An audit of U.S. defense spending in Afghanistan finds the Pentagon may have spent a significant amount of money on fuel for the military there that came from Iran. Congress appropriated billions of dollars of taxpayer money to support the Afghan military and the lack of strict oversight means some of that money may have wound up in Tehran's coffers. A week ago, Iran said it was taking pre-emptive measures by cutting off whatever is left of its European consumer base from oil and natural gas. Demand from vibrant Asian economies, meanwhile, has provided a boost to Iranian oil exports. The audit finds that U.S. defense officials took action in late 2012 to stave off the flow of Iranian fuel products to Afghan forces. The U.S. government's own oversight, however, suggests that efforts to starve Iran of revenue isn't working.
Afghanistan depends largely on its neighbors, as well as Russia, to meet its fuel needs. Special Inspector General for Afghanistan Reconstruction John Sopko writes that he conducted his probe after allegations surfaced that Defense Department money may have been spending money on Iranian fuel designated for Afghan forces.
"The fact that the United States has paid for the acquisition and delivery of imported fuel for the Afghan National Security Forces -- nearly $1.1 billion for the Afghan National Army alone between fiscal years 2007 and 2012 -- raises concerns that U.S. funds could have been used to pay for imports of fuel potentially in violation of U.S. economic sanctions against Iran," he states.
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His comments come amid concerns that Iran installed new centrifuges at its Natanz nuclear facility, adding to growing speculation there may be military dimensions to certain aspects of Iran's nuclear program. U.S. and European sanctions on Iran's energy sector are meant to starve the country of the revenue it may need to fund its nuclear program. Iran managed to keep IAEA inspectors at bay just long enough to allay serious concerns, though even the Kremlin has now expressed frustration with the country's nuclear ambitions.
Chinese oil demand helped lift Iranian crude oil exports last month to their highest level since the EU imposed its embargo in July. Iran's currency collapsed last year under sanctions pressure, though the government there has taken a resilient tone during tough economic times. Iran last week said it was taking "pre-emptive" action against the EU by banning all crude oil and natural gas exports to the 27-member bloc. Now, with Brent crude oil prices hovering above the $100 per barrel mark, Iran is making plenty of cash from its existing consumer base.
Sopko writes that sanctions imposed on Iran are meant to prohibit "virtually all trade and investment activities with Iran." His report, however, acknowledges the difficulties in a regional fuel market where Iranian fuel is sometimes blended with that coming from Russia and Turkmenistan. Meanwhile, he notes that U.S. Central Command in late 2012 took action to prevent further potential violations of sanctions on Iran. Nevertheless, between 2007 and late 2012, billions of dollars of U.S. taxpayer money for fuel for the Afghan military may have wound up in the banks of one of America's greatest enemies – Iran.
By. Daniel J. Graeber of Oilprice.com