San José State University
Department of Economics
Thayer Watkins
Silicon Valley
& Tornado Alley

The CIA-Induced Inflation in the
Kurdish Area of Iraq, 2003

Six months before the invasion of Iraq the Central Intelligence Agency (CIA) of the U.S. sent a team of operatives into the Kurdish area of northwestern Iraq. They carried with them $32 million in American $100 bills. This money was to be used to secure the cooperation of Iraqis in providing information before and during the invasion. The financial inducement for cooperation had to be high because the punishment exacted by the Saddam Hussein regime was extreme; not only would the informant be executed with extreme cruelty but so would all of his family.

The money was brought entirely in one hundred dollar bills because such bills reduced the size of one million dollars to that which would fit into a backpack and weigh only 44 pounds.

The CIA team made large payments to various leaders of the Kurdish region of northern Iraq. This was to support their raising and arming a Kurdish militia.

After such payments had been make for a few months, the leader of the PUK faction, Jalal Talabani, came to the CIA outpost and told the operatives that they would have to supply some lower denomination American bills such as $10's, $5's and $1's. He said that because no one had change for a $100 bill the price for everything in Sulaymaniyah, even a cup of coffee, had become $100.

(To be continued.)

Bob Woodward, Plan of Attack, Simon & Schuster, 2004.

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