BAGHDAD – Lower oil prices are threatening Iraq's efforts to build a military capable of defending the country, raising the possibility that the Iraqis will need substantial U.S. help for years after the Americans leave by 2012.
The budget crunch not only affects ground forces that bear the brunt of the fight against Sunni and Shiite extremists — it also slows development of an air force capable of defending the skies and a navy able to protect vital oil exporting facilities in the Persian Gulf from terror attacks.
All that is forcing U.S. and Iraqi planners to make tough choices during the countdown to the withdrawal of all American troops by the end of 2011. With the Obama administration shifting resources to Afghanistan, the U.S. is not in a position to finance the Iraqi budget shortfall.
"Realistically, as we look out to 2011, this year's budget will not keep them on track they need to be on," said Army Lt. Gen. Frank Helmick, the American officer in charge of training the Iraqi security force.
"These ministers in defense and interior are having to make very, very difficult decisions, having to prioritize their requirements."
Iraq's security plans have gone off course because of the slump in oil prices, which now stand around $60 a barrel after hitting highs last summer of nearly $150 a barrel.
Oil sales account for more than 90 percent of government revenue. When prices were soaring last summer, the U.S. Government Accountability Office predicted Iraq could end the year with as much as a $79 billion budget surplus.
Instead, Iraq's government had to slash its 2009 budget to $58.6 billion from an initial figure of $79 billion. The higher figure was based on the assumption that oil prices would average $80 a barrel this year.
Instead of wallowing in a surplus, Iraq is tightening its belt. There's little chance of a windfall unless oil prices rebound or the government can boost production substantially — which would require a deal with the Kurds over control of fields in their self-ruled northern region.
Helmick said the Defense Ministry this year needed $8.5 billion but received about $4.5 billion, and the Interior Ministry needed about the same and received about $5 billion. About 70 percent of the defense budget goes to salaries, Helmick said.
If oil prices fail to rebound, Iraq's budget — and its defense spending — in 2010 and 2011 will again be curtailed, making it nearly impossible to have its security forces adequately trained and equipped by 2012.
"It would be a really tough year in 2010, if they get the same budget or less," Helmick said.
Abbas al-Bayati, chairman of parliament's security committee, played down the cuts in Iraq's defense spending. He said the budget covered most requests, including building new bases and providing training and arms — though there was no mention of naval or air power.
U.S. military advisers are working with the ministries to re-prioritize how to create a fully functioning security force, examining every possibility from cutting back on purchasing military equipment to creative financing.
Among the priorities being discussed by the government, Helmick says, is whether to increase its army logistics units, buy ships for its navy or buy aircraft to train pilots.
Government spokesman Ali al-Dabbagh said Wednesday that Iraq may ask the British navy to help the Iraqis protect ports and export facilities after the British withdraw by the end of July. Al-Dabbagh said such an arrangement could allow for fewer than 400 British service personnel to carry out tasks inside Iraqi waters.
Last January the Pentagon reported that only 17 of the Iraqi army's 175 combat battalions could operate without U.S. support, largely because of supply and logistics problems.
Chief among U.S. concerns is bolstering Iraq's protection of its oil platforms, borders and skies. They are areas considered critical by American commanders — especially oil platforms which are vulnerable to seaborne terrorist attack.
Iraq's air force has no fighter jets to defend against possible incursions by neighbors including Iran, Turkey and Syria. Defense Ministry spokesman Maj. Gen. Mohammed al-Askari said the government is negotiating with the United States to buy F-16 warplanes.
The target calls for the aircraft to be patrolling the skies by 2016 — four years after the current U.S. withdrawal deadline. But Iraq doesn't have the money to buy the planes and train the pilots.
"We can't really train enough fixed-wing pilots right now, because we don't have enough fixed-wing trainers to do that," Helmick said.
Prime Minister Nouri al-Maliki has been making the rounds with world leaders, and defense and interior ministers have been meeting with foreign counterparts as part of an effort to expand the country's revenue sources, boost oil production and, perhaps, buy less expensive military equipment.
Iraq has purchased nearly $5 billion in military items from the U.S. since 2006, and recently asked to buy $3.8 billion more. It has not funded that request.