More proof that W can't or won't read anything.....except of course "the headlines to get a flavor of things"
Report Offered Bleak Outlook About Iraq Oil
October 5, 2003
By JEFF GERTH
WASHINGTON, Oct. 4 - The Bush administration's optimistic
statements earlier this year that Iraq's oil wealth, not
American taxpayers, would cover most of the cost of
rebuilding Iraq were at odds with a bleaker assessment of a
government task force secretly established last fall to
study Iraq's oil industry, according to public records and
government officials.
The task force, which was based at the Pentagon as part of
the planning for the war, produced a book-length report
that described the Iraqi oil industry as so badly damaged
by a decade of trade embargoes that its production capacity
had fallen by more than 25 percent, panel members have
said.
Despite those findings, Deputy Defense Secretary Paul D.
Wolfowitz told Congress during the war that "we are dealing
with a country that can really finance its own
reconstruction, and relatively soon."
Moreover, Vice President Dick Cheney said in April, on the
day Baghdad fell, that Iraq's oil production could hit 3
million barrels a day by the end of the year, even though
the task force had determined that Iraq was generating less
than 2.4 million barrels a day before the war.
Now, as the Bush administration requests $20.3 billion from
Congress for reconstruction next year, the chief reasons
cited for the high price tag are sabotage of oil equipment
- and the poor state of oil infrastructure already
documented by the task force.
"The problem is this," L. Paul Bremer III, the top civilian
administrator in Iraq, asserted at a Senate hearing two
weeks ago: "The oil infrastructure was severely run down
over the last 20 years, and partly because of sanctions
over the last decade."
Similarly, Bush administration officials announced earlier
this year that Iraq's oil revenues would be $20 billion to
$30 billion a year, which added to the impression that the
aftermath of the war would place a minimal burden on the
United States. Mr. Bremer now estimates that Iraq's total
oil revenues from the last half of 2003 to 2005 will amount
to $35 billion, running at a rate of about $14 billion a
year.
The administration now plays down the report's findings.
Senior administration officials said that Mr. Cheney, Mr.
Wolfowitz and Donald H. Rumsfeld, the secretary of defense,
were aware of the oil group's overall mission, but that
they could not say whether they knew of its specific
findings.
"I think when it is all said and done," said Lawrence Di
Rita, the Pentagon's chief spokesman, "prewar estimates
that may be borne out in fact are likelier to be more lucky
than smart."
Mr. Di Rita added that earlier estimates and statements by
Mr. Wolfowitz and others "oozed with uncertainty."
Iraq's Most Valuable Asset
In the months leading up to
the war, administration officials said little in public
about oil, partly because they were "encumbered by fear"
that their actions would be seen as helping the American
petroleum industry, said one administration adviser. But
behind the scenes, officials were studying how to handle
Iraq's most valuable asset.
It was evident from much of the information they received
that Iraq's oil was not a ready resource for
reconstruction.
One expert consulted by the government, Amy Myers Jaffe,
who heads the energy program at the James A. Baker III
Institute for Public Policy at Rice University in Houston,
said her group concluded in a report last December that
"oil revenues would not be enough and that the expenses of
reconstruction would be huge."
In addition, United Nations reports dating back to the late
1990's documented the deterioration that occurred in Iraq's
oil system as a result of trade embargoes, which curtailed
Iraq's access to technology and equipment.
The administration's examination of the subject began last
September when Douglas J. Feith, the under secretary of
defense for policy, asked an adviser to oversee plans for
Iraq's oil industry in the event of war, according to a
Pentagon official involved in the project.
The result was the Energy Infrastructure Planning Group,
whose existence has not been previously disclosed. It drew
on the expertise of government specialists including the
Central Intelligence Agency and retired senior energy
executives. It planned how to secure the oil industry
during the war and, afterward, restoring it to its prewar
capacity.
The task force's job was not to make a direct assessment of
how much money the oil industry could contribute to
rebuilding Iraq. But determining Iraq's actual oil
production capacity was important. First, it could help
other administration officials gauge how much revenue might
be generated for the reconstruction effort. Second, the
administration was concerned that it did not want to be
seen as profiting from invading an oil-rich nation and
giving oil production levels a boost.
The task force concluded that although Iraq's stated
production capacity was just over 3 million barrels per
day, the system was only producing 2.1 million to 2.4
million barrels, panel members said.
"I think most people would agree that the 2.4 was a little
high and the average for 2002 was 2.1," said a Pentagon
official on the task force who spoke on the condition of
anonymity. The "condition of the Iraqi oil infrastructure
was not particularly good," the official said. "That would
be evident to anybody who realized the country had been
under U.N. sanctions for many years."
The United Nations produced reports on Iraq regularly from
1998 to 2001. The documents painted a picture of a troubled
system and cited the need for improvements, some of which
are now being proposed by Mr. Bremer, like the $125 million
repair of the Qarmat Ali water plant in the south.
In April, when Vice President Cheney was asked about Iraq's
oil during an appearance before newspaper editors, he cited
higher numbers rather than the task force's more sober
findings.
While noting that Iraq's oil fields were in "bad shape,"
Mr. Cheney said, "With some investment we ought to be able
to get production back up on the order of 2.5, 3 million
barrels a day, within, hopefully by the end of the year."
An aide to the vice president said recently that those
estimates were "consistent with prewar capacity," but could
not say whether Mr. Cheney was aware of the task force's
different assessment.
An Optimistic Vision
The administration was also optimistic when it came to
public estimates of Iraq's oil revenues.
Shortly after the war began in March, the administration's
budget office provided Congress and reporters with a
background paper on Iraq. It said that Iraq would "not
require sustained aid" because of its abundant resources,
including oil and natural gas.
On March 27, Mr. Wolfowitz, the deputy defense secretary,
told the House Appropriations Committee that his "rough
recollection" was that "The oil revenues of that country
could bring between $50 billion and $100 billion over the
course of the next two or three years."
Testifying in the Senate that same day, Mr. Rumsfeld
emphasized that "when it comes to reconstruction, before we
turn to the American taxpayers we will turn first to the
resources of the Iraqi government." He noted that the war's
costs were not knowable, but he also said an important
source of money for reconstruction would flow after the
United States worked "with the Iraqi interim authority that
will be established to tap Iraq's oil revenues."
At the outset of the war, the administration had asked
Congress for $62 billion for Iraq, which included $1.7
billion for reconstruction and $489 million for oil-related
repairs.
In a televised interview in late April, Andrew S. Natsios,
head of the United States Agency for International
Development, the group overseeing Iraq's reconstruction,
said that amount was "it for the U.S." He said any other
reconstruction money would come from elsewhere, including
other countries and future "Iraqi oil revenues," which he
predicted at "$20 billion a year."
In an interview this week, Mr. Natsios said he had based
those comments on "the discussion in the interagency
process at the time," adding, "That's what the Office of
Management and Budget was telling us."
Trent Duffy, a budget office spokesman, said this week that
"the administration was very clear that the $1.7 billion in
initial reconstruction was for the beginning stages and
that it was necessary to get a better understanding of the
fuller, comprehensive needs going forward."
Last week, appearing again before the Senate committee, Mr.
Rumsfeld said, "I don't think I did misjudge" Iraq's oil
capacity. According to current projections, he said, the
country's oil revenues will grow to $12 billion next year
from $2 billion this year; they should reach $19 billion in
2005 and $20 billion in 2006.
"So, their oil revenues will be contributing," Mr. Rumsfeld
said.
Yet Mr. Bremer, in his remarks to legislators two weeks
ago, said that for the next two years, whatever revenue was
reaped from oil production would not exceed the cost of
Iraq's day-to-day operating expenses. In 2005, he said,
there would be a surplus of only $4 million to $5 million.
As for Mr. Cheney's projection in April that oil would
produce as much as $20 billion a year, a Cheney aide said
last week that "there was much more extensive damage due to
looting and sabotage, so we're not going to get there when
the vice president anticipated."
Reassessing Revenues
The public revenue estimates made in the spring were in
line with the very top range of projections made by the
Pentagon task force.
According to the Pentagon official who served on the task
force, its projections for yearly oil revenues were $25
billion to $30 billion "in the very best case, no sabotage
and little or no battle damage," and about $16 billion in
the "worse than best case."
The worst case was no revenue for a few years, if there was
"major sabotage and some significant battle damage."
Last December the Baker Institute estimated that even if
there was no war damage, "Iraq's total oil revenues would
still only likely average around $10 billion to $12 billion
annually."
Yet even after the war, some officials in Washington seemed
to cling to an optimistic view of Iraq's oil production.
In July, Mr. Wolfowitz told a group of senators that
production had reached "over a million barrels per day."
Although Iraq was having electrical power problems, Mr.
Wolfowitz said the oil was flowing "because we brought in
portable generators to provide electricity" and planned to
bring in more.
But Philip Carroll, a retired petroleum executive and the
senior American oil adviser in Baghdad, said in an
interview that Iraqi oil production "experienced a terrible
month in July because electrical problems cut us back to
half of what we should have produced." Those problems,
including the need to import considerable fuel, he said,
led him to arrange new generator leases in late July.
Mr. Carroll said that although gross production for the
week of July 25 was a million barrels a day, 350,000
barrels had to be injected back into the ground, because of
a lack of storage or distribution infrastructure.
An aide to Mr. Wolfowitz said he believed that the oil
information came from a briefing and that Mr. Wolfowitz's
testimony was "sober and nuanced."
Once the war ended, and United States officials gained
access to Iraq's oil records, they got a more complete
picture.
"When we actually got their production figures for 2002, we
were able to make a distinction between productive capacity
and what they were actually producing," said Gary Loew, an
Army Corps of Engineers official, reducing their capacity
figures by 20 to 25 percent.
That reduction roughly corresponded to the Pentagon task
force's cuts before the war began.
nytimes.com
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