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Last Updated: Tuesday, 25 April 2006, 21:38 GMT 22:38 UK
Iraq oil hit by graft and attacks
Workmen fixing an oil pipeline in Iraq
Oil revenues are earmarked to help finance the rebuilding of Iraq
Iraq's oil industry is being crippled by corruption at a time when insurgents have stepped up attacks on the nation's infrastructure, a report has claimed.

The Oil Ministry's inspector general Ali al-Alaak said graft and smuggling are the main threat to Iraq's economy.

He called on policymakers to better protect infrastructure such as pipelines and catch corrupt officials.

Iraq has the world's third-largest oil reserves and the revenue from its sale is needed to rebuild the country.

Hard fix

Mr Alaak estimates that some $4.2bn (2.3bn; 3.4bn euros) worth of oil-related products were smuggled out of Iraq last year, while crude was stolen directly from the country's leaking and pipelines.

"We really are losing billions," he said.

"The corruption in the oil sector and smuggling of oil products to neighbouring countries are the most important reasons behind the loss of billions of dollars, and these two problems are the biggest threat to Iraq's economy," he said.

He added that the campaign of violence has intensified against sensitive sites.

"Every time we fix the problems because of those attacks, the next day or a few days later they can attack the same site," he explained in Baghdad.

Another problem is that it has taken longer to upgrade pipelines and other oil equipment.

"We have done about 30% or 35% of what we had listed for 2005," he explained. "This is a really big problem.

"When we increase our production in the south we cannot push more through the pipeline because it can't handle the pressure."

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