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Americans handing out a million dollars a day in Iraq

Tuesday, May 27, 2003

WASHINGTON -- U.S. dollars are flown to Iraq by the planeload. An Army clerk pays Baghdad electricians from a footlocker full of cash. Soldiers string barbed wire at the site where Iraqi retirees get their pensions.

American troops and officials are handing out $1 million a day in Iraq, according to the Pentagon-led Office of Reconstruction and Humanitarian Assistance.

That spending is in addition to multimillion-dollar contracts awarded by the State Department and the roughly $1 billion a week it takes to keep U.S. troops in Iraq.

Officials say they're developing an efficient and well-controlled system for getting money back into the country's economy again. L. Paul Bremer, a former State Department anti-terrorism official who took over the civilian operation in Iraq on May 12, on Monday announced a program, funded by Iraq's central bank and several private financial institutions, to supply credit to encourage exports to Iraq in coming weeks. The program, he said, will "symbolically indicate to the world that Iraq is open for business again."

But financing reconstruction in Iraq is a hugely complicated affair, with money coming in from at least a half-dozen sources and going out in everything from tiny cash payments to contracts worth hundreds of millions of dollars.

The Defense Department, infamous for its long-standing money management problems, will soon send a dozen auditors to oversee the spending.

'Difficult to predict'

Two months into the campaign in Iraq, the Bush administration has declined to say what reconstruction might cost or how long it thinks occupying forces might stay there.

"When is the president going to tell the American people that we're likely to be in ... Iraq for three, four, five, six, eight, 10 years, with thousands of forces and spending billions of dollars?" Sen. Joseph Biden asked Pentagon officials last week in a hearing.

"It is very difficult to predict" how long it will take, Deputy Defense Secretary Paul Wolfowitz responded.

It is also unclear exactly how much they'll have to spend. But the finances will be "frightening difficult and legalistic," said one treasury official privately, partly because the pool of money to be spent is a mix of money that belongs to Iraqi and has been frozen by the United Nations, the United States and other countries; money that might be pledged by coalition members; money Congress appropriated in the defense budget, and huge caches of dollars, gold and other assets found hidden around the country by the former regime.

Money taken from each of those pots comes with its own rules on how it can be spent -- and all the rules aren't yet clear, officials said.

Cash used so far comes from $1.7 billion of Iraqi money frozen by the United States under sanctions since 1990, Pentagon and Treasury officials said. Transferred at the war's start into an account at the Federal Reserve Bank of New York, it's shipped to Iraq as needed.

Singles, fives, tens

About $200 million has been drawn down so far.

That's singles, fives, tens and $20 bills, fluttered through an accounting machine, weighed, shrink-wrapped in stacks and flown on pallets to Iraq with two guards who stay awake and in line of sight at all times during the flight.

Some $31 million had been handed out as of Friday to pensioners, police, teachers, electricians and other civil servants. It's a huge and important effort since a large percentage of Iraq's jobs came from the socialist and repressive former central government.

In just two examples, 6,500 port workers were each given $20 -- for a total of $130,000 -- to help reopen the southern port of Umm Qasr; troops of the air assault 101st Airborne Division paid $142,000 to health ministry workers in the northern city of Mosul.

Money has also been spent for clearing away garbage accumulating on streets for two months since the war started; to repair decayed infrastructure and to replace office furniture and equipment in government ministries that were bombed during the war or looted afterward and have to get up and running again, officials said.

For instance, the 7th Marine Regiment recently wrote a contract for improvements at 180 schools in the central city of Najaf. At $500 for each school, that's $90,000.

$1 billion in contracts

Besides monitoring the river of cash flowing into Iraq, the new auditors will advise and help officials on contract issues.

So far, the State Department has awarded some $1 billion in contracts and grants, mostly to American companies, to rebuild infrastructure, improve health and education and manage the port and airports.

Several officials stressed the Pentagon is particularly concerned about avoiding criticism later, wanting the spending above board and true to the promise that all frozen and found Iraqi funds will be spent on the Iraqi people.

What accountants envision sitting behind desks in Washington isn't easy to pull off in Iraq, where the banking system is broken, so many transactions are in cash, corruption is ingrained and some of the troops don't think this is a job U.S. soldiers should be doing, defense and congressional officials said.

In the only publicly disclosed incident so far, several soldiers were being investigated for allegedly trying to steal some $900,000 from more than $650 million in bills found stashed in a palace compound.

Auditors are to leave sometime around June 1 and stay three to six months. They include representatives from the Pentagon's inspector general, comptroller and joint chiefs of staff; the congressional investigative General Accounting Office; and the White House Office of Management and Budget. The Treasury already has a team of 22 people working to verify Iraqi government payroll lists, rebuild and reform the banking system.


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