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Oil Official Slams GAO on "Smuggling" Report
Ministry: Crude Racketeering Unlikely -- If MNF Does Its Job
05/16/2007 8:39 PM ET
Cover of newly released GAO report on Iraq's oil and electricity sectors.
IraqSlogger
Cover of newly released GAO report on Iraq's oil and electricity sectors.
The Iraqi Ministry of Oil on Wednesday rejected a report prepared by the U.S. Government Accountability Office and published by the New York Times about the alleged smuggling of 100,000 to 300,000 barrels of Iraqi crude oil a day, a spokesman for the ministry said, according to Voices of Iraq.

"The report is not based on documents or accurate information, but on incorrect performance information that was published by the mass media away from all sources from the Iraqi Ministry of Oil," the official spokesman for the ministry, Aasim Jihad, told VOI today.

According to Jihad, the report confuses oil derivatives and crude oil, and is mainly based on operational data that has no relationship to financial accounting. Jihad denied that the Iraqi ministry has had any dealings with the bodies mentioned in the report.

The report, entitled "Rebuilding Iraq: Integrated Strategic Plan Needed to Help Restore Iraq's Oil and Electricity Sectors," was just released this week by the GAO. The New York Times obtained a draft version of the report, which it sourced in its its article on Saturday, leading with the report's conclusion that "between 100,000 to 300,000 barrels a day of Iraq's declared oil production over the past four years is unaccounted for and could have been siphoned off through corruption or smuggling."

Assuming that between 100,000 and 300,000 barrels of Iraqi oil are smuggled everyday, this process will require from 150-500 vehicles with a capacity of 36 cubic meters each to transport this amount of oil by land, the oil ministry spokesperson said. This is an extremely large number and is beyond normal capacity, Jihad explained. Such activity would certainly attract the attention of the Iraqi security apparatus, he added.

Jihad also spun the implications of the report at the Multinational Forces, telling Reuters Arabic that American forces control the outlets through which such smuggling operations would be conducted, and the US had not informed the Iraqi oil ministry of any smuggling operations in crude oil on that level of magnitude.

"Even assuming that the smuggling is done through territorial waters, there are only the official pipelines for exporting oil. Since the downfall of Saddam's regime on April 9, 2003, the Multinational Force in Iraq (MNF) has been exercising full control over Iraqi oil and no cases of smuggling crude oil have been reported," Jihad said, according to VOI.

“The smuggling of crude oil is very complex and is almost beyond the economic capabilities of smugglers because they would need (access to) refineries,” Jihad also said, according to Reuters Arabic.

He also said that the report did not account for discrepancies between daily figures and monthly figures in crude oil production. The spokesman explained that daily figures for crude pumping also include the water and gas included with crude as it is pumped out of the ground, whereas the monthly figures are net of these extraneous materials, Reuters reports.

Smuggling has been alleged in the field of refined petroleum products. Possible smuggling of crude oil is less frequently discussed. The GAO report bases its suggestions that smugglers may be trafficking in crude oil on accounting discrepancies, not on forensic evidence of smuggling rackets moving crude oil.

The figures used in the report were “not dependable,” Jihad told Reuters.

The GAO report was released this week, and is available for viewing online as a PDF document.

The report also argues that as US-funded reconstruction of Iraq's electricity and oil infrastructure winds down, the sectors are not meeting their needs and future sources of funding for further developments are uncertain.

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