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UN: Iraq Can't Explain $69 Million in Fuel Oil From '04, Audit Says

The International Advisory and Monitoring Board has repeatedly criticized the American government for its loose spending controls during the period it controlled Iraqi assets, from the invasion in early 2003 to the transfer of sovereignty last June.

by Erik EckholmThe New York Times
May 23rd, 2005

Iraqi officials cannot explain what happened to $69 million worth of fuel oil produced in the second half of 2004, raising fears that it was smuggled out of the country for private gain, according to a report released yesterday by United Nations-appointed auditors.

The report, by the auditing firm KPMG, said Iraq's recorded exports of fuel oil mysteriously declined by a comparable amount during that same period of 2004, the initial months of sovereignty for the newly installed Iraqi government.

Studying records from the Ministry of Oil, the auditors found that Iraq's production in that six-month period exceeded the recorded domestic uses and exports by 618,203 tons, worth about $69 million.

"We were not provided with a satisfactory explanation for either the unreconciled quantities or sales decrease of fuel oil," the report states. In subsequent paragraphs, it takes note of the suspicions of widespread oil smuggling that were previously voiced by American officials, and describes Iraq's weak controls on sales of oil and oil products.

The group that hired KPMG, the International Advisory and Monitoring Board, was created by the United Nations to watch the handling of Iraqi assets, mainly oil revenues, after the American-led invasion.

The board has repeatedly criticized the American government for its loose spending controls during the period it controlled Iraqi assets, from the invasion in early 2003 to the transfer of sovereignty last June.

In particular, it has questioned a $2.2 billion contract the Pentagon gave, secretly and without competitive bidding, to a subsidiary of the Halliburton Corporation to start repairs of Iraqi oil fields and to import consumer fuels. The international monitoring bureau says the Pentagon has rebuffed requests for a full accounting of that contract, which used Iraqi money.

The international board has also warned, and it repeated in a statement yesterday, that the new Iraqi government is ripe for corruption because its ministries lack sound procedures for accounting and oversight. The discussion in the new report of the missing fuel oil is an unusually specific description of what the monitoring board in its press release called the "possible misappropriation of oil revenues."





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