Report says Iraq insurgents are financially self-sufficient

The insurgency in Iraq has become a financially self-sustaining enterprise, raising tens of millions of dollars a year from oil smuggling and kidnapping, according to a classified US report.

Armed groups responsible for almost 180 daily attacks against coalition troops are annually raising between $70m (£36m) and $200m from illegal activities, the report says. It says that between $25m and $100m comes from oil smuggling, while some $36m is raised from holding hostages to ransom.

"If accurate [these estimates indicate] these sources of terrorist and insurgent finance within Iraq - independent of foreign sources - are currently sufficient to sustain the groups' existence and operation," says the report, obtained by The New York Times. "In fact, if recent revenue and expense estimates are correct, terrorist and insurgent groups in Iraq may have surplus funds with which to support other terrorist organisations outside of Iraq."

The classified report, completed in June and commissioned by a working group within the White House National Security Council, offers little hope that much can be done in the short term to end insurgent financing. It also suggests that the Iraqi government is either unwilling or unable to tackle the problem.

Today, members of the Iraq Study Group, established by President George Bush and headed by the former secretary of state James Baker, will meet in Washington for two days of discussions over its proposals for achieving progress in Iraq. Its report is due to be completed by mid-December.