Iran's Gasoline Supplies to the Rescue in Iraq

CorpWatch, in an exclusive report from Pratap Chatterjee, reveals that gasoline supply into Iraq is being curtailed by many of its suppliers because of unpaid bills. Trucking companies and supplier countries are simply refusing to deliver gasoline to Iraq. While American and Iraqi officials are trying to blame the problem on terrorism and the insurgents, trucking company personnel say it is actually corruption, mismanagement, and "common criminal activity" that are causing much of the crisis.

Turkey and Saudi Arabia, which together supply half of Iraq's domestic consumption needs, have cut off supplies of gasoline to Iraq, because of non-payment. The Iraqi government is now negotiating with Iran to supply gasoline.

The report from CorpWatch describes problems with the supply of gas from Kuwait:

The supply from Kuwait is also drying up. Lloyd-Owen International (LOI), a Florida-based company, had arranged to truck in 1.3 billion liters of gasoline from the Kuwait Petroleum Corporation to gas stations throughout Iraq over the last 19 months. On February 2, Alan Waller, chief executive officer of LOI, stopped supplies to Baghdad because of payment arrears. By this weekend, Iraq's imports had plummeted from the previous norm of 12 million liters a day to three million.In a strongly worded letter he emailed to this weekend to Thomas Delare, the economic counselor at the United States embassy in Baghdad, Waller wrote: "The government of Iraq is unwilling to pay what is correctly owed us or even meet to discuss and that we cannot get any assistance from the U.S. administration in order to help. As such, I can only step back and pull all my international staff out of Iraq for their own safety and let the Iraqi people deal with the situation in their own way."

In 2003, LOI replaced Halliburton as a major supplier of gasoline to Iraq because the Halliburton price was judged by the US military as too high. How high was it? Halliburton was charging $2.65 a gallon to purchase and deliver gasoline, while local suppliers in Iraq were charging 96 cents per gallon. LOI, in 2004, offered to deliver gasoline for 18 cents per gallon "compared to the premium that the military had paid Halliburton previously."

The likelihood of LOI getting paid is not good. The likelihood of the corruption and theft that is happening with supplies of gasoline in the country is equally bad. The US government simply is unable to help American companies who are not being paid.

And while gasoline lines get longer and supplies continue to dwindle, Baghdad is looking increasingly to Iran to help bail it out. As CorpWatch concludes:

Indeed this subject was discussed as far back as last July [2005] when Iraqi Prime Minister Ibrahim al-Jaafari visited Tehran, a prospect that mystifies Waller given the ongoing political disputes between Iran and the U.S. government."Due to payment issues and the fuel problems the U.S. backed government of Iraq is now seeking to purchase and import fuel from Iran, and Najaf is the new Iranian capital of Iraq," Alan Waller, chief executive officer LOI, wrote on February 4th [2006], to the U.S. embassy in Baghdad.

At a time when the United States and Iran are headed for a showdown on the nuclear issue, our client next door is going hat in hand to Tehran looking for a reliable gasoline supplies for the Iraqi economy. One of the great ironies of the American occupation in Iraq continues to be how it has influenced marked improvements in relations between Tehran and Baghdad, once mortal enemies.