry about. I care about how we reconstruct Iraq and I'm afraid this controversy in the US might result in Iraqi money being wasted, simply to respond to this noise that we haven't spent the money," said Basit, the auditor. "In these years we will need many billions, and we need to spend it correctly, not just throw it away."

Corruption's cost unclear
How much of the reconstruction money has been lost to corruption is another question mark. Radhi al-Radhi, the former head of Iraq's Integrity Commission, put the figure at $ 18 bn in testimony to the Senate in March. A US Government Accountability Office report last year said Iraq may be losing as much as $ 15 mm a day in oil revenues due to smuggling.
Basit believes these numbers are an overstatement. Whatever the amounts embezzled by Iraqis, he says, the figure is insignificant compared with the $ 8.8 bn in Iraqi oil money spent by the Bremer administration that still can't be accounted for, according to Special Inspector General reports.
"I am sure the amounts wasted under Bremer exceed the amounts wasted since then," he said. "All the money spent in Iraq needs to be audited very carefully, but the money spent by Americans in Iraq needs an extra special audit."

Figures like these contribute to the widespread perception among Iraqis that the US invaded only to steal the nation's oil, making it difficult for Iraqi legislators to contemplate contributing to the costs of the US military in Iraq, said Sunni lawmaker Dhafer al-Ani.
"It's illogical, illegal and immoral," he said of the US proposal that Iraq give the US military cheap oil. "Any additional commitments by the Iraqis to the Americans will make it less respected in the eyes of the Iraqi people, and that will make things even more complicated."

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