The biggest transfer of cash in history took place
from May 2003 to June 2004 when the U.S. Federal Reserve of New York shipped
$12 billion in bills of various denominations to war-torn Iraq. Over the course
of one year, a fleet of C-130s carried, from New York to Baghdad, 484 pallets
weighing a total of 363 tons and holding 281 million bank notes. This is not
an advertisement for a new board game but the summary of a memorandum prepared
for a meeting of the House Committee on Oversight and Government Reform, chaired
by Rep. Henry Waxman, which is examining the "reconstruction" of Iraq
under Paul Bremer.
No proper record of the funds, which were distributed by the Coalition Provisional
Authority, is available. They seem to have been disbursed like Monopoly
money. Contractors were paid in cash from the back of pickup trucks; thousands
of "ghost employees," people enlisted in ministerial jobs that did
not exist, were paid salaries with bundles of currency; $1 million was stolen
from the CPA vault and nobody seemed to be bothered; $500 million was disbursed
under the heading "TBD" ("to be determined"). An obscure
consulting firm from San Diego was in charge of certifying the distribution
of the money, yet it never conducted any review of internal controls, as was
Bremer's financial adviser, retired Adm. David Oliver, seems surprised by the
House committee's concern, as if the billions that vanished were really play
money. When challenged by a BBC journalist about the consequences of the disappearance
without a trace of billions of dollars, he pointed out that it was irrelevant
where the money had gone because it was Iraqi funds, not U.S. taxpayers' money.
The $12 billion came from Iraqi assets seized after the first Gulf War, from
the sale of Iraqi oil, and from surplus payments from the UN Oil-for-Food program.
The $12 billion is not part of the $400 billion spent by the U.S. in Iraq since
The procedure for unfreezing "political" money is usually very long
and demands the fulfillment of several legal requirements. After a legal battle
waged by a group of Cuban exiles for more than a decade, then-president Bill
Clinton finally released some of the Cuban funds frozen during Fidel Castro's
1950s revolution. Still locked in the vaults of the Federal Reserve: Iranian
money seized after the Ayatollah Khomeini ousted the shah in 1979, some of Gen.
Manuel Noriega's dirty money, and even some assets belonging to the recently
deceased Ugandan dictator Idi Amin.
Iraqi funds were miraculously freed in less than two months. The procedure
was quick and involved the approval of the United Nations, which, technically,
was responsible for the Oil-for-Food surpluses. That money could have been used
to bring back water and electricity to millions of Iraqis; if equitably distributed,
the whole $400+ billion squandered in Iraq thus far would have made each Iraqi
man, woman, and child $15,000 richer. Instead, it was wasted by incompetent
officers appointed by even more incompetent politicians.
It is surreal to think that the U.S. government rushed to fly hundreds of tons
of cash to a country where its Army could not stop people looting arsenals,
banks, museums, and hospitals, a country not yet pacified. As Waxman put it,
"Who in their right mind would send 363 tons of cash into a war zone?"
War is not a board game; it is deadly serious business. Even more surreal is
the fact that no plan existed for what to do with so much money. Bremer claims
that the CPA urgently needed the cash because the banking system had disappeared
and Iraq was a cash economy. Yet the CPA was not equipped to operate in a cash
economy, as demonstrated by the way it wasted those billions. War zones are
always cash economies. Did Bremer really think that after President George W.
Bush's historic "mission accomplished" declaration, ATMs in Baghdad
would miraculously start working again?
Bremer's other explanation was that it was necessary to inject U.S. dollars
into a country where the local currency, the Iraqi dinar, was about to collapse.
Most currencies collapse after major conflicts. In the aftermath of the
World War II, devaluation spread like a virus among European currencies and
new money had to be introduced by the central banks. But injecting cash for
the sake of injecting cash does more harm than devaluation; it can be extremely
dangerous because war economies are run by militias, criminal gangs, black marketeers,
and profiteers. Cash flows naturally toward these people.
Oliver, the man who was supposed to advise Bremer on these issues, is as unmoved
as his ex-boss by the thought that the money they so irresponsibly distributed
may have funded ethnic militias, criminal gangs, and insurgent groups in addition
to contractors engaged in the reconstruction. Their lack of concern springs
from the belief that they are only accountable to the American public, not the
Iraqis. The fact that some of those funds may have subsidized ambushes in which
U.S. soldiers were killed does not cross their minds. War is a highly deceptive
Though the money belonged to Iraqis, there is evidence that the CPA was eager
to spend all of it before the interim Iraqi government was appointed. The House
committee minutes report that one officer was handed $6.75 million in cash and
told to spend it in the week before the interim government took control of the
Development Fund for Iraq, where the money should have been held.
The motives behind such behavior are clear. The primary objective was not to
kick-start the reconstruction of Iraq. If it had been, the U.S. would have appointed
competent people to run the CPA and the $12 billion would have gone to fund
a sort of Marshall Plan, in which each penny would have been accounted for.
But the real objective was to establish an American bastion in the heart of
the Middle East. Having incompetent U.S. officials distribute Iraqi money as
if it were "funny money" instead of turning it over to the Iraqi interim
government was part of this plan. Clearly, the Bush administration has never
played Monopoly, or it would know the game's cardinal rules: never waste
money and always invest wisely.
An earlier version of this article appeared in the Georgia Straight