U.S.: Despite surplus, Iraq can't yet fund its security

BAGHDAD - Iraq might be running a budget surplus, but that doesn't mean it should spend it, U.S. officials said Tuesday, arguing that the Iraqi government's finances are too fragile for it to pay a greater share of its security costs.

The Obama administration commented in response to a new U.S. government study that found that Iraq had a surplus of $52.1 billion at the end of 2009, including $11.8 billion available to be spent.

The study by the Government Accountability Office, the investigative arm of Congress, provided ammunition to lawmakers who have argued that the United States should not run up its own budget deficit to bankroll the Pentagon's military training mission in Iraq.

The study concluded, "Iraq has the potential to further contribute toward its security needs, even as it addresses other competing priorities."

The administration, which has asked Congress to approve $2 billion for training and equipping Iraqi military and police in fiscal 2011, said that carrying out the GAO recommendation could put Iraq at financial risk and jeopardize the United States' interests in a country where it has spent, by the report's calculation, $642 billion in military operations since 2003.

U.S. officials in Iraq said the country's budget - as much as 90 percent of which comes from oil revenues - remained vulnerable to oil price shocks and said its surplus was largely a result of the government's inability to spend as much as it had planned on reconstruction projects.

As security conditions have improved, Iraq is pumping more money into building roads, power plants, schools, and hospitals. Coupled with projected deficits and slightly lower-than-expected oil production this year, U.S. officials in Iraq said, the surplus will evaporate in 2011.

"They are going into the red now," said Kenneth Fairfax, an economic-affairs counselor at the U.S. Embassy in Baghdad.

The U.S. military is changing its role in Iraq - its fewer than 50,000 troops still there have shifted from a purely combat mission to one focused on training and advising Iraqi security forces.

Meanwhile, the Obama administration faces heat for rising federal deficits. The Congressional Budget Office reported last month that the deficit would reach $1.3 trillion this year.

Senate Armed Services Committee Chairman Carl Levin (D., Mich.) has argued that the administration's request should be cut in half, to $1 billion, because Iraq has enough oil revenues to pay its own security costs.