Back in 2004, it was evident that criminal activity was a primary driver of the growing insurgency in Iraq (see: "Guerrilla Entrepreneurs" October 22, 2004 for more). If looked at from a global guerrilla systems dynamic, self-financing via criminal activity is best seen as a positive feedback loop -- a mechanism that reinforces an aberrant trend. For example, it rewarded early efforts at the disruption of the Iraqi oil system (see "Target: Iraqi oil production" July 12, 2004 for more). It also provided a mechanism for attracting new participants to the open source war -- a place where groups formed out of primary loyalties could find financial support for their activities -- and established a means of perpetual funding for Iraq's bazaar for mercenary violence (which is used to hire teams for IED attacks and other forms of violence).
In a positive development, Juan Zarate (a deputy national security advisor) and a cross functional team (composed of people from the FBI, CIA, etc.) recently wrote a classified report that recognized the role of criminal self-financing. For more, read the story by John Burns and Kirk Semple (at the NY Times) on the leaked copy they received. Unfortunately, the vagueness of the report's findings indicates how little the government knows about these in-country financial flows and the underlying dynamics of the type of warfare being waged in Iraq.
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