Crack-down on corruption rife in Iraq's oil industry

The Environment News Service reports that 450 employees have been sacked from the Iraqi Oil Ministry as part of a crack-down on corruption.

Iraqi oil ministry’s general inspector Ali Muhsin Ismael said that criminals used a number of methods to defraud the industry, including the manipulation of fuel pump gauges and incorrect measurement of tankers’ contents - both of which can result in an undeclared surplus that can then be sold on the black market.

In Basra, which is the site of Iraq’s southern oil fields, resident Hussein al-Sabti said that oil smuggling operations were now carried out in the open. "This has prompted the population of Basra to ask whether or not smuggling of petrol is a legitimate act," he said.

Abdul Kareem Li’aibi, the oil ministry’s fuel distribution project manager, said that the government had recently discovered that one of its southern pipelines was peppered with more than 20 illegal taps, allowing tankers to top up their loads at will.

But the government itself is also facing a struggle against corruption, according to Judge Radhi Hamza al-Radhi, chairman of the Commission on Public Integrity.

"This waste of public finances is worrying government officials in Iraq," he said.

"It is difficult to combat corruption due to the absence of a strong mechanism to control all the institutions' civil servants, and due to a lack of support from law enforcement bodies," said Judge al-Radhi.

Oil ministry official Li’aibi is not sure whether actions such as this will put an end to graft. "I can’t recommend any civil servants or workers," he said. "Today they are honest but, after one month, they are engaging in corruption. I can’t even guarantee that I won’t be joining them."

Neo-cons lose to Big Oil

It is being reported that secret documents have been obtained by Harper's, relating to plans for Iraq's oil soon after Bush's inauguration. It shows two conflicting plans, setting off a hidden policy war between neo-conservatives at the Pentagon, on one side, versus a combination of "Big Oil" executives and US State Department "pragmatists". It provides a rare insight into the influence of oil companies in every stage of the invasion of Iraq.

The major policy disagreement was over ownership of the oil. The plan from the US State Department was drafted with the help of American oil industry consultants. The oil-industry favored plan called for the sell-off of all of Iraq's oil fields. In contrast, the plan crafted by neo-conservatives, under the guidance of Amy Jaffe of the James Baker Institute in Texas, favoured privitisation. Apparently the neo-cons were intent on using Iraq's oil to destroy the Opec cartel through massive increases in production above Opec quotas.

Needless to say, Big Oil won. Philip Carroll, the former CEO of Shell Oil USA, is quoted as saying:

Many neo-conservatives are people who have certain ideological beliefs about markets, about democracy, about this that and the other. International oil companies without exception are very pragmatic commercial organizations. They don't have a theology

The documents are here.

Uncle Bucky got lucky

LA Times reports that contracts awarded by Dept Defense to Engineered Support Systems Inc. worth $158 million have been referred to the IG's office for investigation due to sole-sourcing and possible corruption. Unfortunately there is nothing remarkable about this, unless you count that George W. Bush's uncle William H.T. "Bucky" Bush is on the board of the company. Apparently he just made a cool half-mill on his stock due to the company's recent profit surge.

Well, what can I say? What the American taxpayers choose to do with their money is their own business, I suppose :-) What troubles me is that if they are this careless with their own money, how vigilant will they be when it comes to accounting for the DFI?

Congressional hearing

There was a Congressional hearing yesterday, inspired by the latest IG report, joined by Senators Harry Reid and Byron Dorgan, and Representative Henry Waxman (all Democrats). It included the latest on Custer Battles legal efforts:

Assistant US Attorney Richard Sponseller, according to Grayson [lawyer for the whistle-blowers], has suggested that any fraud committed against the CPA should not be equated with theft from the United States, since the CPA was an international organization. But when President George Bush signed the CPA's original funding mandate, it clearly referred to the organization as "an entity of the United States."

Custer Battles has reached the same conclusion about its own lack of culpability, but for different reasons. The company's lawyers told CorpWatch, a website that monitors the activity of war profiteers, that the claim against them should be dismissed because the money allegedly stolen was rightfully that of Iraqis, not Americans.

Interestingly they seem to have some link to the Administration, as alluded to in the above article:

A lawyer attended the hearings to represent two former associates of Custer Battles who declined at the last minute to testify in person for fear of retribution from both the mercenary firm and the Bush administration.

and in this one:

Another witness accused the government of hampering an investigation into alleged fraud US-based by Custer Battles, which had contracts worth as much as 100 million dollars in Iraq for airport security and other jobs.

I guess, considering the lack of transparency with which contracts were awarded, it should be unsurprising to most sensible people if some were awarded to companies with ties to the Administration, and if those companies consequently abused the system. It seems that they're not very nice guys either way.

Bookmark to follow up

The Guardian's compare-and-contrast between the CPA's and the UN's respective Iraqi oil scandals. I didn't get around to the reports this weekend, so I can't comment yet.

Volcker report

It's lengthy. I might be able to read it on Sunday. From my alarm clock, I gather that much of the issue is in how contracts were awarded. I see a pattern forming here.

In the meantime, I'll be reflecting upon the following truism while doing work: Power corrupts.

And for the slavering ideologues (you know who you are), I'll try to speak your language with the following scripture: Psalm 53:3. Here's a nice summary article of the whole debacle for you: All players gained from `Oil for food'. Maybe another truism: Be careful what you wish for, you might just get it. That would be a nice change.

Husain Shahristani on precedent and accountability

From Al-Jazeera, Shahristani highlights what a good precedent the CPA set for the Iraqi government:

"It is very well known in the country that the corruption is very widespread from the police to the judicial systems ... as a matter of fact Iraq has never known the level of corruption prevailing now," Shahristani said.

"A lot of public funds have gone missing under the Coalition Provisional Authority ... and even now," he said, of the disbanded US occupation authority.

Shahristani ... vowed the next government would review all suspect contracts made under the Allawi cabinet.

"One thing we are going to pursue is that all suspicious contracts should be properly examined and any funds that have been misused should be returned to the public ... and these things should be explained to the Iraqi people," he said.

I wonder who will review the suspect contracts made under the next government? Maybe the government after that.