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ONE-YEAR ANNIVERSARY SPECIAL REPORT

Iraq Journals

Glimpses of life in a war-torn country by GNS national security correspondent John Yaukey and photo director Jeff Franko.

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January 26, 2005

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Monday, July 28

Recycled Iraqi assets aid reconstruction

By Jane Norman | The Des Moines Register

WASHINGTON - The United States is bringing millions of dollars in U.S. currency seized from fallen Iraqi leaders back to the United States, changing the money into smaller denominations and shipping it back to Iraq for reconstruction efforts, government officials said Friday.

Other assets held by fallen dictator Saddam Hussein that had been frozen by the United States are also being changed into small-denomination U.S. currency to help pay police officers and other civil service workers in the battered nation.

Members of a National Guard transportation unit from Red Oak, Iowa told a Des Moines Register reporter in Kuwait they have been hauling boxes of U.S. cash while serving in Iraq and Kuwait.

Tony Fratto, a spokesman for the U.S. Department of the Treasury in Washington, said that U.S. money seized from Saddam or other leaders first is authenticated by machines shipped to the Persian Gulf by the Secret Service. While the machines are not as precise as those used at the Federal Reserve, Treasury workers can get a pretty good idea about how much of the money is authentic, he said.

U.S. troops have recovered $800 million in U.S. currency thought to have been taken by Qusai Hussein, one of Saddam's sons who was recently slain, Fratto said.

Most of the money found was in hundred-dollar bills, which are almost impossible to use in Iraq's impoverished economy, Fratto said. After the money is authenticated, he said, it is sent back to the United States to be exchanged for much smaller denominations.

``In the Iraq economy right now, even a $20 bill is too large a denomination,'' he said. ``You could buy a house with a $100 bill. With a $5 bill you could buy a truckload of tomatoes.''

The economy in Iraq deteriorated under Saddam's dictatorship, with the gross domestic product and income per capita plummeting during the past two decades.

The U.S. role in cash exchange is expected to be a temporary one. By October, the U.S. government hopes to replace the entire stock of Iraqi currency with a new Iraqi dinar, and it's possible the Red Oak unit might be involved again because secure transportation would be required, Fratto said.

About 20 employees of the Treasury Department are in the Middle East to coordinate the effort, he said, along with counterparts from allied nations such as the United Kingdom.

Some $1.7 billion in Iraqi assets frozen by the United States in 1990 also have been shipped into Iraq in small denominations to pay schoolteachers and hospital workers, and to secure humanitarian aid. President Bush vested that money in March, meaning it was available to be paid out.

The account is in the New York Federal Reserve. ``They have actual cash in a warehouse in New Jersey,'' Fratto said. ``It gets trucked to Andrews Air Force Base, loaded up on pallets on an aircraft and flown to Kuwait City or Baghdad, unloaded there and trucked, most often, to the Central Bank of Iraq.''

John Taylor, undersecretary of the Treasury for international affairs, told the Senate Foreign Relations Committee in June that a top reconstruction priority from the start was to make emergency and salary payments to government workers and pensioners in Iraq, and the plan called for using U.S. dollars as an interim measure while the Iraqi economy was stabilized.``Despite tremendous logistical challenges, the system of payments has been a success,'' said Taylor, adding that as of that point some 1.5 million Iraqis had received payments.

Eventually Iraq's own resources, including payments for oil, are expected to be used for rebuilding.