Iraq 'set for oil price windfall'

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Increasing oil production and higher oil prices mean Iraq could be set for an influx of extra money towards reconstruction, a report has said.

Iraq could get an extra $15bn (£7.5bn) from its oil in 2008, special inspector general Stuart W Bowen Jnr said.

But the report said greater efforts were needed to establish how the money would be used, and to fight the corruption which eats into oil revenue.

Oil revenue makes up about 84% of Iraq's national revenue.

Iraq's oil production averaged 2.38 million barrels a day in the last three months of 2007, the report said, the highest level since the US-led invasion in 2003, but below pre-war levels.

Along with record oil prices, which hit $100 a barrel earlier this month, this had created "the opportunity for significant economic investment", Mr Bowen said.

"The possible rise in Iraq's revenue emphasises the need for the government of Iraq to pursue its fight against corruption with renewed vigour," the report added.

Violence continues

Mr Bowen has previously labelled offences such as theft, bribery, oil smuggling and fraud as a "second insurgency", threatening Iraq's development.

Violence also remained a "deadly threat" to the reconstruction the report said, with attacks on infrastructure in many industries - including oil - a regular problem.

"Despite the palpably improved security climate, violence continues to impede the efforts of agencies working on Iraq's relief and reconstruction," it said.

Of the $113.95bn spent on Iraq's reconstruction to the end of December, $47.5bn came from the US, $50.6bn came from Iraq itself and the remainder was from the international community.