Didn't see this coming...

A report compiled by the Iraqi Board of Supreme Audit has concluded that at least half, and probably more, of $1.27bn (£700m) of Iraqi money spent on military procurement has disappeared into a miasma of kickbacks and vanished middlemen - or else has been spent on useless equipment.

The report, leaked to the US news organisation Knight Ridder, comes as a blow to the credibility of the Iraqi army and its ability to contain the increasingly cogent insurgency.

According to the report, led by former human rights minister Abdel Baset al-Turki, the vanished money came solely from Iraqi funds, not from foreign donations to Iraq's military or the US-funded training budget.

The report focuses on an eight-month period after the transfer of sovereignty from the US-led occupation to caretaker Iraqi authorities on June 28 2004.