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Iraq faces the mother of all corruption scandals
Allegations of kickbacks rock key government department as 1,000 officials face arrest and Trade Minister is forced to resign

By Patrick Cockburn

Iraq plans to arrest 1,000 officials for corruption after a scandal which has forced the resignation of the Trade Minister and is threatening the food supply of millions of Iraqis.

Corruption at the Trade Ministry is an important issue in Iraq because the ministry is in charge of the food rationing system on which 60 per cent of Iraqis depend. Officials at the ministry, which spends billions of dollars buying rice, sugar, flour and other items, are notorious among Iraqis for importing food that is unfit for human consumption, for which they charge the state the full international price.

The scandal first erupted in April when police, entering the Trade Ministry in Baghdad to arrest 10 senior officials accused of corruption and embezzlement, were greeted with gunfire by the ministry's own guards. The shoot-out allowed several officials, including two brothers of the Trade Minister, Abdul Falah al-Sudany, time to escape out the back gate.

The political crisis over corruption has escalated after a video surfaced showing Trade Ministry officials at a party, apparently drinking alcohol, cavorting with prostitutes, and deriding the Prime Minister, Nouri al-Maliki.

The voice of the man shooting the video, widely viewed and sent from phone to phone in Baghdad, is heard shouting to the dancing girls: "You before Maliki". Guests at the party who were captured on the video are said to include one of Mr Sudany's brothers and the ministry's spokesman.

"We have the video of Trade Ministry officials hosting a party that is unethical and out of control," said Sabah al-Saadi, the chairman of the Commission for Public Integrity. "This party represents the impact of nepotism on the government and wasting of funds by senior officials' family members."

Mr Sudany, who has not been charged and denies all wrongdoing, resigned on Sunday soon after his brother and aide Sabah Mohammed, who had earlier escaped from the police, was arrested with his bodyguards when his car was stopped at Samawa, 140 miles south of Baghdad. Security and police officials said cash, gold and identity cards were found in the car.

Iraq is deemed the third most corrupt country in the world after Burma and Somalia, out of 180 countries, according to the corruption index compiled by Transparency International.

Although it is an important oil producer, many Iraqis are on the edge of starvation; 20-25 per cent of Iraq's 27 million people live below the poverty line on less than $66 (£41) a month.

Amid claims that Mr Sudany's relatives had made millions out of kickbacks from sugar purchases, Mr Maliki visited the leaderless Trade Ministry this week saying that his office would take over its functions. A committee is to take charge of Iraq's large import programme for grain and foodstuffs. "We will not keep silent about corruption after this day and we will chase all the corrupt and bring them before the judiciary," Mr Maliki said.

The Integrity Commission says it issued 387 arrest warrants in April, including warrants for 51 officials who are department heads. In addition, it has 997 arrest warrants not yet issued and Mr Maliki has told the security forces to arrest all those named.

The committee in charge of food purchases will draw its members from the Prime Minister's office, the cabinet secretariat, the corruption watchdog and the audit department. "It will buy foodstuffs in a swift and proper manner and sign agreements with the world's big companies to buy essential foodstuffs without the use of intermediaries," Mr Maliki said.

Iraqis will be sceptical about the anti-corruption campaign until they see senior officials convicted and punished. It is not only the Trade Ministry which is corrupt but the entire government system. Officials have often purchased their jobs, which they see as a way of making money through bribery or payment for awarding jobs and contracts. The last anti-corruption boss in Iraq was forced to flee the country.

And supply of tainted goods is not confined to the Trade Ministry. Refugees living in Sadr City, the great Shia slum with a population of two million in east Baghdad, were expecting food and clothing from the Ministry of Displacement and Migration but when the shipment arrived, the refugees were enraged to discover that it consisted of scratchy thin grey woollen blankets smelling of mould which were useless in the torrid heat of the Iraqi summer. There were also an assortment of children's shoes and 25 boxes of canned tuna. Locals suspect that officials had pocketed most of the money intended to help them.

The breakdown of the rationing system, started in 1995 under Saddam Hussein, threatens millions of Iraqis with malnourishment. The rations consist of items sold for a small sum of money at retail outlets on production of a ration card. They include rice (3kg a person), sugar (2kg), flour (9kg), cooking oil (1.25kg), milk for adults (250 grams), tea (200g), beans, children's milk, soap, detergents and tomato paste.

A survey by the Ministry of Planning and Development Cooperation found that 18 per cent of people had not received the full food ration for 13 months and 32 per cent had not received it for seven to 12 months. When rations do come, they are often of poor quality and Iraqis say that the tea supplied tastes disgusting.
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Oil rush: Scramble for Iraq's wealth
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Independent

Bidding war for Iraq's huge oil contracts sputters into life
Government plays hardball in fees payable to international oil companies

By Patrick Cockburn

Iraq is locked in a struggle with the world's largest oil companies over contracts that would see "Big Oil" return to the Iraqi oilfields for the first time in almost 40 years. The award of contracts began in Baghdad yesterday and was broadcast live on television to show there were no secret corrupt deals. But the process was immediately in trouble as some of the 32 international oil companies involved baulked at the low level of fees they would be paid by Iraq.

The government had hoped they would take risks to become involved once again in Iraq's oilfields, where reserves at an estimated 115 billion barrels of crude are estimated to be the third largest in the world. Iraq wants to raise its faltering oil production, income from which is desperately needed to reconstruct the country after decades of war.

At stake yesterday were six producing oilfields and two undeveloped gas fields, the most important of which is the massive south Rumaila oilfield just north of the Kuwaiti border. The contract finally went to a consortium led by BP and included the China National Petroleum Company, but only after its initial bid, as well as that of a rival consortium led by Exxon Mobil, had been rejected by the Iraqi Oil Ministry as too low. Other fields attracted less interest.

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What happens to Iraq's oil will determine the future shape of the world's energy supply. Iraq and Iran are the only countries in the world which are believed to have huge reserves of undiscovered crude, but war and sanctions have prevented exploration. Beneath Iraq's western and southern deserts may be a further 100 billion barrels of recoverable oil. Decades of under-investment, limited expertise and poor management means that Iraq's oil output is falling and at 2.4 million barrels a day is below what it was in the final days of Saddam Hussein in 2003.

The Iraqi Oil Minister Hussain Shahristani has been hoping to attract international oil companies by asking them to provide investment and technology over 20 years in return for a fixed fee to be paid for every extra barrel of oil they could produce over an agreed minimum which may be higher than current production. This is risky for the companies because neither they nor the Iraqi Oil Ministry know the extent of the damage done to the giant reservoirs by reckless exploitation or how much money it will cost to restore them.

At the opening of bids in Baghdad's al-Rashid hotel, the start of which was delayed by one day because of sandstorms, the Exxon Mobil-led consortium asked for a fee of $4.80 for each barrel produced above the minimum, while BP wanted $3.99 a barrel, said Mr Shahristani. He said Iraq would pay only $2, a demand which was finally accepted by BP.

Mr Shahristani, a nuclear scientist who was imprisoned and tortured under Saddam Hussein, has to guard his back from criticism that he is selling out Iraq's only asset. He points out that the companies will not own a single barrel of Iraqi oil and that the country will get an extra $1.7 trillion in revenue over 20 years which will pay for "infrastructural projects across Iraq – schools, roads, airports, housing, hospitals".

Iraqis are frequently suspicious that the secret purpose of the US invasion of 2003 was to seize their oil reserves which are their country's only resource. Playing the nationalist card over oil has been frequent as different political parties and factions vie for its control. Mr Shahristani has been under sustained attack in parliament for not stopping a fall in oil production and for bringing in foreign companies. He responds that Iraq has no choice if it is going to more than double its output to five million barrels a day in five years' time.

The strength of Iraqi nationalism was evident yesterday as Iraqis celebrated, with an enthusiasm not seen for years, the departure of US troops from cities and towns. Boats on the Tigris, which flows through Baghdad, sported Iraqi flags. Soldiers shinned up telegraph poles to tie flags to the top. People drove through the streets with flags and plastic flowers attached to their cars as if they were going to a wedding. Thousands of Iraqi soldiers paraded in the Green Zone in celebration.

The 130,000 US soldiers who remain in Iraq outside the cities and towns will be constrained in what they can do under the terms of last year's Status of Forces Agreement. They cannot arrest Iraqis or carry out military operations without Iraqi permission, while their convoys must be accompanied by Iraqi military vehicles.
Independent