Monday, September 21, 2009

Lockerbie's cloak and dagger

Commentary - Executive magazine

Earlier this month, Libyan leader Muammar al-Qaddafi's son, Seif al-Islam, told the Arab press that the case of Abdelbaset Al-Megrahi, the Libyan convicted by a Scottish court for the bombing of a PanAm flight over Lockerbie in 1988, “is over for good”.

It would seem to be over for Megrahi, returned to Libya in August on compassionate grounds – he has terminal cancer - after serving eight years in prison. But the Lockerbie issue, in which 270 people were murdered, is far from over.

On an almost weekly basis, certain British publications have been running articles that something was amiss in both the decision to free Megrahi and the investigation into the bombing.

The first major story was that oil giant BP signed major oil deals with Libya in the week following Megrahi's release. Could be coincidence, but certainly fishy. The British government of course claimed nothing of the sort. There could be no “trade for terrorists.”

BP then came out and scuppered that whole premise, saying it had lobbied the British government in late 2007 that a delay in concluding a prisoner-transfer agreement with the Libyan government could hurt a $900 million deal it had inked with Tripoli.

Then it was revealed that the new international mediator on the bloc, Qatar, had put its oar in, with the Minister for International Cooperation, Khalid bin Mohammed Al-Attiyah, pressing Scottish First Minister Alex Salmond over Megrahi in June. Scotland is in talks with Qatar to fund a $3.4 billion road bridge, major subsea electricity cables and other projects.

So yet another case of that sleazy troika of money, oil and dirty politics coming together. But that has been the case from the start. When Libya was accused of being the mastermind, Tripoli eventually paid out compensation to families affected by the Lockerbie bombing as part of a deal to lift economic sanctions. While Tripoli paid up, it refused to accept guilt. “We thought that it was easier for us to buy peace,” said Libyan Prime Minister Shukri Ghanem in a 2004 interview with the BBC.

If that wasn't curious enough – we are not guilty but here's millions of dollars so we can get rid of sanctions – then just as curious was the mainstream Western media's silence on why the Libyans were so jubilant when Megrahi touched down in Tripoli. It was seen as callous and miscalculated. Prime Minister Gordon Brown was “repulsed,” and Barack Obama “outraged”; but Libyans, publicly and privately, consider Megrahi to be innocent.

Yet if the mainstream media suggested that, this would imply a cover up and that Megrahi was framed for the bombing. Explaining all the ins and outs of a stitch-up would have been too much for a report on the 10 o'clock news. Indeed, there are a reported 600 pages of new and deliberately suppressed evidence that would have cleared Megrahi's name if the case had continued, and Megrahi not been pressured by the British government to drop his appeal in exchange for immediate release. Even the Scottish judges admitted there was a “mass of conflicting evidence”.

Let's take a few puzzling parts of the investigation. A “key secret witness” at the original trial, who claimed to have seen Megrahi putting the bomb on to the plane at Frankfurt, was exposed by the defense as a CIA informer that would have been paid up to $4 million if Megrahi was convicted. Then there is the circuit board and bomb timer “found” around Lockerbie and proved by a forensic scientist to have no trace of an explosion on it. But the crucial, damning evidence that put Megrahi away was the clothes found in the wreckage of the plane. A Maltese store owner claimed he sold Megrahi the clothes, yet he gave a false description of Megrahi in 19 separate statements and couldn't even recognize him in the courtroom.

The whole saga of the actual bombing, the reasons behind it and the trial itself– held in Holland without a jury – would make for a good Hollywood thriller. The Lockerbie bombing is a story of double crosses, bribed and dodgy witnesses, government corruption, CIA rogue agents, drugs for hostage deals in (where else?) Lebanon, and tampered evidence. It is also one about the ongoing 'war on terror,' and how geopolitical strategic interests get in the way of real justice.

Qaddafi junior saying that the issue is over is somewhat true for Libya. The country has successfully come in from the cold and now part of the club again; Megrahi is home, guilty in the eyes of the Scottish courts and much of the West but considered innocent in Libya. As for finding out 'whodunnit', the Lockerbie case is yet another file in that ever growing pile of unsolved, politically charged cases of murder and mayhem.

PAUL COCHRANE is the Middle East correspondent for the International News Service

Somalia: Piracy, Ransom and Wads of Cash

EUNAVFOR ship Brandenburg escorts the MV Hansa Stavanger in the pirate ridden waters off Somalia

By Paul Cochrane in London and Beirut

Executive Magazine

The financial cost of piracy off the Horn of Africa has surged over the past year as the pirates become increasingly audacious, better funded and equipped, and able to extend their reach in the high seas. From vessels warned to keep 50 nautical miles off the Somali coast a few years ago, pirates are now boarding ships as far away as the Seychelles. The area the European Union Naval Force (EUNAVFOR) patrols is some 9 million square kilometers, almost the territorial size of the United States of America.

Just as the range of pirate operations has increased, so has the ransoms being paid out, rising from $250,000 to an average of $1.25 million in 2008. According to the London-based International Maritime Bureau (IMB), there were 111 pirate attacks off the Horn of Africa in 2008, of which 42 were successful hijackings. In the first half of 2009 there have been 130 incidents.

The situation turned into what was internationally deemed 'a crisis' last year, prompting the EU to establish its first naval security mission - consisting of 12 ships - in 2008, while Russia, the US, China, India and other nations put to sea to protect their maritime vessels. In a rare show of international solidarity, the armada patrolling the Gulf of Aden is coordinating together to curb the scourge of piracy.

But covering the costs of bases in Djibouti, Kenya, Bahrain (the US base), Dubai and elsewhere runs into the tens of millions. The operating cost of EUNAVFOR alone – naval vessels, aircraft and military personnel costs aside – is $12 million a year.

The cost to the shipping and insurance industries however is far higher. Last year, pirates collected around $30 million in ransoms. Cyrus Mody, Manager of the IMB, said that figure doubles when the legal fees, negotiators, delivery of ransoms and associated costs were added. “The amount paid out is pretty much equal to what the ransom is,” he said.

The cost to insure ships transiting the Gulf of Aden is estimated at $20,000 per ship per

voyage, excluding injury, liability, and ransom coverage. A year ago, the cost of the additional insurance

premium was only $500, according to maritime newspaper Lloyd's List. It is estimated that the increased cost of war risk insurance premiums for the 25,000 ships that ply these waters – which includes an estimated 11 percent of the world's petroleum - could reach as much as $400 million.

Keeping to the designated shipping lanes in what EUNAVFOR calls “group transit” of several ships, and paying up if captured, would seem to be the only options for the world's shippers. The alternative of avoiding the Gulf of Aden and the Suez Canal is simply too expensive and time consuming.

According to the US Department of Transportation, to re-route a tanker from Saudi Arabia to the USA via the Cape of Good Hope adds approximately 2,700 miles to the voyage and some $3.5 million annually. A routing from Europe to the Far East via the Cape, rather than through the Suez Canal, would incur an estimated additional $89 million annually, which includes $74.4 million in fuel and $14.6 million in charter expenses. In addition, the rerouting would increase transit times by about 5.7 days per ship.

Pirate dens

The heightened international naval presence off the Horn of Africa has had a direct impact on curbing piracy. “The number of attacks has not decreased but the number of successful attacks has gone down, primarily because of the naval presence,” said Mody.

EUNAVFOR's specific mandate protects ships of the World Food Progamme. Commander John Harbour of the British Royal Navy and chief media spokesman for EUNAVFOR, said the rate of success was one ship hijacked for every three attempts, whereas a year later it is one in nine successful pirate attacks. “Every single day there is an attempt and everyday we thwart that attempt. And even when there is not a direct attack, we see many skiffs with armed men,” said Harbour.

A knock-on effect however of the naval presence has been the ramping up of the ransoms demanded by the pirates and heightened investment in faster speed boats, mother ships to refuel and launch skiffs on the high seas, and better weaponry.

“When the navies united under an Aden task force, the pirates needed to be more audacious. Ransoms then rose from $250,000 to $1.25 million,” said Simon Davies, a former detective and specialist investigator with Britain's Scotland Yard and a consultant on financial crime and piracy in East Africa. “That [ransom] pie graph is getting more and more cuts in it as the money is shared around. There is money for bigger engines and dhows to ply the sea carrying extra oil,” he added.

The pirates run what Mody called an “extremely business orientated” operation, similar to many organized crime syndicates around the world. The three to five major pirate groups that operate from bases on the Somali coastline are either self-funded or financed by external investors.

Via watchers in the likes of Dubai, the pirates are informed of when a ship leaves port and what cargo it is carrying, or information is easily garnered from reading the shipping news published in local newspapers. A crew of armed men on speed boats or on a mother ship then head out on the high seas to track down potential targets. If successful, the pirates capture a vessel and sail it to Somalia. There, said Davies, the pirate crew is replaced with another crew for negotiations to take place. The onus is then on the owner of the ship and insurance companies to cough up the ransom.

Due to the frequency of attacks ship owners have set up insurance cartels, with many owners paying into a pool that will then pay out in the case of a hijacking. Then the separate insurers of a ship's cargo, hull, and other forms of insurance get involved.

“If say a cargo of sugar costs $50,000, the insurer pays 10 percent of the ransom, the owner 15 percent, hull insurer 15 percent. If maybe $150,000 short, the cartel of ships pays up,” said Davies.

Then the drop off – usually in small denomination US dollars - takes place. Back in 2005, Mody said money exchanged hands in either airport lounges or hotels in Dubai. “A phone call was made and the vessel released. In 2008, the money was taken by security companies by boat to the captured vessel. This has been taken a step further. To make it safer for delivery, the money is now being air dropped on the vessel or nearby. This is how the delivery has progressed, as if you have a security person on-board he will automatically become a threat to the pirates. And sailing in with the money from say Djibouti or Kenya, you need to hire a crew, and the crew know there is $1 million on-board...The air drop has made it cheaper and safer.”

Getting rid of the loot

One spin off from the piracy business has been for sectors catering to the pirates, from arms dealers to boat outfitters, car dealers, and other enterprises. Business has also boomed catering to the hostages. “With Europeans captured, there is a burgeoning restaurant business [in Somalia] to cater to Western palates,” said Davies.

Mody said that living standards are going up due to “lavish spending by pirates, which is encouraging local industry to build up, and flashy new cars to be driven around because of the new money.”

While part of the loot is divvied out among the pirates, some is earmarked for investment in the next venture. But if the ransom money doesn't stay in Somalia, where does it go? There have been claims that the money is laundered in Dubai – a claim the Emirate has vigorously denied – and via Beirut. Mody said quite a lot of money gets siphoned into Kenyan real estate, where there has been a marked increase in Somalis buying properties in neighborhoods such as Eastleigh in Nairobi. Davies said money may also be laundered or invested in Iran, Yemen and the Emirates.

Indicative of the pirates' business savvy, there has been minimal violence towards captured crew members. “It is a business for them and any violence towards the crew will affect this business model. If violence increased, this would change the dynamic, and that could be a turning point in how nations look at piracy. Keeping that in mind, having a link to terrorism is also not in the best of their interests. If a link is established, there would be a very serious clamp down by certain external interests,” said Mody.

Photograph courtesy EUNAVFOR

Thursday, September 03, 2009

Dangerous Air Maneuvers: Aviation Sanctions Have Ended for Syria, the Embargo Should Also End for Iran

Commentary - Executive Magazine

By Paul Cochrane in Beirut

Sanctions are one of those political issues that can make amiable dinner conversation turn unpleasant, as the battle lines are drawn down the table between those for and against. Sanctions have certainly had mixed success, starting with the first recorded case of a trade embargo some 2,400 years ago between Athens and neighboring Megara. The embargo failed and sparked a war.

Sanctions have never worked since then, argue some. That is too reductionist may come the reply, while others prefer to pick-and-mix examples from embargoes through the ages to argue their case. The more pragmatic approach would be not whether sanctions “work,” but when and under what circumstances.

Sanctions that are meant to oust a dictator but result in the deaths of thousands of innocent civilians – Iraq for instance – can be considered counter-productive. Sanctions preventing a particularly nasty regime from getting hold of say chemical weapons on the other hand would appear desirable and effective.

Indeed, in a report on the effectiveness of sanctions by the Washington DC-based Institute for International Economics, out of 211 cases from World War I to 2000, there was success in only 38 percent of sanctions. Some work, others clearly don't.

Sanctions on the aviation sector can fall under the questionable effectiveness category. Meant to impede a country's access to military aviation parts is understandable. For commercial aircraft it ranks as dangerous. In the Middle East, this applies to Iran and until July, Syria, when the United States ended sanctions on the export of goods to the Syrian aviation industry. Sanctions were first imposed against Syria in 1984 and tightened in 2004 by the Bush administration.

Aviation sanctions have long been considered a risk to air safety, with airlines that own American and European manufactured aircraft (Boeing and Airbus) unable to access spare parts, navigation equipment and upgrade technology in line with international safety standards. A report prepared for the United Nations' International Civil Aviation Organization has made this clear.

The dangers for aircraft and passengers was underscored in July when two Iranian commercial planes crashed within 10 days of each other, killing 184 people. Iran claims the sanctions were to blame, and Foreign Ministry spokesman Hassan Qashqavi came out to say the aviation sanctions that have been in place since 1979 by the West, “signifies a violation of human rights.”

While no Western lives were lost in the two crashes, it may only be a matter of time before citizens of the primary sanction imposer, the US, are also 'collateral damage,' whether on board a doomed aircraft, or having a picnic when a badly serviced plane drops out of the sky.

As Flight Commander General Hazim Al Khadra, Director General of the Syrian Civil Aviation Authority told me in Damascus a few years ago: “Sanctions are a big problem because US aviation interferes with the aviation industry, the spare parts for commercial airlines in particular, which maintain the safety of passengers. And these passengers aren’t only Syrians, but also Europeans, Americans and Asians.”

Perhaps there would have to be the rather ironic situation of a plane that lacked the spare parts or proper guidance system accidentally crashing into a US embassy or military facility, for Washington to truly wake up to the hazards of unsafe aircraft.

After all, it is curious that the Air France jet that crashed off Rio de Janeiro, and the US Airways plane that ditched into the Hudson River in New York earlier this year, garnered extensive media reports about aircraft safety, yet the aviation sanctions against Syria and Iran have not. Unsafe aircraft flying around the world are not safe for anyone, whether on the ground or in the air. Indeed, I had heard of people wanting to avoid flying altogether because of the Air France crash.
The US decision to end the sanctions against the Syrian aviation sector – which has rapidly opened up in recent years to include a handful of private airlines – is a step in the right direction. But the sanctions against Iran, and its aviation sector, still continue. In fact, it looks like the sanctions are going to be tightened even further, with America proposing a ban on Iranian airplanes from landing in Western airports, along with banning insurance on trade deals with Iran, and the imposing of sanctions on any company that trades with the Islamic Republic.

While the heightened sanctions are meant to put further pressure on the Islamic Republic to change it ways, the policy should be scrutinized as to what is effective and what is not. The sanctions related to the curbing of Iran's nuclear aspirations and funding to groups like Hamas and Hizbullah is a political minefield, with strong arguments from both sides of the political spectrum as to whether such a policy is working or not. Civil aviation however should be in a special category. It is a human right for people – civilians - to be able to fly and travel freely, and moreover, safely wherever they want.

Saudi Arabia's oil policy

Petroleum Minister Ali Al Naimi represents the oil technocrats and the interests of the king and the estimated 7,000-25,000 members of the House of Saud

By Paul Cochrane for Petroleum Review

With a quarter of the world's reserves Saudi Arabia is the most influential member of the Organization of Petroleum Exporting Countries (OPEC) and able to put an extra two million barrels of oil on the international markets within days. But the kingdom is notoriously opaque about its oil policy and reserves, with decisions made at the highest level by the ruling House of Saud. It is an elite that even the White House appears to have minimal influence over, and one that is keen to ensure its own survival in the face of growing domestic concerns and a changing geopolitical environment.

Since oil company Saudi Aramco was fully nationalized in 1980, the kingdom's oil policy has been relatively clear and consistent. Based on a low price band (between $18-$25 a barrel), Saudi aimed to maintain price stability through excess spare capacity, thereby avoiding price spikes, and ensuring the long-term profitability of its large reserves. But from 1999, the Kingdom's oil policy started to change course as internal problems started to mount: rising unemployment, a population that has grown 300 percent in 30 years, and an oil dependent economy seriously in need of diversification.

To boost revenues, Riyadh in conjunction with OPEC reigned in production to lower oil inventories. In a period of surging global demand driven by the emerging Asian economies, oil prices steadily rose, pushed further by speculation. As a result of this boon, the kingdom's accumulated some $500 billion in foreign reserves and was able to dismiss the Bush administration's calls for heightened oil production. But the global financial crisis in late 2008 caused oil prices and demand to drop. Pressure was again put on Riyadh, this time to keep prices low to stimulate economic recovery.

Why did the Saudis let the price of oil go up and up, when they of all people would realize there would be a correction?” said Simon Henderson, director of the Gulf and Energy Policy Program at the Washington Institute for Near East Policy. “As the swing producer it would be left to Saudi leadership to get OPEC into line afterwards which, frankly, they have managed to do to everyone's surprise.”

In June, Saudi Aramco increased output to 12 million barrels per day (bpd) after three new projects came online, at the Nuayyim, Khurais and Shaybah fields. With an estimated 4.5 million bpd in spare capacity, Saudi Arabia's OPEC output is 8 million bpd.

The financial crisis has presented Saudi Arabia with major challenges. High oil prices are needed to fund economic diversification and infrastructure projects, while at the same time the country has a vested interest in the recovery of the global financial system. Equally, Saudi Arabia is aware of the growing importance put on alternative energies, which could in the long run lessen the West's dependence on the Kingdom, changing a relationship that since 1945 has been based on security in exchange for oil. Furthermore, given that the Saudis effectively subsidize oil sales to the US through discounted transportation costs, the Asian markets – especially India and China – are becoming increasingly attractive given their geographically proximity and willingness to pay international market prices.

Cementing the foundations of a long lasting relationship: King Saud with President Roosevelt in 1945

Surging demand from Asia will almost certainly divert supplies east and unless Saudi supply keeps growing, it could mean a big reduction to the USA, unless we start paying a security premium, which I suspect China would top,” said Matthew Simmons, Chairman of energy consultancy Simmons & Company in the US, and author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.”

Saudi Arabia has worked particularly hard to foster warm relations with China, investing in refineries and the Chinese economy. “China is a secure market for Saudi Arabia, and will be in the future, so it is very clear it's not just exporting crude, but upstream and downstream activities are also being explored,” said Othman Cole, research associate at Cambridge University's Centre for Energy Studies in Britain.

This shift eastwards has been observed by OPEC. “The last full revision of the OPEC Masterplan in 2003-2004, estimated that by 2050 they didn't expect any Gulf OPEC member to be selling oil to the US. The entire Gulf market has been moving east for sometime,” said Kent Moors, an energy policy expert at Duquesne University in the US.

The current, and indeed long term, significance of the Asian markets was made crystal clear by King Abdullah's first overseas visit since ascending the throne in 2005. It was to Beijing, notably not to Washington. Next on the monarch's itinerary was New Delhi.

Saudi Arabia has been increasingly looking to the Eastern markets: King Abdullah with Indian Prime Minister Manmohan Singh in New Delhi, 2005

Asia is a growing market for Saudi, and how that re-balance will effect the US influence and relationship is still unclear,” said Cole.

Any change in bilateral relations has not yet been reflected in current US foreign policy towards Riyadh, demonstrated during President Barrack Obama's visit in June.

Relations are good between King Abdullah and Obama, that was the surprising thing, for Obama to have bonded with an Arab potentate with global views very different from European and US perspectives,” said Henderson. “Logically, Obama should have said, for God's sake, keep oil prices down, but gave them a pass, which I thought was a mistake.”

What is not clear is if the US and Saudi Arabia might actually be seeing eye-to-eye on the current OPEC price band of $75-$80 per barrel. Simmons thinks the West is tacitly supportive of higher oil prices. “Our government leaders now seem to understand that higher prices open all sorts of doors, such as creating alternate energy sources and helping create economic prosperity in the Middle East,” he said.

Such a policy would be to kingdom's advantage. “I suspect Saudi would love to see prices exceed $200 a barrel to pay for the seven new industrial cities and other critical expenses to modernize a kingdom soon to be 40 million people,” Simmons added.

Oil policy is decided by what Daryl Champion, author of “The Paradoxical Kingdom: Saudi Arabia and the Momentum of Reform”, said was an “an inner circle of elite decision-makers centered around the king and key princes.”

Within this elite, Simmons said two camps are emerging in regard to oil reserves and what that could mean for oil prices.

One, as best expressed by many Aramco and Petroleum Ministry officials, is that none of the great fields have many problems and will last for many more decades. The other end of spectrum worry that these same fields are at risk of being overproduced and favour a new era of field-by-field production flow transparency. If they embraced transparency, I suspect the results would send oil prices far higher, benefiting the Kingdom,” said Simmons.

While Petroleum Minister Ali Al Naimi represent the oil technocrats, he also addresses the interests of the king and the estimated 7,000-25,000 members of the House of Saud. How a change in leadership will impact on policy when King Abdullah, aged 84, passes away is not evident. With Crown Prince Sultan in declining health, interior minister Prince Naif, 74, is considered next in line for the throne after being recently appointed second deputy prime minister.

Currently, Riyadh appears to be hedging against changes in the energy market, with Al Naimi acknowledging at a summit in Houston in February the need for nuclear power and renewable energy, adding that in the future Saudi Arabia would export the same British Thermal Unit (BTU) equivalent in electricity from solar power as present crude oil levels. The kingdom is also actively moving beyond the production process. “Saudi Arabia and Kuwait have put aside between $12 billion and $15 billion for controlling future energy from the Caspian region,” said Moors, “moving from the traditional approach of controlling the process, facilities and refineries, to being gate keepers to access and future projects. There has also been an increase of Saudi money to control tanker production facilities.”

But while Saudi Arabia is secretive about its oil policy and reserves, the kingdom does not necessarily have a firm grasp over where the oil markets are going.

Many people assume senior Saudi officials have some magic crystal ball on oil, but they are just as puzzled as the folks at the International Energy Agency or [the US'] Energy Information Administration and most of everyone’s data comes from 'guesstimates'. The blind are really leading the blind,” said Simmons.