so much for the bushcheneyrummiewolfie strategy of getting the oil under control and using it to pay back the American people for their war costs....PHHHHHHHHHHHHHT
18 billion - Iraq's Annual Oil Losses
Walid Khadduri Al-Hayat - 11/04/06//
I have recently chosen to discuss the question of the Iraqi oil with a senior Iraqi oil expert, who, given his clout over the local politics in Baghdad, is quite informed of the current developments there.
In fact, just like any other Iraqi regretting the country's stolen and siphoned wealth, my old friend explained to me in figures how Iraq loses every year some $18 billion of oil funds as a result of smuggling, sabotage, and lost opportunities.
First, I have inquired about the Iraqi revenue as calculated in Iraq's budget - with an exported 1.6 million b/d and a shadow price evaluated with the IMF at $46.1 a barrel or some $27 billion a year.
At this, he simply laughed, saying, "These figures are nonsense. This is the century's scandal, not to mention the continuous developments. For the country loses every year $18 billion of oil receipts."
He then accurately explained to me in numbers how Iraq's wealth is plundered nowadays.
1- Lost opportunities: Iraq currently produces some 2 million b/d on average compared with its pre-occupation 2.6 million-barrels-per-day levels. This huge fall is mainly ascribed to the looted oil facilities in the early post-war days, the continuous sabotage by terrorists, and the insufficient funds to rehabilitate the industry; let alone the current widespread chaos at the Ministry of Oil, where factions and confessions reign.
In a simple calculation, with every lost 600 thousand b/d priced at $50 a barrel, Iraq loses $11 billion a year - a sum it ought to have collected from its oil exports. More painfully, the Iraqi oil production is forecasted to drop further if the current trends remain un-reversed.
But the oil expert overlooked an important fact: Had the US and British troops protected the oil facilities when they were first pillaged and robbed, had they deployed enough troops to safeguard them from looting during the past three years, had the allocated funds been really used to rehabilitate the said industry, production would not have dropped to these low levels. In addition, he has not mentioned that the Iraqi production capacity was expected, according to the pre-war statements, to regain its pre-Kuwait War level of 3.5 million b/d.
2. Imported products: Theoretically speaking, Iraq's refineries refine an estimated 700 thousand b/d, while the country only consumes 400 thousand b/d. However, due to wars, embargo, destruction, sabotage, and the insufficient funds needed to buy reserve tools, and as cars are increasingly used, refineries cannot keep pace with the local consumption of petroleum products. For this reason, the State spends $500 million a month to import products from the neighboring countries. Always according to the Iraqi economist and the relevant documents he has read, 25% of the imported products or $1.5 billion a year are siphoned away by criminal gangs affiliated to militias, parties, and politicians, even by "Zarqawi's group seeking to finance its terrorist operations." In truth, many parties benefiting from these easy, illicit, and huge profits they reap through smuggling and robbery struggle and maneuver to maintain these dire conditions.
3. Smuggled crude oil: Referring to the available information, the Iraqi economist stated that the average Iraqi oil production reached during the past weeks 2 million b/d (1.7 million from the South and 300 thousand from the North), whereas the exportation rate accounted for 1.3 million b/d from the South and zero from the North. As for refineries, they supply some 400 thousand b/d of crude oil. Hence, 300 thousand b/d vanish a day making $5.5 billion a year.
Hence, how can this huge quantity of crude oil be simply "lost?"
In this regard, we cannot strangely understand why no counters are put to measure the quantity of crude oil exported from South Iraq, especially that Iraq under the former regime has equally suffered from this shortage as a result of the war-induced destruction. Today, three years after the regime toppling, things have not changed yet. Thus, nothing justifies this phenomenon that causes the exported oil quantities to be manipulated.
In addition, crude oil is increasingly smuggled to the nearby countries in light of the high prices and the potentially generated profits. This is exactly what took place under the former regime.
The Iraqi expert from Baghdad ascertained that this information is but a drop in this ocean, a sample of the widespread corruption. Amid the predominant chaos, lost transparency, and the inexistent basic components of a State, the senior officials themselves ignore how to disburse funds - which is certainly expected in a country embroiled in civil war.
*Dr. Walid Khadduri is an energy expert and Director of Al-Hayat business desk.
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