U.S. Halts Aid to Iraqi Opposition

Despite a growing drumbeat to expand the war on terrorism to Iraq, U.S. officials this week suspended key funding to the leading Iraqi group opposing President Saddam Hussein because it has failed to account for tens of millions of dollars in U.S. aid.

The Iraqi National Congress, based in London, was formally notified Thursday that an audit of the group had revealed serious “financial management and internal control weaknesses” in its handling of U.S. funds, according to the State Department. The flaws encompass everything from failure to provide receipts to questionable use of funds.

The concern about the INC’s use of U.S. aid underscores the difficulty the Bush administration faces as it debates what to do about Hussein’s regime. Washington remains committed to ousting the Iraqi president, but problems with the INC have slowed and complicated the effort.

Besides questions about the use of aid managed by the State Department, the INC has also failed--because of its management problems--to use most of the $97 million allocated to it by Congress under the 1998 Iraqi Liberation Act, U.S. officials say. So far, the INC has used less than $5 million of the money, officials say.

The conflicts over money reflect a fundamental split between the United States and the opposition group in the effort to change the regime in Baghdad.

The INC, led by Ahmad Chalabi, is pushing hard for the U.S. to foot the bill for largely covert operations in Iraq. But the United States believes that the organization first has to build a viable operation and attract a wider following both in Iraq and in the region. So far, U.S. officials say, the group has failed to make significant progress on those fronts.

“They want us to support programs that take them into Iraq, and we don’t want to do that yet,” an administration official said. “The United States is not ready to take that step because of the consequences.”

U.S. officials are concerned, for example, about what might happen even with a food aid program operated by the group in Iraq. The danger, the officials say, is not only that Iraq might arrest INC operatives and put them on trial but also that the group might use the program to provoke an Iraqi response--and perhaps force U.S. military intervention.

“We need a group like the INC was supposed to be--an umbrella for the opposition with resources that people can turn to and use,” the administration official said. “We would like to see their [media] operating out in the region, building their case. We would like them to take advantage of a lot of training that’s available. But they’re not doing it. They’re intent only on going back inside Iraq.”

The INC has not made serious headway in ousting Hussein since its leadership was forced to flee in 1996, when the CIA-backed operation in northern Iraq collapsed because of fighting among its factions and pressure from Iraqi troops.

Critics of the opposition group within the administration express admiration for Chalabi’s commitment to overthrowing Hussein. But they are concerned about his domination of the INC.

Such differences over strategies led to an open split between the U.S. and the INC in September, when the previous State Department grant of $25 million expired.

When the group submitted a request for a new set of programs costing $25 million, it asked that $17 million of it be approved for operations in Iraq. The Bush administration rebuffed that request and approved only $8 million.

The INC said it wanted all or nothing, according to U.S. officials.

To show ongoing interest, the U.S. still provided $800,000 a month to the INC--until a recent report by the U.S. inspector general’s office instructed the State Department to “withhold or at least restrict future funding to the INC” until the group improves its accounting methods.

Based on the audit, the State Department cut funds for the INC’s Office of Mobilization and Coordination, which was set up to support people in training at the Pentagon, U.S. officials said. Since the September split over funding, the INC has not sent any new trainees.

“We repeatedly asked the INC to send names and the Pentagon has left vacancies in its program, but without trainees we can’t continue to fund the office set up to support them,” said a source familiar with the issue.

The State Department also cut funds for the INC’s Information Collection program, which is largely a news organization. Questions have been raised about the program’s high costs, especially since the audit found no time cards for employees or receipts for expenditures, among other things, U.S. officials say.

The State Department is also investigating funds for the group’s Office of Humanitarian Affairs, in part because of “its failure to propose a viable humanitarian program” for the Iraqi people.

“The INC always accuses the State Department of withholding funds because it doesn’t support the INC cause,” said Henri J. Barkey, a former State Department policy planner now at Lehigh University in Pennsylvania. “But, unfortunately, it was actually the INC that came up short every time in terms of providing accurate accounting and proper documentation and not living up to deadlines.”

U.S. officials say there have been improvements in the group’s operation. INC officials liked to fly first class on overseas trips, preferably on British Airways. Under U.S. law, however, aid grantees must fly in coach on American carriers. The INC has begun to comply with these kinds of basic rules, sources say.

U.S. officials say they are committed to restoring the full $25-million grant from the State Department if the INC will cooperate with improving its management.

The INC will still get $500,000 this month from the State Department.