Iraq's missing $1bn
- What has happened to Iraq's missing $1bn?
By Patrick Cockburn in Baghdad
19 September 2005
One billion dollars has been plundered from Iraq's defence ministry in
one of the largest thefts in history, The Independent can reveal,
leaving the country's army to fight a savage insurgency with
The money, intended to train and equip an Iraqi army capable of
bringing security to a country shattered by the US-led invasion and
prolonged rebellion, was instead siphoned abroad in cash and has
"It is possibly one of the largest thefts in history," Ali Allawi,
Iraq's Finance Minister, told The Independent.
"Huge amounts of money have disappeared. In return we got nothing but
scraps of metal."
The carefully planned theft has so weakened the army that it cannot
hold Baghdad against insurgent attack without American military
support, Iraqi officials say, making it difficult for the US to
withdraw its 135,000- strong army from Iraq, as Washington says it
wishes to do.
Most of the money was supposedly spent buying arms from Poland and
Pakistan. The contracts were peculiar in four ways. According to Mr
Allawi, they were awarded without bidding, and were signed with a
Baghdad-based company, and not directly with the foreign supplier. The
money was paid up front, and, surprisingly for Iraq, it was paid at
great speed out of the ministry's account with the Central Bank.
Military equipment purchased in Poland included 28-year-old
Soviet-made helicopters. The manufacturers said they should have been
scrapped after 25 years of service. Armoured cars purchased by Iraq
turned out to be so poorly made that even a bullet from an elderly
AK-47 machine-gun could penetrate their armour. A shipment of the
latest MP5 American machine-guns, at a cost of $3,500 (£1,900) each,
consisted in reality of Egyptian copies worth only $200 a gun. Other
armoured cars leaked so much oil that they had to be abandoned. A deal
was struck to buy 7.62mm machine-gun bullets for 16 cents each,
although they should have cost between 4 and 6 cents.
Many Iraqi soldiers and police have died because they were not
properly equipped. In Baghdad they often ride in civilian pick-up
trucks vulnerable to gunfire, rocket- propelled grenades or roadside
bombs. For months even men defusing bombs had no protection against
blast because they worked without bullet-proof vests. These were often
promised but never turned up.
The Iraqi Board of Supreme Audit says in a report to the Iraqi
government that US-appointed Iraqi officials in the defence ministry
allegedly presided over these dubious transactions.
Senior Iraqi officials now say they cannot understand how, if this is
so, the disappearance of almost all the military procurement budget
could have passed unnoticed by the US military in Baghdad and civilian
advisers working in the defence ministry.
Government officials in Baghdad even suggest that the skill with which
the robbery was organised suggests that the Iraqis involved were only
front men, and "rogue elements" within the US military or intelligence
services may have played a decisive role behind the scenes.
Given that building up an Iraqi army to replace American and British
troops is a priority for Washington and London, the failure to notice
that so much money was being siphoned off at the very least argues a
high degree of negligence on the part of US officials and officers in
The report of the Board of Supreme Audit on the defence ministry
contracts was presented to the office of Ibrahim al-Jaafari, the Prime
Minister, in May. But the extent of the losses has become apparent
only gradually. The sum missing was first reported as $300m and then
$500m, but in fact it is at least twice as large. "If you compare the
amount that was allegedly stolen of about $1bn compared with the
budget of the ministry of defence, it is nearly 100 per cent of the
ministry's [procurement] budget that has gone Awol," said Mr Allawi.
The money missing from all ministries under the interim Iraqi
government appointed by the US in June 2004 may turn out to be close
to $2bn. Of a military procurement budget of $1.3bn, some $200m may
have been spent on usable equipment, though this is a charitable view,
say officials. As a result the Iraqi army has had to rely on cast-offs
from the US military, and even these have been slow in coming.
Mr Allawi says a further $500m to $600m has allegedly disappeared from
the electricity, transport, interior and other ministries. This helps
to explain why the supply of electricity in Baghdad has been so poor
since the fall of Saddam Hussein 29 months ago despite claims by the
US and subsequent Iraqi governments that they are doing everything to
improve power generation.
The sum missing over an eight-month period in 2004 and 2005 is the
equivalent of the $1.8bn that Saddam allegedly received in kick- backs
under the UN's oil-for-food programme between 1997 and 2003. The UN
was pilloried for not stopping this corruption. The US military is
likely to be criticised over the latest scandal because it was far
better placed than the UN to monitor corruption.
The fraud took place between 28 June 2004 and 28 February this year
under the government of Iyad Allawi, who was interim prime minister.
His ministers were appointed by the US envoy Robert Blackwell and his
UN counterpart, Lakhdar Brahimi.
Among those whom the US promoted was a man who was previously a small
businessman in London before the war, called Hazem Shaalan, who became
Mr Shalaan says that Paul Bremer, then US viceroy in Iraq, signed off
the appointment of Ziyad Cattan as the defence ministry's procurement
chief. Mr Cattan, of joint Polish-Iraqi nationality, spent 27 years in
Europe, returning to Iraq two days before the war in 2003. He was
hired by the US-led Coalition Provisional Authority and became a
district councillor before moving to the defence ministry.
For eight months the ministry spent money without restraint. Contracts
worth more than $5m should have been reviewed by a cabinet committee,
but Mr Shalaan asked for and received from the cabinet an exemption
for the defence ministry. Missions abroad to acquire arms were
generally led by Mr Cattan. Contracts for large sums were short
scribbles on a single piece of paper. Auditors have had difficulty
working out with whom Iraq has a contract in Pakistan.
Authorities in Baghdad have issued an arrest warrant for Mr Cattan.
Neither he nor Mr Shalaan, both believed to be in Jordan, could be
reached for further comment. Mr Bremer says he has never heard of Mr
WORLD VIEW NEWS SERVICE
To subscribe to this group, send an email to:
NEWS ARCHIVE IS OPEN TO PUBLIC VIEW