Chalk this up as yet another screw-up by the Bush administration in Iraq.
Realizing the problem, the Coalition Provisional Authority decided that it needed to remove the subsidies, which were inherited from Iraq's state-controlled economy. Besides fuel, Iraqis receive a subsidized monthly food ration, which takes up another quarter of the government's budget. Fertilizers, industrial products and electricity are also subsidized.Fearing social unrest? These guys are amazing. When they need to tread lightly, they stomp in wearing steel-toed boots. But when a little decisive action is needed (especially of the might-make-things-worse-for-Exxon variety), they chicken out.
But, fearing social unrest, U.S. officials running the coalition left the subsidies in place. A senior economic adviser, quoted anonymously in a recent study by the congressionally funded United States Institute of Peace, described the failure to remove the subsidies as "one of the worst mistakes of the occupation."
I can only hope that history accurately captures for posterity the shocking breadth of incompetence in this running joke that is the Bush presidency.