Iraq Revenue Watch

June 16, 2004

New York: With international attention focused on the impending transfer of power in Iraq, the Coalition Provisional Authority is committing billions of dollars to ill-conceived projects just before it dissolves, according to a new briefing by the Open Society Institute’s Iraq Revenue Watch Project. The briefing, Iraqi Fire Sale: CPA Giving Away Oil Revenue Billions Before Transition, says that the U.S.-controlled Program Review Board in charge of managing Iraq’s finances recently approved the expenditure of nearly $2 billion dollars in Iraqi funds for reconstruction projects.

“With so much money available for cash give-aways, and so little planning on how the process will work, it will be all but impossible to avoid corruption and waste” said Svetlana Tsalik, director of OSI’s Revenue Watch.

The money will come out of the Development Fund for Iraq, the main repository for Iraqi oil revenues. But a number of the expenditures the Program Review Board approved will go toward sectors for which Congress has already allocated American tax dollars. This includes $500 million earmarked for Iraqi security forces, even though Congress allocated $3.2 billion for the same purpose. Likewise, the Program Review Board approved $315 million for the electricity sector despite a $5.5 billion U.S. appropriation for the same sector. And $460 million, on top of the $1.7 billion allocated by Congress, is set to go to Iraq’s oil industry.

Although few would object to the need for funding in these areas, it is unclear why these appropriations were not made when the 2004 Iraqi budget was adopted and subsequently revised this past March. The briefing questions why the CPA is rushing to commit Iraqi oil funds instead of waiting for the interim government to make these decisions when it assumes power at the end of the month.

The UN Security Council resolution passed on June 8 requires the new government to satisfy all outstanding obligations against the Development Fund for Iraq made before June 30, leaving the new interim Iraqi government with no choice but to honor the Program Review Board’s questionable expenditures. Iraqi Fire Sale warns that without mechanisms in place to ensure accountability, the $2 billion in Iraqi funds will be vulnerable to mismanagement and corruption.

Read the full briefing