Iraqi oil industry staggers as government forms

BAGHDAD, Apr 25 (Reuters) Iraqi insurgents have crippled the vital oil industry, but the government has ignored pleas for help to fight graft and smuggling, a senior official said today.

Tackling the endemic violence and reviving the oil sector to sustain the fledgling democracy are the two biggest challenges facing Prime Minister-designate Jawad al-Maliki as he sets about forming a government of national unity.

But Oil Ministry inspector-general Ali al-Alaak told Reuters the violence wracking the country, corruption and smuggling were costing the country billions of dollars a year.

With a 30-day deadline for parliamentary approval of his post and a yet-to-be chosen cabinet ticking since Saturday, Maliki, a tough politician from the majority Shi'ite Muslim community, said he hoped to deliver early.

''If God is willing, I am setting myself a timetable of 15 days to finish forming the cabinet and deliver it to the parliament,'' he told Iraqiya television late last night.

BOMB, JUDGE KILLED President Jalal Talabani asked Maliki to form a government of national unity embracing Shi'ites, Sunni Arabs and Kurds to end an insurgency and sectarian violence threatening to drag the country into civil war.

As politicians haggled over a government and key posts for months after parliamentary election in December, the interim government was unable to tackle the security problem.

Baghdad has been hit by a string of bombings this week, the latest today in a minibus near a crowded market, killing two people. Gunmen also killed a senior judge in the capital.

Sectarian violence has rocketed after the February bombing of a major Shi'ite shrine.

US ambassador to Iraq Zalmay Khalilzad, who spearheaded Washington's very public efforts to push politicians into agreement, warned Americans to prepare for a long engagement in Iraq and the West Asia.

''We must perhaps reluctantly accept that we have to help this region become a normal region, the way we helped Europe and Asia in another era,'' he told the Los Angeles Times. ''Now it's this area from Pakistan to Morocco that we should focus on.

For Maliki and Iraq, the economy is a critical challenge.

After releasing a grim report on the oil industry, the lifeline of Iraq's war-shattered economy, the Oil Ministry's inspector Alaak said rebel attacks were worsening.

''It has been going on for two or three years now without stopping. Actually it has increased. They have always succeeded in attacking very sensitive sites,'' Alaak said.

''Every time we fix the problems because of those attacks, the next day or a few days later they can attack the same site.'' And the industry is wracked by graft and government neglect.

''We have taken these problems to the highest authorities and nothing was done. Perhaps they were busy with other problems,'' he said. ''I have sent them reports three or four times. There have been no changes.'' Oil has hit record highs this year -- a barrel of crude is currently more than 70 dollars -- due to concerns Iran's dispute with the West could cut exports from the world's fourth largest producer and due to supply losses from Iraq and Nigeria.

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