nstraints.

Substantial reconstruction funds have also been provided to
contractors, and the Special Inspector General for Iraq Reconstruction
has documented numerous instances of waste and abuse. They have not
all been put right. Contracting has gradually improved, as more
oversight has been exercised and fewer cost-plus contracts have been
granted; in addition, the use of Iraqi contractors has enabled the
employment of more Iraqis in reconstruction projects.

4. International Support

International support for Iraqi reconstruction has been tepid.
International donors pledged $13.5 billion to support reconstruction,
but less than $4 billion has been delivered.

An important agreement with the Paris Club relieved a significant
amount of Iraq's government debt and put the country on firmer
financial footing. But the Gulf States, including Saudi Arabia and
Kuwait, hold large amounts of Iraqi debt that they have not forgiven.

The United States is currently working with the United Nations and
other partners to fashion the "International Compact" on Iraq. The
goal is to provide Iraqis with greater debt relief and credits from
the Gulf States, as well as to deliver on pledged aid from
international donors. In return, the Iraqi government will agree to
achieve certain economic reform milestones, such as building
anticorruption measures into Iraqi institutions, adopting a fair legal
framework for foreign investors, and reaching economic
self-sufficiency by 2012. Several U.S. and international officials told
us that the compact could be an opportunity to seek greater international
engagement in the country.

The Region

The policies and actions of Iraq's neighbors greatly influence its
stability and prosperity. No country in the region wants a chaotic
Iraq. Yet Iraq's neighbors are doing little to help it, and some are
undercutting its stability. Iraqis complain that neighbors are
meddling in their affairs. When asked which of Iraq's neighbors are
intervening in Iraq, one senior Iraqi official replied, "All of them."

The situation in Iraq is linked with events in the region. U.S.
efforts in Afghanistan have been complicated by the overriding focus
of U.S. attention and resources on Iraq. Several Iraqi, U.S., and
international officials commented to us that Iraqi opposition to the
United States--and support for Sadr--spiked in the aftermath of
Israel's bombing campaign in Lebanon. The actions of Syria and Iran