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Ibrahim Bahr al-Ulum isn't surprised. The new Iraqi oil minister, who earned his doctorate in petroleum engineering at New Mexico Tech, is familiar with the giant oil tanker method. Each tanker holds about 50 tons of oil and is filled within a few days, then transferred to the Shatt al-Arab waterway and from there to the designated ports. Except that this isn't oil that is being exported by the Iraqi government in order to bring in money. It's oil that is being systematically smuggled from Iraq to other countries in the region.

The method is simple. You pierce a hole in one of the oil pipelines, siphon off oil into tankers and transfer it from there to the giant tanks. This is the system in the south of the country, close to the ports. In the north, the system is more destructive. There, they blow up the oil pipelines that carry the oil from Kirkuk to the port of Jihan in Turkey. It takes a long time to repair the pipeline and instead of carrying about 800,000 barrels per day, right now it can only carry 100,000 at most. About 1,500 people are guarding its 480-kilometer span, but they do not have enough equipment, they are poorly trained and have a limited number of vehicles at their disposal, so they are not capable of preventing sabotage operations.

The result is ruinous for the Iraqi economy. Before the war, the forecast was that Iraq would be able to sell about 3 million barrels a day; now, two years on, it is exporting less than 2 million barrels. In the past year, this brought into the country about $17 billion. In the first third of the present year, Iraq sold about $7 billion worth of oil - much less than anticipated and very far from meeting the country's needs. Approximately $100 billion is needed to restore Iraq's infrastructure in almost every area. But the shortage of money is actually the "easy" problem.

The celebrations surrounding the formation of a new government were almost immediately tempered by some very disquieting data: Close to 700 people have been killed since the government was established, and more dead are added to the list every day. This week came a glimmer of hope for some sort of turning point, when insurgency leader Abu Musab al-Zarqawi, whose organization appears to be behind most of the terror attacks, was reported to have been seriously wounded. Several Internet sites even reported that a replacement had been appointed, but the reports have since changed.

Evidently, Zarqawi is still running things and even if he were killed, his organization seems to have a broad enough infrastructure to be able to continue with the terror campaign. The show of force by the Iraqi security forces - about 40,000 Iraqi police and soldiers raided Baghdad neighborhoods in a "lightning" operation - did yield many arrests, but the bombings have not abated.

The shortfall in income from oil, combined with the frequent terror attacks, will force the American administration this year again to pour several tens of billions of dollars into Iraq to keep the country's rehabilitation going. But the rehabilitation efforts apparently are not taking off, and not only because of the bombings. This week, the Kurdish newspaper Al-Ahli, published in Iraq, reported that Kuwaiti companies that won key tenders to rebuild the water network and to install electricity power stations have been unable to start working because of corruption and an excess of bureaucratic regulations.

"The Iraqi system" compels the representatives of these companies to add an Iraqi partner to each tender - to whom about 40 percent of the value of the tender must be paid in return for his ability "to move things along." Iraqi bureaucrats also require the Kuwaiti companies to purchase products from Iraqi companies, even if they have no need for them. But even after such bribes have been paid, there's always another permit or document missing, with the result being that the projects do not progress.

The idea of trying to sue the Iraqis responsible is not being given serious consideration. No one wants to risk his life by having to go to the heart of Baghdad to pursue legal proceedings. The parties conduct most of their business meetings in neighboring countries like Jordan, Iran and Syria. And the results are evident in Iraq. The most widespread complaint seen in letters to the editor in the Iraqi press is about the lack of water and electricity or, in the best case, about how the water that does reach the houses has a terrible odor. In some quarters of Baghdad, the municipality is still supplying drinking water in tanks.

But it's not just the Iraqi bureaucrats who are holding up projects. A report by a Congressional oversight committee reveals that during the period in which the U.S. Coalition Provisional Authority (CPA) was in control, before it transferred sovereignty to the Iraqi government last June, many projects were going on without proper oversight. One suspicion is that the former prime minister, Iyad Allawi, hid large sums whose final destination remains unknown. The amount of money in question is at least $100 million. Another example of apparent theft was described in a hearing before the Senate committee investigating the functioning of the CPA in Iraq. According to testimony from Franklin Willis, a former CPA official, the Custer Battles security company may have forged accounts, hid funds and been paid millions of dollars for work that was never carried out.

The full extent of the institutionalized corruption under American rule, and now under the rule of the new Iraqi government, may never be known. Investigators are not going out into the field to scrutinize data because it would mean risking their lives, and the ministers in the new Iraqi government have been appointing cronies to ensure loyalty.

As for the big question: When will the United States be able to get out of Iraq? - no one in the American administration is willing to talk. "We're examining the situation every day, every week and every month," an American diplomat posted to a country neighboring Israel told Haaretz. "It wouldn't be wise to start talking about a timetable when the Iraqi government itself still isn't stable and when the military force at its disposal is still in its infancy."

Two weeks ago, U.S. President George W. Bush announced proudly that the Iraqi force is now bigger than the American force in Iraq. But in this case, size is not what matters. The Iraqi military capability is far from sufficient and ethnic militias are already starting to take shape. This is not confined to the Kurdish army, the Peshmarga, which obeys only its Kurdish commanders and political leaders. In fact, every political faction seems to have its own private militia, and political coordination is faltering, too.

This week, the parliament appointed a constitution committee whose task is to formulate a permanent constitution for Iraq that will be presented in a national referendum in October. The size and composition of the committee may be indicative of the difficulties it will face. It has 55 members, including 28 Shi'ites, 15 Kurds, eight members of Iyad Allawi's party and four members who represent the Yazidi Christians and the Communists.

U.S. Secretary of State Condoleezza Rice "recommended" that the parliament and government add some Sunni members to the committee since, she believes, it won't be possible to stamp out the terror without Sunni cooperation. In fact, it also will not be possible to formulate a constitution without the Sunnis. But there is very deep distrust, among the Sunnis themselves and of course between the Sunnis and the Shi'ites and the Kurds.

Witty columnist Saman Nuh of the Al-Ahli newspaper recently wrote about the conflicts between the Sunnis and Shi'ites regarding cooperation in the government, saying that now the Sunnis are accusing the Shi'ites of harming their mosques while the Shi'ites are accusing the Sunnis of cozying up to the terror organizations. "Thanks to the wonders of politics, one side [the Sunnis - Z.B.] that aspires to a share of power is seeking the role of mediator in the conflict between the Sunnis and the Shi'ites. This side says that it wants to reach a solution via a return to rationality. The odd thing is that, just a few weeks ago, one of the leaders of the side now offering its mediation services threatened the government with an all-out attack if its prisoners being held by the Americans were not freed. May Allah help the Americans deal with the contradictions, madness and difficulties they encounter in Iraqi society."

Nuh talks about the announcement by Sunni religious sages of a three-day closing of the mosques as a protest against an attack on the mosques by the Badr Brigades Shi'ite militia. "Some of the mosques have already moved from the stage in which they were only centers for political preaching and recruitment centers for one of the rival parties to a new stage in which they also serve as weapons arsenals. Will the next stage be that they serve as launching pads for a holy war against Israel via Najaf?"