Halliburton ripped off American people

Subsidized Fuel Is Spirited Out of Iraq
Government pays the price as smugglers fill up with 5-cent-a-gallon gas, which can be sold for a handy profit in neighboring countries.

By T. Christian Miller, Times Staff Writer


ON THE SHATT AL ARAB, Iraq ?- The rusted skiffs chug down this broad channel lined with marsh, sometimes so laden with illegal cargo that they rise only half a foot above the waterline.

Usually they're carrying diesel fuel, bought cheaply in Iraq and smuggled for a handy profit to countries such as Iran, Kuwait and the United Arab Emirates.
To authorities here in the southeastern tip of Iraq, the smugglers are no more than a law enforcement nuisance. But for U.S. and Baghdad officials, they are the result of what has become one of the most vexing problems in rebuilding Iraq: cheap gasoline.

Iraq has long subsidized gas prices, a practice that continued after the U.S.-led invasion in 2003. Iraqi gas costs about 5 cents a gallon, whereas neighboring Kuwait charges 79 cents.

The difference in prices has created a thriving black market, with smugglers moving hundreds of thousands of gallons of fuel every day by land and sea to neighboring countries, Iraqi officials say.

The smuggling has exacerbated a severe fuel shortage in Iraq, leading to long gas lines and forcing a nation with the world's second-largest reserves of oil to import from $240 million to $400 million per month in fuel, according to various estimates.

"We have to stop the oil smuggling," Oil Minister Ibrahim Bahr Uloum told reporters last month as he announced a law enforcement crackdown. "We're going to do our best."

The Finance Ministry puts the total cost of subsidized fuel, a figure that includes direct subsidy costs as well as gas purchased to replace smuggling losses, at $6.9 billion, a staggering 28% of the country's projected GDP in 2005. That's money the Iraqi government could otherwise use for electrical, water and health projects.

"The only reason behind the smuggling is the subsidized prices," Adnan Ameen, the head of the Finance Ministry's macroeconomics unit, said at a recent conference in London sponsored by the liberal Soros Foundation. "It has been … a huge drain on the national budget."

U.S. and Iraqi efforts to deal with the problem have failed. Immediately after the invasion, Halliburton Corp., the Houston-based oil services company once run by Vice President Dick Cheney, was given a contract to import fuel into Iraq in the face of widespread shortages.

Democrats later attacked Halliburton's contract, saying the company was charging too much in order to boost its profits. The Defense Contract Audit Agency raised concerns that Halliburton had overcharged the federal government more than $61 million. The contract ended last year, and the Iraqis now purchase fuel themselves on the open market. The Pentagon also purchases gas at market prices for military use.