Some specifics on how Bush's Iraq fiasco has made us less safe

John F. Burns, New York Times

Sunday, November 26, 2006

(11-26) 04:00 PST Baghdad -- The insurgency in Iraq is now self-sustaining financially, raising tens of millions of dollars a year from oil smuggling, kidnapping, counterfeiting, connivance by corrupt Islamic 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 groups responsible for many of the insurgent and terrorist attacks are raising between $70 million and $200 million a year from illegal activities. It says that between $25 million and $100 million of the total comes from oil smuggling and other criminal activity involving the state-owned oil industry, 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 who said 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 may 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 an interagency working group investigating the financing of militant groups in Iraq.

A Bush administration official, who spoke on condition of anonymity, confirmed the group's existence. He said it was led by Juan Zarate, deputy national security adviser for combatting terrorism, and was made up of about a dozen people, drawn from the CIA, the FBI, the Defense Intelligence Agency, the State Department, the Treasury Department and the U.S. Central Command.

The group's estimate of the financing for the insurgency, even taking the higher figure of $200 million, underscores the David-and-Goliath nature of the war. American, Iraqi and other coalition forces are fighting an array of shadowy Sunni and Shiite groups that can draw on huge armories left over from Saddam's days, and benefit from the willingness of many insurgents to fight 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 may be that the insurgency now survives off money generated from activities inside Iraq, and no longer depends on sums Saddam and his associates seized as his government collapsed. American officials said that as U.S. troops entered Baghdad, Hussein's oldest son, Qusai, took more than $1 billion in cash from the Central Bank of Iraq and stashed it in trunks aboard a flatbed truck. Large sums of cash 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 document says the pattern of insurgent financing changed after the first 18 months of the war, from the Saddam loyalists who financed it in 2003 to "foreign fighters and couriers" smuggling cash in bulk across Iraq's porous borders in 2004, to the present reliance on a complex array of indigenous sources.

"Currently, we assess that these groups garner most of their funding from petroleum-related criminal activity, kidnapping and other criminal pursuits within Iraq," the report concludes.