The Report
of the Iraq Inquiry
leading up
to the transition, to working with the US to establish principles
of good
governance
in the oil sector.208
385.
Ms Hewitt
reiterated that decisions on the development of Iraq’s oil
resources
would be
for the Iraqi people. But that was entirely compatible with trying
to establish
principles
of good governance before the transition.
386.
Mr Adams
had played an important role in getting good governance onto
the
CPA’s agenda.
A study commissioned by the CPA on the modernisation of the
oil
industry
had identified a number of key governance principles,
including:
•
properly
defined and distinct roles for a national oil company, the Ministry
of Oil,
and the
Iraqi Government;
•
the
national oil company to be run on commercial lines with
transparent
accounting
and auditing; and
•
anti-corruption
policies.
387.
After
“considerable effort” by the UK, the US had agreed on the need to
establish
those key
governance principles.
388.
Ms Hewitt also
reported Sir Jeremy Greenstock’s advice: that making
progress
would not
be easy “given the lack of a real constituency for good governance
amongst
senior
Iraqi figures”.
389.
Mr Straw
replied on 29 January, agreeing that the UK should give a high
priority to
establishing
the principles of good governance in the oil sector before the
transition.209
390.
As the end of
Occupation approached, the UK considered how to ensure that
oil
revenues
would not be mismanaged under an Iraqi Government. Section 10.1
describes
UK planning
for the transition.
391.
The Annotated
Agenda for the 1 March meeting of the AHMGIR advised
that
a modified
version of the DFI should be retained after the transition, in
order to
“ensure
accountability and transparency”.210
Otherwise,
there was a substantial risk of
mismanagement
of oil revenues. The arrangement could also ensure that Iraqi
assets
remained
immune from claims.
392.
The Annotated
Agenda reported that the DFI currently held US$8.8bn, and
paid
for 95
percent of the Iraqi budget. In addition, “substantial DFI funds
had been spent
off‑budget
on the approval of the CPA with intermittent Iraqi
representation”.
393.
The Annotated
Agenda did not provide any further details of the
“off-budget”
disbursement
of DFI funds.
208
Letter
Hewitt to Straw, 16 January 2004, ‘Governance in the Oil
Sector’.
209
Letter
Straw to Hewitt, 29 January 2004, ‘Governance in the Oil
Sector’.
210
Annotated
Agenda, 1 March 2004, Ad Hoc Group on Iraq Rehabilitation
meeting.
430