The CIA has funneled hundreds of millions of dollars to Pakistan’s intelligence service since the Sept. 11 attacks, accounting for as much as one-third of the foreign spy agency’s annual budget, current and former U.S. officials say.

The Inter-Services Intelligence agency also has collected tens of millions of dollars through a classified CIA program that pays for the capture or killing of wanted militants, a clandestine counterpart to the rewards publicly offered by the State Department, officials said.

The payments have triggered intense debate within the U.S. government, officials said, because of long-standing suspicions that the ISI continues to help Taliban extremists who undermine U.S. efforts in Afghanistan and provide sanctuary to Al Qaeda members in Pakistan.

But U.S. officials have continued the funding because the ISI’s assistance is considered crucial: Almost every major terrorist plot this decade has originated in Pakistan’s tribal belt, where ISI informant networks are a primary source of intelligence.


The White House National Security Council has “this debate every year,” said a former high-ranking U.S. intelligence official involved in the discussions. Like others, the official spoke on condition of anonymity because of the sensitivity of the subject. Despite deep misgivings about the ISI, the official said, “there was no other game in town.”

The payments to Pakistan are authorized under a covert program initially approved by then-President Bush and continued under President Obama. The CIA declined to comment on the agency’s financial ties to the ISI.

U.S. officials often tout U.S.-Pakistani intelligence cooperation. But the extent of the financial underpinnings of that relationship have never been publicly disclosed. The CIA payments are a hidden stream in a much broader financial flow; the U.S. has given Pakistan more than $15 billion over the last eight years in military and civilian aid.

Congress recently approved an extra $1 billion a year to help Pakistan stabilize its tribal belt at a time when Obama is considering whether to send tens of thousands of additional troops to Afghanistan.


The ISI has used the covert CIA money for a variety of purposes, including the construction of a new headquarters in Islamabad, the capital. That project pleased CIA officials because it replaced a structure considered vulnerable to attack; it also eased fears that the U.S. money would end up in the private bank accounts of ISI officials.

In fact, CIA officials were so worried that the money would be wasted that the agency’s station chief at the time, Robert Grenier, went to the head of the ISI to extract a promise that it would be put to good use.

“What we didn’t want to happen was for this group of generals in power at the time to just start putting it in their pockets or building mansions in Dubai,” said a former CIA operative who served in Islamabad.

The scale of the payments shows the extent to which money has fueled an espionage alliance that has been credited with damaging Al Qaeda but also plagued by distrust.


The complexity of the relationship is reflected in other ways. Officials said the CIA has routinely brought ISI operatives to a secret training facility in North Carolina, even as U.S. intelligence analysts try to assess whether segments of the ISI have worked against U.S. interests.

A report distributed in late 2007 by the National Intelligence Council was characteristically conflicted on the question of the ISI’s ties to the Afghan Taliban, a relationship that traces back to Pakistan’s support for Islamic militants fighting to oust the Soviets from Afghanistan.

“Ultimately, the report said what all the other reports said -- that it was inconclusive,” said a former senior U.S. national security official. “You definitely can find ISI officers doing things we don’t like, but on the other hand you’ve got no smoking gun from command and control that links them to the activities of the insurgents.”

Given the size of overt military and civilian aid to Pakistan, CIA officials argue that their own disbursements -- particularly the bounties for suspected terrorists -- should be considered a bargain.


“They gave us 600 to 700 people captured or dead,” said one former senior CIA official who worked with the Pakistanis. “Getting these guys off the street was a good thing, and it was a big savings to [U.S.] taxpayers.”

A U.S. intelligence official said Pakistan had made “decisive contributions to counter-terrorism.”

“They have people dying almost every day,” the official said. “Sure, their interests don’t always match up with ours. But things would be one hell of a lot worse if the government there was hostile to us.”

The CIA also directs millions of dollars to other foreign spy services. But the magnitude of the payments to the ISI reflect Pakistan’s central role. The CIA depends on Pakistan’s cooperation to carry out missile strikes by Predator drones that have killed dozens of suspected extremists in Pakistani border areas.


The ISI is a highly compartmentalized intelligence service, with divisions that sometimes seem at odds with one another. Units that work closely with the CIA are walled off from a highly secretive branch that has directed insurgencies in Afghanistan and Kashmir.

“There really are two ISIs,” the former CIA operative said. “On the counter-terrorism side, those guys were in lock-step with us,” the former operative said. “And then there was the ‘long-beard’ side. Those are the ones who created the Taliban and are supporting groups like Haqqani.”

The network led by Jalaluddin Haqqani has been accused of carrying out a series of suicide attacks in Afghanistan, including the 2008 bombing of the Indian Embassy in Kabul.

Pakistani leaders, offended by questions about their commitment, point to their capture of high-value targets, including accused Sept. 11 organizer Khalid Shaikh Mohammed. They also underscore the price their spy service has paid.


Militants hit ISI’s regional headquarters in Peshawar on Friday in an attack that killed at least 10 people. In May, a similar strike near an ISI facility in Lahore killed more than two dozen people. Gen. Ashfaq Kayani, who served as ISI director before becoming army chief of staff, has told U.S. officials that dozens of ISI operatives have been killed in operations conducted at the behest of the United States.

A onetime aide to former Secretary of State Condoleezza Rice described a pointed exchange in which Kayani said his spies were no safer than CIA agents when trying to infiltrate notoriously hostile Pashtun tribes.

“Madame Secretary, they call us all white men,” Kayani said, according to the former aide.

CIA payments to the ISI can be traced to the 1980s, when the Pakistani agency managed the flow of money and weapons to the Afghan mujahedin. That support slowed during the 1990s, after the Soviets were expelled from Afghanistan, but increased after the Sept. 11 attacks.


In addition to bankrolling the ISI’s budget, the CIA created a clandestine reward program that paid bounties for suspected terrorists. The first check, for $10 million, was for the capture of Abu Zubaydah, a top Al Qaeda figure, the former official said. The ISI got $25 million more for Khalid Shaikh Mohammed’s capture.

But the CIA’s most-wanted list went beyond those widely known names.

“There were a lot of people I had never heard of, and they were good for $1 million or more,” said a former CIA official who served in Islamabad.

Former CIA Director George J. Tenet acknowledged the bounties in a little-noticed section in his 2007 memoir. Sometimes, payments were made with a dramatic flair.


“We would show up in someone’s office, offer our thanks, and we would leave behind a briefcase full of $100 bills, sometimes totaling more than a million in a single transaction,” Tenet wrote.

The CIA’s bounty program was conceived as a counterpart to the Rewards for Justice program administered by the State Department. The rules of that program render officials of foreign governments ineligible, making it meaningless to intelligence services such as the ISI.

The reward payments have slowed as the number of suspected Al Qaeda operatives captured or killed by the ISI has declined. Many militants fled from major cities where the ISI has a large presence to tribal regions patrolled by Predator drones.

The CIA has set limits on how the money and rewards are used. In particular, officials said, the agency has refused to pay rewards to the ISI for information used in Predator strikes.


U.S. officials were reluctant to give the ISI a financial incentive to nominate targets, and feared doing so would lead the Pakistanis to refrain from sharing other kinds of intelligence.

“It’s a fine line,” said a former senior U.S. counter-terrorism official involved in policy decisions on Pakistan. “You don’t want to create perverse incentives that corrode the relationship.”

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greg.miller@latimes.com


Times staff writer Alex Rodriguez in Islamabad contributed to this report.