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 Iranian officials have been handing bundles of cash to Hamid Karzai's chief of staff as part of an effort to gain influence in Afghanistan and sideline NATO, according to Afghan and western sources in Kabul.

The payments, which officials say total millions of dollars, go into a secret fund used by Umar Daudzai and Karzai, the Afghan president, to pay Afghan politicians, tribal elders and even Taliban commanders to secure their loyalty, states the report.

"It's basically a presidential slush fund," a western official said. "Daudzai's mission is to advance Iranian interests."

The Iranian payments are intended to secure the allegiance of Daudzai, a former ambassador to Tehran, who consistently advocates an anti-western line to Karzai, the officials said. An aide to Daudzai dismissed the allegations as "rubbish."