The Scandal of Iraq

In the wake of their illegal invasion of Iraq, the United States promised to repair the damage they had caused in overthrowing Saddam. Conferences were held, donors were lined up, and money pledged towards the reconstruction effort. Yet two years later, nothing has happened. Iraqi bloggers such as Riverbend paint a picture of erratic electricity and water supplies, regular brownouts and shortages. Journalists who dare to venture out of the Green Zone show streets still full of rubbish and sewage. Basic services such as electricty, water, and sanitation are still far worse than they were before the war, and show no real sign of improvement. The American's excuse for this lack of progress is "security" - and yet the lack of security has not stopped them from spending large sums on reconstruction. So where has it gone? The answer, according to today's Guardian, is that they stole it. US$8.8 billion of Iraqi reconstruction funds are unaccounted for - and the loss is blamed on poor financial controls, corruption, and outright theft in the American-run Coalition Provisional Authority.

Audits of the CPA show that financial controls and accountability for money were practically nonexistent. American contractors were given literally truckloads of US dollars to distribute as they saw fit, with no requirement to account for its usage. One was given US$25 million in cash, without having to provide a single receipt. Another was given US$23 million, but records showed that only US$6,306,836 was paid out. A third submitted receipts, but was told that they owed US$1,878,870. They turned up three days later with exactly that amount, suggesting, according to auditors, "that the agent had a reserve of cash". But it isn't just agents in the field that were "lax" with funds. The CPA didn't keep records of its cash reserves, and kept US$200 million in a room in one of Saddam's palaces. It was kept under high security;

The US soldier in charge used to keep the key to the room in his backpack, which he left on his desk when he popped out for lunch.

There is also strong evidence of corruption. A review of 225 contracts totalling US$327 million revealed that the records "understated payments made by $108,255,875" - a third of the total. Another review showed that

Of 198 contract files reviewed, 154 did not contain evidence that goods and services were received, 169 did not contain invoices, and 14 did not contain evidence of payment.

Who profited? The evidence is fairly clear:

An Iraqi hospital administrator told me that when he came to sign a contract, the American army officer representing the CPA had crossed out the original price and doubled it. The Iraqi protested that the original price was enough. The American officer explained that the increase (more than $1m) was his retirement package.

When the Iraqi Governing Council asked Bremer why a contract to repair the Samarah cement factory was costing $60m rather than the agreed $20m, the American representative reportedly told them that they should be grateful the coalition had saved them from Saddam.

And obviously, they should express that gratitude by allowing them to steal US$40 million.

But its wasn't just the Americans. An audit found that the entire Iraqi Interim Government budget during Bremer's viceroyship - US$8.8 billion - could not be accounted for, as there simply were no financial controls on it whatsoever. As a result, the IIG inflated payrolls (often by a factor of ten or more), awarded contracts to cronies and relatives, or simply looted the money for themselves, their private militias - or the resistance. And it is still going on:

The IAMB's most recent audit of Iraqi government spending talks of "incomplete accounting", "lack of documented justification for limited competition for contracts at the Iraqi ministries", "possible misappropriation of oil revenues", "significant difficulties in ensuring completeness and accuracy of Iraqi budgets and controls over expenditures" and "non-deposit of proceeds of export sales of petroleum products into the appropriate accounts in contravention of UN Security Council Resolution 1483".

But the real scandal is that this is all Iraqi money. Despite the US Congress having appropriated US$18.4 billion to fund reconstruction, only US$300 million has been spent for that purpose. The systematic looting of Iraq described above has all come out of Iraq's funds - funds which are desperately needed to rebuild electricity plants, water systems, hospitals and schools. The US has illegally invaded a country, demolished its infrastructure, and then systematically looted the very monies supposed to pay to rebuild it. And the Iraqi people are suffering as a result.