Iraq amassing funds as oil flows

Iraqi flags flutter during the opening ceremony of a new oil refinery plant in the Shiite holy city of Najaf, central Iraq, on March 15, 2008.

TEXT OF INTERVIEW

KAI RYSSDAL: The promise from the Bush Administration before the invasion was that Baghdad would be able to finance its own reconstruction. When he was number two at the Pentagon, Paul Wolfowitz said oil revenues would do it. That hasn't been the case so far. But the special inspector general for Iraq reconstruction's out with a new report that says Iraq could net $70 billion in oil revenues this year -- More than enough for Baghdad to begin paying its own way.

Stuart Bowen is the special inspector general. Mr. Bowen, welcome to the program.

STUART BOWEN: Thank you, Kai, it's good to be with you.

RYSSDAL: It kind of makes sense in the face of these rising prices but I thought they had serious production problems there, pipeline problems, export problems. Have those been solved?

BOWEN: They haven't been solved but progress has been made. The pipeline to Turkey came on line six months ago and is now exporting at a rate of about 300,000 barrels a day. That's a significant addition. Indeed, it accounts for most of the rise in the exports.

RYSSDAL: What are they doing with this money? Are they just sticking it in the bank someplace?

BOWEN: Well, the Iraqi oil revenues are deposited in the Federal Reserve Bank of New York, pursuant to a previous agreement. But they are moving forward with a plan to execute another budget this summer to allocate the use of this new money.

RYSSDAL: Do you know if the Iraqi government has plans to spend some of this surplus on capital reinvestment in its oil pipelines and infrastructure?

BOWEN: Yes. That is what they report. And the oil minister has been extremely busy, as has the prime minister, moving forward with an expanded capital plan, and with new reconstruction planning.

RYSSDAL: This is, obviously, a politically sensitive issue back here -- the prospect of Iraq having a surplus while we don't.

BOWEN: Well, my job is just to report on what we're finding over there. And what we're finding is that there is extraordinary potential for new investment by Iraq in their economy. Most critical is Iraq effectively executing its budgets. The country has simply had to relearn how to do that over the last few years. That needs to come up for the infrastructure really to revive.

RYSSDAL: Is this $70 billion enough for Iraq to at least partially fund its own reconstruction?

BOWEN: At least. And certainly Iraq is taking the lead in funding its own reconstruction. And it is the possessor of the third-largest oil reserves in the world. It is a wealthy country and
it should, as its capacities develop, be able to begin to prosper.

RYSSDAL: Do you have any reason to believe that this trend won't continue? That is to say, that their oil revenues won't keep on growing?

BOWEN: I don't any reason to believe that. The post-invasion, record outputs this quarter in oil production and oil exports and prices are going up. I think their income will go up as well.

RYSSDAL: Stuart Bowen is the special inspector general for Iraq reconstruction. Mr. Bowen, thanks for your time.

BOWEN: Kai, thank you. Good to be with you.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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