Iraq's prime minister has fired his electricity minister, who is under investigation for allegations that he failed to follow government guidelines in the signing of $1.7 billion in deals with two foreign companies to build power stations.
The sacked minister, Raad Shalal, is a political rival of Prime Minister Nouri al-Maliki, raising questions about whether his firing late Saturday night and the allegations of financial misconduct are politically motivated.
Shalal signed the deals in question with the Canadian Alliance for Power Generation Equipment and German firm Maschinebau Halberstadt. The Canadian company was awarded a $1.2 billion contract in July to build 10 power stations with a total capacity of 1,000 megawatts while the German firm won a $500 million contract.
Iraq's deputy prime minister, Hussain al-Shahristani, said the deals violated government guidelines because the two companies do not meet the financial and technical capabilities to qualify as manufacturers for this type of project. He claimed the two companies presented false documents about their financial status and technical capabilities and the contracts were annulled on Thursday.
Shalal and the two companies could not immediately be reached for comment.
Shalal is an independent, but was nominated by the Sunni Muslim-backed Iraqiya bloc led by al-Maliki's rival, Ayad Allawi. The prime minister and Allawi have been at loggerheads since the March 2010 elections over which of their blocs had the right to form the government.
Maysoun al-Damlouji, a spokeswoman for Iraqiya, said the bloc "is awaiting the results of the investigation, and it is still committed to hold its ministers accountable for any corruption charges."
The political overtones of the firing could spook foreign investors by drawing attention to the pitfalls of doing business in a country still in deep political turmoil. That is something Iraq can ill afford as it struggles to rebuild from decades of war and international sanctions.
Shalal's firing must still be approved by parliament and a spokesman for the ministry said the minister attended work as usual on Sunday and that the office had not received an official notice from the prime minister's office on the firing.
The electricity ministry spokesman, Musab al-Mudaris, said under the terms of the deals, the government does not pay any money to the companies until after the power plants are installed and operational.
"In reality, the Iraqi government paid not even a cent to these companies and there is no loss for Iraq," he said. "We do not know the reason behind this clamor because we did not pay these companies any money."
A Cabinet official said al-Maliki's decree was issued late Saturday and an investigation is under way to determine whether there was any criminal wrongdoing. He spoke on condition of anonymity because he was not authorized to brief the media on the details.
Al-Maliki is under intense pressure to show that he is trying to address the country's electricity shortages and tackle corruption.
Iraq sits atop the world's fourth largest proven reserves of crude oil and has some of the largest gas reserves. But the government has failed to meet demand for electricity since the start of the 2003 U.S.-led war to topple Saddam Hussein. The ensuing daily power outages have enraged Iraqis, with many arguing that the country's oil wealth is being siphoned into the pockets of corrupt officials.
Former Electricity Minister Ayham al-Samarraie was jailed in a corruption investigation but escaped in December 2006 and fled to the United States, where he also holds citizenship.
Last summer, Electricity Minister Karim Waheed stepped down after demonstrations by citizens complaining about the few hours of electricity they received a day turned deadly and two people were killed.
Since then, the government has been rushing to award contracts to build new power plants.