Abdul Basit Turki al-Sae'ed, now Iraq's acting central bank governor, is simultaneously the head of the country's Supreme Audit Board. In September, he led an audit of central bank currency auctions that convinced him that $800 million is "transferred illegally under false pretenses" outside of the country every week, according to the latest report from the US government's Special Inspector General for Iraq Reconstruction (SIGIR).
Mr. Shabibi was fired by Prime Minister Nouri al-Maliki shortly afterward.
Think you know the Middle East? Take our geography quiz.
The claim is staggering, even for a country whose politicians and government agencies are generally acknowledged to be among the most corrupt in the world. The Transparency International's 2011 Corruption Perceptions Index ranked Iraq 175th out of 182 countries (Sudan, Turkmenistan, Uzbekistan, Afghanistan, Myanmar, North Korea, and Somalia were the only countries deemed more corrupt). If Abdul Basit got his figures right, $38.4 billion is illegally laundered and sent abroad every year. For comparison's sake, that's 30 percent of Iraq's annual GDP, and 65 percent of the $60 billion US taxpayers have spent on reconstruction of the country since 2003.
There is no question that huge amounts of Iraq's oil revenue and related contracting are flowing into the pockets of senior politicians and their political parties. Contracts related to government work and the oil business are frequently inflated and awarded without competition to the friends and relatives of Iraqi leaders. Still, taking an $800 million bite every week out of national revenue is an astonishing accomplishment that points to far more than inflated contracts. It's hard to see how this could happen without revenue from oil exports being more or less directly diverted to personal, rather than government, accounts.
And corruption is a sport played by every political faction within Iraq. Some parties are just more successful than others, with their loyalists stuffed into the ministries with the largest budgets. Junior party members at, say, the oil ministry, are placed there with the expectation they'll direct revenue to the party and its senior members. Failure to do so means they are replaced by bureaucrats willing to play ball. It's basically the same system as under Saddam Hussein, except atomized. Multiple parties competing for the biggest piece of the pie they can get rather than the Baath eating the whole meal.
There is very, very little interest among Iraq's senior leaders to stop the music and bring the national, oil-fueled corruptathon to an end. Popular agitation for political change that briefly flared last year in both Iraq and Iraqi Kurdistan, inspired by the uprisings in Egypt and Libya, was successfully crushed, so pressure for change from below seems unlikely.
So was the central bank governor really canned for apparent corruption that has to have involved hundreds of officials, many of them far more senior and powerful than he? Not everyone is convinced. Nor will I be, until paddy-wagons begin backing up to luxury villas in Baghdad's international zone and carting large numbers of government ministers and members of parliament away, starting with members of the most powerful parties.
"Political opponents of Prime Minister al-Maliki, along with many banking and financial experts, expressed immediate concern that the dismissal of Dr. al-Shabibi ... was an attempt to bring the [central bank] and its $63 billion in reserves under executive branch," SIGIR writes in its quarterly report. In his foreword to the report, Inspector General Stewart Bowen called Shalibi's removal a "peremptory and constitutionally questionable move."
Mr. Maliki, leader of the Shiite Islamist Dawa Party, has steadily amassed more power for himself, both by bringing legal cases against political opponents and by seeking to change Iraq's internal rules. In February, a council of judges largely appointed by Maliki said they approved of independent agencies like the central bank being brought under the prime minister's supervision, rather than the Parliament.
How does the fraud work? Iraqis need documentation to prove their money was legally obtained in order to convert large sums of Iraqi dinars into US dollars via the central bank. Abdul Basit's audit found that the overwhelming majority of such documents were forged.
There's little mystery as to how cash can be illicitly obtained in Iraq. As Bowen's report explains:
According to several current and former [Iraqi] officials, corruption in Iraq is not tied to personal criminal activity but has become ingrained in the government infrastructure through the political parties. A widespread method to accomplish this corruption has been government contracts, often using shell companies outside of Iraq. The companies that received these rigged awards then move the funds outside of the country through fraudulent means.
[You must be registered and logged in to see this link.]