Afghan President Hamid Karzai acknowledged on Monday that 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 said the money flowing from Tehran was further proof that Iran is playing a double game in Afghanistan _ wooing the government while helping Taliban insurgents who are fighting U.S. and NATO forces.
The United States has itself used cash as a weapon in the wars in both Afghanistan and Iraq _ from local development projects to win public support, to salaries for Iraqi insurgents who switched sides, to cash payoffs to influential community leaders willing to back the U.S. and its allies.
Karzai said that once or twice a year, Iran gives his office $700,000 to $975,000 for official presidential expenses.
"This is transparent. This is something that I've even discussed while I was at Camp David with President Bush," Karzai told a news conference, referring to meetings with then-President George W. Bush at the U.S. presidential retreat outside Washington.
"It is not hidden," he said. "We are grateful for the Iranians' help in this regard. The United States is doing the same thing. They are providing cash to some of our offices."
Asked whether the U.S. actually gives bags full of cash to the presidential office, Karzai responded: "Yes, it does give bags of money."
David Sherzer, a spokesman for Bush, declined to comment on Karzai's comments.
But U.S. officials in Washington said both countries have given Afghanistan assistance in cash payments _ a widespread practice in a country where few people have bank accounts or credit cards.
"Going back a number of years, because of the nature of the Afghan financial system, there have been times where assistance has come into Afghanistan in the form of cash," said State Department spokesman P.J. Crowley said.
"Our assistance is focused squarely on helping the Afghan people and the Afghan government improve the quality of governance, security, justice, jobs and services, and give the Afghan people a meaningful alternative to the Taliban recruiting."
Pentagon press secretary Geoff Morrell questioned Iran's motives, saying Tehran was playing a destabilizing role in Afghanistan.
"I think Iran in Afghanistan _ much as it has been in Iraq _ has been walking both sides of the street for years," Morrell told MSNBC. "On one hand, as this report indicates, clearly trying to curry favor with the government while at the same time on the other hand, training, arming, financing, directing anti-government forces."
Karzai's remarks came a day after The New York Times reported that Iran was giving bags of cash to the president'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 had used to pay Afghan 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.
"It is official and by my order," Karzai said.
The Iranian embassy in Afghanistan dismissed the allegations that the Iranian government was making cash payments to Daudzai, calling them "ridiculous and insulting." The statement, which didn't mention money that it might be giving the president's office, was issued earlier Monday, before Karzai's comments.
Karzai said that several nations have given money to his office _ starting with the United Arab Emirates, which provided $1.5 million nine years ago when Afghanistan's interim government was formed.
"That was a big help and we submitted all the money to the central bank and we were paying for the daily expenses of the government," Karzai said. "After that, a number of other countries helped us in the same way."
Karzai did not offer details about how the money was spent, saying only that it was used to "help the presidential office" and to "dispense assistance" to certain individuals.
Reports of Iranian money flowing into Afghanistan occurred as Iran appears to be gaining ground in competition with the U.S. for influence in America's other battleground, Iraq. The Iranians were instrumental in putting together a Shiite coalition that could end up controlling the Baghdad government to the exclusion of Iraqi Sunnis _ despite U.S. efforts to promote an inclusive administration in Iraq.
In Afghanistan, the Iranians appear to be exploiting Karzai's strained relations with the U.S. to expand their influence.
Last year, as relations with the West became strained over corruption in the Afghan government, Karzai's advisers said they urged the president to court neighboring Iran and strengthen relations between the two countries.
The advisers, who spoke on condition of anonymity to discuss private discussions with Karzai, said the Afghan leader was told that having Iran as an ally would bolster Kabul's strategic importance to the West and possibly even serve as a bridge to better relations between Western capitals and the Iranian regime.
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 in the region, which includes substantial American forces in Iraq to the west and Afghanistan to the east.
As a result, U.S. and Afghan officials say, Iran currently provides low-level support to insurgents to make it difficult for coalition forces to fight the Taliban.
Associated Press Writers Kathy Gannon and Rahim Faiez in Kabul, and Matt Lee in Washington, contributed to this story.