MIDDLE EAST NEWS
SEPTEMBER 29, 2009
BAGHDAD -- A severe budget crunch here is holding up the sale of billions of dollars of American military equipment, including tanks, more than two dozen helicopters and thousands of radios.
The hardware is seen by Iraqi and U.S. officials as crucial in helping Iraq's military and police force completely take over security from American combat forces, scheduled to depart by August 2010.
"We are in a cost-crunch, time-crunch situation," says Army Lt. Gen. Frank Helmick, head of the Multi-National Security Transition Command-Iraq, the command training and equipping Iraqi security forces.
Iraqi officials placed orders for the equipment during superhigh oil prices in recent years, then saw their finances dwindle as crude prices fell. Iraq gets most of its revenue from oil sales.
After soaring well above $100 a barrel last year, prices slumped during the global economic downturn. Officials in Baghdad slashed their budget several times to make up for the reduced forecast revenue.
For its 2009 budget, the ministry of defense requested $15 billion. It was allocated $4.1 billion.
Oil has since recovered, with U.S. benchmark crude for November delivery trading at $66.84 a barrel in New York on Monday. That has helped Iraq's spending plans, but won't come close to covering its big-ticket defense needs.
Gen. Helmick says American commanders have asked the U.S. government to give Iraq what is known as "dependable undertaking" status as part of Washington's Foreign Military Sales program. Under the program, foreign defense ministries negotiate with Washington for the purchase of equipment. The U.S. government then awards contracts to private companies to deliver the goods. (W1)
Dependable-undertaking status would allow Iraq to pay the U.S. government for the equipment in installments. But qualifying requires proof of ability to pay in full eventually and a good credit history. So far, Iraq hasn't qualified because of its financing crunch and its history of bad debts under Saddam Hussein. It also hasn't developed a reputable credit history since he was ousted.
Its finances have created a kind of Catch-22, with Iraq's credit rating after being invaded by the U.S. keeping it from buying U.S. equipment meant to aid the end of the U.S. military presence here.
The equipment holdups go back as far as about a year.
The dependable-undertaking status review for Iraq has been held up partly because of an internal debate in the Pentagon over whether Iraq should be treated like any other country in the FMS program or if exceptions should be made given U.S. interests there, according to people familiar with the matter.
The need to get equipment moving fast enough to help with the U.S. drawdown is forcing more flexibility in Washington. The U.S. government is no longer making Iraq pay upfront for the 15 coastal patrol boats Baghdad agreed to buy from the U.S. in 2008. The boats are part of a $454.3 million package aimed at beefing up basic maritime defense. Instead, Iraq will pay for the boats when it receives them.
Washington also is considering allowing Iraq to buy on credit. Big-ticket purchases will be reviewed on a case-by-case basis, says Gen. Helmick. Uncertainty over Iraq's dependable-undertaking status, meanwhile, is holding up the release of 140 M1A1 Abrams tanks, 26 helicopters and thousands of radios.
"We are still waiting for lots of equipment from the U.S. side," said one Iraqi defense ministry official. "And they are things we really need."