Iraq's Oil Crisis

While officials privately debate whether communitarian violence in Iraq constitutes a low-grade civil war, there is no disagreement about the oil crisis there, which has little to do with the insurgency. Gasoline and home heating fuel are scarce and expensive, thanks to runaway corruption. This problem’s difficulty and importance will test the new Iraqi government once it is organized.

Industry sources privately cite corruption as the reason for recent decisions by Turkey and Saudi Arabia to halt gasoline exports to Iraq for non-payment of bills. That exacerbates a worsening situation where Iraq, one of the world’s great petroleum producers, has to truck in gasoline from Kuwait.

While the formal line in Washington and Baghdad blames insurgents for the oil crisis, U.S. officials who are close to the situation gave me a totally different explanation. They blame corruption at every level, from the oil ministry on down, that is common to Iraq. It cannot be controlled by the Americans but is the responsibility of the long-delayed Iraqi government. Thus, oil is a microcosm of the overall conundrum in Iraq, where there are no good options for the Bush administration in dealing with a culture where honesty and efficiency historically have been rare.

The exhilaration in the Bush administration that the Anglo-American attack in 2003 had preserved the oil producing capacity is as illusory as claims of victory three years ago. The fuel shortages in oil-rich Iraq are profound and growing worse, with endless lines at gasoline stations. That drives up prices to the equivalent of $15 for a cylinder of home fuel — too expensive for the average Iraqi.

The best explanation for this was given me by a non-political U.S. civil servant, an "Arabist" with vast experience in the region. He has been ordered definitively to say nothing and write nothing about oil in Iraq or anything else to do with the country. He spoke to me only if I would not identify him, by name or organization.

My source blamed corruption on an unimaginable level. "There is no system for turning on the oil in Iraq," he told me. "Everyone there is taking their cut. Everybody takes a little." It is corruption from top to bottom. At a time of an acute shortage in Iraq, oil is being surreptitiously sent across the border for gain.

Such corruption is familiar there. The situation is endemic in the brief, tragic history of Iraq. Since the discovery of the country’s liquid wealth, government officials have been dipping into the proceeds. This was true during the monarchy and the successor governments, including Saddam Hussein’s. The addiction to corruption also contributed to the United Nations oil-for-food scandal.

The immediate crying need of Iraq’s oil industry three years after the invasion is for substantial investment in improvements for infrastructure and technology. It was assumed that once the dictatorial regime was displaced, money from all over the world would pour into Iraq. But there is no inclination by risk capital to put any money in enterprises that are bleeding money to corrupt officials throughout the government.

Everybody with any familiarity with this situation believes the only answer is that the new Iraqi government, still unformed three months after the election, must gain control over corruption. One former U.S. official with experience in Iraq says: "We really have no levers left to pull, except hope that the government we’re backing becomes powerful enough to take on the crooks."

Sen. Chuck Hagel, a frequent visitor to Iraq, is well aware of this dilemma. "The future of Iraq is in the hands of the Iraqis," he told me. Hagel is not yet ready to call for a unilateral military withdrawal from Iraq, realizing that the dreary conditions there — including the oil crisis — would get worse if the U.S. disconnected today. The pocketing of oil revenues by corrupt bureaucrats will hardly be improved by a quick American exit.


I erred in Monday’s column when I wrote that President Bush was mistaken in saying the Hungarian National Day event he attended at the Capitol March 15 celebrated the 50th anniversary of Hungary’s 1956 anti-Soviet rebellion. March 15 is actually the anniversary of the 1848 Hungarian Revolution, but the invitation to the president noted the Oct. 23, 1956, uprising.