Saturday, November 28, 2015

Syria crisis hits Jordanian meat market (copyright protected)

THE DEMAND for meat in Jordan has been weakened by the conflict in its troubled neighbour Syria, with the Jordanian economy slowing down due to regional instability, impacting consumer purchasing power. However, at the same time, demand for meat is being bolstered by Syrian refugees.
A country of 6.6 million people, Jordan is currently hosting 937,830 Syrian refugees, according to the United Nations High Commissioner for Refugees (UNHCR), with 80% living outside of refugee camps. The influx of Syrians has boosted meat imports, mirroring the impact of an influx of Iraqi refugees following the US-led invasion in 2003.
“At a food level it has been a plus as increased imports of meat, like when the Iraqis came from 2003 onwards. But there are psychological differences. The Iraqis had money but the Syrians less so, and are more conservative in spending,” said Ali Noor, general manager of Kaylani Food Centre, a meat distributor in Amman, Jordan’s capital.
Until 2014, food was provided to refugees by the UN and aid agencies, in addition to handouts from wealthy Gulf Arab donors, purchased either via international tenders or local retailers. Over the past year, however, food vouchers have been provided to 538,274 refugees, according to the UNHCR, to buy whatever food they need: “Syrians go to the supermarket, to Carrefour, with coupons for rice, sugar, oil and sometimes meat,” said Noor.

Market Instability
However, regional instability has seriously impacted Jordan's economy by warding off tourists and foreign investment. Economic growth is forecast at just 2.8% this year, according to the World Bank.
“For commercial products – beef and lamb – you see demand going up and down. Is it a reflection of the crisis? Possibly, but I can't put my finger on it and say for certain,” said Noor.
The crisis has also affected trade that had previously transited through Syria to and from Turkey and Europe. “Meat imports from Turkey are taking up to 21 days instead of a week, due to having to ship to Aqaba port (in southern Jordan),” said Ahmad Al-Hamad, Kaylani's commercial manager.
But while logistical costs have risen, the domestic market has been bolstered by the closure of the border with Syria. “People used to buy in Syria as it was 2 Jordanian Dinar (USD2.80) for a kilo of lamb compared to 10 JD (USD14) in Jordan. There was price gouging with people taking advantage (of the price difference), but the government has stopped this,” said Noor.

Fear of Disease
However, despite Jordan's borders being better monitored by the authorities and restricting meat trades, there is a high risk of disease due to smuggled livestock from both Syria and Iraq. “The threat of transboundary animal disease has increased,” said Markos Tibbo, livestock officer at the UN's Food & Agriculture Organisation (FAO) for the Near East and North Africa. “I think the vaccination coverage in Jordan is not up to the recommended standard as their capacity and resources are limited in undertaking disease surveillance and control.” He noted: “We've helped Lebanon vaccinate the entire livestock population via a USD5.6 million programme from the UK's Department of International Development (DFID), implemented in 2014-15. We want to repeat this in Jordan, as well as to protect the livestock assets of the poor.”

Wednesday, November 04, 2015

IS, and will be yet - Islamic State and Terrorist Financing

Money Laundering Bulletin

Islamic State controlled areas in Syria and Iraq 

The oil price may have dropped but Islamic State runs varied funding streams, making it brutally resilient. New thinking on financial lines of attack may be needed, discovers Paul Cochrane, in Beirut.

The Islamic State is touted as the wealthiest terrorist organisation on the planet, yet the financial war against the group is stumbling, highlighting deficiencies in methodologies and approaches to countering the financing of terrorism.

There has been no shortage of effort against the IS, including: UN Security Council Resolutions for example 2199 (2015), requiring member states to do all they can to prevent its financing; the Financial Action Task Force (FATF) has published an extensive report on the group's funding; a Bahrain-hosted November 2014 meeting of counter terrorist financing (CTF) experts result in the Manama Declaration, which set out policy proposals; and Italy, Saudi Arabia, and the United States co-established a Counter-ISIL Finance Group in Rome. Despite such measures, ISIL goes from strength to strength in northern Iraq and Syria.

Black gold behind the black flag

“Twelve months ago everyone was saying ISIL [Islamic State of Iraq and the Levant] is incredibly wealthy from oil. Although it seems its ability to rely on oil revenue has declined considerably since then, it is still functioning reasonably well,” said T
om Keatinge, Director of the Centre for Financial Crime and Security Studies at RUSI in London.

Indeed, reports suggest IS was generating millions of dollars a day in oil revenues, either sold in territory under its control, smuggled over borders or, in a curious twist, sold to the Syrian regime. The group appears to have weathered the recent drop in oil prices and adapted.

“When IS first started to control territory there were a number of jackpot events; there may or may not have been a large quantity of money in the Central Bank in Mosul, and it took oil storage facilities and agricultural stores. That was phase one, using resources it gathered. Now it needs to raise finance from day to day, like any other governing authority, something it seems to do effectively albeit by imposing increasing taxes on people and businesses,” said Keatinge.

Adaptive response

Furthermore, ISIL appears to be getting around many of the financial controls arrayed against it. Jimmy Gurule, Professor of Law at Notre Dame University in Indiana, and a former undersecretary of the US Treasury, describes the CFT strategy against the group as “weak and ineffective,” saying the efforts by FATF and the US Treasury have been “misguided”.

“There are a couple of obvious observations – one, not going after the money, and if there is a strategy, it's been largely ineffective. Secondly, the current strategy is based on the old Al Qaeda model, so we need to do something different,” said Gurule.

While FATF recognises that IS presents “a new form of terrorism” and that its financing is a “constantly changing picture,” Gurule criticises the focus on money going to IS, and not out from its territories. “When money comes in typologies makes sense, but for services (ISIL needs) that is money going out, and I don't think typologies work there. Let's target service providers that help ship or transport oil, and impose sanctions on these providers,” he said.

He cited the lack of IS-linked designated individuals under US Executive Order 13224 on blocking terror funds as indicative of the difficulties of going after external financiers. “I testified before a Congressional hearing last November (2014) and I pointed out the paucity of designations, just three that worked on raising money for ISIL,” he added.

To Gurule, part of the problem is treating ISIL as a non-state actor when it controls land and is operating like a government. The international community “doesn't want to recognise it as a government or at the UN but it's a defacto state. Because of the way it's generating revenues it shouldn't be treated merely as a terrorist organisation. If it is state like, governs resources and provides services, then it needs to be treated like a state to change its behaviour. That strategy should include second tier economic sanctions that have been relatively effective against Iran.”

In February, following the release of the FATF report, a senior international AML/CFT export told MLB that “there may need to be some changes to typologies, but the existing machinery is likely to be adequate. We will be doing a typological renewal, having another look at the ways finances flow.” A new report is slated to be published in October (2015).

“I do think there is a need for a typology review, and the FATF report has been an excellent tool for the private sector,” said Jon Byrne, Executive Vice President of the Association of Certified Anti-Money Laundering Specialists (ACAMS). “The new head of FATF is actively seeking input from the private sector, and this has become increasingly important as ISIL has access to oil and other revenues, and money has to go somewhere, through legitimate institutions.”

Alternative sources of funds

To John Cassara, a former US Treasury special agent, the fight against IS has fallen short in its approach to trade-based money laundering; he argues a new methodology that adds to a fact-finding intelligence report would “break some new ground.”

“I would urge FATF, instead of getting experts with a PhD from the US or UK to (address shortcomings), to get them from MENA-FATF. Get the Lebanese, the Saudis involved, those that know the region and what needs to be reported,” he said.

With IS using multiple streams to generate funds, new typologies may need to address certain revenue streams. “The potential exfiltration of value – antiquities – is a risk spot. It is striking how little the UN appears to know about this trade. Everyone says its happening, but where is the evidence and the facts? That's where the argument stops,” said Keatinge.

An approach to tackling the smuggling of artefacts from ancient sites in Iraq and Syria that IS now controls, such as Palmyra in eastern Syria, should also include looking for orders for items. “I heard from a source that when Palmyra was overrun (in May 2015) you could ask for a specific piece. So apparently there is a pull as well as a push factor,” Keatinge added.

Gurule also raised the issue of antiquities traded on the black market. “Selling stolen artefacts is generating tens of millions of dollars, but what are the typologies?” Kidnap for ransom has also been identified by FATF as a key revenue stream for IS. “Is there a typology for money generated from the release of hostages? If the family of a victim agrees to pay $1.2 million, how is that money transferred? Are ransom payments being deposited in offshore bank accounts or disguised as donations to charities or NGOs?” said Gurule.

Human trafficking is a further area of concern. “Is IS making money from human traffickers as they seek to traffic migrants through areas under its control?” said Keatinge.

Whether typologies ought to be made public, and risk enabling IS to wise up to CFT efforts is also in question. Byrne cited the example of banks looking for account-holders who suddenly fall off the grid, and are then found to be withdrawing cash in Turkey. In another example, potential fighters or funders give a third party their ATM cards to withdraw cash in another country, such as Italy, and then the cash is taken to IS territory. “But any time you make typologies public they become stale. I think it is about staying as current as much as you can, as IS is obviously able to get hold of information so much easier now through social media,” said Byrne.

FATF's report downplayed the role of foreign 'deep pocket' funders behind IS, despite a statement in 2014 by US Vice President Joe Biden that fingered supporters in the Gulf, and other reports that have surfaced. MLB has also reported on donations and funding from the Gulf, particularly Qatar and to a lesser degree Kuwait, Saudi Arabia and the United Arab Emirates (see

Financial institutions are certainly keeping an eye on Gulf countries. “It is all very well for international banks to do their bit to interrupt IS financing, but the regulatory and enforcement structure in surrounding countries (bordering Iraq and Syria) represent possible vulnerabilities and ways IS funds could get into the international system,” said Keatinge.

The Gulf has made public moves to show it is trying to counter ISIL financing, such as organising the Manama Declaration on CFT in November 2014, but Keatinge suggests this rhetoric needs to be reinforced by continued raising of regulatory and enforcement standards.

Cassara believes more pressure should be brought on the Gulf states. “Even though for the most part they have adhered to the FATF recommendations and put in place compliance programs, with some exceptions enforcement has been somewhat lax,” he said. “If the West comes to them with a case, 'look at this', they'll do it, unless (it involves) a politically exposed person (PEP), but they rarely use their own initiative, and that is frustrating as they know what is going on or should.”

Image via Wikicommons

Monday, October 12, 2015

Interview on Al Manar's Panorama show

On Thursday 8th, I was interviewed on Al Manar TV's Panorama show about Jeremy Corbyn, British politics and foreign policy. Skip to 34 minutes in. It is dubbed into Arabic -

Sunday, September 27, 2015

FATCA – cost and effect

Money Laundering Bulletin

The United States’ Foreign Account Tax Compliance Act (FATCA) went into effect on 1 July 2014. A year on, financial institutions are filing for the first time, but teething problems abound, Paul Cochrane discovers, with some banks no longer accepting new US clients and registration volumes far below expectations.

FATCA, which requires foreign financial institutions (FFIs) to provide information on US accounts above US$50,000 to the US' Internal Revenue Service (IRS), has been a complicated piece of legislation from the get-go. The over 1,000 page Act, which is aimed at curbing tax evasion, was delayed repeatedly after its passage in 2010, as US authorities worked to persuade more jurisdictions to sign Intergovernmental Agreements (IGAs), and FFIs to secure a Global Intermediary Identification Number (GIIN). 

The uptake was slow due to FATCA's extra-territorial nature, requiring legislative changes in many countries, including override of national banking secrecy and to effect financial institution reporting to a foreign jurisdiction.

With FFIs having to screen all clients for US indicia as well as hiring new compliance staff, FATCA has proved both onerous as well as expensive to implement; it has cost an estimated $8 billion worldwide. 

Deadlines and delays

Aware of the complexities, IRS set a 'transition' period, running to the end of 2015, for 'good faith' compliance efforts by FFIs; only then would it start cracking down on what it terms 'recalcitrance' via a 30% withholding tax on US-sourced income, and the risk of being shut out of the US financial system.
Despite the transition phase, the legislation's complexities has already led jurisdictions to extend reporting deadlines, notably one of the first to sign up to FATCA, the Cayman Islands, a FATCA world leader, with 30,868 FFIs registered, pushed the date for providing details of its US reportable accounts back to 26 June 2015. Luxembourg extended its deadline from 30 June to 31 July 2015. 

“The IRS has extended FATCA reporting for 90 days, if you ask for it,” said Malek Costa, Head of Group Compliance at BLOM Bank in Lebanon, which operates throughout the Middle East. “The real issue was with the software, at first we thought it would be easy to extract data from the core banking system and send it to the IRS but it has been a difficult task and took a lot of time. It involved many processes starting from getting the authorized certifications, buying necessary software that transform the file to be reported into .xml schema, encrypting it and then decryption when extracting the IRS response when validating the file.”

It is not just upgrading software that is causing issues for financial institutions. “Bankers are frustrated at the amount of paperwork, and US citizens with the extra paperwork, of 80 pages compared to 5 to 10 pages in the US,” said Liz Zitzow, Managing Director of British American Tax, a London-based US accounting firm.

Irreconcilable differences

The extra form-filling is expected to generate numerous problems, particularly filing figures that correspond with other tax files; filing on the value of shares; around beneficial ownership and exchange rate differentials. “I think everyone is going to be off the mark and figures that match will be less than 5 percent,” added Zitzow. For example, “tax filers don't use the exchange rate that banks use as many people do their own forms.”
Filing issues are compounded by the 7.6 million US citizens abroad having to fill in the Foreign Bank Account and Financial Accounts Report (FBAR), a BE-10 form on foreign affiliates, and other tax forms. “I estimate there will be around 100,000 false positives on FATCA,” said Professor William Byrnes, Associate Dean of Special Projects at Texas A&M University's School of Law. “I find the forms difficult, and I've written a 1,500 page analysis on FATCA. Many issues are unsolved or unworkable.”

A concern for FFIs is that the IRS will audit institutions over the data they send, with the ability to go over 10 years of records.
“They have the data to match taxpayers information with the information they're receiving from financial institutions. So if the IRS knows Mr X made a transfer from the US to an account in bank Y, and the bank did not report this account, the IRS may ask bank Y if the account is still active. If the bank says yes, the IRS will ask why it wasn't reported. They could investigate,” said Costa. “If the client declared non-US status with no US indicia in the electronic and paper records, the bank is then covered. The reason for doing enhanced due diligence is to mitigate the risk of identifying the accounts with US indicia and thus minimizing IRS investigations. This is a conservative approach for applying the FATCA procedures.”

American exodus

While banks have to screen for clients above $1 million, the next IRS requirement, by 2016, is to screen for all US clients.
An unintended consequence of FATCA has been Americans renouncing their citizenship due to the extra due diligence. Already a record 1,336 Americans have done so in 2015, according to the IRS, while earlier this year a survey by the deVere Group, a financial consultancy, found that 73% of expatriate Americans were considering relinquishing their passports due to FATCA. 

Banks are also shunning American clients, unless high net worth individuals, due to the extra due diligence required. “Over half of UK banks will not take Americans anymore,” said Zitzow.
Furthermore, FATCA is impacting the employment prospects of American managers abroad due to filing requirements. “Many Americans are becoming unemployable as they are not being given signing authority as (companies would then be) exposed to FATCA,” said Jim Jatras, Manager of in Washington D.C.

Not a priority for all

But despite the fallout (or maybe because of it), there is still a long way to go for global FATCA compliance. As of June 2015, 165,461 FFIs have registered on the IRS FATCA portal, according to Byrnes. Such a figure is well below what the IRS initially suggested, of 500,000 potential FFIs to be registered worldwide, while others suggested 800,000 to 900,000 FFIs. Indicative of the low uptake, the HM Revenue & Customs estimated that 75,000 UK financial institutions would be impacted, yet just 23,256 GIINs are in place in the mainland UK. The UK and its 10 main dependencies and overseas territories – the Cayman Islands, the British Virgin Islands, Montserrat, the Turks & Caicos Islands, Anguilla, Bermuda, Gibraltar, the Isle of Man, Jersey, and Guernsey - comprised 74,694 of the GIINs, representing 45% of the total, according to Byrnes. Of concern to global roll-out, of the four BRIC countries, there are just 8,254 FFI registrations. “At the end of the day the lagging GIIN registrations tell us FATCA is a back burner issue for most foreign governments,” said Byrnes. “The IRS should have upfront employed a more diplomatic and inclusive stakeholder approach.”

Regarding IGAs, 57 countries have signed Model 1 agreements (with 11 signed this year) as framed in FATCA, whereby the FFI reports directly to their central bank/regulator, which then reports to the IRS; and seven countries have signed Model 2, where the FFI reports directly to the IRS. A further 48 jurisdictions have signed onto FATCA “in substance,” bringing the total to 112 jurisdictions, according to IRS figures. The US, meanwhile, recognises 250 jurisdictions and territories worldwide. There are some 6,296 GIINs in 131 jurisdictions without an IGA. 

“The IGAs are potentially a weak link as without them FATCA is not enforceable - as the IGAs are not legal [agreements in the conventional sense], having not gone through Congress or the usual international treaties processes, and these vulnerabilities could be exploited,” said Jatras. There is a degree of uncertainty about the “consequences of sanctioning foreign institutions.”

Exaggerated claims

Meanwhile, FATCA is not expected to repatriate the amount of tax stated by the IRS and US Treasury in 2010 of more than $100 billion annually. In 2013, the Congressional Joint Committee on Taxation estimated that FATCA “will generate additional tax revenue of approximately $8.7 billion over the next 10 years,” or $870 million a year. “That is a pretty big difference. So where did the $100 billion come from? It was made up. My conclusion is FATCA will never pay for itself, as amounts are so small in the big picture of things,” said Byrnes. “The goal was already being achieved through the normal tools the IRS has at its disposal and through negotiations with Switzerland. There were 150,000 evaders before FATCA. Now, 100,000 of them have been caught (through tax evasion probes into banks in Switzerland and elsewhere), so that leaves only 50,000 left. As a percentage of 150 million tax payers, that is not even a correction error. A 50 percent whistle blower reward to find a tax dodger would have been a better idea.”

With some banks reluctant to on-board US customers due to the extra due diligence, and certain Americans not wanting to hand over their financial data to the IRS, an up-tick in financial crime is expected. “I think shell companies will increase as it is a way to evade tax, although AML (anti-money laundering) procedures are playing a strong role in fighting tax evasion by finding out who is the real beneficial owner of an account as this later may be a US person,” said Costa.

Looking ahead, FATCA is expected to play a role in the upcoming US presidential elections, with Senator Rand Paul proposing through Senate Bill S66 amendments to the IRS Code, which would amend FATCA. Also, the Organisation for Economic Cooperation & Development's (OECD) tax information sharing initiative is gaining steam, which could have implications for FATCA implementation and compliance.

Friday, September 18, 2015

Guilty countries doing little to bear brunt of refugee crisis impact

Global Times 

An informal refugee camp in the Bekaa Valley, Lebanon

There is a massive debate raging in Europe and the US as to what should be done about the Mediterranean refugee crisis. How many should be let in? What is our moral responsibility?

Largely absent from these discussions is the role of certain European states and the US in triggering the refugee crisis in the first place.

It was not Greece, whose beaches and borders are inundated with refugees, or other countries along the South-Eastern Mediterranean. Nor Lebanon, which has a staggering 1.2 million registered refugees, or Iraq or Jordan. Turkey is another matter, but all four of these Middle Eastern countries have taken in the bulk of 4 million Syrian refugees.

All the neighboring countries of Syria are reeling from the strain of such an influx, particularly Lebanon, which has taken in the equivalent of a quarter of its population in the last four years. Yet Europeans are complaining about collectively taking in 350,000 refugees: try over a million in one country and see what happens on the social and economic level.

Ironically, the countries that have taken in the most Syrian refugees on a per capita basis were not involved in any recent military adventurism in the Middle East.

The countries that beat the drums of war for the invasion of Iraq in 2003 have not been as welcoming, despite causing the deaths of over 1 million Iraqis and displacing 1.9 million people.

Initially, the US took in only a handful of refugees, and under pressure increased the number, since 2007 taking in 105,000 Iraqi refugees.

Britain was also not very refugee-friendly, despite London's role in pushing for the war. When it comes to Syrian refugees, the US has taken in just 1,243 since 2011.

This year, the US has pledged to take in a further 33,000. That figure should be seriously increased.

The Iraq war ties in with the Syrian refugee crisis, as does the NATO decision in 2011 to bomb Libya. The Iraq war provided the catalyst for the rise of the Islamic State, which did not exist prior to the West's "humanitarian intervention."

Libya's shoreline, which is being utilized primarily by African refugees to cross the sea, was not a launch pad prior to the overthrow of Muammar Gaddafi. Neither was Syria a source of refugees prior to the conflict in 2011.

Certainly such dictatorships should not be excused any blame since their clinging onto power at all costs has proved devastating, but it is the public, in particular women and children, that are bearing the brunt of conflict. Furthermore, the conflicts have negatively impacted economies around the region, adding further impetus for people to leave.

No wars, no refugees. It is essentially that simple. Indeed, the EU estimates that two out of every three migrants come from conflict areas. This is only likely to increase as Britain, France and the US up their military involvement in Syria.

The advocates of humanitarian intervention will argue that a new democratic state cannot emerge without a difficult "transition period," but is war the right way to make such a change happen?

A broken country that is not able to rebuild, like Iraq, Libya or Afghanistan, without the equivalent of a Marshall Plan that rebuilt postwar Europe, is not going to succeed.

Instead, we have hand-wringing about what to do with refugees.

Blame for the Mediterranean refugee crisis should also lie with the key regional US allies like the Gulf states, which have so far not taken one Syrian refugee despite their counter-revolutionary role in the Middle East, especially in Syria but also Libya and Egypt.

There needs to be a global debate about the refugee crisis, and the role of those countries most responsible should not be overlooked.

That said, supporters of the Assad regime should also be involved in taking in refugees, as they too hold culpability for the deaths of 240,000 Syrians and the displacement of 9 million people.

(Photograph by Paul Cochrane)

Saturday, September 12, 2015

Economics and the Syrian Uprising


Economics was a major factor behind the Arab uprisings, in Syria as much as in North Africa, but the role of economics has been downplayed by governments and the media alike. What is more, plans are underway to replicate the same economic policies in post-conflict Syria that helped trigger the uprising in the first place, writes Paul Cochrane in Beirut.

In the years immediately after the US-led invasion of Iraq in 2003, there were often discussions in Syria and Lebanon about whether there would one day be regime change in Damascus. Would the regime eventually be overthrown – internally or via external intervention – and Syria become a democracy? An often typical, if somewhat cynical statement was that Syrians did not want either. Syria was stuck like the meat in a sandwich, with on one side a devastating conflict in Iraq that had forced over 1.4 million Iraqis to seek refuge in Syria, and on the other side laissez faire Lebanon, a democracy in name but essentially a dysfunctional one due to a political-confessional system that maintains a fragile status quo but results in minimal development and a weak state.
The choice of a painful, bloody transition from autocracy that could lead to civil war and then perhaps be followed by a “demo-crazy” Lebanese style government was not overly attractive for Syrians compared to stability and security, and where minorities – which account for around 26% of the country's population of 23 million - were protected under a nominally secular regime.
So, the argument went that while Syrians wanted change, such as greater civil liberties, less corruption, and the reigning in of the omnipresent mukhabarat (the secret police), the trade off was questionable. In short it was that pithy statement of “better the devil you know, than the devil you don't.” Economics however barely figured into discussions.
Fast forward to the beginning of 2011, and the same conversations were being had: would the Syrians be the next citizens of an Arab autocratic state to rise up following the Tunisians, Libyans and Egyptians? In one such debate, a French embassy employee and a French NGO worker, both working in Damascus, argued that the conditions were different from North Africa, poverty was not as biting, and there was little room for a mass uprising to take place. A year later, the same French embassy employee – since evacuated from Syria – admitted how wrong she was, having been sucked into a “Damascene bubble” of the good life and not exposed to the rude reality of life in the towns and smaller cities outside of the capital and the second largest city, Aleppo.
Indeed, under the economic reforms initiated in 2001 following the death of President Bashar Al Assad's father, Hafez, the middle and upper middle classes in Damascus and Aleppo were doing better from a materialistic perspective, able to buy goods and services previously unavailable during the period of a state-run economy, and greater economic opportunities seemingly abounded. Tourism was also doing well, with the number of visitors surging from 2 million in 2002, to 8.5 million in 2010, and revenues reaching $8 billion. 

European tourists by Souk Hamidiyeh, Damascus in 2008

Decades of rising unemployment

The reforms, spearheaded by Assad and the Western-educated deputy prime minister Abdallah Dardari, gradually liberalized the economy, in part pushed by foreign banks – the bulk Lebanese – entering the market from 2004 onwards, and in 2009 the opening of the Middle East's newest stock market, the Damascus Securities Exchange (DSE).
Real estate projects, shopping malls and boutique hotels also sprung up, whether financed by expatriate Syrians returning home with an eye for an investment, to Levantine and Gulf investors (US investment was largely curtailed due to the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003, while bilateral trade in 2010 was estimated at $928 million or 2.4% of all trade).
However, the economic reforms enabled the elite to further line their pockets – like Rami Makhlouf's Cham Holding, whose board members and investors read like a Who's Who of prominent Syrians – while creating massive income disparities amid high inflation, leaving ordinary Syrians with an average monthly salary of $234 but an average monthly household expenditure of $638, according to figures from the Syrian Central Bureau of Statistics in 2010.
The shift from a centrally planned economy to a more open market model still had too much of the cronyism and endemic corruption that had plagued Syria for decades. Indeed, there was massive capital flight between 2000-2009, with Global Financial Integrity estimating Syria lost $23.6 billion from corruption, trade mispricing, bribery and other illicit activity.
The billionaire businessman and maternal cousin of Assad, Rami Makhlouf, whose portfolio includes mobile phone operator Syriatel, was a particular figure of hate for ordinary Syrians, with his heavy-handed tactics of muscling in on business deals to get his cut, and judged to have too much of a controlling stake in the economy.
Not that the reforms were all negative. Syria sorely needed to overhaul its economy given declining oil revenues, a burgeoning population – reaching 3.5 percent growth a year in the early 2000s – and fiscal woes (Moscow had to write off $10 billion of Syria's $13 billion Soviet-era debt in 2005 in able to sell new weapons to Damascus).
When you look back, don't throw reforms in the dustbin,” said Jihad Yazigi, editor of financial paper The Syria Report. “Average Syrians were entitled to open a bank account, get loans and buy cars. The problem was economic reform was in no way accompanied by a real vision as to where to take the country to.”
On top of a lack of vision, Syria arguably opened up too soon in terms of trade liberalisation, such as joining the Greater Arab Free Trade Agreement (GAFTA), and inking a free trade agreement with Turkey, which did not give adequate time for Syrian industry to get up to speed with competitors.
The idea was to create jobs and exports, but it didn't work. The borders opened, and the Turks and the Chinese flooded the market; thousands of workshops closed,” said Yazigi. “People on the streets today are farmers, plumbers, semi-skilled workers and those that lost jobs over the past decade in the smaller cities and the suburb cities; not from Damascus or Aleppo, which benefited from the reforms.”
With topsy-turvey geographical economic development, the economy was not growing fast enough to handle a rising population. “Over the last three decades you've had low GDP growth and periods of high GDP growth, but according to most economists Syria needed growth of 8% per annum. Syria never grew more than 7%, some years by 5%, but most years by 2-3%. In other words, there was 30 consecutive years of rising unemployment every year,” said Yazigi.

The opening of the Four Seasons in 2005 was indicative of Syria's opening up to the world, and outside capital.

Downplaying economics

Economics played a key part in the uprisings in Tunisia and Egypt, both having adopted neo-liberal economic models and applied International Monetary Fund (IMF) recommendations. Both countries, like much of the Middle East and North Africa, have burgeoning populations, 50% of the populace under 30 years old, and unemployment rates among the highest in the world. Such dissatisfaction with the status quo had been growing for years, and in many senses the indicators were there for all to see.
In Egypt, there were 3,426 strikes, sit ins and protests by workers between 1998 and 2010. It was a “decade of unprecedented strikes,” said Joel Beinin, Professor of Middle East History at Stanford University, at a lecture on “Arab Workers and the Popular Uprisings of 2011” at the American University of Beirut. A major demand of workers was a minimum wage. “The mobilization of workers from the 1990s onwards is an ongoing story, and demands were primarily economic,” said Beinin.
However, the economic angle of the uprising in Egypt – and Tunisia – was barely covered in the Western media, focusing instead on demands for democracy and freedom, and downplaying the role of workers and economics in the uprisings. For instance, a key move in the struggle against the government of Hosni Mubarak came when tax collectors stopped working. Furthermore, workers' strikes have continued in Egypt even after Mubarak's fall, demonstrating the importance of the need for economic change in the country, with 1,419 collective actions by workers in 2011, with around 1 million participants in each protest.
If you compare the Polish Solidarity movement (in the 1980s) to the Egyptian uprising, it was championed by the West as it was anti-Communist, but in Egypt it was anti neo-liberal, so it was viewed as a “negative” phenomenon by the West,” said Beinin.
Regarding Syria, Damascus did not have the same economic relations with the West as Egypt and Tunisia had, nor had it IMF loans and stipulations or major worker movements. “The dynamics of the struggle in Syria” are different to that of Egypt, said Beinin. “It is hard to find a class dimension, although political-economics definitely played a part in what led to the uprising.”
The geography of the uprising in Syria is testament to the role economics played, starting in the southern town of Dera'a near the Jordanian border in March 2011, and spreading to other periphery towns and cities, with the last places affected the economic and political centres of Aleppo and Damascus.
There is a link between the economy and the uprising,” said Yazigi. “Early on in Dera'a, before the people said they wanted the fall of the regime, they burned down Syriatel stores, which is a reflection of their frustration with crony capitalism.”

Damascus skyline, 2008

A ravaged economy

The uprising quickly became violent, initiated by the Syrian regime's crackdown on what started as peaceful demonstrations and escalated as an armed opposition took form – when external involvement in training and arming rebels began is not clear, and may never be.
Unlike how the US, Britain and France did not initially support the uprisings in Tunisia and Egypt, or believe in the fall of their long time leaders, the West was quick to denounce the Assad regime, and by May the US imposed sanctions, followed by the European Union later in 2011, banning EU importation of Syrian oil and gas, which had accounted for 93% of Syria's exports to the EU (22.5% of overall exports).
As the conflict spread throughout Syria and the sanctions started to take hold, the economy was on a slippery downwards slope. According to the Syrian Center for Policy Research, Syria's real GDP contracted by 18.8% in 2012 following a contraction of 3.7% in 2011, with economic losses estimated at $48.4 billion in both 2011 and 2012, equivalent to 81.7% of its 2010 GDP. The Institute of International Finance (IIF) on the other hand estimated contractions of 20% in 2012, and 6% in 2011, and that the economy will contract by 15% this year, to $27 billion, from $30.9 billion in 2012, $46.7 billion in 2011 and $57.5 billion in 2010.
The economic ramifications of the conflict have also spilled over into Lebanon, with up to 375,000 Syrian refugees in the country, while in Jordan – also hosting refugees – the IIF estimated output losses to the economy from regional unrest at $1 billion in 2011 and $3 billion in 2012, equivalent to 3.4% of GDP in 2011 and 9.5% of GDP in 2012.
It is like history repeating itself, as Iraqis had taken refuge in both countries following the 2003 invasion, and now Iraqis are fleeing back to their war ravaged country while Syrians are taking refuge elsewhere. “What happened to Iraqis 10 year ago is now happening to the Syrians,” said Yazigi.

 The Citadel in Aleppo after a refit to encourage tourism, 2008

The future?

The outlook for the Syrian economy is pretty dire, while the government is hemorrhaging money to retain allegiances, fund the military and bolster public sector employment. How long Damascus will be able to handle the situation without assistance from allies is now a pressing question. The loss of government oil revenues due to the sanctions was estimated at $4 billion in 2012, or 25% of the budget, and the Syrian pound (SYP) has depreciated by 72% since 2010, now trading at SYP 81 to the US dollar, while the black market rate is around SYP 100.
Official foreign currency reserves are also in a precarious position, with the IIF estimating they will decline to $2.1 billion at the end of this year, equivalent to one month of import cover, from $5.6 billion in 2012.
The next big question is what will happen economically after the conflict is over, which may – if a long drawn out civil war is prevented - involve the remnants of the Assad regime, as some are predicting, with a transitional government of sorts in place, to a government made up of the numerous factions currently fighting Damascus. Whatever the outcome, tens of billions of dollars will be needed to get Syria and its economy back on its feet.
The West and Gulf backed National Coalition for Syrian Revolutionary and Opposition Forces announced in November, 2012, that it is seeking $60 billion for reconstruction efforts. However, the opposition does not have a publicly announced economic plan for a post-uprising Syria. “The Syrian opposition doesn't realize how important economics is or how it important a role it played in the uprising,” said Yazigi.
What is being discussed appears to be a return to the same economic policies as before, yet with a weaker state role, such as ending subsidies and pushing privatisation programmes. At the forefront of such discussions is Abdallah Dardari, the man that spearheaded Syria's economic reforms in the 2000s. He is now in Beirut, working at the United Nations Development Programme (UNDP) and advising the opposition. “Dardari is a neo-liberal, and the West wants him to steer economic reconstruction, yet he was responsible for how Syria's economic reforms were carried out,” said Yazigi.
The opposition is aiming for funding from Syrian businessmen, the West and the Gulf states, which have common economic aims. As the UAE's Minister of State for Foreign Affairs Anwar Gargash told the press in Dubai in November: “What we want to do is involve the private sector in what sort of economy emerges in a future Syria.”
Yet while the private sector needs a role in the future Syria, other voices need to be heard too. “If you want to talk about the economy the business community matters, but it is not the whole economy. They are working on cooking up a programme that suits their interests,” said Yazigi.
While the battle lines have been drawn in the current conflict, the next part of the battle will involve economic policy and how it is determined by local, regional and global players keen to exert their influence. 

Photos by Paul Cochrane 

Monday, September 07, 2015

Japan ready to operate in shadows of espionage with new spy agency

Illustration: Luo Xuan/GT

With Tokyo pushing for a more offensive military role, Japan not having an external intelligence agency is set to change with an agency reportedly just months away from being launched.

Modelled and developed in conjunction with Britain's external intelligence agency MI6 and the Australian Secret Intelligence Service (ASIS), news of Japan wanting a secret foreign intelligence service first emerged in a leaked 2008 diplomatic cable. Further news this spring confirmed that Tokyo was developing its human intelligence capabilities following the kidnapping and killings of two Japanese citizens in Syria by the Islamic State. 

Japan's intelligence services, which were confined to domestic matters following WWII, have had to rely on open-source intelligence and cooperation with foreign intelligence services for information, notably the countries that make up the surveillance alliance exposed by whistle-blower Edward Snowden, known as the "Five Eyes:" the US, Britain, Canada, New Zealand and Australia.

The development of such a spy agency dovetails with Prime Minister Shinzo Abe's drive for a reversal of the ban on overseas military engagement. New legislation has been passed at the lower house and needs to be endorsed by the parliament's upper chamber. The move however has been met with massive resistance from the public, with over 120,000 anti-war protesters demonstrating in Tokyo on August 30.

While the demonstrations were anti-military in nature, protests were not per se against the new agency, news of which has been clouded in secrecy. The agency, which has no name yet and is to be run out of the prime minister's intelligence service, the Naicho, or Cabinet Research Office, is expected to take years to get up to operational strength and be on par with the global intelligence giants.

It was reported in August that Abe met with Shigeru Kitamura, head of the Naicho several times, along with the Budget Bureau Chief Kazuho Tanaka, to finalize a new budget for the fledgling agency.

According to the 2008 leaked cable, Japan's foreign intelligence priorities were China and North Korea, followed by preventing terrorist attacks. Again, this gels with the reversal of Tokyo's stance on non-military engagement, which is aimed at containing China and strengthening ties with the US.

At the same time, Japan is establishing two new signal intelligence stations, on Yonaguni island which is close to Taiwan, with the second slated to open in 2017. Operated by the country's Defense Intelligence Headquarters, the two new facilities will bring the total to 19, enabling Japan to have one of the best interception services on the planet. This will link Tokyo even more with the "Five Eyes" in the global showdown over surveillance capabilities.

Unsurprisingly, such moves are being eyed with great suspicion in the Asia-Pacific region. Tokyo has been increasingly antagonistic in recent years toward China and the two Koreas, while heightened foreign intelligence and surveillance gathering brings back bad memories of Japan's brutal military intelligence in the first half of the 20th century. A new spy agency will only exacerbate current tensions.

Such surveillance and intelligence gathering will not of course be confined to military matters. As has been seen time and again, intelligence services work for the national interest in multiple ways, with economic intelligence a top priority. With Japan's economy going head-to-head with Asian rivals, greater intelligence gathering will bolster Japanese competitiveness. Surveillance will also be used to anticipate political, social and economic unrest overseas, giving Japan another advantage.

The big question now is whether the new military legislation will be passed by the upper chamber. This would officially green light the new agency. If the legislation is not passed, will the spy agency still go ahead? Given Abe's passing of a state secrecy act in 2013, and that training of intelligence agents has been underway for years in conjunction with the ASIS, it is likely either way.

We are going to see the rise of a much darker Japan that is able to better operate in the shadowy intelligence world.

Monday, August 31, 2015

ANALYSIS: A flawed US approach to countering IS financing?

Middle East Eye

Military efforts to dislodge the Islamic State (IS) group from its strongholds in Syria and Iraq have not yet had the desired effect, in part due to the lack of a coordinated policy by regional and global actors.
The other major strategy to weaken IS, financial warfare, has been described as “pathetic” despite numerous international efforts, ncluding UN Security Council resolutions, an extensive report by the OECD's Financial Action Task Force (FATF), the Manama Declaration on combating the financing of extremism, the establishment of the Counter-ISIL Finance Group in Rome and pressure from the United States.
Financial crime experts attribute the failure to curb the rise of IS to policy initiatives and the “stalled war on terrorism financing”.

To read more:

Wednesday, August 19, 2015

Can growing pressure make Lebanon’s army reform its military courts?

  Middle East Eye 

BEIRUT - Lebanon is not a military state like Egypt, Jordan or Syria. There is no military-industrial complex like in Egypt, where it is estimated to account for about 30 percent of the gross domestic product (GDP). There is also no clear national leader capable of doing publicity stunts with parachute regiments like in Jordan, and there is no military service.
The last two Lebanese presidents aside - who switched their general's uniforms for suits once in office - Lebanese politics has been dominated more by former militia leaders and technocrats than by an elite officer corps with the potential to carry out a coup.
However, a storm is brewing over the extent of the army’s power, and in particular its use of military courts.
On the one hand, the Lebanese Armed Forces (LAF) exerts tremendous power within the country and has long been seen as one of the only neutral bodies in an otherwise heavily fractured state.
According to many activists it has also been able to further expand its influence in recent years thanks to the growing political vacuum that has left the country unable to select a president since May last year. Furthermore, it is having its hard power upgraded through a $3bn arms pledge from Saudi Arabia, which should see its stockpiles updated.
On the other hand, the body is keen to win public approval and has embarked on a soft power offensive, working to rally the populace around the cross-sectarian institution to keep stability amid regional unrest.
Billboards line the country's roads celebrating the army's 70th anniversary with the words Jamaa Moushtarak (Common Unity). In August, a smartphone app was launched, LAF Hero, with one game about territorial defence where the player has to strategically place army check points to nab terrorists.
This dual strategy has left the army open to criticism, touting itself as the defender of the people while at the same time trying citizens through the military court without full legal process, prompting a battle for reform that is currently underway.

To read more:

Tuesday, August 11, 2015

Britain had an Empire? -

An online video of Indian MP Shashi Tharoor arguing that Britain should pay India reparations for its colonial legacy has gone viral. It prompted much enthusiasm in the Indian press and parliament, as well as responses in the British press arguing both for and against Tharoor’s proposal. Interestingly, it also prompted a short article in the Guardian newspaper, ‘How much did you really learn about the British empire in school?
The article did not really answer the title’s question, even though the answer is ‘bugger all’.
It is quite extraordinary that British school children learn essentially nothing about an empire upon which ‘the sun never set’, which invaded every country on the planet bar 22 countries, spawned the world’s superpower, the United States, and that drew up the borders to so many countries with long-lasting negative results – Pakistan/India (Kashmir conflict), Sykes-Picot (divided up the Middle East), Nigeria, South Africa, and so on.
I had a British education in the 1980s and 1990s. In history lessons we touched on ancient Egypt, the Romans, the Vikings, then flash forwarded to Agincourt, Tudor England, the Industrial Revolution, the two World Wars, and some Cold War history. Colonialism was barely mentioned, or de-colonisation. Students had no idea about the true scale and the long history of the British empire. Then at university, where I studied international history and international politics, I encountered next to nothing about British colonialism; one course was on de-colonisation in Africa, but that was a class only history students took. In fact, I learned more about the British empire from the Flashman novels than I did at school or university – through George McDonald Fraser’s witty novels I read for the first time about the First Anglo-Afghan War (1839-42), the First Anglo-Sikh War (1845-6), the Indian War of Independence (or Mutiny as the Brits call it in 1857), the British and French invasion of China (the Second Opium War, 1856-1860), the invasion of Abyssinia (1868), and the White Rajah of Sarawak.
While Fraser had no real truck with imperialism, his extensive footnotes allowed you to read between the lines, and importantly learn something about what perfidious Albion was up to in the nineteenth century.
The Flashman novels aside, there are few other popular novels about the British empire (although J.G. Farrell’s excellent Empire Trilogy comes to mind), or films for that matter, certainly with a critical perspective produced over the past few decades. It is as if there is a collective amnesia about Britain’s imperial past. The one place you do encounter it is at the Imperial War Museum in London, but that is very much a hagiographic experience, not touching on the dark side of colonialism.
This amnesia extends to political studies too. Despite studying international relations at university, British foreign policy – old and contemporary – was not taught. An internet search showed that only one British university covers British foreign policy, as if Britain was not at all an actor on the world stage, not a part of the G8 or the UN Security Council, and was practising isolationism, when we know that is far from being the case. This is also extraordinary. There were – and still are – plenty of research papers and essays written about US foreign policy – invariably bashing it – but the same does not apply to British foreign policy; Europe yes, but not about what is coming out of Westminster and the Foreign and Commonwealth Office (FCO). Indeed, the FCO’s title says it all really, which should mean students, academics and journalists should be devoting as much, if not more, attention to its activities than Washington’s.
In conversation with Mark Curtis shortly after he published “Unpeople: Britain’s Secret Human Rights Abuses”, in which he states Britain bears “significant responsibility” since 1945 for the direct or indirect deaths of 8.6 million to 13.5 million people throughout the world, I asked him how many people were going through declassified British documents. He answered just one other research he knew of, Caroline Elkins, for her book “Britain’s Gulag: the Brutal End of Empire in Kenya”.
No academics or investigative journalists? He answered in the negative. That may, one hopes, have changed since 2005. But the title to George Monbiot’s article in 2012 discussing Elkins’ book still holds true, ‘Deny the British empire’s crimes? No, we ignore them’.
To have discovered about Britain’s past – varnished and unvarnished – has been a long term endeavour, from one’s own volition. Travel has also helped to discover the true extent of Britain’s empire and its legacy. The fact that all plug sockets in the Gulf Cooperation Council countries are British speaks volumes. Unless I had been there and read about the Gulf, I would never have known that the United Arab Emirates, Qatar and Bahrain all got their independence from Britain in 1971, and Kuwait in 1961. Or known that Cyprus got independence in 1960 – despite the ongoing presence of British Sovereign Base Areas – Uganda in 1962 and Tanzania in 1963. Hong Kong in 1997.
None of these ‘handbacks’ are very old, at all, yet few Brits below a certain age would know, and I would bet the vast majority of schoolchildren as well as university students today wouldn’t know either. Students wouldn’t be able to point on the map the countries that were British colonies. India perhaps. But would they know about the rest of Asia, Africa, South America, the Caribbean? Perhaps from the Commonwealth Games the public would have an idea, but the history of how Britain ‘acquired’ its colonies would be missing.
Tharoor’s suggestion that Britain should pay India reparations, even a token £1 ($1.54) a year as a form of apology for 200 years of occupation, should be strongly considered. Teaching children about the British empire should also be a major component of the curriculum. It is, quite simply, ridiculous that such a broad sway of history is not touched upon, especially a history that has had such a profound effect on the modern world.

Friday, July 31, 2015

Support in a Time of Peril: Nurses and Syrian Refugees

Nurses helping people affected by the civil unrest in Syria do what they can with limited resources, writes Paul Cochrane for Nursing Standard Journal

Volunteer nurse Sylvie in Zaatari camp, Jordan

In the fifth year of the civil war in Syria, nurses working for more than 200 agencies and aid groups in the region are providing paid and unpaid assistance. In 2014, the United Nation’s Syria Humanitarian Assistance Response Plan dispensed 16.5 million medical treatments in Syria. In Turkey, 522,000 people received health assistance in September 2014 alone.
The plan has also provided 3.6 million primary healthcare consultations for Syrians, and trained 4,343 health workers. According to the International Labour Organisation, 75% of Syrian refugees are struggling to meet their food needs or pay for medical care. This is where aid agencies step in.
In neighbouring Lebanon, senior nurse Norma Kebbe works for the international Catholic charity Caritas’ Saint Michel Medical Centre in the Beirut suburb of Sid El Bauchrieh. The clinic sees more than 80 families every day.
‘It is busy because our services are free of charge,’ Ms Kebbe says. The clinic has two doctors, a nurse and an occasional volunteer Syrian nurse. Ms Kebbe, who has 17 years’ nursing experience, decided to leave her public hospital job and take a 20% salary cut to work for Caritas because the clinic’s daytime hours suit her. The clinic cares for Syrian refugees, Iraqi refugees and low-income Lebanese people. 

Ms. Kebbe at the Caritas Clinic

Marked improvement

Over the past two years Ms Kebbe has noticed a marked improvement in refugees’ health. ‘When we started the clinic, refugees were in a bad situation medically and psychologically. After a year, people with hypertension are improved, there are fewer skin infections and follow up is better,’ she says.
Patients are also referred to social workers and psychologists. ‘All the refugees are traumatised and stressed,’ says Ms Kebbe.
Lebanon has no refugee camps but Jordan does – although about 84% of refugees live outside camps. Minimal care is provided by the Jordanian government. The largest camp, Zaatari, with 83,796 refugees, is near Jordan’s capital Amman. Nurse Sylvie, who does not want to give her full name, is from New York and volunteered with the Syrian American Medical Society for a n week in March.
‘It was a shock,’ she says. Conditions at Zaatari’s healthcare facilities were basic and patients’ health issues were related to poor living conditions, trauma and prior medical conditions.
‘Burns from gas stoves were prevalent among women and children. I did a lot of dressings with almost nothing to work with and it was impossible to wash hands between patients.’
Despite the difficult conditions, Sylvie plans to volunteer again: ‘I should be in Jordan doing something useful.’

Syrian refugees: the figures

7.6 million
Internally displaced
3.8 million
1.2 million
Registered in Lebanon
1.6 million
In Turkey
In Jordan
Source: United Nations Office for the Coordination of Humanitarian Affairs (OCHA)

First photo courtesy of Sylvie, second by Paul Cochrane