Billions Lost in Secret Federal Reserve Funding of Iraq War

Tens of billions were shipped to Iraq since the 2003 invasion, most of it lost or stolen. And we're not allowed to know about it.

by John Glaser, October 25, 2011

Since the beginning of the Iraq War in 2003, the New York Federal Reserve has been shipping tens of billions of dollars to the government and central bank of Iraq, ostensibly for reconstruction and resumption of governmental services after the fall of Saddam Hussein. Between 2003 and 2008, over $40 billion in cash was secretly shipped in trucks from the New York Federal Reserve compound in East Rutherford, New Jersey to Andrews Air Force Base outside of Washington, where they were then flown by military aircraft to Baghdad International Airport. In just the first two years, the shipments of dollar bills weighed a total of 363 tons.

But much of that money was stolen, misappropriated, and simply lost. Despite Congressional hearings and reports, official inquiries from Washington to Baghdad, an investigating special inspector general’s office and Department of Defense, nobody knows exactly what happened to the bulk of the money. Likely destinations of the stolen fiat, secretly printed out of thin air to fund the US government’s illegal war and occupation in Iraq, went towards intricate contracting schemes, corrupt Iraqi and American officials, and brash, blanket appropriations in war torn Iraq.

The shipments followed a detailed route, documenting by the minute who was in custody of the money, until it reached the Coalition Provisional Authority (CPA) official in Baghdad who arranged for them to get to the Central Bank of Iraq in downtown Baghdad. That responsibility was fulfilled by one man, a naturalized American citizen of Lebanese descent who was born in Saudi Arabia working as a civilian contractor for the US military. Only his first name has been released: Basel. He was the last to see the bales of cash before they entered the Central Bank of Iraq.

The flow of money between the Iraqi government and central bank and the New York Federal Reserve did not end in 2008. Rather, it continues to this day, albeit reportedly in smaller amounts. “We don’t have access to the Federal Reserve account to know how much money actually came out of the Fed,” said Jason Venner, the inspector general’s chief auditor. “They won’t tell us.”

The government of Iraq continues to pour portions of the profits from its renewed oil industry into its accounts at the Fed in New York, called the “Oil Proceeds Receipts Account” that serves as a cash reserve for the Iraqi Central Bank. Just this passed April, the Iraqi government informed the UN security council about a new account it is setting up with the Fed to replace the Development Fund for Iraq account established at the beginning of the war.

The issue of the tens of billions of dollars – at least that portion of the total which has been made public – being sent to Iraq for what the US and Iraqi governments call reconstruction and then being lost, stolen, unaccounted for, etc. is indeed a criminal level of recklessness and negligence. But another aspect of these shady giveaways is perhaps more fundamental. At the beginning of the Iraq War, the US government secretly commissioned the New York Federal Reserve to create money in order to covertly fund the war and the newly-crafted client regime in Iraq. The American people were not informed, Congress was in the dark, and the total amounts and the beneficiaries involved are to this day being kept secret.

This clandestine collaboration of unaccountable public-private institutions colluding to facilitate warfare and secure profits in the process understandably leads to questions of the legitimacy of these institutions. The Federal Reserve system has long been tied to the most egregious genre of violence perpetrated by the state, that is war. Yet hardly any support in Congress exists to impose restrictions and accountability on the Federal Reserve, and the institution itself seems entrenched beyond the grip of those most affected by its policies. Both Americans, and Iraqis.

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