Falling oil price could hamper Iraqi military: U.S.

BAGHDAD (Reuters) - A collapse in oil prices will set back Iraq's ability to rebuild, train and equip its maturing security forces as U.S. troops withdraw, the U.S. general in charge of efforts to train Iraqi troops said.

"The budget is going to drive a lot of that this year. They are not going to be able to grow as fast as they want to grow," said Lieutenant General Frank Helmick in an interview.

"This is the first year where they really do not have all the money they wanted. Last year, oil was $120 a barrel. Years before that, we the coalition had billions of dollars to give them. We don't have the luxury of that any more," he said.

Helmick said senior Iraqi officials were slowly embracing the idea that they will have to slow procurement and growth, for example postponing plans to buy armed vehicles or cargo planes.

"They're coming around to it. This is the first year they've had to do this, prioritize," he said.

The United States is hoping Iraq's 600,000-strong security forces, rebuilt since the fall of Saddam Hussein in 2003, can take over responsibility for security so that 144,000 American troops can leave by the end of 2011 at the latest.

Iraq, with the world's third largest oil reserves, gets nearly all of government revenues from exports of crude.

Last year, with oil prices at record highs, the government earned more than it was able to spend. But with oil prices now less than a third of the record $147 reached last summer, the government has twice had to scale back its 2009 spending plans.

DELAYED PLANS

As an example of plans that would have to be delayed, Helmick said Interior Minister Jawad Bolani had hoped to send a national police brigade to each of Iraq's 18 provinces.

"He just will not have the money to do that this year. He has six now; he may be able to get one more in 2009," Helmick said.

Defense Minister Abdul Qader Jassim was "slowly coming around to the idea that he won't be able to buy 400 APCs this year," he added, referring to armored personnel carriers.

Iraq's proposed 2009 budget has been cut to $62 billion from $80 billion, and even that depends on oil prices averaging $50 a barrel. New York crude is now trading at around $40.

Helmick said the rapid growth of Iraqi forces had challenged developing security ministries, themselves plagued by sectarianism, corruption and mismanagement in the years since 2003. But he said ministers were growing into their roles.

The United States is shifting its support focus from basic training to developing specialized officers, in logistics or intelligence, and helping ministries plan for the future.

"The Iraqis have a tendency to be short-sighted when they plan, so what we really need to do is look out two, five, 10 years" in developing a budget, Helmick said.

U.S. officials say Iraq has made great strides but is not yet ready to handle security on its own.

Helmick said local forces still needed major improvements in engineering and intelligence capacity, while he described logistics -- equipping soldiers, moving police around the country, upkeep of expensive equipment -- as an Achilles' heel.

Iraq may also need to increase the size of its tiny navy from 2,000 people to up to 5,000 people, and acquire new ships, to take on a greater share of the responsibility for securing its oil platforms in the Gulf, he said.

"They are going to decide in the next few weeks about patrol ships, 15 of them, and support ships, two of them, which will really be the jewels of the Iraqi Navy," Helmick said.

(Editing by Peter Graff)