Oil price drop squeezes Iraq on security

BAGHDAD

Falling oil prices will force Iraq to cut back on military spending, leaving questions about whether it can handle tasks such as protecting oil platforms in the Gulf once the American pullout is complete, a top U.S. commander said.

Iraq’s leaders now have to decide where the cuts will be deepest: arms, patrol boats or air power - all of which the country needs to create a fully functioning security force.

“It’s a matter of capability and how much risk they are willing to take to spread that capability out … because the money is so tight,” Lt. Gen. Frank Helmick, commander of Multi-National Security Transition Command, told the Associated Press on Saturday.

Iraq’s security plans for this year have been dragged down along with the price of oil, which is now about $45 a barrel after hitting highs last summer of around $150 a barrel.

Iraq’s government has been forced twice to cut planned spending - from $79 billion to $68 billion and then to $64 billion.

And the cuts may go even deeper. Iraq’s parliament delayed a vote over the weekend on the $64 billion budget, with some lawmakers saying the cuts didn’t go far enough.

“There are many, many hard decisions that the minister of defense will have to make with the prime minister about what to spend their money on,” Gen. Helmick said.

The clock is ticking. U.S. forces must be out of Iraqi cities by the end of June, and combat operations will end in August 2010 under the timetable announced Friday by President Obama.

To counter the blow of falling oil prices, Iraq’s oil minister, Hussain al-Shahristani, said Sunday that state oil planners need wider powers to make deals with foreign companies to boost production. Mr. al-Shahristani said the government is working on reviving the Iraqi National Oil Co. and establishing an oil and gas council to oversee investments and planning.

The government will have to decide whether it buys badly needed patrol boats to secure its oil platforms; parts and service for its heavily armored vehicles; or helicopters and other aircraft, Gen. Helmick said.

“When oil was $120 a barrel, this wasn’t a problem. When we could give them money, it wasn’t a problem,” Gen. Helmick said. “Oil is not $120 a barrel, and there is not an appetite [in the United States] to give the Iraqis large sums of money.”

The Iraqi government has purchased nearly $5 billion in military items from the U.S. since 2006. But it needs billions more in equipment, parts and service contracts.

Iraq recently asked to buy another $3.8 billion from the U.S. in military-grade purchases but has not been able to fund the request. The American government requires money to be deposited with the Federal Reserve before any foreign military sales can be finalized and equipment handed over.

That $3.8 billion request includes patrol boats, support ships, parts and service for its tanks and other armored vehicles and helicopters.

Story Continues →