- The Washington Times - Thursday, April 27, 2006

BAGHDAD — A new class of “grand mafiosi” is sucking billions of dollars out of Iraq’s vital oil sector and crippling efforts to rebuild the nation, according to an official report published in Baghdad.

The findings of the Oil Ministry’s inspector-general paint a sordid picture of corruption pervading every corner of the industry, from the oil wells to the gasoline pump.

The report says that since Saddam Hussein’s overthrow in 2003, the spread of smuggling had turned Iraq from a major exporter of petroleum products into an importer.

“These problems have led to the loss of billions of dollars, both in direct actual losses and in lost opportunities,” according to the report.

“This is robbing Iraq of historic opportunities for revival and reconstruction and of basic necessities for a ruined nation and heavily burdened people.”

The report calls for “radical and urgent action” to stop the abuses and punish those involved, including new legislation and penalties to make oil smuggling a crime of “grand economic sabotage.”

Walid Khadduri, economics editor of the pan-Arab al-Hayat newspaper, estimates that smuggling and other rackets in Iraq are costing the country more than $18 billion a year in direct losses and missed opportunities.

“There is no accountability, no punishment and it goes all the way to the top — the smuggling gangs are in cahoots with local authorities and politicians because they need protection,” he said. “There was corruption under Saddam, but nowhere near this.”

The ministry report says smuggling has created a “new class of grand mafiosi” and that a corrosive environment of corruption is affecting everybody in the oil business and destroying public faith in politicians.

The report documents abuses ranging from direct theft from oil consignments and pipelines, to fraud involving false documentation for imported oil.

Even roadside supplies of black-market gasoline sold locally were worth an estimated $900 million a year to the illegal profiteers, according to the report.

The report estimates that 10 percent to 20 percent of the refined products that Iraq now is obliged to import from neighboring Turkey, Syria and Jordan are being smuggled back to their countries of origin after receiving Iraqi government subsidies to bring the price down for local consumption.

Part of the problem is that product prices in those countries are significantly higher than Iraqi levels, which are government-subsidized to the tune of about $7 billion a year to keep them within reach of the distressed Iraqi consumer.

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