Friday, December 01, 2006

Corruption: The 'Second Insurgency' In Iraq

In an interview with the Guardian, Stuart Bowen, the Special Inspector General of the Iraq reconstruction, told the British paper that corruption by contractors in Iraq is costing a staggering $4 billion dollars a year.

The story begins by asserting that, according to Mr. Bowen (pictured at left),
"The Iraqi government is in danger of being brought down by the wholesale smuggling of the nation's oil and other forms of corruption that together represent a 'second insurgency'"
adding that
"corruption had reached such levels that it threatened the survival of the state"

Oil Smuggling Funds The Insurgency

The Guardian reports that Mr. Bowen views oil smuggling as the region's top problem,
"The pipelines that are meant to take the oil north have been blown up, so the only way to export it is by road. 'That leaves it vulnerable to smuggling,' he said, as truckers sell their cargoes on the black market."
That stolen money apparently also helps to finance the insurgency. As Julian Borger and David Pallister wrote:
"A US government report has concluded that oil smuggling abetted by corrupt Iraqi officials is netting insurgents $100m a year, helping to make them financially self-sustaining."

U.S. Incompetence May Have Armed Insurgents And Death Squads

The scathing Guardian article refers to monumental incompetence in the handling of weapons:
"A recent audit by (Bowen's) inspectors found that more than 14,000 guns paid for out of US reconstruction funds for Iraqi government use could not be accounted for. Many could be in the hands of insurgents or sectarian death squads, but it will be almost impossible to prove because when the US military handed out the guns it noted the serial numbers of only about 10,000 out of a total of 370,000 US-funded weapons, contrary to defence department regulations."

9 Billion In Oil Revenue Missing

There are other bombshell accusations, such as the fact that:
"Mr Bowen's office found that nearly $9bn in Iraqi oil revenues could not be accounted for. The cash was flown into the country in shrink-wrapped bundles on military transport planes and handed over by the ton to Iraqi ministries by the Coalition Provisional Authority (CPA) run by Paul Bremer, a veteran diplomat. The money was meant to demonstrate the invaders' good intentions and boost the Iraqi economy, which Mr Bremer later insisted had been 'dead in the water'. But it also fuelled a cycle of corruption left over from Saddam Hussein's rule.

"'We know it got to the Iraqis, but we don't know how it was used,' Mr Bowen later told Congress."

Contractors Making A Killing

Much of the problem is traced to the U.S. corporations that are making a financial killing from the invasion. Regarding the awarding of contracts, the Guardian stated,
"In most cases the contracts were distributed without competition and on a cost-plus basis. In other words the contractors were guaranteed a profit margin calculated as a percentage of their costs, so the higher the costs, the higher the profits. In the rush to get work started the contracts were signed early in 2004. In many cases work did not get under way until the year was nearly over. In the months between, the contractors racked up huge bills on wages, hotel bills and restaurants.

"According to a Sigir review published in October, Kellogg, Brown and Root (a subsidiary of Halliburton, Vice President Dick Cheney's former company) was awarded an oil industry repair contract in February 2004 but 'direct project activity' did not begin until November 19. In that time KBR's overhead costs were nearly $53m. In fact more than half the company's $300m project costs from 2004-06 went on overheads, the audit found.

"Iraq also represented a grey zone beyond the reach of the US civil courts. KBR was found to have overcharged the US military about $60m for fuel deliveries, but that did not stop it winning more government contracts."
Based upon such revelations, the ability of Congress to now investigate such abuses should lead to these sort of headlines finding their way into American newspapers.

It's amazing what the power of the subpoena will allow the Democrats to do.

To access the Guardian story, click here.

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