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Karzai admits Iran gives him 'bags of cash'

Afghan president Hamid Karzai admitted yesterday that Iran pays hundreds of thousands of pounds into a presidential slush fund run by his office, but angrily dismissed the suggestion of political corruption, claiming the payments were completely "transparent".

The revelation that Mr Karzai's chief of staff, Umar Daudzai, receives "bags of money" to the tune of €700,000 "once or twice a year"– a form of "official aid" according to Mr Karzai – is also a crude reminder of the battle for influence foreigners are waging in Afghanistan. Mr Karzai told a news conference that the presidential office received bundles of cash from "various friendly countries" including the United States.

"It's all the same, let's not make this an issue," he said. Asked what Iran expected in return, he snapped back that they wanted "good relations" and "lots of other things".

"We have also asked lots of things in return in this relationship, so it's a relationship between neighbours and it will go on and we'll continue to ask for cash help from Iran," the President said. The claim that Mr Daudzai, the presidential chief of staff, received Iranian cash surfaced on Sunday in The New York Times but was dismissed by Iran as malicious gossip peddled by the West to undermine Iran's Afghanistan policy. The Iranian embassy in Kabul called the allegations "ridiculous and insulting", although it has been undercut somewhat by Mr Karzai's statements.

The newspaper claimed that Mr Karzai used the money to buy the loyalty of Afghan MPs, tribal elders and Taliban commanders, although the President said the cash payments helped pay expenses and salaries, and debts to "people outside" the presidential palace.

The paper also reported that Mr Daudzai, a former ambassador to Iran, wanted to drive a wedge between the President and his main benefactor, urging him to build a closer relationship with his neighbour at America's expense. "Daudzai is the source of all the problems with the US. He is systematically feeding [Karzai] misinformation, disinformation and wrong information," an associate of the President apparently told the paper. A Daudzai aide dismissed the allegations as "rubbish".

Iran appears to be playing a double game in Afghanistan, funding and training Taliban-led insurgents one minute, and cosying up to Mr Karzai's government the next. Iranian spies, meanwhile, are reported to have financed the campaigns of several candidates in last month's parliamentary election.

The schizophrenic approach is motivated by the conflicting desires of seeing a stable government, in which Afghanistan's Shia minority is strongly represented, at the same time as US influence in the country is undermined.

The Iranian President, Mahmoud Ahmadinejad, has denied US intelligence reports that his government is abetting the Taliban. Whatever the exact scale of Iranian aid to the insurgents, it pales in significance compared with the support they receive from Pakistan, another neighbour with a powerful vested interest in Afghanistan's future.

More than anything the "bags of money" saga is a sad and slightly farcical reminder of the boxing match outsiders have been conducting in Afghanistan for decades, to the country's terrible expense.