Iraq Can't Explain $69 Million in Fuel Oil From '04, Audit Says

By ERIK ECKHOLM

Iraqi officials cannot explain what happened to $69 million worth of fuel oil produced in the second half of 2004, raising fears that it was smuggled out of the country for private gain, according to a report released yesterday by United Nations-appointed auditors.

The report, by the auditing firm KPMG, said Iraq's recorded exports of fuel oil mysteriously declined by a comparable amount during that same period of 2004, the initial months of sovereignty for the newly installed Iraqi government.

Studying records from the Ministry of Oil, the auditors found that Iraq's production in that six-month period exceeded the recorded domestic uses and exports by 618,203 tons, worth about $69 million.

"We were not provided with a satisfactory explanation for either the unreconciled quantities or sales decrease of fuel oil," the report states. In subsequent paragraphs, it takes note of the suspicions of widespread oil smuggling that were previously voiced by American officials, and describes Iraq's weak controls on sales of oil and oil products.