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News and opinions on situation in Iraq
On the American steps – Corruption and Militias Twins turn Iraq into a “free fraud zone” 

Sabah Ali (10 Sept. 2006) –

     On May 2, 2006 evening, two floors in the Ministry Of Oil  huge building were caught on fire, eating away two very important departments: the archives and the computers floors where all the records, documents, accounts books, and contracts…are kept. There were no employees in the building except for the guards and the Facilities Protection Services. (1) 

     Two days before this “incident”, the general inspector in Iraq had issued the Smuggling Crude Oil and Oil Products: Second Transparency Report in which he exposed in details the catastrophic numbers and facts about corruption in the oil sector in Iraq : smuggling, theft, fraud, black market leading to great loss in money and resources.  On his side the former Minster of Oil, Ibrahim Bahr Al-Oloom, said that Iraq lost at least 4 billion dollars of smuggled oil last year, referring to the involvement of the government’s high officials in the smuggling and corruption scandals. Many political analyses considered the fire an attempt to conceal the corruption evidences.  

     The fire took place few days before the new Iraq government took office, after 6 months of delay due to conflicts on governmental offices among the Shiite winning parties within the United Iraqi Alliance. The Ministry of Oil was one of the disputed ministries, especially between the Supreme Council of the Islamic Revolution in Iraq and Al-Fadhila party (both in the Alliance). Any one who is familiar with the “new” Iraqi politics knows that the first thing each Iraqi government does, is to expose the previous government corruption scandals. Finally, the Ministry of Oil, and the Ministry of Finance, were given to two persons well known for being the closest to Iran among the Shiite Alliance. 2 

     Another “accident” : in Zafaraniya, a poor district south of Baghdad, of Shiite and Sunni mixture, a huge explosion killed and injured more than 250 civilians on Sunday evening August12. The Iraqi Ministry of Interior said that it was a car bomb; the American sources and witnesses said it was not; actually it was a gas explosion which caused many other explosions. 

      Few days later, newspapers in Baghdad were talking about a corrupt deal where the Ministry of Oil imported cooking gas from Iran. Bad deals, imported oil products which do not fulfill the same qualities mentioned in the purchase contracts, were one of the big corruption problems mentioned in the Second Transparency Report. The question is why the Ministry of Interior would try to cover the Oil corruption. 

    Another big and scandalous problem of controlling the oil production is the Ministry’s failure of reinstall equipments to meter oil production, after they were stopped since the beginning of 2005. There is no way to know how much oil is officially exported, according to the UN International Advisory and Monitoring Board report published last August. The report said that $241m of oil money were put in unrecognized ministries’ accounts, and that $221m were put in unrecognized accounts of the State Oil Marketing Organization (SOMO) whose director is well known to be the previous oil Minster’s closest friend.

    These are just few of many recent examples which clearly indicate that the government, or members in it, is involved in the corruption scandals directly and through its connection to the armed militias, namely Al-Mahdi army (of the Sadr Movement) and the Badr militias (of the Supreme Council of the Islamic Revolution in Iraq-SCIRI) -both heavily and effectively represented in the Iraqi government now. These militias are controlling the corrupt oil production and marketing (Ministry of Oil) and controlling the security -or rather insecurity- in Iraq (Interior and Defense). 

     A parliament member said lately that the political militias are actually stronger than the government now, and an adviser in the Prime Minister office described some of the Iraqi security forces as terrorist militias paid by the government, not to mention the handsome bribes, according to the advisor. He said that many high officials who criticize corruption are corrupt themselves and are closely connected to the sectarian militias. To prove this, he said, 15 Iraqi judges were assassinated especially those who secretly work with the Commission of Public Integrity in Iraq.  In Basra, however, those militias control the oil smuggling, with complete Iranian help and protection (together with drugs and weapons poured by the Iranians in all of the southern Iraqi regions). 

  In its statement on Sept 10, 2006, the Commission said that the number of Iraqi high officials who are involved in financial corruption cases has reached 73 (yes seventy three!), 15 of them are ministers, the rest are deputy ministers, general directors, Parliament members and parties leaders. All are granted legal immunity. 

     The Commission which is directly connected to the presidency council announced that it has 1852 corruption cases involving billions of dollars, and it is trying to change its law, obviously to have more power in the high officials’ cases. The irony is that in mid 2004, a UN audit committee working on the first 6 months of 2004 found that $6 b of the Development Fund in Iraq were unaccounted for, about $2 b of them are connected to Talabani, the Iraqi president now! 

    The Commission head, Radhi Hamza al-Radhi repeats privately and publicly that there are many government pressures on him “to slow down and take it easy”, and that he is facing many obstacles. The Ministry of Interior, for example, did not respond to the Commission’s 164 arrests orders against prominent officials accused of corruption, and 100 investigation order concerning administrative and financial corruption inside the Interior Ministry itself.  

    The Commission speaker said that there are at least 234 corruption cases in this ministry waiting to be looked in by the judicial committee. Among the officials who are called to reply to the Commission’s inquiries are the Iraqi former prime ministers: Allawi and Al-Jafari, on cases of stealing money, accepting kickbacks and assigning millions of dollars to phantom rebuilding contracts that appeared only on paper. Another corrupt official, who is already in jail now, is the High Commissioner of the Elections, Adil Allami, on charges of fraud and bribes in millions.   

  In its latest report, Measuring Stability and Security in Iraq -August 2006 the American Ministry of Defense, Pentagon, said that “Many of Iraq’s political factions tend to view government ministries and their associated budgets as sources of power, patronage and funding for their parties. Ministers with out strong party ties…some times have little control over the politically appointed or connected people serving under them”.  

   The corruption problem is directly connected to what is called the sectarian violence problem. It would be useful to notice that through 2005-2006, both twin problems were openly escalating together. Every “last month” was the deadliest month in Iraq, while Transparency International sited Iraq on the top of corruption list. Eye witnesses of the sectarian militias’ raids in different parts of Iraq, especially in Baghdad suburbs, talk about expensive modern cars and weapons (including grenade launchers and heavy machine guns, apart from light weapons) and hundreds of young men in each raid. There is no declared number for the militias of course, but it is safe to say that they are hundreds of thousands each. These people are well known to be beautifully paid. 

    The American official reports insist on saying that terrorism is the main problem in the oil sector in Iraq, that the terrorists’ attacks on pipelines are the main obstacle to normal oil industry in Iraq, implying that the resistance is responsible of depriving the Iraqi people of 95% of its national income. The Americans also attribute the reconstruction program failure to what they call terrorism. 

     The Iraqi General Inspector, Dr. Ali Al-Allaq, however, puts targeting oil pipelines as the fifth problem after 4 more dangerous problems (large discrepancy in oil product prices between Iraq and the neighboring countries, inadequate control and supervision of movement and trading oil products, lax judiciary measures against offenders and lawbreakers, and greater reliance on the imported oil products…). 

        Each of these problems is a big story in itself –detailed in the General Inspector’s Second Transparency Report, available in English and Arabic – but targeting pipelines is of special interest. Well informed sources in the Ministry of Oil and eye witnesses say that an exploded pipe would create a lake of crude oil. The Ministry sells these lakes very cheep to certain individuals who in turn sell them to customers outside Iraq. 

     These individuals are usually high officials in the government or the political parties who control it, and the customers are usually Iranians. Other eye witnesses in Basra say that there are pipelines which go from Iraq directly into Iran, and that there are tens of illegal outlets of exported Iraqi crude oil which is loaded in ships holding the Iranian flag. Everything in all these cases takes place under the protection of the Shiite militias, especially Badr. Last year the amount of smuggled oil through illegal outlets was the equivalent of one billion dollars, according to Dr. Ali.   

     The Shiite-Shiite (SCIRI, Fadhila and Sadr) conflict in Basra this summer is a flagrant evidence of the connection between corruption and the sectarian militias. To begin with, the Shiite political parties, whose militias are controlling the oil smuggling, do not consider stealing the Iraq oil revenue a crime. On the contrary they consider the southern oil fields their natural right given to them by God, and that the central Sunni governments of Iraq has deprived them of this right for ages. Actually this is what the Shiite Federal region of the south is all about. 

       But each of these parties wants to control the oil industry to guarantee power through wealth to fund their militias, which means that the fighting will go on as far as these militias are not controlled by any central power. So far the Maliki government and the occupation forces proved to be helpless in dealing with them, assuming that they want to.      

    Oil black market inside Iraq is well known for being controlled by the Sadr militias. Moqtada Al-Sadr, the Sadr Movement leader, himself is said to “order” his militias to move away from the oil black market after too many scandals were exposed. Again many eyewitnesses talk about big tankers protected by armed men secretly load oil from the warehouses or the fuel stations. One of the British generals in Basra said on a documentary, months ago, that they witness oil smuggled daily but the British troops do not want to do anything about it because “we don’t want to be rained by bombs the next day”.  

     Ironically, after fuel reached higher prices 374 percent in July than the previous month, thanks to the black market, the only solution that the Minister of Oil, Shehristani could come out with to fight corruption and smuggling, is to privatize the oil products trade, a procedure that leaves the doors wide open for the political mafias and for the powerful militias leaders to steal the market “legally”, and of course all the contracts will go to Iran, which is what is already happening now.  

     Administrative and financial corruption as a wide, open phenomenon is new in Iraq. The Iraqi state never knew such phenomenon before the occupation. Of course there were individual cases, as every where in the world, but few officials would dare to mess with the public money. It is part of Iraq’s social and political culture to consider wrong doing in the public property as the worst of crimes that damage personal integrity. It is not a defense of Saddam Hussein, but all Iraqis know that a corrupt official would be dealt with very cruelly as personal offence and betrayal against the president himself.   

    Corruption in this sense, like many other political fatal diseases, came to Iraq with the occupation. There is and endless list of the American authorities’ theft and fraud scandals; probably the biggest of them was the story of the 9 billion dollars which “disappeared” when the American governor of Iraq, Paul Bremer left the country. The Americans inherited more than $30 billion of frozen and oil-for-food assets when they invaded Iraq in 2003, to say nothing of $26 million worth of Iraqi property sequestered by the occupation authorities.

      These fortunes were supposed to be spent on rebuilding through the Development Fund in Iraq. The money disappeared but the country remained in ruins. Many fraud stories are coming out and published now and then in the American mainstream media, talking about billions of Iraqi “reconstruction” money which were misused, stolen, lost, or unaccounted for. Billions dollars of Iraqi money were misused by Bremer, who issued 100 catastrophic economic decisions. 80% of big contracts were given to the American corrupt companies; only 2% were given to the Iraqis.

    Millions were handed directly to officials in certain ministries, not through the Ministry of Finance or the Iraqi Central Bank. One example: last June the Commission was investigating kickbacks of $300 million in purchase of “defective and outdated helicopters, machine guns and armored personnel carriers” by a former procurement chief in the Defense Ministry. Another senior defense official was convicted for receiving $400.000 in bribes…etc.

      The American officials describe the Iraqis as a corrupt and lawless society. Any Iraqi whose house was raided by the American troops tells a story of how the soldiers stole money, jewelry, personal weapons and any expensive thing, a part from documents. A lawyer in Al-Qaim handed the American troops 300 files of such cases documents (theft during raid) in 2005. When he went back to the American base asking about the cases, he found that the stolen things and the documents had disappeared.

   In 2003 and 2004, Iraqis were wondering why many of the thieves and criminals who were sentenced to jail by Iraqi judges were released by the Americans. I personally was a witness of a case in which a car thief was released by an American raid on the police station in which he was kept; three days after the Iraqi judge put him in jail in Dora, south of Baghdad. One of the well known oil smugglers was arrested in April 2006 in the north-western desert, but an American military commander is demanding his release now. Account books, receipts, financial documents and any evidence of financial operations before the Iraqis were “handed” authority, were destroyed or disappeared instead of being handed to the Ministry of Finance.

   The Bush Administration refuses to prosecute US firms accused of corruption, a refusal which is turning Iraq into a “free fraud zone” according to a senior official in the occupation authorities in Iraq. If the Americans are going away with their crimes, why not the Iraqis, after the Iraqi officials now were educated and trained in the US.

1-       Sadr’s four ministries control 70,000 uniformed, armed men who are part of the Facilities Protection Service, according to the Interior Ministry. U.S. military commanders acknowledge that the agency has mushroomed to more than 140,000. A top former U.S. military commander has said militia fighters under the Facilities Protection Service are tied to kidnappings, execution-style killings and other crimes.

2-      One of the sad jokes about corruption says that the food expenses of the protection personnel for the Minister of Finance, Bayan Jabr Solagh, alone are 40.000 dollars a month. Another says that the Minister of Oil, Shehristani, used to be paid $25000 a month when he was a vice president of the National Assembly, and that this money was NOT his salary, but an allowance. He also put his hand on one of Saddam’s palaces, and was given $100.000 to repair it and $50.000 to furnish it. He bought himself 3 armored cars for $300.000 each, and got 50 armed men to protect him. This information was sent in a letter to “his Excellency” the grand Ayatollah Sistani to do some thing about it. So far “his Excellency” did not.

3-      For more information, see:

  • Smuggling Crude Oil and Oil products: Second Transparency Report
  • Commission of National Integrity in Iraq’ statements
  • A Switching in Time: a New Strategy for America in Iraq. Sabban Center
  • SIGIR. Statement of Stuart W. Bowen, Jr. 
  • “So, Mr. Bremer, where did all the money go”. Guardian, July7, 2006, or London Review of Books, Vol.27 No.13 dated July 7 2005. 
  • Iran, its neighbors and the regional crisis. Chatham House
  • Development Fund for Iraq, Summery of Audit results. August 2006
  • Measuring Stability and Security in Iraq. Pentagon. August 2006
  • Among others.
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