Loss of oil revenue hampers reconstruction efforts

Attacks on oil pipelines cost the Iraqi economy an estimated US $6 billion in 2005, severely restricting the funding available for post-war reconstruction, according to the Ministry of Oil. “Part of reconstruction in Iraq has its budget allocated from the oil trade, and the constant attacks and sabotage on pipelines have caused a decrease in investment,” said Abbas Abdul Lattif, a senior official in the Ministry of Reconstruction. Some 35 percent of oil trade profits are used for reconstruction, according to Lattif. “Hundreds of schools, hospitals, sports centres and colleges would have been built with this lost money, and thousands of Iraqis would have benefited from it,” he pointed out. Assem Jihad, a spokesman for the Ministry of Oil, said that in 2005 there were 186 attacks on Iraqi oil installations, a 35 percent increase from 2004. “Money is being lost through attacks on pipelines and money is being reallocated to security issues leaving a huge gap in the reconstruction process,” he said. “We hope the new government will correct this situation.” Iraq is currently producing around two million barrels of oil per day countrywide, 800,000 barrels less than the levels seen before the US-led invasion in 2003. According to Lattif, US $450 billion was allocated by the US government after the invasion for development of the oil sector, which was in turn expected to partially fund reconstruction efforts. “They spent a lot of money to improve the oil sector, [the proceeds of which] were supposed to go towards reconstruction,” Lattif noted. “But the final result is that neither is working properly.” Insurgents fighting coalition troops and the Iraqi army have used attacks on oil pipelines to destabilise the government. “They believe that attacking pipelines will affect the economy, and that the population will accuse the government of not having the capacity to run the country,” Jihad explained. He went on to say that less than 25 percent of planned reconstruction efforts had been completed to date, while billions of dollars originally allocated by the US government had since been diverted to security issues. Decisions on reconstruction allocations are made by the United States Agency for International Development (USAID) and the Iraqi parliament. “About 20 percent of each project's budget has gone towards security, including providing trained security teams with communications equipment which would have been allocated to buy books for students and medicines to supply hospitals,” Lattif said. He cited government buildings, roads, power stations and sewage infrastructure as some of the areas for which reconstruction funding was most urgently needed.