Iraq defence money siphoned?

A billion dollars, earmarked for training the newly installed Iraqi army, was allegedly siphoned abroad in cash in exchange for military purchases from Poland and Pakistan, debilitating the government's fight against insurgency, a media report claimed on Monday.

"It is possibly one of the largest thefts in history," it quoted Ali Allawi, Iraq's Finance Minister as saying.

"Huge amounts of money have disappeared. In return, we got nothing but scraps of metal," he told The Independent.

The money, crucial for providing the necessary military assistance to the country ravaged by years of war and insurgency, was supposedly spent in buying arms from Poland and Pakistan, the daily said.

But rather than purchasing state-of-the-art weapons Iraq had procured "museum piece weapons," the paper alleged.

It listed a series of problems with the arms purchased including armoured cars, which "turned out to be so poorly made that even a bullet from an elderly AK-47 machine-gun could penetrate their armour."

Other armoured cars reportedly leaked so much oil that they had to be abandoned.

Many Iraqi soldiers and police have died because they were not properly equipped, the daily said.

The contracts to dealers in these countries, Allawi said, were awarded without bidding, and were signed with a Baghdad-based company, and not directly with the foreign supplier.

Baghdad officials alleged that the Iraqis involved in the dealings were only front men, and "rogue elements" within the US military or intelligence services may have played a decisive role behind the scenes.

The fraud took place between June 28, 2004 and February 28 this year under the government of Iyad Allawi, who was interim prime minister, the paper said.

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.

The sum missing was first reported as USD 300m and then USD 500m, but in fact it is at least twice as large. "If you compare the amount that was allegedly stolen of about USD one billion 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 (absent without leave)," said Allawi.

He said a further USD 500m to USD 600m has allegedly disappeared from the electricity, transport, interior and other ministries.

"This helps to explain what 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."