Billions in Oil Missing in Iraq, US Study Says
Between 100,000 and 300,000 barrels a day of Iraq’s declared oil production over the past four years is unaccounted for and could have been siphoned off through corruption or smuggling, according to a draft American government report.
Using an average of $50 a barrel, the report said the discrepancy was valued at $5 million to $15 million daily. 
The report does not give a final conclusion on what happened to the missing fraction of the roughly two million barrels pumped by Iraq each day, but the findings are sure to reinforce longstanding suspicions that smugglers, insurgents and corrupt officials control significant parts of the country’s oil industry.
The report also covered alternative explanations for the billions of dollars worth of discrepancies, including the possibility that Iraq has been consistently overstating its oil production.
Iraq and the State Department, which reports the numbers, have been under relentless pressure to show tangible progress in Iraq by raising production levels, which have languished well below the United States goal of three million barrels a day. Virtually the entire economy of Iraq is dependent on oil revenues.
The draft report, expected to be released within the next week, was prepared by the United States Government Accountability Office with the help of government energy analysts, and was provided to The New York Times by a separate government office that received a review copy. The accountability office declined to provide a copy or to discuss the draft.
Paul Anderson, a spokesman for the office, said only that “we don’t discuss draft reports.”
But a State Department official who works on energy issues said that there were several possible explanations for the discrepancy, including the loss of oil through sabotage of pipelines and inaccurate reporting of production in southern Iraq, where engineers may not properly account for water that is pumped along with oil in the fields there.
“It could also be theft,” the official said, with suspicion falling primarily on Shiite militias in the south. “Crude oil is not as lucrative in the region as refined products, but we’re not ruling that out either.”
Iraqi and American officials have previously said that smuggling of refined products like gasoline and kerosene is probably costing Iraq billions of dollars a year in lost revenues. The smuggling of those products is particularly feared because officials believe that a large fraction of the proceeds go to insurgent groups. Crude oil is much more difficult to smuggle because it must be shipped to refineries and turned into the more valuable refined products before it can be sold on the market.
The Shiite militia groups hold sway around the rich oil fields of southern Iraq, which dominate the country’s oil production, the State Department official said. For that reason, he said, the Shiite militias are more likely to be involved in theft there than the largely Sunni insurgents, who are believed to benefit mostly from smuggling refined products in the north.
In the south, the official said, “There is not an issue of insurgency, per se, but it could be funding Shia factions, and that could very well be true.”
“That would be a concern if they were using smuggling money to blow up American soldiers or kill Sunnis or do anything that could harm the unity of the country,” the official said.
The report by the accountability office is the most comprehensive look yet at faltering American efforts to rebuild Iraq’s oil and electricity sectors. For the analysis of Iraq’s oil production, the accountability office called upon experts at the Energy Information Administration within the United States Department of Energy, which has long experience in analyzing oil production and exports worldwide.
Erik Kreil, an oil expert at the information administration who is familiar with the analysis, said a review of industry figures around the world - exports, refinery figures and other measures - could not account for all the oil that Iraq says it is producing. The administration also took into account how much crude oil was consumed internally, to do things like fuel Iraqi power plants and refine into gasoline and other products.
When all those uses of the oil were taken into consideration, Mr. Kreil said, Iraq’s stated production figures did not add up.
“Either they’re producing less, or they’re producing what they say and the difference is completely unaccounted for in any of the places we think it should go,” Mr. Kreil said. “Either it’s overly optimistic, or it’s unaccounted for.”
Several analysts outside the government agreed that such a large discrepancy indicated that there was either a major smuggling operation in place or that Iraq was incapable to generate accurate production figures.
“That’s a staggering amount of oil to lose every month,” said Philip K. Verleger Jr., an independent economist and oil expert. “But given everything else that’s been written about Iraq, it’s not a surprise.”
Mr. Verleger added that if the oil was being smuggled out of Iraq, there would be a ready market for it, particularly in smaller refineries not controlled by large Western companies in places like China, the Caribbean and even small European countries.
The report also contains the most comprehensive assessment yet of the billions of dollars the United States and Iraq spent on rebuilding the oil and electricity infrastructure, which is falling further and further behind its performance goals.
Adding together both civilian and military financing, the report concludes that the United States has spent $5.1 billion of the $7.4 billion in American taxpayer money set aside to rebuild the Iraqi electricity and oil sectors. The United States has also spent $3.8 billion of Iraqi money on those sectors, the report says.
Despite those enormous expenditures, the performance is far short of official goals, and in some cases seems to be declining further. The average output of Iraq’s national electricity grid in 2006, for example, was 4,300 megawatts, about equal to its value before the 2003 invasion. By February of this year, the figure had fallen still further, to 3,800 megawatts, the report says.
All of those figures are far short of the longstanding American goal for Iraq: 6,000 megawatts. Even more dispiriting for Iraqis, by February the grid provided power for an average of only 5.1 hours a day in Baghdad and 8.6 hours nationwide. Both of those figures are also down from last year.
The story is similar for the oil sector, where - even if the Iraqi numbers are correct - neither exports nor production have met American goals and have also declined since last year, the report says.
American reconstruction officials have continued to promote what they describe as successes in the rebuilding program, while saying that problems with security have prevented the program from achieving all of its goals. But federal oversight officials have frequently reported that the program has also suffered from inadequate oversight, poor contracting practices, graft, ineffective management and disastrous initial planning.
The discrepancies in the Iraqi oil figures are broadly reminiscent of the ones that turned up when some of the same energy department experts examined Iraq’s oil infrastructure in the wake of the oil-for-food scandals of the Saddam Hussein era. In a United Nations-sponsored program that was supposed to trade Iraq’s oil for food, Mr. Hussein and other smugglers were handsomely profiting from the program, investigations determined.
In reports to Congress before the 2003 invasion that ousted Mr. Hussein, the accountability office, using techniques similar to those called into play in its most recent report, determined that in early 2002, for example, 325,000 to 480,000 barrels of crude oil a day were being smuggled out of Iraq, the majority through a pipeline to Syria.
But substantial amounts also left Iraq through Jordan and Turkey, and by ship in the Persian Gulf, routes that could also be available today, said Robert Ebel, a senior adviser at the Center for Strategic and International Studies in Washington.
“Any number of adjacent countries would be glad to have it if they could make some money,” Mr. Ebel said.
Mr. Ebel said the lack of modern metering equipment, or measuring devices, at Iraq’s wellheads made it especially difficult to track smuggling there. The State Department official agreed that there were no meters at the wellheads, but said that Iraq’s Oil Ministry had signed a contract with Shell Oil to study the possibility of putting in the meters.
The official added that an American-financed project to install meters on Iraq’s main oil platform in the Persian Gulf was scheduled to be completed this month.
As sizable as a discrepancy of as much as 300,000 barrels a day would be in most parts of the world, some analysts said it could be expected in a country with such a long, ingrained history of corruption.
“It would be surprising if it was not the case,” said John Pike, director of GlobalSecurity.org, which closely follows security and economic issues in Iraq. He added, “How could the oil sector be the exception?”
Copyright 2007 The New York Times Company
well if this story doesn’t covertly explain what the quagmire in Iraq is really all about, i will eat my hat!
So, if they cannot have their oil neither can anyone else. In the USSR in 1942 this was called the scorched earth policy. It is the perfect response to the whole war in the first place.
“The State Department official agreed that there were no meters at the wellheads, but said that Iraq’s Oil Ministry had signed a contract with Shell Oil to study the possibility of putting in the meters.
The official added that an American-financed project to install meters on Iraq’s main oil platform in the Persian Gulf was scheduled to be completed this month.”
What exactly does “American-financed” mean??? Is it going to be financed by Shell Oil or We The Tax-payers? Furthermore, if the installation of the meters is being financed by the U.S., why the hell would Iraq’s Oil Ministry have to “study the possibility” if the Iraqi government is serious about sharing the oil wealth within the country? Is this a joke?
Let’s keep sending our troops over there to die until the Iraqi government decides it’s time to get their act together.
Bring our troops home now. The Iraqis are big people and it is high time that they figure out how to live together.
“lack of modern metering equipment”
Aside from the carnage, this is one of the most laughable, disgusting, thoroughly putrid aspects of this entire mess.
http://liberalcoalition.blogspot.com/2004_04_18_archive.html
Sunday, April 18, 2004
A Little Matter of Invisible Pipelines, The Constitution, and Our Good Friend, Oil
On “60 Minutes” today, Bob Woodward talks about his book- a collection of interviews with the President and various high-ranking Vulcans who made the decision to go after Iraq.
The most telling bit was about the “blank check” that (ready?) Bush gave Rumsfeld to give to Gen. Tommy Franks to prepare for war in Iraq- secretly. It ended up siphoning 700 Million dollars from funds congress allocated to Afghanistan, without any congressional knowledge or approval. Which is against the increasingly flexible separation of powers as dictated by the Constitution.
“Rumsfeld and Franks work out a deal essentially where Franks can spend any money he needs. And so he starts building runways and pipelines and doing all the preparations in Kuwait, specifically to make war possible,” says Woodward. […] “…Some people are gonna look at a document called the Constitution which says that no money will be drawn from the treasury unless appropriated by Congress. Congress was totally in the dark on this.”
The interesting thing- a very, very interesting thing- is this news item in a “Popular Mechanics” Magazine a while back. It’s a very small, paragraph long article with a satellite photo showing what appeared to be an oil pipeline through Kuwait to Iraq’s border.
Civilian oil industry experts tell POPULAR MECHANICS that the location of the lights, which extend to the Iraqi border, does not correspond with known pipelines. A spokesman for U.S. Central Command, which had a presence in the region from fall 2002 through (at the time of this writing) fall 2003, said it was unaware of any pipeline construction.
The question is, if there is a secret pipeline being used to funnel oil out of Iraq to pay for the war, then what, pray tell, is the $87 Billion dollars going to? This is veering into tin foil hat territory, I’ll admit- wars, lies, secret oil pipeline projects- but I think it is a very fair and important question, meaning, of course, that no one is going to ask it.
[Here’s another reference to the pipeline article.]
Yours, And Then…
posted by Eryk @ 8:55 PM | Comment (1)
“lack of modern metering equipment”
Let Shell take the meters off our gasoline pumps in the USA for a few years so we can start to recover our losses.
What was that Executive Order that Bush gave out very early in the occupation declaring that US Corporations involved with oil, energy, etc, were exempted from all legal liability? Didn’t get a lot of press at the time, but it sure makes sense to me now.
How many more impeachable offenses do we need to hear about?
I’m glad Clark Kent (not his real name) brought this up:
“The most telling bit was about the “blank check” that (ready?) Bush gave Rumsfeld to give to Gen. Tommy Franks to prepare for war in Iraq- secretly. IT ENDED UP SIPHONING $700 MILLION FROM FUNDS CONGRESS ALLOCATED TO AFGHANISTAN WITHOUT ANY CONGRESSIONAL KNOWLEDGE OR APPROVAL.”
This is the impeachable offense that should get Bush jailed - undeniable, documented, simple. Congress provided funds to attack Afghanistan and Bush illegally used the money for something else, something Congress did not provide funds for. This one incident, a betrayal of Congress, the Constitution and the country, should be enough to get Bush hanged alongside Saddam.
Peachmcd: That Executive Order may have been issued in part to keep Cheney out of jail, because, as Halliburton’s CEO, he was directly responsible for their illegal dealings with Libya, Iraq and Iran, countries with which all private corporations were forbidden to do business by US law. When asked about his illegal business with states who sponsor terrorism, Cheney said he didn’t see that the US government had any right telling corporations with whom they could do business.
We need hearings on this. McKinney was all over missing military budget money before Pelosi stripped her of her seniority upon her return to Congress. I guess Pelosi eats from the same trough.
This all seems very ’shocking’, but I’m still not clear on what’s been happening to the rest of the ‘non-missing’ oil. So roughly 10% of Iraqi oil goes missing every day - what/where/who exactly happens to the other 90%?
This is a criminal version of the British comedy
DADS ARMY….
Alternately, all we need NOW is Bush getting a blowjob from a White House trollop/intern and this will be the final piece of VITAL evidence to place IMPEACHMENT back onto PELLOSI’s table…..
See — this PROVES that the Bush Administration did not lie us into the war. At the outset of the war, the Administration’s leaders — and the cheerleaders of the Pavlov’s dogs media — told the American people that Iraqi oil would fund the war. They were right — it was and is funding the insurgency, al Qaeda and the fundamentalists.
As for funding the American effort in the war, perhaps Iraqi oil money went there too, in addition to unaccounted for billions of US aid. Paul Bremer’s, no unions, no competitive bidding reign over Iraq most probably included “corrupt officials”. Perhaps some of the oil money also funded those corrupt officials, some of whom were Americans.
Naturally, the possibility of Iraqi oil being ‘directly’ looted at the rate of $15 million per day, while the US taxpayers are pouring $177 million per day into war and subsidy costs in Iraq is a sobering consideration.
However, the most important (and even more sobering) thing to keep in mind is that this $15 million ‘direct’ looting of oil would not even show up to the left of the decimal point in comparison to the massive ‘indirect’ looting that Bush and his global corporate Empire are doing through the overall Iraq war Ponzi scheme.
Any profit from the Iraq oil (or the entire Middle East oil) will be less than the True Cost Pricing of getting the oil. But, the key to understanding this apparent inconsistency is that the global corporate Empire that is actually going to receive the profit from the oil is not the one who is going to pay the true costs of getting the oil.
Quite simply the global corporate elite Empire that controls and abuses the financial and military power of their facade “Vichy America” is (and will forever be) receiving the profits from the Middle East oil-war(s) — but the party actually paying the costs of getting the oil for them is you and I, and every American.
In essence, the Iraq (and soon to come broader Middle East) oil-wars are the greatest Ponzi scheme for private enrichment the world has ever seen.
But this massive Ponzi scheme is not the old fashioned type of direct Ponzi scheme that Charles Ponzi would have recognized.
Traditional, old fashioned, direct Ponzi schemes promise profits to all participants (investors/marks), but simply use new fund inputs from new investors to payout some high returns to earlier investors (and, naturally pocket some funds for the scam artist). The new fund input cycle and profit cycle of any such traditional Ponzi scheme are locked together in a very short term, unsustainable, easy to detect, and bound-to-collapse model. This type of single cycle profit pump is always dependent on new funds coming in, and under the urgent pressure to produce more new profits with no breathing room for the Ponzi crook. Investors have to see profits coming to them in short periods, and thus such a direct, single cycle, Ponzi scheme simply can not work by telling the ‘investors’ that their profits will only come in 20 or 30 years.
However, corporations for many years have been using and perfecting a new dual cycle Ponzi scheme based not merely on a profit cycle, but also a cost/debt cycle that can be greatly extended over longer time frames into the future, and greater geographical areas to hide the costs. As Enron compellingly demonstrated through their 500 phony shell companies, you can make as much profit indirectly by hiding your costs/expenses as you can by actually making net profits.
The typical dual cycle, modern corporate Ponzi scheme, such as practiced by cigarette corporations, asbestos companies, gun makers, drug lords and oil companies is to sell a product but avoid paying the full costs of the product. This cost avoidance is easily done by leveraging (or really ‘gaming’) a well known ‘market failure’ that economists call ‘negative externality costs’. The manufacturing corporation pays the standard accounting costs for materials, labor, and marketing and G&A on the product, but hides and avoids the negative externality costs that the product imposes on others/society. Thus, for example, a cigarette company pays the very low tobacco and manufacturing costs, and even the higher advertising costs of marketing their product, but avoids and hides the very real medical costs of the cancers that their product causes. Naturally, the same is true of the global warming and climate damage costs of oil — which are not borne by Exxon et al.
But in the Iraq/Middle East oil-wars we now see the evolution of the Ponzi scheme to a triple cycle Ponzi, which for the first time in history is firing on all cylinders (no pun intended). First the direct profit cycle works by providing real profits to investors in the private sector, who because of their increasing wealth and influence push government not to interfere with this major profit making sector of the ‘free enterprise system’. Secondly, the negative externality costs, like global warming, of using the oil/gasoline are denied, obscured, avoided, and finally socialized far into the future, so as not to lower the actual private profits of the investors or Ponzi crook executives. And third, the more immediate negative externality costs of soldiers lives and US budget to get the oil by fighting oil-wars is socialized to the US government and its people rather than borne by the privately owned elite oil corporation.
Wow! The trifecta of Ponzi schemes.
Who hit the trifecta? Do some research on Bayoil and Koch Industries. The NY Times article is what you call a red herring. They want you to think insurgents are gaining an advantage. Nothing could be further from the truth. And that is that blue-eyed shieks are hauling tankers-full of free crude into the Houston Ship Canal on a regular basis, couresy of the protection (racket) of the U.S. Navy acting in cahoots with its cronies.
War is Just a Racket:
http://www.lexrex.com/enlightened/articles/warisaracket.htm
Check ‘em out. Bayoil and Koch. Both crazy pirate operations. Predatory capitalists gone mad, gone bad.
Ever wonder who is siphoning off your money that you work so hard for? BIG ALL(Oil), Y’all.
Hear that sucking sound ??? Sucker.
He conned/cashed-out for his grades, failing businesses, nominations and elections. Whats new? He just said its alright, we “e-lected” him! Anyone with that kind of family$ is his own Mob. Why does it take the Iraqis to tell us its missing? Someone in power must know first, 10%? “OH! Gosh it spilled, it must have!”
“lack of modern metering equipment”, Brain cells? We just built the pipeline, why else do we need some, one out of four, contractors on the site.
Simonhhh, Cheney will never tell….
Anyone who is surprised by this should be nominated for happy sunshine naive person of the year.
With the prize will come one of the therapeutic, totally innocent, massages provided to the Bush abstinence only, AIDS czar by that kindly Washington agency that dispatched virginal friends to pray with lonely gentlemen.
I think you’ve got it, so I won’t ask if it’d be wrong of me to note that the GAO auditing the production records indicates that the U.S. has oversight of oil production in Iraq.
SO THE BURGLARS MUST BE IN THE U.S. Hmm!