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Illicit Earnings Sources and Estimation Methodology

Regime Finance and Procurement - Annex E

 
Figure 17 and the subsequent notes describe how ISG derived its estimates for Iraq’s various illicit revenue streams.

  • The UN was aware of the Jordanian Protocol; consequently, it was not considered illicit. However, it is included in this section in order to document all the revenue streams Iraq possessed through its trade Protocols and oil sales programs.


Jordan Protocol

Iraq has provided little data on the earnings from the Jordanian Protocol.

  • Data for 1991-95 is an ISG estimate based on accumulated Iraqi debt owed to Jordan over this period of $1 billion—averaging $200 million in “income” for each of the five years. To this was added an estimate for the amount of trade to be financed by Jordan under the trade Protocol of $200 million per year. This provides a total of $400 million per year.

  • Data for 1996-98 is the Protocol trade figure cited in press and other reporting.

  • Data for 1999-2001 is based on SOMO data for the value of invoices with Jordan under the general trade Protocol as well as a 60 percent credit, 40th percent cash arrangement with Jordan’s Ministry of Energy and Mineral Resources. SOMO did not provide actual collections for this period so the invoice figure was adjusted downward based on the average difference (70 percent) between invoices and actual collections in 2002 and 2003. Seventy percent of the SOMO invoice figure is used to estimate Iraq’s actual collections.

  • Data for 2002-2003 is based on SOMO actual collections under the trade Protocol and 60/40 arrangements.


Syria Protocol

Data is based on SOMO actual collections. The program did not exist prior to 2000. Any exports to Syria prior to 2000 would be accounted for as private sector trade.


Turkey Protocol

Data is based on SOMO actual collections. The program did not exist prior to 2000. Any exports to Turkey prior to 2000 would be accounted for as private sector trade.

Egypt Protocol
Data is based on SOMO actual collections. The program existed only in 2001 and 2002. There is no evidence that oil exports to Egypt occurred except in these years.


Import Kickbacks

This program did not exist prior to 2000. Iraq has provided little data on earnings from the UN OFF import kickback scheme. Data for 2000-2003 is based on:

  • UN data for Iraq’s oil earnings per phase.

  • The amount of money actually spent on imports by the UN OFF program during its existence after deducting for UN purchases for the Kurdish North (contracts Iraq would not get kickbacks from).

  • UN data that over $16 billion in funds remained unspent when OIF started—more than the $10 billion in earnings from phases 12 and 13 and indicating those earnings did not result in actual kickbacks received by Iraq.

  • An assessment that lags between earnings and contract signings in the UN OFF procurement program resulted in the money earned in phase 7 of the program (prior to the implementation of the kickback scheme) actually being used to sign contracts and obtain kickbacks in phase 8 and later—when the kickback program was in effect.

The total value of contracts signed for and delivered by the UN under the UN OFF program was $31 billion. Based on UN data as of December 2002, 93.7 percent of all contracts were signed by Baghdad. The UN signed the rest for the Kurdish North. Consequently, ISG estimates the value of contracts signed by Baghdad and paid for by the UN over the life of the program amounted to $29.047 billion.

The earnings from each phase were calculated as a percentage of total UN OFF earnings (See Figure 18). This percent was then applied to total contracts signed by Baghdad and paid for by the UN ($29.047 billion) to obtain an estimate for actual contracts per phase. Iraq earned roughly 10 percent of the contract value as a kickback so the contract value for each phase was multiplied by 10 percent. The phases, which roughly account for half a year each, were then allocated to years to obtain the estimate for kickback earnings per year, as follows:

  • Phase 7 for 2000.

  • Phases 8-9 for 2001.

  • Phases 10-11 (minus $50 million) for 2002.

  • The $50 million from phases 10-11 for 2003.

 

Oil Surcharges

Data is based on SOMO actual collections. The program did not exist prior to 2000.

 

Private Sector

Data for 1991-97 is based on an ISG estimate for the value of cash and barter trade conducted by the Iraqi government with private sector entities outside any Protocol or UN OFF program arrangements during the period. The estimate is based on observed oil export trends in 1997-1998 and an assessment of the development of Iraq’s illicit trade capabilities. Data for 1998-2003 is based on SOMO actual collections for cash transactions and the invoice value for barter trade (no cash or credit “collections” were realized from the barter trade).


Posted: Apr 23, 2007 07:32 AM
Last Updated: Apr 23, 2007 07:32 AM