U.S. May Tap Oil for Iraqi Loans
WASHINGTON — The Bush administration is considering a provocative idea to pledge some of Iraq's future oil and gas revenue to secure long-term reconstruction loans before a new Iraqi government is in place to sign off on the proposal.
The plan, endorsed by the Export-Import Bank of the United States and some of America's biggest companies, would help avert a looming cash crunch that has the potential to stall the postwar rebuilding effort. One U.S. official rated the proposal's prospects at 50-50.
But the plan is drawing fire from some administration officials, lawmakers, policy analysts and prominent Iraqis who say it would mortgage the Persian Gulf nation's most treasured resource, prevent future leaders from deciding how to spend their oil money and put U.S. taxpayers at risk.
"Iraqis believe their oil should not be touched by foreigners, that it should remain in the hands of the Iraqi government and that no one has a right to do anything before an elected government is in place," said Fadhil Chalabi, executive director of the Center for Global Energy Studies in London and a former Iraqi Oil Ministry official.
"As an economist, I believe in what they are proposing. You couldn't come up with a better formula," Chalabi said. "But Iraqi politics and the way they look at these things are not encouraging. It could create problems later on. Better to wait until a government is formed."
That may be too late, in the view of the plan's supporters. The Export-Import Bank and an industry coalition that includes Halliburton Co., Bechtel Group Inc. and other major companies that are interested in winning contracts in Iraq are warning that unless steps are taken soon to secure new funds, the reconstruction well could run dry.
"Common sense says get Iraq running. How do you get the country running? By using its own oil revenue 100% for the benefit of the Iraqi people," said Export-Import Bank Chairman Philip Merrill. "If you want to wait three or four years, be my guest. But that means the country is going to be running on the dole of the United States."
Many experts agree that Iraq is headed for a possible cash flow crisis as reconstruction costs escalate, initial funds are depleted and the resumption of oil exports is delayed due to damage caused by looting and sabotage.
But they part company over whether the U.S.-led occupation administration in Baghdad has the legal or moral authority to pledge future oil revenue as loan collateral before the issue can be debated by elected Iraqis.
