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Is the US military funding both sides of the Afghan war?

Pay-offs from lucrative contracts with the U.S. military may be giving the Taliban more money than they are getting from drugs, according to sources.

“Of course we pay off the Taliban,” said one procurement director for an Afghan company that imports fuel for the military. “What is the alternative?”

There are few viable options for those who work in the widening area of Afghanistan that is under Taliban control. Those who do not pay up front end up bearing even greater costs in cash or blood. Contractors often tell the story of one transportation company that refused to pay – it lost 800 trucks before it bowed to the inevitable.

The amounts involved are far from negligible. According to the procurement director, who spoke on condition of anonymity, when fuel comes into the country from Central Asia it costs approximately $1.00 per liter.

By the time it reaches a military base in Kandahar or Tirin Kot, in the volatile, dangerous, Taliban-controlled south, the price has gone up to $1.60 — billed, of course, to the U.S. military. A modest portion — between $.10 and $.20 — goes to the company as profit; the rest, or more than 30 percent, goes for “security” — which means handouts to the Taliban to allow the shipment through. It adds up. According to Mike Capstick, head of Peace Dividend Trust, an organization that matches Afghan companies to international donors, the value of military contracts given to Afghan companies last year alone was $1.1 billion.

If, as insiders say, between 10 and 20 percent is being siphoned off to the Taliban, then funding from the U.S. military would rival the narcotics industry as a source of revenue for the insurgency.

“I think it is important to note that the ISAF and our international partners are taking a broad-based approach to identify and close vulnerabilities that criminals, including the Taliban, use to raise, store, and move funds,” Shanks said. “We work closely with our Afghan partners to take action against specific people involved in financing of the Taliban, and to build Afghan capacity in strategic areas, like internal audits, to better track budget and procurement flows, as well as to improve overall security conditions with the help of the Afghan National Security Forces.

Shanks pointed to a series of recent military operations aimed at capturing or eliminating insurgents and their supporters.

Attempts are also being made to track and control the "hawala" system, a traditional financial structure in this part of the world that does not admit easily to regulation.

Hundreds of thousands, perhaps millions, of dollars are moved through hawala every day. The procedure is simple, and virtually untraceable. The customer brings his money, in cash, to a hawala trader at a central market. The broker takes a percentage, then makes a phone call to a partner in London, Cairo, New York or Sydney, who dispenses the requisite amount in cash to a designated recipient.

In Kabul, the government has distributed forms to hawala traders, and is requiring that they fill them out for every transaction. This also means that the hawala trader would have to pay taxes on all his profits.

“Of course we do not record everything,” snorted one broker. “We record a percentage — usually for those businesses that are all legitimate and above board. We do not register the rest.”

The major customers for hawala, according to the broker, are those dealing in drug money and those with major international contracts.