Falling oil prices stymie Iraq's security spending

BAGHDAD (AP) -- Falling oil prices will force Iraq to cut back on military spending, leaving questions about whether it can handle tasks such as protecting oil platforms in the Gulf once the American pullout is complete, a top U.S. commander said.


AP - Graphic shows the price of crude oil ...
Iraq's leaders now have to decide where the cuts will be deepest: arms, patrol boats or air power -- all of which the country needs to create a fully functioning security force.

"It's a matter of capability and how much risk they are willing to take to spread that capability out ... because the money is so tight," Lt. Gen. Frank Helmick, commander of Multi-National Security Transition Command, told The Associated Press on Saturday.

Iraq's security plans for this year have been dragged down along with the price of oil, which is now about $45 a barrel after hitting highs last summer of $150 a barrel.

Iraq's government has been forced twice to cut planned spending -- from $79 billion to $68 billion and then to $64 billion.

And the cuts may go even deeper. Iraq's parliament delayed a vote over the weekend on the $64 billion budget with some lawmakers saying the cuts didn't go far enough.

"There are many, many hard decision that the minister of defense will have to make with the prime minister about what to spend their money on," Helmick said.

The clock is ticking. U.S. forces must be out of Iraqi cities by the end of June and combat operations will end in August 2010 under the timetable announced Friday by President Barack Obama.

To counter the blow of falling oil prices, Iraq's oil minister, Hussain al-Shahristani, said Sunday that state oil planners need wider powers to make deals with foreign companies to boost production. Al-Shahristani said the government is working on reviving the Iraqi National Oil Co. and establishing an oil and gas council to oversee investments and planning.

The government will have to decide whether it buys badly needed patrol boats to secure its oil platforms, parts and service for its heavy armored vehicles or helicopters and other aircraft, Helmick said.

"When oil was $120 a barrel, this wasn't a problem. When we could give them money, it wasn't a problem," Helmick said. "Oil is not $120 a barrel and there is not an appetite (in the United States) to give the Iraqis large sums of money."

The Iraqi government has purchased nearly $5 billion in military items from the U.S. since 2006. But it needs billions more in equipment, parts and service contract.

Iraq recently asked to buy another $3.8 billion from the U.S. in military-grade purchases, but has not been able to fund the request. The American government requires money be deposited with the federal reserve before any foreign military sales can be finalized and equipment handed over.

That $3.8 billion request includes patrol boats, support ships, parts and service for its tanks and other armored vehicles and helicopters.

"If they don't purchase patrol boats and patrol ships, they might not be able to provide the security for their (oil) platforms when they think the could be able to," Helmick said. "That's a significant issue that needs to be addressed."

Iraq is already behind a year in plans to equip its navy after an unsuccessful attempt to buy boats from Malaysia, which was unable to fill the contract. Iraq still needs another 17 boats and support ships to meet its basic naval requirements.

Iraq has been talking to other countries about buying arms and equipment for its security forces. It recently purchased four patrol boats from Italy and made trips to Australia to inquire about naval vessels.

Helmick said military advisers have been working with Iraq's ministries of interior and defense to make suggestions about what to buy and what to cut.

For example, Helmick said: "Perhaps when you need tanks, maybe you don't need to buy 140 at one time. Maybe you only need 20."