Monday, Oct 29, 2007

(MORE TO FOLLOW) Dow Jones Newswires

29-10-07 0502GMT

Monday, Oct 29, 2007

(MORE TO FOLLOW) Dow Jones Newswires

29-10-07 0503GMT

Monday, Oct 29, 2007

(MORE TO FOLLOW) Dow Jones Newswires

29-10-07 0504GMT

Monday, Oct 29, 2007

(MORE TO FOLLOW) Dow Jones Newswires

29-10-07 0505GMT

Monday, Oct 29, 2007

By Hassan Hafidh

Of DOW JONES NEWSWIRES

AMMAN (Dow Jones)--Iraq is losing at least 15,000 barrels of crude oil a day smuggled from its southern fields to Iran and the Arab Gulf states, the president of the Iraqi Board of Supreme Audit said Sunday.

"The smugglers open holes in the crude oil pipeline networks and load their trucks," Abdulbasit Turki Saeed told Dow Jones Newswires in an interview in Amman. The smugglers unload these trucks into small boats that take the oil to Iran or nearby ports in the Persian Gulf.

At current prices the crude is worth more than $40 million a month in lost revenue to the war-torn country. Oil prices reached a record-high above $90 a barrel Friday.

Saeed blamed "organized gangs who are more strong and influential than the government and political officials" in Basra, the oil-capital of southern Iraq, for the smuggling.

Former Iraqi President Saddam Hussein helped create the black market in oil in southern Iraq in response to economic sanctions imposed in the wake of the 1990 invasion of Kuwait.

Saddam used smuggling, as well as kickbacks on oil sold legitimately through the United Nations' oil-for-food program, to generate cash for his regime and to reward allies. Now smugglers are doing a booming business as surging prices for fuel in the Gulf increases demand for contraband.

The Iraqi government and the U.S.-led coalition have launched a campaign to combat the oil smuggling, which accounts for a major loss of revenue to the Iraqi government.

Saeed is dissatisfied with slow progress in installing equipment to measure crude oil produced from southern oil fields and sold to the international market by the Oil MinistryOil Ministry that could help monitor fraud.

A metering system is working on only one of Basra's two oil export platforms, the country's main export hub for crude, he said.

Parsons Corp. is currently installing metering systems at the Basra terminal from where Iraq exports some 1.6 million barrels a day of oil, almost all the country's exports.

Iraq's oil metering system has been out of action since the fall of Saddam's regime and this has encouraged smugglers to steal oil and fuel from Iraq.

Missing Funds

Saeed said his office, which also monitors contracts and expenditures of other ministries, had registered some 400 financial penalties in various government ministries up to June 30, mostly in defense and health.

He didn't give a figure for the money involved in these penalties but said they were estimated at millions of dollars.

In 2005, the Supreme Audit, discovered $1.25 billion had gone missing from the Defense Ministry, Saeed said.

The Iraqi government then blamed the missing money on the former Defense Minister Hazem al-Shaalan and other Iraqi officials. It issued an arrest order against Shaalan. But Shaalan rejected the charge and the government couldn't arrest him as he is currently living outside Iraq.

Saeed said that the missing money was discovered through fake contracts signed by the ministry to buy weapons.

He also said penalties were registered against the health ministry through its contracts to buy medicines and medical equipment.

The electricity ministry also ranks as one of the worst Iraqi offices in financial corruption, he said. Last year, electricity minister Karim Waheed said that over $2 billion was misspent in Iraq's shattered power industry after the U.S.-led war in 2003.

-By Hassan Hafidh; Dow Jones Newswires; + 962 777 612 111; hassan.hafidh@dowjones.com

Copyright (c) 2007 Dow Jones & Company, Inc.

(END) Dow Jones Newswires

29-10-07 0507GMT