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How the US sent $12bn in cash to Iraq. And watched it vanish


Special flights brought in tonnes of banknotes which disappeared into the war zone

February 8, 2007

Almost $12bn in cash was spent by the US-led authority


The US flew nearly $12bn in shrink-wrapped $100 bills into Iraq, then distributed the cash with no proper control over who was receiving it and how it was being spent.

The staggering scale of the biggest transfer of cash in the history of the Federal Reserve has been graphically laid bare by a US congressional committee.

In the year after the invasion of Iraq in 2003 nearly 281 million notes, weighing 363 tonnes, were sent from New York to Baghdad for disbursement to Iraqi ministries and US contractors. Using C-130 planes, the deliveries took place once or twice a month with the biggest of $2,401,600,000 on June 22 2004, six days before the handover.

Details of the shipments have emerged in a memorandum prepared for the meeting of the House committee on oversight and government reform which is examining Iraqi reconstruction. Its chairman, Henry Waxman, a fierce critic of the war, said the way the cash had been handled was mind-boggling. "The numbers are so large that it doesn't seem possible that they're true. Who in their right mind would send 363 tonnes of cash into a war zone?"

The memorandum details the casual manner in which the US-led Coalition Provisional Authority disbursed the money, which came from Iraqi oil sales, surplus funds from the UN oil-for-food programme and seized Iraqi assets.

"One CPA official described an environment awash in $100 bills," the memorandum says. "One contractor received a $2m payment in a duffel bag stuffed with shrink-wrapped bundles of currency. Auditors discovered that the key to a vault was kept in an unsecured backpack.

"They also found that $774,300 in cash had been stolen from one division's vault. Cash payments were made from the back of a pickup truck, and cash was stored in unguarded sacks in Iraqi ministry offices. One official was given $6.75m in cash, and was ordered to spend it in one week before the interim Iraqi government took control of Iraqi funds."

The minutes from a May 2004 CPA meeting reveal "a single disbursement of $500m in security funding labelled merely 'TBD', meaning 'to be determined'."

The memorandum concludes: "Many of the funds appear to have been lost to corruption and waste ... thousands of 'ghost employees' were receiving pay cheques from Iraqi ministries under the CPA's control. Some of the funds could have enriched both criminals and insurgents fighting the United States."

According to Stuart Bowen, the special inspector general for Iraq reconstruction, the $8.8bn funds to Iraqi ministries were disbursed "without assurance the monies were properly used or accounted for". But, according to the memorandum, "he now believes that the lack of accountability and transparency extended to the entire $20bn expended by the CPA".

To oversee the expenditure the CPA was supposed to appoint an independent certified public accounting firm. "Instead the CPA hired an obscure consulting firm called North Star Consultants Inc. The firm was so small that it reportedly operates out of a private home in San Diego." Mr Bowen found that the company "did not perform a review of internal controls as required by the contract".

However, evidence before the committee suggests that senior American officials were unconcerned about the situation because the billions were not US taxpayers' money. Paul Bremer, the head of the CPA, reminded the committee that "the subject of today's hearing is the CPA's use and accounting for funds belonging to the Iraqi people held in the so-called Development Fund for Iraq. These are not appropriated American funds. They are Iraqi funds. I believe the CPA discharged its responsibilities to manage these Iraqi funds on behalf of the Iraqi people."

Bremer's financial adviser, retired Admiral David Oliver, is even more direct. The memorandum quotes an interview with the BBC World Service. Asked what had happened to the $8.8bn he replied: "I have no idea. I can't tell you whether or not the money went to the right things or didn't - nor do I actually think it's important."

Q: "But the fact is billions of dollars have disappeared without trace."

Oliver: "Of their money. Billions of dollars of their money, yeah I understand. I'm saying what difference does it make?"

Mr Bremer, whose disbanding of the Iraqi armed forces and de-Ba'athification programme have been blamed as contributing to the present chaos, told the committee: "I acknowledge that I made mistakes and that with the benefit of hindsight, I would have made some decisions differently. Our top priority was to get the economy moving again. The first step was to get money into the hands of the Iraqi people as quickly as possible."

Millions of civil service families had not received salaries or pensions for months and there was no effective banking system. "It was not a perfect solution," he said. "Delay might well have exacerbated the nascent insurgency and thereby increased the danger to Americans."


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Democrats wary over Iran claims

US handout showing alleged Iranian mortars

In pictures: US Iran evidence
Senior Democrats in the United States have urged the Bush administration to be cautious about accusing Iran of fomenting violence in Iraq.

They were speaking after US officials in Iraq said they had evidence that Iran was providing weapons to Shia militias who attacked the US military.

US claims the bombs were smuggled from Iran cannot be independently verified.

Democratic Senator Chris Dodd said the Bush administration had tried to falsify evidence before.

"I'm looking at this report with a degree of scepticism," he said.

"I don't doubt that Iran has been involved to some degree and clearly that's a problem that needs to be addressed, but I'm getting uneasy that they're trying to create a premise, set a premise, for some future, broader military action in Iran.


We assess that these activities are coming from the senior levels of the Iranian government
US official

"I think that would be a huge mistake at this point," said Mr Dodd.

Another senior Democrat, Senator John Kerry, said that people should "listen to those of us in Congress who have said we've got to engage in the region."

The Bush administration denies it is planning to invade Iran but has indicated it is willing to use military force to deal with any Iranian interference inside Iraq, says the BBC's James Westhead in Washington.

Tehran has denied any involvement.

'Senior levels'

US defence officials told reporters in Baghdad that the bombs were being used to deadly effect, killing more than 170 US troops since June 2004.



The weapons known as "explosively formed penetrators" (EFPs) are capable of destroying an Abrams tank.

The US officials, speaking off camera on condition of anonymity, said EFPs had also injured more than 620 US personnel since June 2004.

They said US intelligence analysts believed the bombs were manufactured in Iran and secretly sent to Iraqi Shia militants on the orders of senior officials in Tehran.

"We assess that these activities are coming from the senior levels of the Iranian government," one official said.

He pointed the finger at Iran's elite al-Quds brigade, a unit of the Revolutionary Guards, saying that a senior commander from the brigade had been one of five Iranians seized by US forces in a raid in the Iraqi town of Irbil in January.

'Flushing the evidence'

The defence official said that when the men were captured they had been tying to flush documents down a toilet and that one of them had been contaminated with explosives residue.

They had also reportedly shaved their heads to alter their appearance - bags of their hair were found during the raid.

Tehran has denied that the captured Iranians are members of the brigade, which Iran does not officially recognise, but which observers say reports directly to Ayatollah Ali Khamanei.

The US officials also referred to a raid in Iraq in December in which the security forces said they found inventory sheets of weaponry and equipment that had been brought into Iraq.


Police have frequently been the targets of attacks in Iraq

The US officials said that as well as bomb-making technology Iran was supplying Shia groups in Iraq with money and military training.

The BBC's Jane Peel attended the briefing in Baghdad, at which all cameras and recording devices were banned.

Examples of the allegedly smuggled weapons were put on display, including EFPs, mortar shells and rocket propelled grenades which the US claims can be traced to Iran.

"The weapons had characteristics unique to being manufactured in Iran... Iran is the only country in the region that produces these weapons," an official said.

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12 February 2007

The United States is moving closer to war with Iran by accusing the "highest levels" of the Iranian government of supplying sophisticated roadside bombs that have killed 170 US troops and wounded 620.

The allegations against Iran are similar in tone and credibility to those made four years ago by the US government about Iraq possessing weapons of mass destruction in order to justify the invasion of 2003.

Senior US defence officials in Baghdad, speaking on condition of anonymity, said they believed the bombs were manufactured in Iran and smuggled across the border to Shia militants in Iraq. The weapons, identified as "explosively formed penetrators" (EFPs) are said to be capable of destroying an Abrams tank.

The officials speaking in Baghdad used aggressive rhetoric suggesting that Washington wants to ratchet up its confrontation with Tehran. It has not ruled out using armed force and has sent a second carrier task force to the Gulf.

"We assess that these activities are coming from senior levels of the Iranian government," said an official in Baghdad, charging that the explosive devices come from the al-Quds Brigade and noting that it answers to Ayatollah Ali Khamenei, Iran's supreme leader. This is the first time the US has openly accused the Iranian government of being involved in sending weapons that kill Americans to Iraq.

The allegations by senior but unnamed US officials in Baghdad and Washington are bizarre. The US has been fighting a Sunni insurgency in Iraq since 2003 that is deeply hostile to Iran.

The insurgent groups have repeatedly denounced the democratically elected Iraqi government as pawns of Iran. It is unlikely that the Sunni guerrillas have received significant quantities of military equipment from Tehran. Some 1,190 US soldiers have been killed by so-called improvised explosive devices (IEDs) in Iraq since the overthrow of Saddam Hussein. But most of them consist of heavy artillery shells (often 120mm or 155mm) taken from the arsenals of the former regime and detonated by blasting caps wired to a small battery. The current is switched on either by a command wire or a simple device such as the remote control used for children's toys or to open garage doors.

Such bombs were used by guerrillas during the Irish war of independence in 1919-21 against British patrols and convoys. They were commonly used in the Second World War, when "shaped charges", similar in purpose to the EFPs of which the US is now complaining, were employed by all armies. The very name - explosive formed penetrators - may have been chosen to imply that a menacing new weapon has been developed.

At the end of last year the Baker-Hamilton report, written by a bipartisan commission of Republicans and Democrats, suggested opening talks with Iran and Syria to resolve the Iraq crisis. Instead, President Bush has taken a precisely opposite line, blaming Iran and Syria for US losses in Iraq.

In the past month Washington has arrested five Iranian officials in a long-established office in Arbil, the Kurdish capital. An Iranian diplomat was kidnapped in Baghdad, allegedly by members of an Iraqi military unit under US influence. President George Bush had earlier said that Iranians deemed to be targeting US forces could be killed, which seemed to be opening the door to assassinations.

The statements from Washington give the impression that the US has been at war with Shia militias for the past three-and-a-half years while almost all the fighting has been with the Sunni insurgents. These are often led by highly trained former officers and men from Saddam Hussein's elite military and intelligence units. During the Iran-Iraq war between 1980 and 1988, the Iraqi leader, backed by the US and the Soviet Union, was able to obtain training in advanced weapons for his forces.

The US stance on the military capabilities of Iraqis today is the exact opposite of its position in four years ago. Then President Bush and Tony Blair claimed that Iraqis were technically advanced enough to produce long-range missiles and to be close to producing a nuclear device. Washington is now saying that Iraqis are too backward to produce an effective roadside bomb and must seek Iranian help.

The White House may have decided that, in the run up to the 2008 presidential election, it would be much to its political advantage in the US to divert attention from its failure in Iraq by blaming Iran for being the hidden hand supporting its opponents.

It is likely that Shia militias have received weapons and money from Iran and possible that the Sunni insurgents have received some aid. But most Iraqi men possess weapons. Many millions of them received military training under Saddam Hussein. His well-supplied arsenals were all looted after his fall. No specialist on Iraq believes that Iran has ever been a serious promoter of the Sunni insurgency.

The evidence against Iran is even more insubstantial than the faked or mistaken evidence for Iraqi WMDs disseminated by the US and Britain in 2002 and 2003. The allegations appear to be full of exaggerations. Few Abrams tanks have been destroyed. It implies the Shias have been at war with the US while in fact they are controlled by parties which make up the Iraqi government.
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