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Where’s Kurdistan’s missing $4 billion?
3.7.2011
By Michael Rubin
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July
3, 2011
The story of the United Nation’s Oil-for-Food
program is tragic. Meant as a humanitarian program
to support the war-weary people of Iraq, it came to
symbolize not only Iraqi President Saddam Hussein’s
antipathy to his own people, but also UN
administrators’ venality and corruption.
Alas, Saddam’s fall did not end corruption. Despite
the poverty Iraqis suffered under Saddam, Iraq was
never a poor country. The United Nations held
billions of Iraq’s money, and Saddam had hidden
billions more. When the Baathist regime fell, the
United States set up the $17 billion Development
Fund for Iraq which included unspent Oil-for-Food
money, Saddam’s frozen assets, and proceeds from new
oil sales.
Much of that money is now missing, and Iraqis are
rightly indignant. A letter sent last month by the
Iraqi parliament’s Integrity Committee to the United
Nations’ office in Baghdad demands accountability,
and accuses the United States of corruption. “All
indications are that the institutions of the United
States of America committed financial corruption by
stealing the money of the
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Michael Rubin |
Iraqi people, which was allocated
to develop Iraq, [and] that it was about $17
billion,” the letter reportedly read.
The Coalition Provisional Authority (CPA) certainly
wasted much money in poorly conceived development
projects. (In full disclosure, I worked in the CPA
but not in a financial or developmental capacity).
There was disorganization, poor accounting, waste,
and neither a cohesive strategy nor consensus about
goals. The CPA did not, however, steal $17 billion;
it mismanaged it. It should certainly be held
accountable for that.
Some money did disappear. In the CPA’s waning days,
its administrator L. Paul Bremer transferred $1.6
billion in cash to the Kurdistan Regional Government
(KRG), slightly less than half of the money which
the KRG demanded. The transferred Oil-for-Food money
was to be split between the Kurdistan Democratic
Party and Patriotic Union of Kurdistan. That was not
the only money transferred, however. According to
family members and senior politicians, both leaders
also received money from the American intelligence
community and development funds from across the U.S.
government. International donors provided additional
cash. As Nechirvan Barzani stepped down from the
premiership, he reportedly bragged that the KRG had
$4 billion in the bank.
That cash and much of the rest transferred to the
KRG now appears to be missing. While the money was
meant to belong to the citizens of Iraqi Kurdistan,
top political leaders in both major Kurdish
political parties apparently transferred funds from
the international payments into personal bank
accounts. Granted, too often in Iraqi Kurdistan,
leaders treated the treasury and personal bank
accounts as interchangeable. The Korek cell phone
company is the prime example. Its leaders apparently
used several hundred million dollars in KRG money to
purchase the national license. In effect, they used
the Kurdish citizens’ own funds for personal gain.
Korek today may be worth billions of dollars. In a
democracy,www.ekurd.neta
company would have issued shares to provide start-up
funds. The shares would reap profit or loss for
investors. In Kurdistan, however, ordinary citizens
assume the loss but family members of the political
leaders monopolize the gain. In effect, they gamble
without risk of loss. Assuming each Iraqi Kurdish
resident received a share for what was, in effect,
their forced investment in Korek, every individual
in Kurdistan should now receive cash dividends for
their share.
Assuming Nechirvan Barzani’s account of a $4 billion
surplus was accurate, then Kurds should demand
accountability not only for the $4 billion, but for
the interest and profit that $4 billion would
generate. If senior Kurdish officials from both
parties transferred any or all of that money into
their personal bank accounts, then they should be
accountable not only for the principle, but also for
the interest, stock dividends, and profits from
investments in companies and real estate. Kurds may
not realize it, but they now own shares in companies
in China, hotels in the United Arab Emirates, and
stocks in American companies. If, for example, that
$4 billion investment generated 5 percent profit per
year which was reinvested, then in the last two
years, the principle has grown by more than $400
million.
Both Massed Barzani and KRG Prime Minister Barham
Salih have promised reform. Financial transparency
must be at the top of their agenda alongside press
freedom. Borrowing from government coffers is not
legitimate; it is theft. When public officials seek
personal profit from the public treasury while
ordinary, non-politically connected citizens
struggle to get by, they are not simply gambling or
investing; rather, they are replicating the
financial crimes Saddam committed against the Iraqi
people.
Michael Rubin
is a resident scholar at the American Enterprise
Institute AEI. His major research area is the Middle
East, with special focus on Iran, Iraq, Turkey, and
Kurdish society. He also writes frequently on
transformative diplomacy and governance issues. At
AEI, Mr. Rubin chaired the "Dissent and Reform in
the Arab World" conference series. He was the lead
drafter of the Bipartisan Policy Center's 2008
report on Iran. In addition to his work at AEI,
several times each month, Mr. Rubin travels to
military bases across the United States and Europe
to instruct senior U.S. Army and Marine officers
deploying to Iraq and Afghanistan on issues relating
to regional state history and politics, Shiism, the
theological basis of extremism, and strategy.
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