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Levin, Warner Announce Release of GAO Report on Iraq Oil Revenues, Reconstruction Spending, and Budget Surpluses

Press Release

Location: Washington, DC

Senate Armed Services Committee Chairman Carl Levin, D-Mich., and senior Committee Member John Warner, R-Va., today announced the release of a report [PDF] by the Government Accountability Office (GAO) detailing annual Iraqi oil revenues and Iraqi government contributions to security and reconstruction efforts in the country. This report was requested by the Senators in a March 6th letter to the Comptroller General.

To date, U.S. taxpayers have paid approximately $48 billion for stabilization and reconstruction activities in Iraq. According to the GAO report, the Iraqi government generated an estimated $96 billion in revenues from 2005 to 2007, 94 percent of which are attributable to oil revenues. For 2008, the GAO estimates that Iraq will generate an additional $73 billion to $86 billion in revenues, primarily driven by the high price of oil, resulting in a budget surplus of as much as $50.3 billion.

Despite these revenues, Iraqi expenditures for reconstruction activities have been minimal. The GAO report states that the Iraqi government spent only 28 percent of its $12.2 billion capital investment budget in 2007. Even this number overstates the performance of the Iraqi government, since it includes nearly $2 billion of expenditures by the Kurdistan Regional Government. Overall, the Iraqi central ministries expended only 11 percent of their capital investment budgets in 2007, spending just $896 million on the reconstruction of the country.

"The Iraqi government now has tens of billions of dollars at its disposal to fund large scale reconstruction projects. It is inexcusable for U.S. taxpayers to continue to foot the bill for projects the Iraqis are fully capable of funding themselves," said Levin. "We should not be paying for Iraqi projects, while Iraqi oil revenues continue to pile up in the bank including outrageous profits from $4 a gallon gas prices in the U.S. We should require that U.S. taxpayers be reimbursed for the cost of large projects."

"Despite Iraq earning billions of dollars in oil revenue in the past five years, U.S. taxpayer money has been the overwhelming source of Iraq reconstruction funds," said Warner. "It is time for the sovereign government of Iraq, using its revenues, expenditures and surpluses, to fully assume the responsibility to provide essential services and improve the quality of life for the Iraqi people."

At the beginning of the Iraq war, Congress was told by then-Deputy Secretary of Defense Wolfowitz that Iraq would be able to "finance its own reconstruction" through oil revenues in fairly short order. More recently, on April 8, 2008, Ambassador Ryan Crocker told the Armed Services Committee that "the era of U.S.-funded major infrastructure projects is over" and said the U.S. is no longer "involved in the physical reconstruction business."

However, despite these statements and commitments from the Iraqi government to spend more of its budget for reconstruction, the U.S. continues to fund many significant projects in the country. On August 1st, Senators Levin and Warner wrote to Secretary Gates [PDF] regarding one notable example in which U.S. taxpayers are paying approximately $33 million for the development of an "Economic Zone" at the Baghdad International Airport. Among other things, this project includes funds for two hotels and improvements to a business center and VIP building which the Iraqi government will own. Funding for this project is being provided through the Commanders' Emergency Response Program (CERP), a program established by Congress to allow commanders on the ground to address small-scale, humanitarian relief and reconstruction projects for the benefit of the Iraqi people. In their letter, Senators Levin and Warner expressed great additional concern that CERP funds were being used inappropriately for large scale infrastructure development and requested that any U.S. funds used for the project be reimbursed by the Iraqi government.

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