Updated June 28, 2004








Billions Swiped from Iraq

Occupation Authorities Stash Oil Funds as Iraqi Health Care Dies


By Christopher Bollyn


Iraqi children perish for want of medicines and equipment in Iraq’s under-funded hospitals while U.S. Treasury officials have billions of dollars of Iraqi oil revenues stashed away in secondary “slush funds” and U.S. Treasury bills.

President George W. Bush has repeatedly said that Iraqi oil revenues are to be used solely for the benefit of the Iraqi people. At a White House press conference on April 13, Bush said: “Well, the oil revenues are—they’re bigger than we thought they would be at this point in time. . . . And that money is—it will benefit the Iraqi people. It’s their oil, and they’ll use it to reconstruct the country.”

In May, as oil prices soared and Iraqi oil production reached 2.4 million barrels per day, nearly $70 million per day flowed into the coffers of the Development Fund for Iraq (DFI). The DFI funds, administered until June 30 by L. Paul Bremer III and the U.S.-led Coalition Provisional Authority (CPA), are managed in accounts at the Federal Reserve Bank of New York.

With the approach of the June 30 handover, however, reports suggest that Iraq’s oil revenues have been mismanaged and that untold millions have been siphoned off into unregulated “slush funds.”

According to CPA accounting, a total cash inflow of more than $20.24 billion filled the DFI since it was created on May 28, 2003. Although nearly all of the “development” funds came from Iraqi oil exports, the Central Bank of Iraq had only $216 million in its DFI account on June 20.

A simple spread sheet of 35 rows lists how more than $11.3 billion of the fund had been disbursed by the CPA. The sheet reveals that the “Commanders Emergency Response Program” received $391 million of Iraqi money, the U.S. Army Corps of Engineers got another $367 million, and the CPA Front Office got $2.8 million etc. Details, dates and specifics are not provided.

There has been no monitoring or independent auditing of the fund until April 2004. Until that time disagreements between the CPA and the International Advisory and Monitoring Board (IAMB), an oversight body set up by the UN Security Council, prevented any outside audit of the DFI.

In April, the accounting firm KPMG began a UN-man dated audit of the fund, which it hopes to complete by June 30. In their first interim report, KPMG auditors said they had “encountered resistance from CPA staff” and that the DFI is “open to fraudulent acts.”

A member of the former Iraqi Governing Council told The Financial Times, “If the auditors don’t finish by June 30, they never will, because the CPA staff are going home.”

When the U.S.-appointed temporary Iraqi government takes over on July 1, however, it will be bound by a June 8 UN Security Council resolution to honor the obligations and contracts passed down by the CPA’s spending arm, the Program Review Board (PRB).

After what is described as “a last-minute spending spree” by the CPA, it now appears that the Iraqi interim government will have very little money left to use.

The largest Iraqi recipients of DFI money have been the Ministry of Finance ($7.47 billion) and the Ministry of Oil ($2 billion). There is, however, no recorded disbursement of funds to the Ministry of Health.

This apparently troubled Yusaf Samiullah, the British government’s representative on the PRB, who, according to the minutes of the board’s May 15 meeting, asked: If given the opportunity to revise the 2004 budget, would the disbursements “include other areas such as health and education”?

Of the $2 billion of Iraqi money passed out during the May 15 PRB meeting, much of it was allocated to projects that are already over-funded with money provided by Congress for reconstruction of Iraq. For example, $500 million was marked for Iraqi security forces, although Congress allocated $3.2 billion for the same purpose in 2004. Similar amounts were set aside for the already funded electricity and oil sectors.

In May, when American Free Press asked the Federal Reserve Bank of New York about the Iraqi oil revenues a spokesman for the bank said the money is handled by the U.S. Treasury.

The Department of the Treasury, however, appears reluctant to discuss the status of the Iraqi funds managed by its former deputy general counsel.

The U.S.-dominated PRB, which has a 12-member voting board, is chaired by Treasury Department official, George B. Wolfe. Wolfe stepped down as the deputy counselor to Secretary John W. Snow and was appointed to the Treasury job in Iraq.

Proponents of the war often suggested that Iraqi oil revenues would minimize U.S. costs for the occupation and rebuilding of Iraq. “The cost of the war will be small. We can afford the war, and we’ll put it behind us,” Snow told the House Ways and Means Committee on March 9, 2003.

However, billions of dollars from the Iraqi oil revenues have been diverted to “a host of poorly planned projects,” according to Iraq Revenue Watch, a program of George Soros’s Open Society Institute. “The lack of planning and the huge funds on tap for cash give-aways and other highly discretionary programs have paved the way for corruption and waste,” the organization wrote in June.


While $7.3 billion from the DFI money is invested in U.S. Treasury Bills and another $1.3 in Overnight Deposits at the Federal Reserve Bank of New York, the citizens of that occupied nation are dying for want of basic medical supplies. The U.S. occupation and windfall profits from the oil sales have done nothing to improve the miserable conditions at Iraqi hospitals.

The Associated Press reported on June 4: “At Baghdad’s General Teaching Hospital for Children, children die each week from diarrhea because of poor sanitation, shortages of medical equipment and poorly trained staff. . . . Even though improved medical care is a stated priority of U.S. occupation authorities, medicine is still costly and in short supply.”

The hospital’s sewage system has largely collapsed and is working at 10 to 20 percent of capacity. The hospital also lacks air conditioning.

Most hospital deaths—between 15 and 20 a month—are from secondary infection, mainly because of the unsanitary hospital conditions.

On June 19, a three-month old Iraqi boy, known as “Baby Ali,” died of septicemia, a bacterial blood infection that could have been treated if advanced medical care had been available, said Dr. Haidar Hadi of Baghdad’s General Teaching Hospital for Children.


American Free Press 2004