HOW HE SEES IT U.S. occupiers raid Iraq's treasury

By DANIEL SNEIDER
KNIGHT RIDDER NEWSPAPERS
Last year the White House went to Congress for $18.4 billion that it said was urgently needed to rebuild Iraq. But as the American occupation closed up shop last month, it revealed to Congress that a tiny fraction of that money -- $333 million -- had actually been spent.
"It is shocking," says Larry Diamond, a Hoover Institution expert who was an adviser to the Coalition Provisional Authority, the American occupation. He cites lack of security and bureaucratic infighting for the failure to deliver.
Equally shocking, and raising even more serious questions, is that while the occupation found it hard to spend American money, it hastily shoveled Iraq's own money out the door. The new Iraqi government inherits an almost bare cupboard.
Before it handed over authority to the new Iraqi government, the CPA spent or committed almost every dime of about $21 billion in the Development Fund for Iraq, established by the United Nations to manage Iraq's oil revenue. In the last two months alone, the CPA doubled the payments out of the Iraqi fund. In one meeting on May 15, the CPA authorized spending $2 billion in Iraqi money. A U.N. resolution requires that the new Iraqi government honor those commitments, and the U.S. Embassy in Baghdad will ensure the contractors are paid.
Why has the Iraqi money been spent while American money hasn't? Some of it went to fund Iraqi ministries. But another reason is that there is almost no oversight over what the CPA did with the Iraqi dough.
Since the uproar over the award of a $7 billion no-bid contract to Halliburton, the oil services firm formerly headed by Vice President Dick Cheney, Congress imposed tougher controls over U.S. spending. It required publication of all contract awards, competitive bidding and multiple audits.
In contrast, the CPA provided bare information on how the money was spent, no details on who got contracts, and no apparent restriction on sole source contracts. Spending is described in broad categories -- to fund Iraqi ministries, provide food and fuel rations, for security and reconstruction -- with some smaller projects specified.
One of the recipients of the Iraq money appears to be -- no surprise here -- Halliburton. It got the bulk of almost $2 billion spent to import cooking gas and other fuel into Iraq, according to The Washington Post.
Closed-door decisions
There is nothing wrong with spending Iraq's money. But it has been decided behind closed doors and largely not by Iraqis. And American firms, not Iraqis, appear to have benefited most. The decisions were made by a Program Review Board -- and Americans made up most of the voting members, along with representatives of the Australian and British governments and a couple of members of the U.S.-appointed Iraqi government.
According to the minutes of the review board meetings, posted on the CPA Web site, only the British and Australians persistently questioned why new money was requested when similar funds were authorized by the U.S. Congress. When they pressed for assurances that contracts would be competitive, the CPA agreed, but there is no way to know if that happened.
"It's been so much easier to spend the Iraqi money than the congressional money," says Svetlana Tsalik, director of Iraq Revenue Watch, an Open Society Institute project monitoring Iraq's oil industry.
The United Nations set up an international board to monitor the Iraqi fund and to appoint an independent auditor to ensure the transparent use of the money. But according to a report issued to Congress last week by the General Accounting Office, the international board only recently began to exercise oversight. The auditor, KPMG, only began work in April.
"Transactions worth billions of dollars in Iraqi funds have not been independently reviewed or the results reported," the GAO concluded.
KPMG's audit is due to be released Wednesday, but a preliminary version obtained by Revenue Watch reported resistance from the CPA staff to cooperate with their work. The CPA repeatedly refused to hand over information requested on sole source contracts.
The new Iraqi government has no say over what has been decided. "If I were an Iraqi, I would be livid," says Revenue Watch's Tsalik.
Of course if the Iraqis need money, they can always knock on the door of the new U.S. ambassador, who will still have $18 billion left to dole out. I wonder how the Iraqis will feel about that.
X Daniel Sneider is foreign affairs columnist for the San Jose Mercury News. Distributed by Knight Ridder/Tribune Information Services.