BAGHDAD: Mohammad Dulaimi says that when an American colonel called at his house asking him to inform on his neighbours, his first reaction was anger. Dulaimi says the colonel told him terrorists were operating in the Bahaijha district of Baghdad - near a US encampment that comes under frequent mortar attack - and handed him a flyer with a list of telephone numbers to call if he had information.

Dulaimi, a civil engineer, says he refused to help, as he believes it is a crime for Iraqis to betray their countrymen to occupying forces. Many Iraqis share his views. They say informants are often motivated by greed or grudges when they give US soldiers information about their neighbours - and that what they say often turns out to be false. But not all Dulaimi's neighbours share his qualms about informing - the following day a retired Iraqi army officer three houses away was arrested during a dawn raid in the normally peaceful neighbourhood.

Anger about informants is visible in the graffiti sprayed on walls in Baghdad and the restive towns of the "Sunni triangle", with slogans proclaiming death to collaborators - threats that have often been carried out.

ARMY SAYS INFORMANTS CRUCIAL: The US military says informants have led them to weapons caches, bomb-making workshops, and former Saddam Hussein loyalists and Islamist militants blamed for daily attacks on American troops.

Senior officials say they do not discuss the specifics of intelligence issues, but add that informants with local knowledge are crucial in the ongoing battle against insurgents.

They say offering multi-million-dollar rewards for information on leading fugitives has led to the capture of several key figures, and helped catch Saddam Hussein himself.

Brigadier General Mark Kimmitt, deputy director of operations for the US Army in Iraq, said the military uses "fair methods" to determine rewards, with a system that places "specific amounts on specific people".

Dan Senor, spokesman for Paul Bremer, the US civilian administrator in Iraq, says the quality of intelligence has improved dramatically since the capture of Saddam, helped by the system of rewards. He said the rewards were a positive incentive to help "mitigate the risk" of passing on information.

The Iraqi who led US troops to Saddam's sons Uday and Qusay - killed last July in a raid in Mosul - received a $30 million reward and was relocated to another country.

US forces are offering $10 million for information leading to the capture of Saddam's former deputy Izzat Ibrahim al-Douri, and the fugitive militant Abu Musab al-Zarqawi, a suspected Al Qaeda operative blamed for a series of attacks in Iraq.

Some Iraqis say the system of using informants is the same as during the rule of Saddam, when people would report on their neighbours, friends and sometimes even family members to the Mukhabarat secret police. And they say that in some cases, informants who prospered under Saddam are prospering again by offering information to the Americans. "They would write before to party bosses and now they take dollars and inform the Americans," said Ibrahim Kubaisi, a merchant who says his brother Faisal was accused of being a guerrilla by a neighbour with an old grudge.

Iraqis say American forces must take account of the fact that some informants manipulate the system to settle scores. "There is no government and there are personal grudges that cannot be settled in the absence of authority...so some seek to get back their rights indirectly," said Shaker Obeidi, a former detainee arrested by US troops after a tip-off that he was financing insurgents, and later released. -Reuters

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