updated 11/26/2006 7:36:36 AM ET 2006-11-26T12:36:36

The Iraq insurgency has become financially self-sustaining, raising tens of millions of dollars a year from oil smuggling, kidnapping, counterfeiting, corrupt charities and other crimes, The New York Times reported in Sunday editions.

According to a classified United States government report, a copy of which was obtained by the newspaper, groups responsible for many of the insurgent and terrorist attacks are raising an estimated $70 million to $200 million a year from illegal activities.

Some $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, the Times said, citing the report.

As much as $36 million a year comes from ransoms paid over hundreds of kidnappings. Unnamed foreign governments -- identified in the past by senior U.S. officials as including France and Italy -- paid kidnappers $30 million in ransom last year alone, the report said.

The Times also quoted the report as saying: “If recent revenue and expense estimates are correct terrorist and insurgent groups in Iraq may have surplus funds with which to support other terrorist organizations outside of Iraq.”

The report, completed in June, was provided to the newspaper by U.S. officials in Iraq who told the Times they had done so in hopes that the findings could improve U.S. understanding of the challenges faced in Iraq.

According to the Times, the report holds out little hope that much can be done any time soon to stem the flow of funds to insurgents, acknowledging how little U.S. authorities in Iraq know about crucial aspects of insurgent operations.

And it paints a bleak picture of the Iraqi government’s ability, or willingness, to take the necessary measures to contain the insurgency’s financing, the Times said.

Some terrorism experts outside the government who were given an outline of the report by the Times criticized it for a lack of precision and a reliance on speculation, the newspaper noted.

Terrorist haven
The report was compiled by an interagency working group that is investigating the financing of militant groups in Iraq. A Bush administration official confirmed the group’s existence and said it is studying how money was moved into and around the country, the Times said.

The official said the group, led by the National Security Council, drew its members from the CIA, the FBI, the Defense Intelligence Agency, the State Department, the Treasury Department, and the United States Army’s Central Command, which oversees the war in Iraq. The group is led by Juan Zarate, deputy national security adviser for combating terrorism.

The report also concluded that the Iraqi insurgency no longer depends on the sums, in excess of $1 billion, that Saddam Hussein and his associates seized as his government collapsed.

The possibility that Iraq-based terrorist groups could finance attacks outside Iraq appeared to echo Bush administration assertions that prevailing in the war is essential to preventing Iraq from becoming a terrorist haven as Afghanistan became under the Taliban, the Times said, adding that that suggestion was one of many aspects of the report that drew criticism from Western terrorism and counterinsurgency experts working outside the government.

According to the Times, the report also said that U.S. efforts to follow the insurgency financing trails have been hampered by a weak Iraqi government and its new intelligence agencies; a lack of communication between U.S. agencies and between the Americans and the Iraqis; and the nature of the insurgent economy itself, chiefly driven by manual money transfers rather than more easily traceable means.

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