Where are the missing billions?

Christian Aid journalist Dominic Nutt calls for accountability from Iraq reconstruction funds

The Guardian
October 30, 2003
By Dominic Nutt

The billions pledged for the reconstruction of Iraq at the donors' conference in Madrid look pretty good on paper. It would certainly be churlish to sniff at $33bn (£20bn) - specially when you consider that at a similar conference for Afghanistan, after the Taliban were defeated, the world could only scrape together $4.5bn (£2.7).

In fact, the world has promised the equivalent of around $1,400 (£848) for each Iraqi citizen, when Afghans got just $57 (£34).

So, should we be asking why Iraq, a middle-income country, is worth so much more to the world than Afghanistan, which is one of the poorest countries on earth and has few natural resources?

It may genuinely be the case that President George Bush has stumped up $20bn (£12bn) of the Madrid money for altruistic reasons. But it does raise the question: why has Iraq been given more than four times the amount pledged to Afghanistan? Is it because Afghanistan does not produce oil?

The problem is that raising such questions is likely to fuel Iraqi mistrust of the American-led Coalition Provisional Authority (CPA) which effectively runs the country at the moment. This mistrust should not be underestimated.

Iraqis lived for decades under the control of a totalitarian state and its legacy provides fertile ground for distrust, rumour-mongering, conspiracy theories and a belief in hidden agendas. Many Iraqis are convinced that the coalition is motivated by a desire to control Iraqi oil. This cynicism aggravates the insecurity and violence that are taking an ever-tighter grip on Iraq.

It does not help that much of the extra $13bn (£7.65bn) pledged by governments and institutions like the International Monetary Fund, comes in the form of loans.

Iraq is already estimated to have accrued anything from $120bn (£72bn) to $400bn (£240bn) of debt during the Saddam era. It is often assumed that oil will bail out Iraq. However, even the most optimistic projections for Iraqi oil sales suggest that the most the country could raise through sales, after the long process of rehabilitation, will be $50bn (£30bn) a year. Meanwhile, interest will pile up on debts and reconstruction must be funded.

It should come as no surprise if Iraqis feel that the international community is writing a post-dated cheque to be drawn on their oil in future years. The prospect of new debts will further crank up mistrust.

And it gets worse. At the Madrid conference, we at Christian Aid revealed in our report, Iraq: the Missing Billions, that the American-led coalition had failed to account for $4bn (£2.4bn) in oil revenues and assets from the Saddam regime.

The United Nations had empowered the coalition to gather this money - estimated to be worth around $9bn (£5.4bn) by the end of the year - and spend it on Iraq's reconstruction through the Development Fund for Iraq (DFI). Under UN resolution 1483, the UN also obliged the coalition to set up an independent monitoring board to oversee and to publish these oil accounts.

This was meant to happen in May this year and failure is no minor matter.

Christian Aid has been working in Iraq for more than 10 years and the people we talk to constantly tell us they mistrust American intentions towards their country. Many feel that the US wants their oil. Therefore it is crucial that the coalition lets the Iraqi people know how it is spending Iraq's oil money.

We have been asking the coalition what on earth it has to hide? Is it putting the cash to the best use for the people of Iraq? Or is it rewarding American companies with lucrative and overpriced reconstruction contracts?

Unemployment in Iraq is soaring; hundreds of thousands of Iraqi soldiers - still with their guns - have been demobilised with no hope of work. They are poor and they are angry. And that makes them dangerous. They are entitled to ask why they are not getting jobs from all these reconstruction projects.

Under pressure form Christian Aid, the coalition has finally published some figures on where the oil money has so far been spent. This is good news - it means the coalition has recognised the need for transparency. But in reality the information is less than the bare minimum. You would expect more details on your own bank statement.

For example, the accounts state that $125m (£75m) has been spent on buying wheat. Is this Iraqi wheat or American wheat? They say that $6m (£3.6m) has been spent on oil infrastructure. But who has benefited from these payments - Iraqi or American companies?

Crucially, the account on the coalition website now says that $192m (£115.2m) from the US Treasury Special Account - that is money from frozen Iraqi bank accounts - has been transferred into the DFI. This is as it should be - the DFI is the fund that oil and assets money is meant to support.

But Christian Aid sources tell us that money from frozen Iraqi bank accounts totals around $1.7bn (£1bn). This, added to $800m (£480m) in funds seized in Iraq when the coalition entered the country, makes up the $2.5bn (£1.5bn) in unaccounted for assets we refer to in our report. So, where is the rest of the money?

By publishing these accounts, the CPA has acknowledged the need to be open about how it is spending Iraqi money - but it has far from fulfilled that need.

Suspicion will hang over the coalition until it comes clean.

· Dominic Nutt is emergencies journalist for Christian Aid

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