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'Massive problems' tracking Iraq oil
Board: Country still lacks proper monitoring, leaving the door open to smuggling and lost revenues.

UNITED NATIONS (CNN) - Iraq still has "massive problems" in monitoring its oil revenues, including no oil metering system to measure output and the failure to use competitive bidding for all contracts, an auditing board said after a meeting Wednesday.

Members of the International Advisory and Monitoring Board have "repeatedly raised" the issues with the U.S. Coalition and the Iraqi government, according to Jean-Pierre Halbwachs, the group's U.N. representative, who spoke to reporters.

Halbwachs said a recent agreement had been reached between the Iraqis and a U.S. company to install metering equipment, but could provide no immediate details.

In addition to the contract and measurement problems, other problems are the use of bartering for oil sales and "persistent weak controls" of Iraq's spending ministries.

A lack of metering equipment has been a problem since the days of Saddam Hussein's rule, and has prevented investigators from quantifying any fraud or smuggling violations, Halbwachs said. The equipment "is essential to maintain control over oil revenues," Halbwachs said.

Board member Bert Keuppens of the International Monetary Fund said it was generally acknowledged that "large amounts" of Iraqi oil have been smuggled, but provided no numbers.

"These things are known -- it is a matter of putting controls into place," Keuppens said.

The board also is waiting for the U.S. government to collect $208.5 million in "questioned costs" from a Kellogg, Brown & Root (KBR) contract and turn the money over to the Iraqi government.

The request was made last month, and while the board has no enforcement power, Halbwachs said the issue will be raised again in meetings with Department of Defense officials.

The IAMB was established in December 2003 by the U.N. Security Council with representatives from the United Nations, the World Bank, the International Monetary Fund, the Arab Fund for Economic Development and the government of Iraq. Its mandate was recently extended to expire at the end of 2006.

Absent from the IAMB meeting Wednesday was the Iraqi government representative who ran into U.S. visa delays, Halbwachs said.


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