United Nations, 29 December 2005 (RFE/RL) -- The International Advisory and Monitoring Board (IAMB) has repeatedly raised four concerns related to Iraq's oil trade:
- the widespread absence of oil metering;
- the use of barter transactions for certain oil sales;
- persistent weak controls on spending by ministries;
- and the use of noncompetitive bidding procedures for some contracts funded from the DFI.
At a press conference at UN headquarters in New York on 28
December, IAMB Chairman Jean-Pierre Halbwachs said an agreement has recently
been reached between the government of Iraq and a U.S. company to begin the
expeditious installation of oil metering equipment. He did not specify the
company.
Regarding the use of barter transactions for oil sales,
Halbwachs said these are confined to one of Iraq's neighboring countries and are
done mostly in exchange for electricity.
"Are we concerned about
the state of the accounts and the control in place? I think the answer is yes,"
Halbwachs said. "In particular, we have repeatedly raised the use of barter
transactions. [It] makes it difficult to determine whether fair value has been
received for Iraqi oil revenues."
The DFI is the repository for
proceeds from Iraq's oil export sales, as well as remaining balances from the
UN's oil-for-food humanitarian program. A major report released in October
documented large-scale corruption in the oil-for-food program.
Halbwachs appeared to go to great lengths to avoid using the word
corruption. But Fayezul Choudhury, a World Bank representative on the IAMB,
referred to weaknesses that have been identified that "speak to the potential
for mismanagement [or] corruption."
The IAMB has repeatedly raised
alarm over barter transactions because they are not being accounted for as
required by UN Security Council Resolution 1483.
The persistent
weak controls over financial transactions in Iraqi ministries have also been
criticized in the reports issued by the IAMB since it began its work in December
2003.
"There are questions whether all the DFI disbursements have
been made for the purposes intended, since the audits continue to criticize the
overall financial control framework and contain exceptions to administrative and
accounting procedures in the [Iraqi] spending ministries, by the U.S. agencies
in respect of outstanding commitments which they have using DFI resources, and
the Iraqi administration of DFI resources itself," Halbwachs said.
The IAMB asked a special auditor, KPMG, to review some 25 noncompetitive
contracts amounting to $600 million. It said KPMG found "a number of exceptions
to contracting procedures."
One specific contract -- for $1.4
billion, awarded to Kellogg Brown & Root, a subsidiary of the U.S. defense
contractor Halliburton -- has been the subject of additional scrutiny. Nearly
$210 million of the total has been reported as questionable, and a review is
continuing.
Bert Keuppens, a representative on the board from the
International Monetary Fund (IMF), said it will take time to fix the problems.
But he said the Iraqi authorities "are committed to bringing their country
back," adding, "They are on the road to recovery."
The monitoring
board's mandate had been due to expire on 31 December, but has been extended by
the UN Security Council for one more year.