http://www.washingtonpost.com/wp-dyn/content/article/2006/07/16/AR2006071600774.html

Corruption Cited in Iraq's Oil Industry

By Walter Pincus
Washington Post Staff Writer
Monday, July 17, 2006; Page A12

U.S. Comptroller General David M. Walker told Congress last week that "massive corruption" and "a lot of theft going on" in Iraq's government-controlled oil industry is hampering the country's ability to govern itself.

"It took me about, you know, a second and a half to realize that, obviously, there was massive corruption going on, because the numbers just didn't add up," Walker said, referring to a trip he took to Iraq this year in which he was shown figures on oil production and revenue.

Walker, who heads the Government Accountability Office, made his remarks at a House Government Reform subcommittee meeting last Tuesday called to examine implementation of the Bush administration's 2005 "National Strategy for Victory in Iraq." He said one of the failures of the U.S. program was related to the prewar assumption that Iraq would be able to pay for its reconstruction "in large part through oil revenues."

He said about 10 percent of Iraq's refined fuels and 30 percent of its imported fuels are being stolen, in part because the subsidized Iraqi price of gasoline, about 44 cents a gallon, is less than half the regional price of 90 cents a gallon. "That provides a tremendous incentive to be able to steal these fuels and be able to sell them for whatever purposes, corruption or otherwise," Walker said.

Walker noted that oil production, which was to provide prime support to the new government, is below prewar production and distribution levels, complicated by the insurgency and difficulties in maintaining the aging oil infrastructure.