Iraq's oil industry is slippery, bedeviled

By Peg Mackey and Barbara Lewis
LONDON, March 14 (Reuters) - Rampant corruption and
political anarchy have pushed Iraq's oil industry to the brink
of collapse and may drive away the experts needed to save it.
Three years after the U.S.-led invasion of Iraq, the
country's oil exports have sunk to nearly half the level they
were under former president Saddam Hussein.
Western-educated technocrats, who built up and ran Iraq's
most vital sector, are in despair as rapid turnover at the oil
ministry and state marketer have failed to establish authority.
"Things are worse than ever now. There's a limit to how much
we can take," said an Iraqi executive, adding that many other
veteran oilmen shared his view.

Trade in refined oil products has been riddled with
corruption and smugglers are capitalising on the huge gap
between Iraqi and international prices.
"We've been asked to take bribes," said an official, who
requested anonymity, though he said he had declined to do so.
Crude trade has been relatively untarnished so far, but
exports have been severely hit by relentless sabotage, technical
problems and mismanagement.

"The country is destroyed now. These politicians are working
to make personal gains," Shamkhi Faraj, director general of
marketing and economics at the ministry of oil, told Reuters.
Faced with a power vacuum at the ministry, which has had
three different ministers in three years, the role of the once
mighty State Oil Marketing Organisation (SOMO) should be to
provide continuity, but SOMO is also in flux.
Rumours are rife about yet another looming leadership change
after the installment only this month of Falah al-Amery, the
company's fifth boss since the war.

The oil industry's lack of leadership is part of the wider
context of a country without government as protracted
negotiations have so far failed to establish who is in power.

QUANTITY NOT QUALITY
Iraqi officials say the number of SOMO employees has
tripled, but most new recruits have little experience of the
industry that is the economic backbone of Iraq, home to the
world's third biggest oil reserves.

Some analysts even say SOMO, which was a crucial
intermediary during the United Nations oil for food programme
under Saddam's regime, could be dispensed with.
"It's really not clear why Iraq needs SOMO, why they need a
special markets negotiator. It's sort of an intermediary between
the producers and the ministry of finance," said Yahia Said,
Iraq expert at the London School of Economics.

As conflict racks the oil sector's top brass, ordinary
Iraqis, promised a share in the riches that are their
birthright, are almost nostalgic for the days of Saddam.
"The public is very frustrated. A lot of people now say they
were much better off in Saddam's time," said Faraj.

Even under the crippling international sanctions imposed
during Saddam's leadership, the nation managed to export around
two million barrels per day, compared with a rate of just under
1.5 million now and around a million in January.
"Under Saddam, it was an order, not a suggestion, when it
came to getting things done," said another Iraqi official with
decades of oil experience.

Bad as the situation is in Iraq, international oil companies
have little choice but to bide their time and the more
optimistic Iraq officials say the investment desperately needed
to rebuild Iraq will eventually take place.
"Certainly there is a total lack of leadership," said Tariq
Shafiq, one of the founding members of Iraq's National Oil
Company in 1964. "But I still hope Iraq will reconcile itself
and get itself back into the right stream."

For now major oil companies will continue to buy the limited
amounts of Iraqi crude available, not least because it is
relatively cheap.
"Iraq has been selling at a huge discount. At this level,
why wouldn't people be buying?" said Said.
(additional reporting by Simon Webb)
((Reporting by Barbara Lewis; editing by James Jukwey;