The Independent (London)
September 19, 2005,
Monday
WHAT HAS HAPPENED TO IRAQ'S MISSING $
1BN?;
BY PATRICK COCKBURN IN BAGHDAD
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 museum-piece weapons.
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 disappeared.
'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 Baghdad.
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 Defence Minister.
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
Cattan.
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