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Iraq misplaces billions in oil, U.S. study finds

Iraq misplaces billions in oil, U.S. study finds
Saturday, May 12, 2007

From 100,000 to 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 U.S. government report.

Using an average of $50 a barrel, the report said the discrepancy was valued at $5 million to $15 million daily. Over four years, that comes to $7 billion to $22 billion.

The report does not offer a 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 discrepancies, including the possibility that Iraq has been consistently overstating its oil production.

Iraq and the U.S. 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 U.S. 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 U.S. Government Accountability Office with the help of government energy analysts, and was provided to a reporter 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."

A State Department official who works on energy issues said 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 U.S. officials have 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.

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