Iraq Violence Surges Amid Corruption, U.S. Report Finds

Iraq has endured “a troubled year evidenced by increasing official corruption, resurgent violence” and apprehension about the war in Syria since the last American troops departed, according to an assessment by a U.S. special inspector general.

Violence during the last quarter “rose to levels not seen for more than two years,” with at least 854 Iraqi citizens killed and more than 1,640 wounded in attacks -- 1,048 casualties in September alone, the bloodiest month since 2010, Stuart Bowen, the special inspector general for Iraq reconstruction, said today in his quarterly report.

Even in the face of such “daunting challenges,” Iraq’s economy improved, with record electricity production and the “highest crude oil output since 1990,” at more than 3 million barrels a day, according to Bowen.

Bowen’s report provides an independent assessment of Iraq’s troubles and progress a week before the U.S. presidential election, after a campaign in which the timing and extent of the troop withdrawal that ended in December has become a point of contention between President Barack Obama and Republican challenger Mitt Romney.

Obama has said he kept a 2008 campaign pledge by ending the Iraq war begun under Republican President George W. Bush and bringing U.S. forces home. Romney has blamed the president for failing to negotiate a Status of Forces agreement with Iraq that would have allowed several thousand troops to remain to help train Iraqis and stabilize the country.

Costly War

Bowen’s quarterly reports have been the only regularly available assessments of conditions in Iraq after a U.S. invasion that resulted in 4,488 U.S. military and civilian personnel killed and 32,220 wounded, according to Pentagon figures. As many as 120,000 civilians may have died, according a 2011 Brown University estimate.

In addition to the human price of the war, it cost the U.S. $725 billion, according to Pentagon data that doesn’t include State Department, intelligence agency and long-term disability payments. The Pentagon estimate leaves out about $100 billion that it doesn’t categorize as “war-related,” according to Amy Belasco, an analyst who has studied the war’s costs for the nonpartisan Congressional Research Service.

In addition, the U.S. has appropriated $60.5 billion for Iraqi relief and reconstruction as of September, according to Bowen.

Revived al-Qaeda

Even so, security has deteriorated in the last year “amid regular reports of a reviving al-Qaeda in Iraq,” Bowen wrote.

U.S. intelligence officials say that as many as 2,500 members of al-Qaeda in Iraq, a group ideologically allied but only loosely affiliated with the remnants of Osama bin Laden’s core group in Pakistan, are now living in five training camps in Iraq’s Sunni-dominated Anbar and Saladin provinces.

The officials, who spoke on condition of anonymity because the intelligence reports are classified, said that fewer than 800 al-Qaeda fighters were thought to be in Iraq when the last U.S. troops departed at the end of 2011. Six months earlier, in June 2011, Defense Secretary Leon Panetta had said in testimony before the Senate Armed Services Committee that “there are a thousand al-Qaeda that are still in Iraq.”

Iraq “sustained a series of coordinated bombings nationwide this quarter as well as assassinations and other smaller daily attacks, mostly in Baghdad, Anbar, Diyala and Ninewa provinces,” Bowen said.

Deadliest Attacks

Many of the deadliest attacks coincided with the Sept. 9 sentencing to death in absentia by Baghdad’s Central Criminal Court of Vice President Tariq al-Hashimi, a Sunni political figure who fled Baghdad. He was convicted of operating death squads.

The Islamic State of Iraq, al-Qaeda’s Iraqi branch, said attacks that killed dozens of people in the past two days were in response to what the group described as arrests of Sunni women in an effort to pressure relatives wanted by Iraqi security forces to turn themselves in, according to a statement posted yesterday on a militant website, the Associated Press reported.

In a section on corruption, Bowen reported that Iraqi Prime Minister Nouri al-Maliki and Iraq’s chief justice said corruption “remains a problem,” though both said the pervasiveness “has been exaggerated.”

Government critics, however, told inspectors “corruption is now worse than it has ever been,” Bowen said.

Dollar Flight

Abdul-Basit Turki, the interim governor of Iraq’s Central Bank, told Bowen’s inspectors “there has been a massive flight of U.S. dollars from Iraq, mostly through money laundering, and that this is evidence of widespread corruption,” according to the report.

The bank official said “approximately $1 billion a week is leaving Iraq -- 80 percent of it moved through fraudulent documents hiding its true purposes,” according to the report.

U.S. relations with al-Maliki and his Shiite-dominated government have been strained in the last year by his growing ties to Iran. Both countries support the regime of Syrian President Bashar al-Assad, who is fighting mostly Sunni rebels seeking his overthrow with backing from the U.S., European allies, Turkey and Persian Gulf nations such as Saudi Arabia and Qatar.

A “deteriorating” border situation has led to an influx of 39,036 Syrian refugees into Iraq as well as 80,850 Iraqis who returned after living in Syria, according to Bowen’s report.

Russia, China

Iraqi deals, including agreements announced this month to buy more than $4.2 billion in Russian arms, have added to tensions and questions about whether Iraq’s ties to the U.S. are fraying. Russia was the main supplier of arms to the late dictator Saddam Hussein’s regime, so many Iraqis are familiar with them.

About 30 percent of new oil fields being developed in Iraq have some financing or involvement by China, Fatih Birol, the chief economist of the International Energy Agency, said at a conference sponsored by the Center for Strategic & International Studies in Washington on Oct. 22, according to Bloomberg BNA.

About half of Iraq’s oil exports currently go to Asian markets, and that’s likely to increase to 80 percent in the next two decades, Birol said.

An IEA report released Oct. 9 predicted that Iraq’s oil production could double to 6 million barrels per day by 2020 and reach 8.3 million barrels per day by 2035.

Kurdistan Tensions

Tensions remain between al-Maliki’s central government and the regional government in Kurdistan over how to share revenues from the northern Kirkuk oil field. Kurdish officials have been negotiating their own deals with foreign energy companies.

Iraq surpassed Iran in June as the second-biggest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia. Iran’s oil sales have been hobbled by U.S. and European Union economic sanctions aimed at its nuclear program.

While electricity production has increased by “unprecedented amounts,” it “was still only enough to provide the average Iraqi consumer with 10-12 hours of power each day because demand vastly outpaces supply,” Bowen said in his report.

The last U.S. Status of Forces agreement with Iraq for keeping U.S. troops in the country was negotiated in 2008 under Bush and expired at the end of last year.

Authors Michael Gordon and Bernard Trainor, in their new book “The Endgame,” said Obama in August 2011 settled on a proposal to the Iraqis that would have kept a force of about 3,500 U.S. troops in Iraq and an additional 1,500 would rotate through the country.

The proposal was submitted to the Iraqi parliament with a provision that U.S. troops be given legal immunity from prosecution from Iraqi laws, and it failed to win approval. The administration didn’t consider the inability to get a new agreement a setback “because the White House never considered it a requirement,” Gordon and Trainor wrote.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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