Global Policy Forum

Corruption Draining Oil Industry


Country's Most Lucrative Industry Is Being Undermined
by Corrupt Officials and Criminals Gangs

By Yaseen al-Rubai'I*

Institute for War & Peace Reporting
April 20, 2005

The Iraqi oil ministry has sacked more than 450 employees suspected of selling fuel on the black market. The recent move is the most recent in a series of measures designed to crack down on corruption within the industry, the country's most lucrative sector. Iraq is thought to have the world's second largest oil reserves after Saudi Arabia. But graft and attacks on fuel tankers and pipelines have led to disappointing 2004 revenues.

The oil ministry's general inspector Ali Muhsin Ismael told IWPR that the government's inability to provide a secure environment was partly responsible, but noted that his ministry accepted some of the blame for the situation. "There is still corruption in the oil ministry and this cannot be [completely eradicated]," Ismael said.

Ismael said that criminals used a number of methods to defraud the industry, including the manipulation of fuel pump gauges and incorrect measurement of tankers' contents - both of which can result in an undeclared surplus that can then be sold on the black market. In Basra, which is the site of Iraq's southern oil fields, resident Hussein al-Sabti told IWPR that oil smuggling operations were now carried out in the open. "This has prompted the population of Basra to ask whether or not smuggling of petrol is a legitimate act," he said.

An official from the Iraqi army's Border Forces 4th Regiment Command, which controls frontier crossings and the ports, claimed that some government officials had asked the authorities to turn a blind eye to oil smuggling. "[We were ordered to] allow some citizens of a neighbouring country to cross the border with the aim of visiting the holy shrines, without having official documents," the border official said.

"It appeared later on that they had something to do with oil smuggling operations." Abdul Kareem Li'aibi, the oil ministry's fuel distribution project manager, told IWPR that the government had recently discovered that one of its southern pipelines was peppered with more than 20 illegal taps, allowing tankers to top up their loads at will. Li'aibi claims that organised gangs are behind these corrupt practices, and blames them for the fact that only 60 per cent of trucks carrying oil products from wells to other areas reach their destination, the remainder being attacked and hijacked.

He also told IWPR that many petrol station managers are also selling their products on the black market - sometimes in cooperation with the police. Yahia al-Rubai, supervisor of Baghdad's al-Khalisa fuel station, said that within days of him taking charge, armed bandits had seized control of petrol distribution and started stealing fuel. "When I confronted them, the bandits tried to attack me with their guns," he said. "The country's economy and security is dependent upon catching those who engage in corruption and the criminals who collaborate with them."

The government as a whole is facing a struggle against corruption, according to Judge Radhi Hamza al-Radhi, chairman of the Commission on Public Integrity. "This waste of public finances is worrying government officials in Iraq," he said. "It is difficult to combat corruption due to the absence of a strong mechanism to control all the institutions' civil servants, and due to a lack of support from law enforcement bodies."

In an effort to deal with the corruption problem, the Iraqi oil ministry has sacked more than 450 employees suspected of selling fuel on the black market. But oil ministry official Li'aibi isn't sure whether actions such as this will put an end to graft. "I can't recommend any civil servants or workers," he said. "Today they are honest but, after one month, they are engaging in corruption. I can't even guarantee that I won't be joining them."

About the Author: Yaseen al-Rubai'I is an IWPR trainee in Baghdad.

More Information on Iraq
More Information on Oil in Iraq


FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.