By Hannah Allam

McClatchy Newspapers

Monday 27 August 2007

Baghdad - Iraq's deadly insurgent groups have financed their war against U.S. troops in part with hundreds of thousands of dollars in U.S. rebuilding funds that they've extorted from Iraqi contractors in Anbar province.

The payments, in return for the insurgents' allowing supplies to move and construction work to begin, have taken place since the earliest projects in 2003, Iraqi contractors, politicians and interpreters involved with reconstruction efforts said.

A fresh round of rebuilding spurred by the U.S. military's recent alliance with some Anbar tribes - 200 new projects are scheduled - provides another opportunity for militant groups such as al Qaeda in Iraq to siphon off more U.S. money, contractors and politicians warn.

"Now we're back to the same old story in Anbar. The Americans are handing out contracts and jobs to terrorists, bandits and gangsters," said Sheik Ali Hatem Ali Suleiman, the deputy leader of the Dulaim, the largest and most powerful tribe in Anbar. He was involved in several U.S. rebuilding contracts in the early days of the war, but is now a harsh critic of the U.S. presence.

The U.S. Embassy in Baghdad declined to provide anyone to discuss the allegations. An embassy spokesman, Noah Miller, said in an e-mailed statement that, "in terms of contracting practices, we have checks and balances in our contract awarding system to prevent any irregularities from occurring. Each contracted company is responsible for providing security for the project."

Providing that security is the source of the extortion, Iraqi contractors say. A U.S. company with a reconstruction contract hires an Iraqi sub-contractor to haul supplies along insurgent-ridden roads. The Iraqi contractor sets his price at up to four times the going rate because he'll be forced to give 50 percent or more to gun-toting insurgents who demand cash payments in exchange for the supply convoys' safe passage.

One Iraqi official said the arrangement makes sense for insurgents. By granting safe passage to a truck loaded with $10,000 in goods, they receive a "protection fee" that can buy more weapons and vehicles. Sometimes the insurgents take the goods, too.

"The violence in Iraq has developed a political economy of its own that sustains it and keeps some of these terrorist groups afloat," said Iraq's Deputy Prime Minister Barham Saleh, who recently asked the U.S.-led coalition to match the Iraqi government's pledge of $230 million for Anbar projects.

Despite several devastating U.S. military offensives to rout insurgents, the militants - or, in some cases, tribes with insurgent connections - still control the supply routes of the province, making reconstruction all but impossible without their protection.

One senior Iraqi politician with personal knowledge of the contracting system said the insurgents also use their cuts to pay border police in Syria "to look the other way" as they smuggle weapons and foot soldiers into Iraq.

"Every contractor in Anbar who works for the U.S. military and survives for more than a month is paying the insurgency," the politician said, speaking on condition of anonymity because of the sensitivity of the matter. "The contracts are inflated, all of them. The insurgents get half."

Iraqi Foreign Minister Hoshyar Zebari said he was aware of the "insurgent tax" that U.S.-allied contractors are forced to pay in Anbar, though he said it wasn't clear how much money was going to militant groups and how much to opportunistic tribesmen operating on their own.

"It's part of a taxation they put on trucks through all these territories, but it's very difficult to establish if it's going directly to insurgents," Zebari said.

As of July, the U.S. government had completed 3,300 projects in Anbar with a total value of $363 million, the U.S. embassy said. Another 250 projects with a total price tag of $353 million are under way.

Saleh, the deputy prime minister, said dealing with such huge amounts of money in such a volatile place means corruption is inevitable and that some projects cost far more than they should. But despite qualms, he believes the effort is worth it.

"I'm a realist," he said. "When I look at my options, will I have a 100 percent clean process? No. But will this force me to hold back? Absolutely not."

Suleiman, the Dulaimi sheikh and onetime U.S. ally, speaks more bitterly. Sitting in his Baghdad office, he displayed a stack of photos and status updates for projects that included two schools, a clinic and a water purification center. The photos showed crumbling, half-finished structures surrounded by overgrown weeds and patchworks of electrical wires. He blamed such failures on "the terrorists" who work under the noses of U.S. and Iraqi officials.

"Those responsible for these projects had to give money to al Qaida. Frankly, gunmen control contracting in Anbar," he said. "Even now, the thefts are unbelievable, and I have no idea where those millions are going."

None of the Iraqi contractors agreed to speak on the record - they risk losing future U.S. contracts and face retaliation from insurgent groups. Some of the Iraqis interviewed remain in Fallujah or Ramadi on the U.S. payroll; others had fled to Arab countries and Europe after they deemed the business too risky.

"I put it right in my contracts as a line item for 'logistics and security,'" said one Iraqi contractor who is still working for a major American company with several long-term projects in Anbar. "The Americans think you're hiring a security company, but how you execute it is something else entirely. This is how it's been working since Day 1."

One Iraqi contractor who is working on an American-funded rebuilding project in the provincial capital of Ramadi said he faced two choices when he wanted to bring in a crane, heavy machinery and workers from Baghdad: either hire a private security company to escort the supplies for up to $6,000 a truck, or pay off locals with insurgent connections.

He chose the latter, and got $120,000 for a U.S. contract he estimates to be worth no more than $20,000. The contractor asked that specific details of the project not be disclosed for fear he'll be identified and lose the job.

"The insurgents always remind us they're there," the contractor said. "Sometimes they hijack a truck or kidnap a driver and then we pay and, if we're lucky, we get our goods returned. It's just to make sure we know how it works.

"Insurgents control the roads," he added. "Americans don't control the roads - and everything from Syria and Jordan goes through there."

Another Iraqi contractor with several U.S. rebuilding contracts said he's been trying to avoid paying off insurgents by strengthening his relationship with reputable tribal leaders in Anbar.

In one contract for a major U.S. company, the contractor said, he gave cash payments to tribal leaders and trusted them to buy the goods in Anbar instead of having to pay insurgents to bring the goods in from Baghdad. He said the tribesmen took photos as proof that they used the money properly and had to hide the supplies in their homes for fear insurgents would find out they'd been left out of the deal.

The contractor said such scenarios are extremely rare and very dangerous. More typical, he said, was a recent order he took to haul gravel to U.S. bases in Anbar.

"If I do it in the Green Zone, it's just putting gravel in Hesco bags and it would be about $16,000," the contractor said. "But they needed it for Ramadi and Fallujah. I submitted an invoice for $120,000 and I'd say about $100,000 of that went to the mujahideen," as Iraqis sometimes call Sunni insurgents.

An Iraqi who used to work as an interpreter for Titan Corp., the U.S. company that supplies local interpreters to U.S. forces in Iraq, said he witnessed countless incidents of insurgents shaking down contractors during the two years he spent as a translator in the "Engineering Operations Room" on a U.S. military base in Anbar. The man, a Fallujah native who has since fled to the United Arab Emirates, spoke on condition of anonymity because he hasn't ruled out returning to Iraq now that Anbar construction is on the upswing.

He said he was stunned when, from early 2004 to his departure in summer 2006, a parade of sheikhs with known insurgent connections were awarded contracts worth hundreds of thousands of dollars.

The interpreter said that on several occasions contractors pleaded with American officials for protection and told them that gunmen were shaking them down for large sums of cash.

In a project to rebuild Dam Street in Fallujah, the interpreter said, insurgents forced the local contractor to pay for protection on three or four separate occasions. Work would stop for a few days until the contractor paid up. In the end, the interpreter said, the contractor grew so terrified that he walked off the unfinished project and fled Iraq.

On another project for a water treatment plant in the insurgent stronghold of Zoba, the interpreter said, the local contractor was summoned to meet with militant leaders who threatened his life if he didn't give them at least half the contract's value.

Fawzi Hariri, a member of the Iraqi cabinet and head of the government's Anbar Reconstruction Committee, said some U.S. rebuilding funds "absolutely" have gone into insurgents' pockets. The exception is where construction sites were guarded around-the-clock by U.S. or Iraqi troops.

"If you're on your own, you certainly would have to pay somebody," Hariri said.

Hariri said the Iraqi government's Anbar committee checks contractors' permits and references, withholds payment until the work is reviewed and only hires workers who are familiar enough with Anbar's deep-rooted tribes to arrange for security. On the parallel U.S. reconstruction effort, however, American contracting officials rarely consult their Iraqi counterparts about how much they spent or who was paid on specific projects.

"The Americans are accountable only to themselves," Hariri said. "It's their money."

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Leila Fadel and McClatchy Newspapers special correspondent Mohammed al Dulaimy contributed.

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