The Special Inspector General for Iraq Reconstruction (SIGIR) is set to publish a blistering report sometime later this spring that exposes the failure of two U.S. companies charged with repairing oil meters on Iraqi pipelines responsible for calculating the flow of billions of dollars worth of crude oil.
U.S. contractors in Iraq, Halliburton Inc. of Houston, Texas and Parsons Corporation of Pasadena, California are expected to fair badly in the report documenting the companies’ multiple failures to complete their work – started back in March 2003 shortly after the U.S. led takedown of Iraqi dictator Saddam Hussein.
Heavily armed U.S Navy troops and Iraqi Marines guard the maze of 40-inch pipes stretching from two main terminals, Al Basra Oil Terminal (ABOT) and the smaller Khawr Al Amaya Oil Terminal. The two terminals together encompass most of southern Iraq all the way to the Northern Arabian Gulf, and estimated to supply 85% of Iraq oil output.
This from AlterNet:
Heavily armed soldiers spend their days at the oil terminals scanning the horizon looking for suicide bombers and stray fishing dhows (boats). Meanwhile, right under their noses, smugglers are suspected to be diverting an estimated billions of dollars worth of crude onto tankers because the oil metering system that is supposed monitor how much crude flows into and out of ABOT and KAAOT -- has not worked since the March 2003 U.S. invasion of Iraq.
(snip)
Rumors are rife among suspicious Iraqis about the failure to measure the oil flow. "Iraq is the victim of the biggest robbery of its oil production in modern history," blazed a March 2006 headline in Azzaman, Iraq's most widely read newspaper. A May 2006 study of oil production and export figures by Platt's Oilgram News, an industry magazine, showed that up to $3 billion a year is unaccounted for.
"Iraqi oil is regularly smuggled out of the country in many different ways," an oil merchant in Amman told the Nation (U.S.) magazine last month. "Emir al-Hakim [the head of the Supreme Council of the Islamic Revolution in Iraq] is spending all his time in Basra selling oil as if it were his own. People there call him Uday al-Hakim, meaning he is behaving the same way Uday Saddam Hussein was acting. Other merchants like me have to work through him with the big deals or smuggle small quantities on our own. The petroleum is now divided among political parties in power."
Interestingly enough, over the 6-year period in which Saddam Hussein carried out his mega-manipulation of the U.N. Oil-for-Food program, he was estimated to have diverted $5.7-billion into his own coffers while U.N. inspectors seemingly turned a blind eye. In the 4-years since, Hussein’s successors may have absconded with an equal amount. The black market operations taking place now are very similar to those of Hussein for circumventing the U.N. embargo.
The hardest hit, both back in the Hussein era and post-invasion are of course the Iraqi people whose war-torn country now ranks as one of the poorest in the world despite ranking number three behind Saudi Arabia and Canada in proven oil reserves. Iraq sits on 115-billion barrels.
Economists call this the "resource curse." Those blessed with non-renewable resources often benefit the least, because a few wealthy people control the resources, or war prevents almost anyone from benefiting.
The Development Fund for Iraq currently manages Iraq’s main revenue source - earnings from the export sales of petroleum, petroleum products and natural gas -. DFI's May 21, 2003 document, United Nations Security Council Resolution 1483, assigns this money to benefit the Iraqi people. The resolution replaces the previous United Nations-run Oil-for-Food scheme that lasted from 1997 until the March 2003 invasion.
Almost four years after the DFI was created, officially logged crude sales have generated more than $80 billion. The U.S.-led Coalition Provisional Authority (CPA) managed the DFI from the immediate aftermath of Saddam's removal until June 28, 2004, when the CPA was disbanded. During those 14 months, the CPA spent $19.6 billion of Iraq's DFI funds. The three succeeding governments have been officially in charge of the DFI revenues, although the influence of the U.S. military and political advisors has remained significant throughout. In the 32 months after the CPA left, the three governments spent $47 billion more.
And, that brings us to the present-day robber barons
U.S. contractors have played a key role in the repair and upgrading of Iraq's oil infrastructure and expected the industry to pay for reconstruction. In January 2004, under project Restore Iraqi Oil II (RIO II), the Bush administration contracted with Halliburton to fix southern Iraq's oil fields and with Parsons to handle the northern fields. The two companies were supposed to be supervised by yet another contractor, New Jersey-based Foster Wheeler. (The first RIO contract was the infamous, secret no-bid contract issued to Halliburton before the invasion of Iraq. Although RIO II was competitively bid, Sheryl Tappan, a former Bechtel employee wrote a book criticizing the award as unfair.)
Halliburton and Parsons have long histories in Iraq, going back more than 40 years. Brown & Root, which is now part of Halliburton, began work in Iraq in 1961, while Parsons dipped into Iraq's oil sector in the 1950s. Foster Wheeler dates its work in Iraq to the 1930s.
These companies have a lot of experience at the terminals where the black market now thrives. Indeed, Halliburton built the ABOT terminal, then known as Mina al-Bakr, in the early1970s. After it was damaged during the Iran-Iraq war in the 1980s, Halliburton repaired the terminal, before it was bombed yet again during the 1991 Persian Gulf War.
The Khor al-Amaya oil terminal also saw a similar cycle of destruction and rebuilding. Built with Halliburton 's help in 1973, it was heavily damaged by Iranian commandos during the Iran-Iraq war, then again during Operation Desert Storm in 1991, and most recently in May 2006 by a major fire that destroyed 70 percent of its facilities. During the sanctions, Ingersoll Dresser Pump Company, a Halliburton subsidiary, had a secret contract to sell Iraq spare parts, compressors, and firefighting equipment for the refurbishment.
(Halliburton also has a long history near the Turkish port of Ceyhan, from where Iraq sells oil produced at Kirkuk in northern Iraq. Halliburton runs the nearby U.S. military base at Incirlik, which was the staging ground for Operation Northern Watch that provided air protection for the Kurds during the 1990s.)
Both Halliburton and Parsons have failed to deal satisfactorily with the routine problem of broken meters at both southern Iraq terminals despite having decades of experience with oil infrastructure and ports. The process of replacing the custom-built meters can take up to a year. Once built, the meters are shipped then assembled and calibrated on-site. However, in the 4-years since the invasion, no meters have been replaced in Iraq.
For reasons yet to be determined, after the 2003 invasion the meters were turned off and since then no reliable estimates of how much crude has already been shipped from the southern oil fields. In stark contrast, The oil fields in Kirkuk have operated with functioning meters since the invasion, but are in near shutdown mode, and able to ship only a portion of what counterparts in the south ship – because of repeated insurgent attacks.
In charge of Mobil Security 7 at ABOT, U.S. Navy Lieutenant Aaron Bergman says export authorities have guesstimated the amount of oil being sold using what’s called a back-of-the-envelope formula: every centimeter a tanker lowers in the water equals a cargo of 6,000 barrels of oil.
"So you can imagine," he said earlier this month to Stars & Stripes, a newspaper serving the U.S. military, the numbers could be off, "A couple of inches could equal 180,000 barrels of fuel."
"I would say probably between 200,000 and 500,000 barrels a day is probably unaccounted for in Iraq," Mikel Morris, who worked for the Iraq Reconstruction Management Organization (IRMO) at the U.S. embassy in Baghdad, told KTVT, a Texas television station.
Neither contractors nor U.S. officials have provided good reasons why, four years into the US occupation, the meters have not been calibrated, repaired, or replaced. One excuse is that the job of calibration requires special devices to assess the current meters and security issues make importing these devises problematic. Yet that and other security-related explanations fall apart given that the oil terminals are under 24 hour high security guard, lie more than 50 miles off-shore, and are accessible only by helicopter or ship.
AlterNet has done a great job reporting on this highly dubious operation. By their deduction, there are two possible scenarios at work here – one highly dubious and one slightly less so. Either the project has been stymied by bloated bureaucracy, OR, "vested interests" benefiting from the absence of oil meters have stopped the program dead in its tracks.
Just another day in the hell-spawned life of the Bush crime syndicate.
The full 3-page article is a fascinating read.