09 April 2010 – Commodities Now
The Iraqi Oil Ministry has presented the UN with a plan to install a complete system of oil metering and auditing tools and institutions which, it is hoped, will enable closer assessment of government revenues from its oil exports and identify misappropriations of either crude and refined products, or the funds derived from their export.
Its installation would allow the UN Security Council (UNSC) to scrap the UN-controlled Iraq Development Fund (IDF) framework, which currently receives all Iraqi oil export revenues before releasing them to the government. This framework was set up by the UNSC immediately following the 2003 U.S.-led invasion to internationalise the control over Iraq’s oil revenues and dispel allegations that the invasion was fuelled by a wish to gain access to Iraq’s oil export earnings.
The International Advisory and Monitoring Board—which has served as the fund’s auditing and oversight body—would also be closed down, according to Bloomberg, which quoted UN Secretary-General Ban Ki-moon as saying that “the action plan and timeline as presented by the government of Iraq is realistic”.
Significance: The lack of a comprehensive and stand-alone metering system at Iraq’s oil production chain has been a longstanding problem, allowing large crude- and refined products-smuggling operations to develop, whose substantial revenues have sustained many political militias—particularly in the prolific south—during the years of high instability and weak government control after the invasion.
Fighting the last remaining vestiges of oil smuggling and corruption throughout the Iraqi oil industry is therefore closely related to the country’s efforts to improve its security, as well as government control of its oil operations. It is of course also important in allowing Iraq to shed the last vestiges of international control and checks over its sovereignty.
Installing a thorough metering system has been politically difficult given the vested interests among certain political forces benefiting from the corruption, so the fact that this might now happen shows in itself that the overall situation in Iraq is improving.