President Hamid Karzai of Afghanistan has admitted his chief of staff has received large amounts of cash from Iran.
Mr Karzai was responding to a report in The New York Times that Tehran had been passing bags of cash to Mr Karzai's aides.
The report said the cash was intended to promote Iran's interests in Kabul.
However, Mr Karzai said on Monday the money was not for an individual, but to help run the president's office.
He told a news conference that many countries had given aid money to Afghanistan in cash, including the United States.
"The government of Iran has been assisting us with 500,000 or 600,000 or 700,000 euros once or twice every year, that is an official aid," he said.
Mr Karzai said his chief of staff, Umar Daudzai, "is receiving the money on my instructions".
The New York Times said money was passed to Mr Daudzai in August by Iran's ambassador to Afghanistan, Feda Hussein Maliki.
Citing Afghan and Western officials, the report said it was part of a "secret, steady stream of Iranian cash to buy the loyalty of Mr Daudzai and promote Iran's interests in the presidential palace".
The officials claimed that the payments had been used to pay Afghan politicians, tribal elders and even Taliban commanders to secure their loyalty.
Slush fund not unusual - EU envoy
However, former EU envoy to Afghanistan Francesc Vendrell said the practice was far from unusual.
"Many governments that hope to court influence are paying and providing money to the president's office in what I would call a slush fund," he said.
"This has been going on since the very beginning, and the Americans are very much in the vanguard. So I'm not surprised the Iranians are doing it," he told the BBC.
US suspicious
The United States says it is suspicious of Iran's intentions.
The State Department says the US does not question Iran's right to provide financial assistance or Kabul's right to accept it.
But, it says, Teheran had a track record of meddling in its neighbours' affairs.
