Iraqi officials cannot explain what happened to US$69 million worth of fuel oil produced in the second half of last year, raising fears that it was smuggled out of the country for private gain, according to a report by UN-appointed auditors.
The report, by the auditing firm KPMG, was released on Monday. The auditors said Iraq's recorded exports of fuel oil mysteriously declined by a comparable amount during that same period of last year, the initial months of sovereignty for the new Iraqi government.
Studying records from the Ministry of Oil, the auditors found that Iraq's production in that six-month period exceeded the recorded domestic uses and exports by 618,203 tonnes, worth about US$69 million.
"We were not provided with a satisfactory explanation for either the unreconciled quantities or sales decrease of fuel oil," the report states.
In subsequent paragraphs, it takes note of the suspicions of widespread oil smuggling that were previously voiced by US officials, and describes Iraq's weak controls on sales of oil and oil products.
The group that hired KPMG, the International Advisory and Monitoring Board, was created by the UN to watch the handling of Iraqi assets, mainly oil revenues, after the US-led invasion.
The board has repeatedly criticized the US government for its loose spending controls during the period it controlled Iraqi assets, from the invasion in early 2003 to the transfer of sovereignty last June.
In particular, it has questioned a US$2.2 billion contract the Pentagon gave, secretly, to a subsidiary of Halliburton Corp to start repairs of Iraqi oil fields and to import consumer fuels. The board says the Pentagon has rebuffed requests for a full accounting of that contract, which used Iraqi money.
The board has also warned, and it repeated in a statement on Monday, that the new Iraqi government is ripe for corruption because its ministries lack sound procedures for accounting and oversight.