AFAIK, that ammo wasn't supposed to go to ANYONE. It was lousy oversight, and a con artist made off with lots of taxpayer dollars. He should hang for that. Or just ship him off to China for a "trial", since he broke our laws and their laws by importing Chinese ammo to the US and shipping it elsewhere. He broke a book's worth of international laws.
Nobody in their right mind would supply old corrosive eastern bloc ammo to any modern military.
Another question I have is why, precisely, we have been ordering new 7.62x39 AKs for the Iraq forces instead of having AK-101's shipped instead. They'd be on the same platform with no learning curve, and we'd have tighter control over ammo with less logistics, since they use the same 5.56x45 our M-4's use. As it is now, so much stuff gets stolen or sold on the black market, some of the x39 we're supplying them with is probably going in other, older AKs and coming back at our guys. There's a lot more 7.62x39 weapons in the hands of insurgents, much less 5.56x45 NATO.
If US forces and Iraqi forces are fighting side by side, shouldn't they be using the same ammo...? So why not, say, M-4's for US, Bulgarian SLR-106 for Iraqi, and they can share battlepacks?