Afghan President Hamid Karzai on Monday confirmed that he receives cash in bags from Iran, but he defended the process as "transparent."
"This is transparent. … This is something that I have also discussed when we were at Camp David with President [George W.] Bush," Mr. Karzai told reporters during a news conference in Kabul, noting that "this is nothing hidden."
"We are grateful for the Iranian help in this regard," he said. "The United States is doing the same thing. They are providing cash to some of our offices."
Mr. Karzai was responding to a New York Times report that said the president's confidant and top aide, Umar Daudzai, had received plastic bags stuffed with euro bills on a trip to Iran in August.
Mr. Karzai said he was grateful to Iran for the help and that Mr. Daudzai was acting on his instructions.
Iran's ambassador to Afghanistan, Feda Hussein Maliki, passed the cash to Mr. Daudzai, according to the Times report.
The Iranian Embassy in Kabul in a statement on Monday dismissed the Times report as one based on "baseless rumors" intended to impair relations between Afghanistan and Iran.
Mr. Karzai said the money was used to maintain the presidential office.
U.S. officials are wary of Irans growing influence in Afghanistan.
State Department spokesman Philip Crowley said the U.S. is concerned about the payments because of Iran's past "negative" role in its neighborhood.
"We'll let the government of Afghanistan speak to how they spend the financial assistance received from other countries. But we remain skeptical of Iran's motives, given its history of playing a destabilizing role with its neighbors," he said.
"We hope that Iran will take responsibility to play a constructive role in the future of Afghanistan," Mr. Crowley said.
White House deputy spokesman Bill Burton told reporters traveling with President Obama that the "American people and the global community have … every reason to be concerned about Iran trying to have a negative influence on Afghanistan."
Mr. Karzai said he would continue to seek cash from Iran.
In return for this support, Iran has asked for "good relations … and lots of other things," Mr. Karzai said.
Marvin Weinbaum, a former Afghanistan analyst at the State Department and currently a scholar at the Middle East Institute, said the Iranians are providing Mr. Karzai with a slush fund.
"Iran is buying influence, so why not buy it at the top," Mr. Weinbaum said.
"The Iranians have been two-faced. They don't want the Taliban back; on the other hand they don't want the U.S. to be comfortable there," he said.
Despite Mr. Karzai's claim of transparency in the cash-transfer process, a former Afghan official who served in the Karzai administration said members of Mr. Karzai's own Cabinet were in the dark on these transactions.
"It is true that the U.S. was providing cash; so was [the European Union] right after the fall of the Taliban for everyday expenses or travel expenses, but to call Iranian cash follow a transparent process, he must be delusional," said Wahid Monawar, a former chief of staff in the Afghan ministry of foreign affairs.
Mr. Monawar said any financial aid to Afghanistan must go through the ministry of finance and not Mr. Karzai's aides.
He recalled a telling example of Iranian influence within the Karzai government when he was serving as the Afghan ambassador to the International Atomic Energy Agency in Vienna.
Mr. Monawar said the government in Kabul put enormous pressure on him to drop an Afghan bid for a seat on the IAEA board of governors in order to allow Iran to takes its place.
"The Iranian ambassador was insisting on receiving more cables from Kabul, a clear sign of their connections in foreign ministry and palace," Mr. Monawar said.
Meanwhile, a former governor of an Afghan province that shares a border with Iran said the Karzai government and its Western allies are underestimating Iran's destabilizing influence.
Ghulam Dastgir Azaad, who was in charge of Nimroz province, said he frequently investigated and was sometimes an intended target of attacks inside Afghanistan that variously used Iranian-supplied weapons or Iranian-trained militants, according to Reuters news agency.
"No one pays [as] much attention to Iran as Pakistan, but that's a mistake ... Iran plays its own hidden game to increase its influence in western areas," Mr. Azaad told Reuters.
On Sunday, Mr. Karzai chaired a meeting of the Afghan national security council at which he reaffirmed his commitment to dissolve private security firms, which he described as a key cause for insecurity.
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