With little more than two weeks before the Iraqi transitional government takes over in Baghdad, the U.S.-led Coalition Provisional Authority has approved an additional $500 million in Iraqi oil money to be spent in coming months on equipment and facilities for the still-being-trained Iraqi security forces.
The funds, approved May 15, brought to $1 billion the amount of Iraq's oil income that the occupation authority has tapped for security spending in a 30-day period, as fighting continued in Fallujah and Najaf, and bombings and sporadic firefights took place in Baghdad. The money will enhance security funds included in the $87 billion U.S. supplemental appropriation for Iraq and Afghanistan.
The $500 million approved April 28 and the new $500 million will be spent for as-yet-unspecified programs. The first allotment was to go to regional U.S. commanders for local security construction projects, and would supplement U.S. funding.
The most recent allocation was meant "to provide the Iraqi security forces with sufficient resources to ensure an orderly transition to sovereignty on June 30, 2004, and to ensure the future security of a sovereign Iraq," said Brig. Gen. Nigel Aylwin-Foster of the occupation authority's Office of Security Coordination, according to notes of the May 15 meeting of the Program Review Board.
When Neil Mules, the Australian representative at the meeting, expressed his "concerns about the level of discretion for spending and the lack of specificity of the proposal," he was told it was to be "up to the Iraqi ministries to identify costs and fund them," according to the published notes.
"The evolving security needs are based on the events of recent months, which threaten the transition to Iraqi sovereignty as well as the long-term security of the nation," said Aylwin-Foster. Another OSC official, unnamed in the notes of the meeting, said "that there was no limit to the amount one could spend on security and that these funds were necessary to limit risk and were the top priorities."
According to the official meeting notes, board members said failure to finance the initiatives would "delay the time that Iraqi Security Forces will be a viable and instrumental security element," which would "prolong presence of coalition forces, particularly in the urban areas, in large numbers." Gen. Ali A. Allawi, the outgoing Iraqi minister of defense, spoke in favor of the proposal, the notes said.
Deputy Defense Secretary Paul D. Wolfowitz referred to the occupation authority action this week in an article he wrote that was published June 9 in the Wall Street Journal.
"After the lengthy competitive bidding process for contracts under the Iraq Reconstruction Supplemental appropriated by Congress last fall, substantial quantities of equipment are starting to fill the shortages in Iraqi forces," Wolfowitz wrote. "In addition, over the past two months, the Iraqis added another $1 billion of Iraqi funds to meet additional security requirements."
One reason the occupation authority is reaching into the Iraqi oil fund is because the rising price of oil is creating additional income for Iraqi, a Pentagon official who spoke on the condition of anonymity said this week. As of this past Tuesday, the Development Fund of Iraq, which captures the country's oil income, had about $10.2 billion of total liquid assets, $8.6 billion of it held in U.S. Treasury bills and $1.2 billion in Iraq's Central Bank.
Although L. Paul Bremer, coalition administrator, controls disbursement of this money, he will lose that authority June 30 when the occupation authority goes out of business. Iraqis will then have the final say on how the funds are spent.
According to a Feb. 21, 2004, occupation authority report to Congress, Iraq earned about $1.3 billion from oil exports in January when oil was priced at about $27 a barrel. A barrel of oil was selling at $38.45 Thursday. Under an international agreement, 5 percent of Iraqi oil revenue is allocated to Kuwaiti war reparations and the rest to Iraq's Development Fund.
The most recently reported occupation authority contracts that draw on that fund show the wide range of projects for which the money is being used. In a two-week period at the end of April, for example, $4.6 million was spent on Hyundai troop carriers; $1.7 million on police riot gear; $500,000 on police uniforms; and $400,000 on a new police investigative unit. Contracts totaling $42.5 million were approved for body armor during March and April.
Meanwhile, new bids on security contracts are being sought. For example, earlier this month, the occupation authority said it was looking for contractors to supply 700 concrete barriers to be placed outside an Iraqi army training base in the Kurdish area.
The May 15 meeting of the occupation authority's Program Review Board also dealt with another financial problem that it will leave to the incoming Iraqi government. It involved a request for $180 million to begin paying claims to compensate Arabs whom President Saddam Hussein forced to move into Kirkuk and surrounding Kurdish areas, displacing Kurds. The Arabs recently have been forced to leave those homes, which have been seized by their former owners.
About 100,000 Arabs have been forced into displaced persons camps, which "has led to a growing humanitarian problem." Although the occupation authority has set up a commission to resolve the property issues raised by the expropriations, it is unclear how the Iraqi transitional government will handle the issue.
The Review Board notes said that the entire compensation bill "is likely to reach around $3 billion" and that "serious ethnic clashes are likely to occur if the current situation is not tackled soon."