Corruption seen as grave threat to Iraqi democracy

BAGHDAD (Reuters) - Corruption is a grave and gathering threat to Iraq's fragile democracy and its strides in curtailing bloodshed, a senior U.S. official in Baghdad said.

Unchecked, corruption "threatens the stability of the democracy, because people won't support a government that is widely viewed as corrupt through and through," Ambassador Lawrence Benedict, anti-corruption coordinator at the U.S. embassy in Baghdad, said in an interview this week.

"Senior officials in the Iraqi government have characterized corruption as the second insurgency -- that's pretty strong language in a place like this," Benedict said. "Iraqis view it a serious problem, and we certainly share that view."

Widespread graft is drawing scrutiny as Prime Minister Nuri al-Maliki's Shi'ite-led government seeks to match success on the battlefield with government reforms and political progress.

After more than five years of war, violence across Iraq has dropped to levels not seen since 2004.

But Iraq scored only above Myanmar and Somalia in 2007 in Transparency International's ranking of perceptions about corruption in 180 countries and territories.

Radhi Hamza al-Radhi, former head of Iraq's integrity board, told the U.S. Congress last year the cost of corruption across Iraqi ministries was believed to be at least $18 billion.

Iraq, blessed with the world's third largest oil reserves but scarred by years of authoritarian rule, crippling sanctions and war, is a country primed for such pitfalls, Benedict said.

He ticked off a list of problem areas like oil smuggling, abuse of state contracts, misuse of antiquated laws handing officials vast powers and a thriving black market for everything from state-subsidized gasoline to cooking gas.

Benedict, whose team of American officials seeks to quietly prod the Iraqi government, stopped short of naming specific officials or ministries believed to be most corrupt.

PART OF THE PROCESS

He described the spectacular surge this year in the price of oil, which provides Iraq with about 90 percent of its government revenues, as both a boon and curse. "There's more money around for people to try to get their hands on," Benedict said.

A report by a U.S. watchdog agency in 2007 found that inadequate metering, reinjection, corruption, theft and sabotage robbed Iraq of 100,000-300,000 barrels of oil per day.

Maliki's government has been taking steps to combat the problem, enacting earlier this year a United Nations convention on corruption and empowering an independent integrity commission that oversees ombudsman positions across the government.

The parliament passed a law cracking down on oil smugglers.

But a special Iraq ombudsman in Washington has found that Iraqi anti-corruption efforts are hindered by security, lack of proper resources, and sometimes by the Iraqi government itself.

Benedict acknowledged there is a tension between the desire to accelerate slow steps to rebuild infrastructure and the need to ensure funding in major projects doesn't go astray.

Corruption is also a threat to Iraqi security, Benedict said, describing the diversion or black market sale of basic goods as a possible conduit for "activities of terrorists."

(Editing by Dominic Evans)