The notion that Iraq is sitting on billions of dollars in windfall oil profits as the United States spends $10 billion monthly on operations there has led to complaints recently from both Democratic and Republican lawmakers. An August report (PDF) by the U.S. Government Accountability Office put Iraq's surplus as high as $79 billion through 2008. Analysts note that such estimates are notoriously difficult to confirm, and that Iraqi and U.S. accounting standards differ markedly.
Iraq's finance minister, Bayan Jabr Solagh, denies that Iraq is holding back any huge surplus of money that could offset U.S. spending. "The surplus or the excess in money that people talk about is money that was not spent [at the time of the GAO report]," the finance minister told CFR.org in an interview. "We are spending it now through the budget process." Solagh also expressed concern more broadly about investment in Iraq and the impact of a continuation of the global financial crisis.
Americans are looking for an answer on the question of Iraqi surplus money. The figure of $79 billion, as reported in an August 2008 U.S. General Accountability Office report, was cited by Senator Obama in his debate with Senator McCain on Tuesday. Why is the U.S. spending so much in Iraq while there is such a huge Iraqi surplus?
This number is not accurate at all. We have at the DFI fund [Development Fund for Iraq] an amount that is not exceeding $22 billion. And this amount is allocated for the supplemental budget for 2008. In this regard there is no surplus. The surplus is only at the Central Bank of Iraq, and it is needed for supporting the Iraqi currency, and it does not exceed $30 billion. It is not surplus; it is the federal reserve. It is the reserve of Iraq. That means we cannot have a fixed currency without it.
But the general criticism, that the U.S. is spending so much money in Iraq while Iraq has extra money, you're saying that's not an accurate criticism?
There is no surplus. I have indicated in my remarks that Iraq needs about $400 billion to rebuild its infrastructure. People do not have drinking water; they do not have sewers; we need all these projects to rebuild Iraq. The surplus or the excess in money that people talk about is money that was not spent. We are spending it now through the budget process.
Can Iraq continue to function without a substantial amount of U.S. financial involvement?
The financial aid that America is giving to Iraq is not to the Iraqi people; it is going to spend on its troops-the salaries, the equipment-but they're not giving the Iraqi citizen this money; they're not giving the Iraqi budget this money. They're spending it on the troops and the costs of the troops. Now Iraq is starting to cooperate with the Americans on specific projects. We allocated $300 million in our budget [last year] and gave it to the MNF-I [Multi-National Force Iraq] to spend it on projects. For that we start to share with the Americans to spend on projects together. Americans, they don't give the Iraqi budget or the Iraqi government any money directly. They spend it on their own military salaries, weapons. This is the money; it's not going to the government.
And some of it is also spent on projects, correct?
It is not like this huge amount; it's a small amount.
In addition to concerns about the amount of money Iraq is spending, American officials have also criticized the pace of Iraqi spending as too slow. I wonder if you could answer those criticisms as well.
We have a real problem with security, and the capability of the ministries. During the Saddam era ... until now, the ministries and the provinces, they don't spend any dollar[s] on any projects. So when we start to spend our money, there is no capability. There is no capacity of these ministries and the provinces to spend money. And the private sector, the foreign private sector, they do not enter Iraq because of the security. [Not] even the Americans. We ask them to come, to enter, [but] they don't care. They don't enter. The problem is the lack of capacity to spend. It's not because we have extra money. And also, the reason the foreign companies are not coming is the security reasons.
It could also be argued that one of the concerns foreign investors have is continued political infighting within Iraq that has slowed, for example, passage of the hydrocarbon bill. Security is improving, and that's very positive. But investors also need to see a stronger central government, a government that's able to ensure a strong regulatory footing. Is that a fair assessment?
In terms of contracts and construction and work, politics is not involved because there are contracts, there is money to be spent, and politics is not a factor. The politics [are] involved in the making of the law.
You've said that Iraq needs more foreign private investment. How is that going to happen? If the money is available, people will come. But what do you think needs to happen for investors to make an investment in Iraq?
There is still fear of the security situation. Those companies have not come up with new solutions, new alternative solutions like what GE [General Electric] did (Reuters). GE provided the generators, and the Iraqi engineers were provided the service. Those Iraqi engineers will come to America, get trained on [that] equipment, and then go back to Iraq to do the maintenance and the operation. These are the alternative solutions that the foreign companies have not thought of yet. And they need to do that; they need to work on finding a new alternative solution, solutions that go around the question of security.
Are you in New York to try and help them move in that direction?
Yes, I also will be in Washington to have some meetings with the U.S. Chamber of Commerce. [U.S. institutions and foreign investors] can find a solution. No problem. Boeing, for example, when I signed with Boeing, [a] $5 billion [contract] to buy Boeing [airplanes], who will do treatment, for example, or maintenance? We will send our engineers to Washington, or to the United States, they will learn and take it back. There is the solution, all joint venture.
This is a tough time to be making that sort of pitch, as the global financial markets are trembling. Do you see direct effects of this financial crisis rippling into Iraq?
Yes, I am worried, but not now. The real worry is in about six months, if the current financial situation continues, this may affect the oil prices. If the oil prices keep fluctuating, the stock market also will be affected in Iraq and the price of the currency also.
Will the financial jitters scare off investors potentially?
The foreign investors should come to areas like Iraq that have not been affected with the current financial turmoil. Iraq does not have a financial crisis now. However, there is a financial crisis here. In other words, investors should come to the safe haven. I am only speculating that Iraq will be affected, but I'm not 100 percent certain that Iraq will be affected.
It's possible that Iraq will weather the storm?
Yes. The influence or the effect that we may get is only if oil prices fluctuate and the currency market fluctuates. In terms of the oil, we can increase our production or we can decrease it. We can control that, but we don't have control over the currency market.
Clearly there are some great things Iraq has accomplished. In budgetary terms, you've increased your 2009 budget to $79 billion. You've passed a supplemental focusing on food aid, focusing on assistance to Iraqis. Talk about some of the new priorities that you have set with these new allocations.
The $79 billion budget has a deficit of roughly $18 billion, and this will be covered by the surplus that some politicians talk about. We emphasize on the investment. We allocated about $18 billion for investment capital. The second is to improve the living conditions. One of the measures that we took is the increase of the salaries that we already did. We will try to decrease the support and the subsidies of the food basket. We will replace it by cash.