On January 13, 2009 the Inspector General for Iraq Reconstruction (SIGIR) released an audit of a $1.2 billion contract to fix and rehabilitate oil and gas infrastructure in southern Iraq by the U.S. company KBR. Like previous reports, it found that costs went over budget, there was little oversight, and that while some improvements were made, overall, the projects’ potential was unfulfilled. What was most important for the future of the country however, was the finding that Iraq was either unwilling or incapable of maintaining many of these U.S. funded reconstruction projects.
Much of Iraq’s oil infrastructure is dated, and needs massive investment to continue production. The industry suffered years of sanctions, and then looting immediately after the invasion. SIGIR found major damage at several facilities costing millions of dollars from the theft and vandalism in 2003. KBR did improve the facilities it worked on, but the SIGIR thought that it might be futile because of the attitude of the Iraqi government. U.S. officials are worried about Baghdad’s commitment to reconstruction as it appears they don’t care about finishing some of the U.S. projects, maintaining them, or even using some.
For example, KBR worked on a $146.7 million project to improve gas plants in southern Iraq. It bought rotors for gas compressors at one, but didn’t have time to install them. They were left in a nearby warehouse when KBR was done, but the Iraqis have yet to install them. The plant is producing below benchmarks as a result, and SIGIR believes that the U.S. money was wasted because Baghdad doesn’t have plans to finish it.
Another case was in June 2004 when KBR was given a contract to fix the loading arms at Al Basra Oil Terminal. SIGIR found that the company ended its work early at the request of Baghdad in January 2005. In April 2006 a U.S. contractor told the state-run South Oil Company that they had to maintain the loading arms by oiling them, but the Iraqis never did. The contractor witnessed Iraqis using the rusted equipment in ways that might break the arms. KBR and other companies repeatedly told South Oil that they had to do preventive maintenance, but nothing was done. The government didn’t seem to want the project in the first place, and after the work was finished, showed little interest in keeping it up.
There have been similar reports before. In November 2008, Reuters reported on Al Qods, a new U.S.-funded power plant opening in Baghdad that cost $170 million and would service 180,000 households in central Iraq. Right next to Al-Qods was another energy facility that was abandoned by the Iraqis. The $20 million turbines in the plant broke because the Iraqis couldn’t operate them. The government may never repair them.
This is of major concern since the U.S. has spent billions on Iraq, but it is an open question about how much of it was effective. In total, the U.S. has spent almost $18 billion on reconstruction. On September 30, 2008 the last amount of money was appropriated. All the way back in 2005 however, the SIGIR warned that the Iraqi government was not ready to take over many of these projects, and had even rejected responsibility for some of them. The U.S. often turned over projects to the local government whether they wanted them or not. Sometimes the Americans had to continue to operate them because there was no one else willing to. Others remain idle and unfinished because of Iraqi neglect. Baghdad has also been unable to spend most of its capital budget that goes into infrastructure. The war has caused a brain drain of Iraqi professionals and skilled workers leaving the country, leading to a talent deficit to operate and fix facilities. Iraqis also seem to have created a culture of just getting by in industry after years of sanctions. That has led simple preventative measures such as oiling equipment to be ignored. That’s not to say that the U.S. has not contributed to Iraq’s rebuilding, but the amount that was wasted on large projects Iraqis either didn’t want or couldn’t maintain appears staggering.
For more on reconstruction and development see:
Maysan Province Remains Underdeveloped
Special Inspector General for Iraq Reconstruction’s Quarterly October Report
Special Inspector General for Iraq Reconstruction July Report’s Major Findings
Iraq Outspends U.S. on Reconstruction
Pincus, Walter, “Report Details Iraq Contract Failures,” Washington Post, 1/14/09
Radio Free Europe/Radio Liberty, “Iraqi Official: Oil Infrastructure Needs Major Upgrade,” 1/15/09
Ryan, Missy and Qusay, Aws, “Iraqis Measure Progress with Flip of Switch,” Reuters, 11/14/08
Special Inspector General for Iraq Reconstruction, “Cost, Outcome, and Oversight of Iraq Oil Reconstruction Contract with Kellogg Brown & Root Services, Inc.,” 1/13/09
- “Quarterly Report to the United States Congress,” 10/30/08