Iraq's financial free ride may end

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By ANNE FLAHERTY

Iraq's Free Budget Ride May Be Nearing End As Congress Asks Country to Pay More for Rebuilding

Iraq's financial free ride may be over. After five years, Republicans and Democrats seem to have found common ground on at least one aspect of the war. From the fiercest war foes to the most steadfast Bush supporters, they are looking at Iraq's surging oil income and saying Baghdad should start picking up the tab, particularly for rebuilding hospitals, roads, power lines and the rest of the shattered country.

"I think the American people are growing weary not only of the war, but they are looking at why Baghdad can't pay more of these costs. And the answer is they can," says Sen. Ben Nelson of Nebraska.

Nelson, a Democrat, is drafting legislation with Republican Sen. Susan Collins of Maine and Democrat Evan Bayh of Indiana that would restrict future reconstruction dollars to loans instead of grants.

Their bill also would require that Baghdad pay for the fuel used by American troops and take over U.S. payments to predominantly Sunni fighters in the Awakening movement. Plans are to propose the legislation as part of a war bill to cover spending through September.

Likewise, Sen. Carl Levin, D-Mich., chairman of the Armed Services Committee, said he wants to add a provision to a defense policy bill that would force the Iraqi government to spend its own surplus in oil revenues to rebuild the country before U.S. dollars are spent.

These senators, who are well-known war skeptics, could find allies in lawmakers who support President Bush's current Iraq policies. In hearings last week, Joseph Lieberman, I-Conn., asked Defense Secretary Robert Gates whether Baghdad should start paying some U.S. combat costs, and Lindsey Graham, R-S.C., raised the possibility that an anticipated Iraqi budget surplus this year could be used to help Afghanistan, whose $700 million in annual revenue represents a small fraction of Iraq's $46.8 billion budget.

Bush has suggested that Congress is preaching to the choir. Last week, he noted that Baghdad's latest budget would outspend the U.S. by more than 10 to one on Iraq reconstruction, with American funding for large-scale projects "approaching zero."

"Ultimately, we expect Iraq to shoulder the full burden of these costs," he said.

But lawmakers are skeptical. Considering that past predictions in Iraq have fallen short, the legislation would ensure Iraq assumes more of the financial burden, they say.

On the surface, it looks as though the U.S. has about split the costs of rebuilding efforts with the Iraqis: Congress has appropriated about $47.5 billion since 2003 while the Iraqis have budgeted $50.6 billion. International contributions have totaled $15.8 billion.

And, as Bush pointed out, Iraq's latest budget is on track to outspend the U.S. when it comes to rebuilding. Baghdad has devoted $13.4 billion in 2008 for capital expenses, more than a quarter of its $48.6 billion budget.

However, there is a key difference: Whereas the U.S. has actually spent most of the money it has approved, Iraq hasn't, according to the watchdog agency that audits reconstruction efforts. In 2006 and 2007, for example, Iraq spent only $2.9 billion of its designated $16.3 billion capital budget, which is used to invest in reconstruction projects.

Administration and military officials say the lack of spending isn't sinister.

"Part of it's a lack of expertise. Part of it is a lack of trained people. And part of it, in the past, has probably been politics," Gates told Congress last week. "We think they're making headway on all of those."

Levin said he doesn't buy it, including Bush's declaration that the U.S. is no longer in the business of major reconstruction. Congress received notice on April 3 that the Pentagon planned to transfer $590 million in its war budget to cover construction and infrastructure improvements for Iraq security forces.

"I just think it's totally unacceptable that we say they don't know how to cut a check," Levin said.

A primary cause for the unhappiness in Congress is the high price of oil as the U.S. heads into election season. While Americans are complaining of gasoline prices, officials predict that Iraq is headed toward a major windfall because of the soaring price of oil and record-setting production levels.

For years following the 2003 invasion, a lack of infrastructure kept Iraq's oil production and exports down. But with rebuilding efforts bearing fruit, including U.S.-aided actions to prevent the illegal tapping of pipelines, production had recovered to an average of about 2.4 million barrels per day by late last year compared with 2 million earlier in the year and 1.3 million in early 2003.

Adding to Baghdad's projected surplus is Iraq's conservative estimate of the oil's worth. The country's 2008 budget of $46.8 billion was calculated based on $57 per barrel of oil, roughly half of today's market rate, according to a report by the special inspector general for Iraq reconstruction.

Stuart Bowen, who heads the IG office, predicted in a March hearing that Iraq's oil revenue could climb to as high as $60 billion this year, from early estimates of $35 billion.

The U.S. military isn't reaping those benefits. American troops in Iraq are buying fuel on the open market at $3.23 a gallon and spending some $153 million a month, according to a recent report by The Associated Press.

Collins says the Iraqis should cover those costs.

"It's really difficult for Americans who are struggling with the high cost of the energy to see us paying for fuel costs in a country that has the second-largest oil reserves" and a burgeoning budget surplus, she said.