Inefficient Iraq resorts to secret arms deal

BAGHDAD — An $833 million Iraqi arms deal secretly negotiated with Serbia has underscored Iraq's continuing problems equipping its armed forces, a process long plagued by corruption and inefficiency.

The deal was struck in September without competitive bidding, and it sidestepped anti-corruption safeguards, including the approval of senior Iraqi army officers and an Iraqi contract-approval committee. Instead, it was negotiated by a delegation of 22 high-ranking Iraqi officials, without the knowledge of U.S. commanders or many senior Iraqi leaders.

The deal drew enough criticism that Iraqi officials later limited the purchase to $236 million. And much of that equipment, American commanders said, turned out to be either shoddy or inappropriate for the military's mission.

An anatomy of the purchase highlights how the Iraqi army's administrative abilities — already hampered by sectarian rifts and corruption — are woefully underdeveloped, hindering it in procuring weapons and other essentials in a systematic way.

Such weaknesses mean that five years after the American invasion, the 170,000-strong Iraqi military remains underequipped, spottily supplied and largely reliant on the United States for such basics as communications equipment, weapons and ammunition.

Iraq's defense minister, Abdul Qadir, defended the arms deal, saying he had followed proper contracting protocols and had informed Prime Minister Nouri al-Maliki every step of the way.

Nonetheless, American commanders and some Iraqi officials were critical. Closer monitoring of weapons deals has been a sensitive subject since a series of tainted arms purchases totaling $1.3 billion in Iraqi government funds in 2004 and 2005. Lacking electronic banking systems at the time, Iraqi officials paid for second-rate or nonexistent weapons and equipment in cash, using middlemen to ferry duffel bags stuffed with bricks of $100 bills.

That episode brought down the previous defense minister, Hazam Shalan, now a fugitive, and tarnished the reputation of the interim prime minister, Ayad Allawi. American and Iraqi officials said the loss of so much money and time caused critical delays in the development of the Iraqi army.

Those with knowledge of the Serbian arms deal said they knew of no specific crimes, but warned that with so little transparency and such poor oversight, problems were likely to emerge, as they did with the 2004 deal.

The Serbian deal called for the purchase of a large number of helicopters, planes, armored personnel carriers, mortar systems, machine guns, body armor, military uniforms and other equipment. It largely was negotiated by Qadir and the planning minister, Ali Glahil Baban. The deal was signed in March, American military officials said.

Pentagon program

American military officials and the Iraqi authorities alike point to the Pentagon's little-known Foreign Military Sales program as the reason the Serbian arms deal was pursued in the first place. After that, however, their versions of events diverge sharply.

Under the sales program, used by more than 100 allied nations, Pentagon officials serve as intermediaries for government-to-government defense procurements, handling administrative issues, logistics, delivery, maintenance and training.

Defense contractors also benefit to some extent, because the program often channels clients to American companies that produce arms and other equipment.

American officials hoped the program would help Iraq spend more of its money on defense. For the first time, Iraqi military expenditures of $7.5 billion last year surpassed the $5.5 billion in American financing for Iraq's military.

But with protocols spanning hundreds of pages, the program is built more for transparency and standardization than for speed.

Beginning in late 2006, the Iraqi government deposited $2.6 billion in an account for Foreign Military Sales procurements. But by September 2007, less than $200 million worth of badly needed equipment had been delivered, and many of those items were stockpiled because of poor distribution and accountability systems. And that, the officials noted, was during one of the most violent periods on record.

A bureaucracy used to functioning under a command economy during the reign of Saddam Hussein had little use for formal procurement protocols and was unaccustomed to such basic practices as writing detailed specifications.

Some critics, all of them high-ranking Iraqi and American military officials, contend that senior Iraqi officials intentionally obstructed American-sponsored procurements because they feared the sales program would prevent them from siphoning off a share of the money. But they offered no independent corroboration.

American procurement experts were so mystified by some of the delays that they set up a new office to track procurements and found that many of the delays led straight back to Qadir's desk. Qadir denied delaying contracts or making money from them.

After months of delays and an overhaul of the Pentagon procurement bureaucracy, the program increased the value of its delivered equipment to $1 billion by this February. But in the absence of a comprehensive distribution and inventory system in Iraq, much of that equipment remains locked in Iraqi storehouses, American officials said.

Qadir blamed the slowness of the Foreign Military Sales program for his decision to deal directly with Serbia.

In an interview in February in his office, Qadir, a Sunni native of Ramadi, confirmed that the original Serbian deal "exceeded $800 million."

"The thing is, we did not limit ourselves to any fixed number or fixed price," he said.

But critics say the deal circumvented fragile anti-corruption safeguards. Indeed, at Qadir's urging, al-Maliki abolished the National Contracts Committee, a mandatory review agency for all government purchases of more than $50 million.

Al-Maliki also overrode the nation's Supreme Economic Committee after it expressed concerns that the Serbian deal lacked guarantees of service from the Serbian government.

The deal also was supported by Iraq's Office of the Commander in Chief, a shadowy group of Shiite advisers to al-Maliki that American officials accused last year of leading a purge of Sunni Iraqi army commanders who had cracked down on Shiite militia leaders.

"I heard about it out of the blue, that the minister of defense took a delegation to Serbia and came back and said he had signed deals with the Serbian prime minister," said one high-ranking Iraqi government official. "Why Serbia? Why not Ukraine? Why not Russia? We just don't know."