U.S. Finds Iraq Insurgency Has Funds to Sustain Itself

This is just crazy. From the New York Times:

BAGHDAD, Nov. 25 — The insurgency in Iraq is now self-sustaining financially, raising tens of millions of dollars a year from oil smuggling, kidnapping, counterfeiting, corrupt charities and other crimes that the Iraqi government and its American patrons have been largely unable to prevent, a classified United States government report has concluded.

The report, obtained by The New York Times, estimates that groups responsible for many of the insurgent and terrorist attacks are raising $70 million to $200 million a year from illegal activities. It says that $25 million to $100 million of the total comes from oil smuggling and other criminal activity involving the state-owned oil industry aided by “corrupt and complicit” Iraqi officials.

As much as $36 million a year comes from ransoms paid to save hundreds of kidnap victims in Iraq, the report said. It estimates that unnamed foreign governments — previously identified by senior American officials as including France and Italy — paid Iraqi kidnappers $30 million in ransom last year.

A copy of the report was made available to The Times by American officials in Iraq, who said they acted in the belief that the findings could improve American understanding of the challenges the United States faces in Iraq.

To be honest, I really don't know what I can say in terms of an analysis of this story--the numbers are just mind-boggling! It doesn't matter whether you choose to accept the $70 million or the $200 million figure here. The insurgency groups have a steady source of funds to conduct military operations against both the American occupation forces, or even amongst themselves and the Iraqi government with the civil war. The one number that I find especially telling is the ransom figure--$36 million a year paid out by "unnamed foreign governments" to free kidnapped victims in Iraq. It is ironic that the report singled out France and Italy as two of the governments responsible for paying $30 million in ransom last year. Even if you accept that $36 million ransom payment, that makes up over half of low estimate of $70 million that the terrorists and insurgents are raising for their war effort. Where's the other half coming from? Most likely oil smuggling:

The oil ministry in Baghdad, for example, estimated earlier this year that 10 percent to 30 percent of the $4 billion to $5 billion in fuel imported for public consumption in 2005 was smuggled back out of the country for resale. At that time, the finance minister estimated that close to half of all smuggling profits was going to insurgents. If true, that would be $200 million or more from fuel smuggling alone.

Even if the insurgents are able to smuggle out 10 percent of the $4 billion in fuel imported into Iraq, that gives the insurgents $400 million worth of fuel sold. A ten percent profit margin on $400 million sale of fuel oil gives $40 million in profits--I'm just doing back of the envelope calculations here. If the insurgents are smuggling out 30 percent of up to $5 billion in fuel oil imported into Iraq, then the insurgents are taking in $1.5 billion in fuel oil sales. The numbers here are astounding. And what is more, the insurgents can still use up what they took from Saddam's leftover armories before they start purchasing newer weapons.

One final little detail to reflect on from the Times story:

If the $200 million a year estimate is close to the mark, it amounts to less than what it costs the Pentagon, with an $8 billion monthly budget for Iraq, to sustain the American war effort here for a single day.

What a waste.