- Iran acknowledges it has been funding Afghanistan for years, says money is for reconstruction

TEHRAN, Iran — Iran acknowledged Tuesday it has been sending funds to neighbouring Afghanistan for years, but said the money was intended to aid reconstruction, not to buy influence in the office of Afghan President Hamid Karzai.

Karzai said Monday he receives millions of dollars in cash from Iran, adding that Washington gives him "bags of money" too because his office lacks funds. U.S. officials asserted the money flowing from Tehran was proof that Iran is playing a double game in Afghanistan — wooing the government while helping Taliban insurgents fighting U.S. and NATO forces. Iran denies that.

"Iran has provided the country with plenty of help," Foreign Ministry spokesman Ramin Mehmanparast said Tuesday in his weekly news briefing in Tehran. "Iran has helped construction of Afghanistan and the preparation of its economic infrastructure and it will pursue it in the future, too."

Mehmanparast said Iran's help began years ago. He said peace and stability in Afghanistan is important for Iran.

The acknowledgment prompted a challenge from seven Iranian lawmakers who demanded that Foreign Minister Manouchehr Mottaki appear before parliament to clarify the payments, according to the news website www.Khabaronline.ir.

The call indicated that lawmakers — who have the power to impeach ministers — were unaware of the payments. Under Iran's constitution, government funds sent abroad, including aid donations and loans, must get parliamentary approval.

In a letter, the lawmakers demanded to know the amount of money sent over the past five years, where it came from, the way it was transferred and the legal basis for the payments.

On Saturday, The New York Times reported that Iran was giving bags of cash to President Karzai's chief of staff, Umar Daudzai, to buy his loyalty and promote Iranian interests in Afghanistan. The Times quoted unidentified sources as saying the cash amounted to a slush fund that Karzai and Daudzai used to pay lawmakers, tribal elders — and even Taliban commanders — to secure their loyalty.

Karzai told reporters Monday that he had instructed Daudzai, a former ambassador to Iran, to accept the money from Tehran.

Before Karzai spoke, the Iranian Embassy in Afghanistan dismissed the allegations that the Iranian government was making cash payments to Daudzai, calling them "ridiculous and insulting."

Iran publicly opposed the U.S.-led offensive that toppled the Taliban after the Sept. 11, 2001, terrorist attacks in the United States, though its relations with the Taliban regime had been frosty.

Iran is believed to not want the Taliban to return to power. But it remains wary of a long-term U.S. military presence on its doorstep in both Iraq and Afghanistan.

Copyright © 2010 The Canadian Press. All rights reserved.

- Afghan president confirms large cash payments by Iranian officials

Hamid Karzai says, yes, he receives about $2 million annually from Iran, but the cash is a donation and covers governmental operating costs. The U.S. makes such payments, he says.

Reporting from Kabul, Afghanistan —

Afghanistan President Hamid Karzai on Monday acknowledged that his office regularly received large cash sums from Iranian officials but insisted there was nothing untoward about the payments.

The New York Times, in an article in Monday's editions, described the periodic transfer of bulging sacks of currency to a senior Karzai aide and strongly suggested that the money was meant to curry favor on behalf of the Tehran government in policy matters.

At a news conference in the capital, the Afghan leader acknowledged receiving semiregular cash payments totaling around $2 million annually from Iran but said the sums were meant to defray governmental operating costs. Other countries, including the United States, make such donations as well, he told reporters.

"The government of Iran assists [the presidential] office," Karzai said. "Nothing is hidden. … Cash payments are done by various friendly countries to help the presidential office — to help expenses in various ways."

Hours before Karzai's disclosure, Iranian authorities in Kabul dismissed the allegations with gusto.

"Such baseless rumors by certain Western media are raised to create anxiety in the public opinion and impair the expanding relations between the two friendly and neighboring countries," the embassy said in the statement released early Monday, according to the pro-government Fars news agency.

But the revelations also could serve Iran's interests, underscoring its continued influence in the region even as Washington attempts to isolate Tehran over its continued pursuit of sensitive nuclear technology.

The episode illustrated the complex regional politics at play in Afghanistan. Karzai, who has spoken publicly of the possibility of the West abandoning Afghanistan, has openly courted neighbors such as China and Iran, as an apparent counterweight to the influence of the United States and other allies.

The incident also comes at a time when Karzai and his administration are under intense pressure to clean up graft and corruption in public life. Although Karzai's Western backers have been struggling to establish transparency in financial transactions involving his government, it is not unusual in Afghanistan for large sums of money to be disbursed in a much more informal manner.

American military officers in the field, for example, are sometimes given a considerable cash stockpile to be distributed to local tribal elders for projects at what is more or less their on-the-spot discretion. Such spending, intended as a bulwark against the insurgency, is sometimes referred to as using cash as a weapon.

The flap over Iranian money also comes as Karzai is locked in confrontation with the Western diplomatic community over his plans to suspend use of private contractors to safeguard humanitarian and development projects before the end of the year.

Western governments have expressed agreement that such security firms should be phased out eventually but argue that the Afghan security forces are not yet ready to step into the role such companies fill.

Karzai spent much of the weekend in negotiations with senior U.S. and Western officials over the issue and fielded a phone call from Secretary of State Hillary Clinton. The Afghan administration has indicated willingness to sign off on individual aid projects requiring private protection, but the West has balked at the effective granting of veto power to Karzai for development and humanitarian assistance.

Also at issue is whether the money that would have been paid to private security firms -- a multibillion-dollar business -- would be funneled instead to the Afghan security forces, by way of Afghanistan's Interior Ministry. Western officials have informed the Karzai administration there is no such plan in place.