Revolt in Iraq richly funded

Criminal acts supply millions of dollars yearly for insurgency

November 26, 2006|By John F. Burns | John F. Burns,New York Times News Service

BAGHDAD, Iraq -- The insurgency in Iraq is now self-sustaining financially, raising tens of millions of dollars a year from oil smuggling, kidnapping, counterfeiting, corrupt charities and other crimes that the Iraqi government and its American patrons have been largely unable to prevent, a classified U.S. government report has concluded.

The report, obtained by The New York Times, estimates that armed groups responsible for many of the insurgent and terrorist attacks across Iraq are raising between $70 million and $200 million a year from illegal activities. It says that $25 million to $100 million of the total comes from oil smuggling and other criminal activity involving the state-owned oil industry that is aided by "corrupt and complicit" Iraqi government officials.

As much as $36 million a year comes from ransoms paid to save hundreds of kidnap victims in Iraq, the report said. It estimates that unnamed foreign governments - previously identified by senior American officials in Iraq as including France and Italy - paid Iraqi kidnappers an estimated $30 million in ransom last year.

A copy of the report was made available to The Times by American officials in Iraq, who said they acted in the belief that the findings could improve American understanding of the challenges facing the United States in Iraq.

The report offers little hope that much can be done, at least anytime soon, to choke off insurgent revenues. For one thing, it acknowledges how little the American authorities in Iraq know - 3 1/2 years after the invasion that toppled Saddam Hussein - about key aspects of insurgent operations. For another, it paints an almost despairing picture of the Iraqi government's ability, or willingness, to take measures the report says will be necessary to tamp down the insurgent financing.

"If accurate," the report says, its estimates indicate that these "sources of terrorist and insurgent finance within Iraq - independent of foreign sources - are currently sufficient to sustain the groups' existence and operation." To this, it adds what might be its most surprising conclusion: "In fact, if recent revenue and expense estimates are correct, terrorist and insurgent groups in Iraq may have surplus funds with which to support other terrorist organizations outside of Iraq."

Some terrorism experts outside the government who were given an outline of the report by The Times, criticized it for a lack of precision and a reliance on speculation.

Completed in June, the report was compiled by a working group in Iraq that operates under the leadership of the National Security Council.

A Bush administration official confirmed the group's existence, saying it has probed sources of insurgent financing in Iraq and studied how money is moved into and around the country. He said the group's members are drawn from the CIA, the FBI, the Defense Intelligence Agency, the State Department, the Treasury Department and the Army's Central Command, which oversees the war in Iraq. The group has about a dozen members, the official said, and is led by Juan Zarate, deputy national security adviser for combating terrorism.

Even taking the higher figure of $200 million, the group's estimate of the financing for the insurgency underscores the David-and-Goliath nature of the war here, with American, Iraqi and other coalition forces fighting a shadowy array of Sunni and Shiite groups that can draw on huge armories of weapons and ammunition left over from Hussein's days, and the willingness of many insurgent fighters to go with little or no pay. If the $200 million a year estimate is close to the mark, it amounts to less than what it costs the Pentagon, with an $8 billion monthly budget for Iraq, to sustain the American war effort here for a single day.

For Washington, the report's most dismaying finding might be that the insurgency no longer depends on the sums that Hussein and his associates seized as his government collapsed. As American troops entered Baghdad, American officials said at the time, Hussein's oldest son, Qusai, took more than $1 billion in cash from the Central Bank of Iraq and stashed it in steel trunks aboard a flatbed truck. Large sums were found in Hussein's briefcase when he was captured in December 2003.

But the report says Hussein's loyalists "are no longer a major source of funding for terrorist or insurgent groups in Iraq." Part of the reason, the report says, is that an American-led effort has frozen $3.6 billion in "former regime assets." Another reason, it says, is that Hussein's erstwhile loyalists, realizing that "it is increasingly obvious that a Baathist regime will not regain power in Iraq," have turned increasingly to spending the money on their own living expenses.

The Hussein loyalists - some leading insurgent groups in Iraq, many others fugitives - retain control of "tens or hundreds of million dollars," the report says.

The trail to these assets "has grown cold," the report adds.

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