Many reports were published about the misappropriation of Iraqi oil money. Here, we will attempt to present an overview of the most important of these, published since 2003. Our aim is to raise the following questions:
Who was behind the theft? Is the misappropriation of hundreds of millions of dollars’ worth of oil possible without the perpetrators being known, and without legal action brought against them, even if in absentia? Or has the mishandling of public money become so commonplace, amid the pervasive culture of corruption in the country?
The issue involves theft that occurred over the past decade. But learning the identity of those responsible remains important, even if years have since passed. Indeed, the amounts stolen are huge, allowing the offenders to launder the money or even use it for political purposes.
If the perpetrators felt secure to steal hundreds of millions of dollars in the past without accountability or responsibility, then what will stop them from stealing millions more when they assume political and economic posts and responsibilities in future?
The methods used to embezzle oil money were many, with one method, for instance, being the result of the lack of an adequate oil metering system for the flow of oil from wells and pipelines since 2003.
The International Advisory and Monitoring Board, which oversees natural resources in the country, stated in 2006 that it has been calling for the metering of oil production, in line with standard industry practice, for years, so far without results.
KBR, a firm owned by the U.S. company Halliburton, and one of the top suppliers of oil metering systems worldwide, was contracted to purchase and install these meters.
But the export of Iraqi oil went on for years without accurate metering, leaving the door wide open to abuse. The Board, in a memorandum issued in July, expressed its concern over the lack of adequate metering systems.
Until 2010, the United Nations continued to call for the installation of accurate meters for oil exports. So is it reasonable for the oil institution in Iraq, with all the achievements that have been made over a decade, to be unable to install the required metering systems to measure the quantities of crude oil being exported? If they are indeed unable to do so, then for what reason, and who is responsible?
The lack of metering systems means that a 1% discrepancy in the load carried by a supertanker would allow, without being detected, the theft of a quantity of oil equivalent to the load of 500 trucks, each carrying around a 1,000 gallons. In 2007, the British newspaper the Guardian mentioned that a certain tribe in Basra would pay nearly $ 250,000 each week to militants to protect the oil terminal in Basra, in return for loading oil tankers with unmetered oil (i.e. stolen from the government).
Another method for stealing oil involved syphoning it from breached pipelines and illegally benefiting (stealing) from major oil collection and storage facilities. In addition, oil tankers and petroleum products transported by land were often robbed directly.
Attacks on oil facilities, described as being terrorist attacks, were yet another method for organized gangs. The former Finance Minister Ali Allawi estimates that the gunmen were getting 40 - 50 percent of oil revenues (which means billions of dollars annually).
The gangs (whether terrorists or those supported by ruling parties) benefited from the chaos and lack of security in the desolate roads, to rob dozens of trucks loaded with petroleum products.
According to the Inspector General of the Iraqi Oil Ministry at the time, the thefts were targeting shipments of products entering Iraq from Kuwait and Turkey.
This type of crime peaked during 2004 - 2005 when the official price for a gallon of gasoline in Iraq was three cents in the official market and more than a dollar on the black market.
The report of the inspector general adds that the period between February and September 2005 saw the theft of about nine trucks a day carrying petroleum products from Basra to the Iraqi market.
In 2007, a report on security and stability in Iraq issued by the U.S. Department of Defense said that about 70 percent of the refined products of the Baiji refinery (the largest in the country) was stolen, and that the number of outlets selling stolen gasoline near Baiji rose from eight in 2003 to more than 50 in 2008. These thefts were dealt with and eliminated by reducing fuel subsidies and then abolishing them altogether by the Ministry of Oil starting with 2010.
This information is a small sample of the instances of theft of Iraqi oil in the past years. They were all documented in a book recently published, titled the “Iraq Oil Almanac: A Reference Guide”, published by OpenOil in London.
This information was also published by other publications, and it is likely that other information exists and is still under wraps. OpenOil is a non-governmental organization dedicated to transparency in the global oil industry.
It is worth noting here that the Iraqi oil industry managed during the past few years to restart its operations. The output of crude oil has reached about 3.4 million barrels per day, which means that the production level of Iraq is the second largest among the countries of OPEC, while current exports of crude oil amount to 2.62 million barrels per day.
* Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
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