A worker at the K-1 pumping station near the Babagurgur oil fields in Kirkuk, Iraq. Photograph: Kevin Frayer/AP
The US department of defence has called in forensic accountants to help track $8.1bn (£5.2bn) of $9.1bn in Iraq's oil revenue entrusted to it after the fall of Baghdad, following an official audit that revealed the money was missing.
The funds were to be used for spending on reconstruction during 2004-07, a period when Iraq was under weak transitional rule.
The report was issued today by the Special Inspector General for Iraq Reconstruction, which had previously criticised poor book-keeping by senior officials throughout the last seven years.
Iraqi officials said they knew nothing about the missing billions and had no means to find where they had been spent. "We will speak to the oil ministry finance committee tomorrow about this," said a spokesman for Iraq's oil minister.
The revelation was made against a backdrop of limited services nationwide made worse by a summer that has seen demand for electricity well exceed Iraq's meagre means to supply it through weeks of staggering heat.
The reconstruction of Iraq's worn-out infrastructure was to be a central plank of the US military's achievement. However, as combat forces steadily withdraw from the country to meet a 31 August deadline of only 50,000 troops remaining – mostly engineers and trainers – Iraqis are pointing to a dearth of the services that they were promised.
The Pentagon pledged to undergo a process of "archival accounting" to track missing funds, some of which is thought to be a result of shoddy book-keeping. However, the audit could not find any documentation to substantiate how the Pentagon spent $2.6bn. An additional $53bn has been allocated by Congress to rebuilding Iraq and the audit committee is examining whether those funds can be accounted for.
"I will need a lot of convincing," said Adnan Makhoul, a businessman from the Baghdad suburb of Karrada. "In fact I will never believe it, look around and tell me how any money has been spent."
Yunadim Kenna, a member of the Iraqi parliament's economic committee, said the massive shortfall had its roots in the heady early days after the fall of Saddam Hussein when billions of dollars of reconstruction contracts were handed out by the-then Coalition Provisional Authority.
"In the beginning, the contracts were huge, especially with the American companies and local mediators. It was not supervised well and it was very clear there was massive corruption, especially in projects related to the oil, defence and interior ministries.
"The Americans were spending wildly in the early days. We didn't know what on and there was no documentation. But after 2008, things became more organised."
Meanwhile, the chairman of the joint chiefs of staff, Admiral Michael Mullen, arrived in Baghdad tonight citing "stunning" security progress before he landed.
The most senior US military officer is due to review the troop withdrawal plans, which are running ahead of schedule as the White House and Pentagon refocus attention on Afghanistan after seven years in Iraq.
