Iraq lets watchdog continue monitoring oil

UNITED NATIONS - Iraq will let an outside watchdog keep monitoring its oil production and the way it spends its oil money, Foreign Minister Hoshiyar Zebari told the United Nations.

Iraq's decision to extend the life of the watchdog agency, called the International Advisory and Monitoring Board, will demonstrate Iraq is using its oil resources "transparently for the benefit of the people of Iraq," Zebari said in a letter to the 15-nation UN Security Council.

Monitoring will also reassure aid donors and creditors that Iraq is managing its resources and debts "in a responsible manner designed to benefit the Iraqi people," he said.

The Security Council created the board -- whose members include officials of the United Nations, World Bank and International Monetary Fund -- in May 2003 to watch over the stewardship of Iraq's natural resources.

The board was launched during the US-led occupation, but the council extended its mandate after power reverted to the Iraqis in June 2004. Thereafter, the board's future was left in Iraqi hands, contingent on a council review which took place on Tuesday.

Provided the Iraqi government did not object, the mandate would remain in place until the transition to an elected Iraqi government, expected later this year.

In addition to the board, the council also set up an oil account, called the Development Fund for Iraq, so that outside auditors could track all oil income and spending.

The latest audit, conducted by KPMG and covering the period June 29 through December 31, 2004, recommended numerous management improvements after identifying a variety of problems with Iraq's handling of its oil money.

The audit, released a week ago, said Iraq could not account for 618,000 tonnes of fuel oil worth US$69 million ($99 million), failed to install equipment to meter oil production and granted many contracts on a non-competitive basis without explanation.

In addition, the State Oil Marketing Organisation improperly deposited US$97.8 million of oil proceeds into three unauthorised bank accounts in Iraq and Jordan and carried out US$461 million in barter transactions discouraged by the board because they are hard to track, KPMG said.

Zebari said Iraq welcomed the recommendations as they helped the authorities take corrective measures.

- REUTERS