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System to Track Iraq Oil May Take Months

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By Kim Gamel

Associated Press
July 27, 2004

The U.N. controller chairing an oversight body for Iraq said it may take more than a year to establish a system to track how much oil is being produced in the Mideast country.


Controller Jean-Pierre Halbwachs, who chairs the International Advisory and Monitoring Board, made the comments Monday after briefing U.N. Security Council members on an audit of Iraq's oil revenues that was released July 15 in Washington. The audit, prepared by accounting firm KPMG, revealed a lack of adequate financial controls and an inability to get information on large non-competitive contracts, including one awarded to Halliburton. It also cited concerns about an inability to track how much oil is being produced in Iraq and a lack of proper internal controls on the money being spent.

Halbwachs said the U.S.-led coalition, which ceded sovereignty to an interim Iraqi government last month, had been working to establish a "metering" system but predicted the problem would take about 18 months to resolve. "There were no meters to measure the oil ... and therefore there could be no guarantee that all the oil could be accounted for," he said, stressing the problem was there under Saddam Hussein as well.

U.N. Ambassador Gunter Pleuger said the report did not cover all areas of concern regarding the use of Iraqi oil resources and finances under the U.S.-led occupation. "It is necessary to provide full transparency of how the Iraqi oil resources have been used," he said. "That kind of transparency in our view is also necessary to induce foreign investment in the country."

The board is composed of officials from the United Nations, the IMF, the World Bank and the Arab Fund for Economic and Social Development. It was authorized by the U.N. Security Council in May 2003 to monitor the operations of the Development Fund for Iraq, which was designated as the recipient of Iraq oil revenues and assets of the previous government frozen by various countries. The United Nations and Congress are conducting separate investigations into allegations of corruption in that program, which was designed to provide humanitarian relief to the Iraqi people from economic sanctions imposed during Saddam' presidency.

The KPMG audit, which covered the period from May through December of last year showed $10.3 billion had been put into the fund, with $5.6 billion of that coming as a transfer from the U.N. Oil for Food program.


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