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. Last Updated: 07/27/2016

Tracing Hussein's Cash Flows Proves Tough Task

BAGHDAD, Iraq -- Iraq's U.S.-appointed financial guru has a problem: It has been impossible to understand how Saddam Hussein spent the country's money.

"We just don't have that, probably never will. It has been very difficult to get the figures for the prewar operating budget," said Peter McPherson, appointed last month to the top financial job at the U.S.-led civil administration running Iraq.

U.S. President George W. Bush wants answers to where Hussein's cash went, especially the suspected billions earned from a long-running illicit oil smuggling operation.

The money was siphoned away from a UN supervised program selling oil to buy food and medicine for the people of Iraq, which has the world's second-biggest oil reserves after Saudi Arabia but has been hit by UN-imposed sanctions since its 1990-91 occupation of Kuwait.

The UN Security Council could decide this week whether to end sanctions under a U.S. proposal for the United States and Britain to have powers to spend oil revenues for reconstruction.

But sorting out Iraq's finances to help rebuild the nation is not proving easy, according to officials of the Office of Reconstruction and Humanitarian Assistance, or ORHA, which is running the country until an Iraqi interim authority takes over.

They say it is impossible to gauge the true size of Hussein's "black budget" or whether it could yield proof Baghdad had a weapons of mass destruction program -- the main reason cited for the U.S.-led war launched on March 20 that ousted Hussein.

About $1 billion in cash taken by Hussein's son Qusay in tractor-loads from the central bank just before the war has largely been recovered, U.S. Treasury officials said.

"Coalition forces returned about 20 percent of that. Who knows how much more is out there," a senior ORHA official said.

The officials said they see evidence of a state within a state whose workings were known only to Hussein and a handful of aides. Even captured former Finance Minister Hikmat Ibrahim al Azzawi has revealed nothing useful to interrogators so far.

Working with records that have survived the looting of ministries and the central bank, McPherson and his team of experts are struggling to put together a state budget that will show where every penny will go for the first time in decades.

"One of the things that is so important in this new government is that revenues be known where they came from, the underlying contracts and deals that those be transparent and how the money is spent is clear," McPherson, president of Michigan State University since 1993, told reporters at the weekend.

Sitting in a stifling reception hall of one of Hussein's former palaces converted into ORHA headquarters, McPherson knows he must quickly restore the economy to normal, starting with payments to more than 3 million civil servants and pensioners.

"There has been a disbursement of a little over $20 million and we fully expect additional resources disbursed shortly," McPherson said.

Other senior officials said 1.8 million pensioners across Iraq this week started getting a $40 emergency payment to tide them over until regular disbursements start.

More significantly, ORHA has readied 130 billion dinars (about $100 million) to pay delayed April salaries under a revamped scheme that would more than double doctor and teacher wages and slash those for security services and the military.

Salaries now range between 100,000 to 500,000 dinars, seeking to redress the major imbalances created by a complicated system of bonuses under Hussein that sought to reward loyalists.

Iraq's central bank, whose central vault remains under water in its flooded basement, is set to restart operations on May 30.

"Our biggest surprise was the extent of the destruction," another senior ORHA official said. "We are making progress, but I would say we are crawling."