I'm not at all surprised.
A> Capitalism at work. The people -- good and bad -- want the weapons, and the market steps in and provides them. Either by way of smuggled imports, stolen from the army/police, or whatever, they WILL enter the marketplace. Never mind that strict gun control officially exists there.
B> Gun control is a joke. Even if you choke off all "legit" gun sales and ownership regarding civilians, there will still be a demand for weapons and the marketplace will still supply them. Especially in chaotic situations like what is going on over there right now. By shutting down "legit" civilian arms sales and ownership, all you do is drive it underground. The same principle applies not only there, but everywhere else, including right here.
C> Sending weapons to the Iraqi army and police (in this instance) without insisting on strict security on the weapons themselves and strict serial number control to minimize such pilfering is idiotic. Not that it would halt the black market in weapons (there's still imports to deal with, along with clandestine pre-war caches), but it would help avert it somewhat, and drive the prices for black market weapons up even further. Better yet would be to insist that the Iraqi government use some of that oil money they have and buy their weapons themselves on the world weapons market. Maybe if they were spending their own (albeit limited) money on the weapons, they would have more incentive to tighten their own weapons security and audit procedures.