Boon time for mercenaries

Nervous and embattled Arab regimes look abroad for help

Commentary - Executive magazine

Erik Prince holds up a photo during a hearing in the US

The wars in Afghanistan and Iraq are supposedly winding down, Osama Bin Laden is dead, and the so-called ‘Arab Spring’ is eroding the iron-fisted regimes that have for so long held sway over the Middle East and North Africa (MENA). For private military contractors (PMCs) — a polite name for professional mercenaries — such developments might be considered a harbinger of tough times. But business is better than ever in Iraq and Afghanistan, and the suppression of internal revolts throughout the MENA is presenting new opportunities for this multi-billion dollar industry.

Last month details emerged that the infamous founder of Blackwater, Erik Prince, was forming an 800-strong secret army for the United Arab Emirates, for a price tag of $529 million. Prince moved to the UAE after Blackwater, later renamed Xe Services, faced legal problems in the United States, notably in a case against four Blackwater operatives accused of killing 17 Iraqi civilians in Baghdad in 2007, which has recently been reopened.

Reflex Responses, Prince’s new venture in conjunction with a 51 percent Emirati stake, features South African and Latin American mercenaries, the latter brought into the UAE disguised as construction workers, according to the New York Times, hired to protect under-construction nuclear power plants and oil infrastructure from terrorist attacks, and to “put down internal revolts” and “unrest in crowded labor camps.”

What is curious is the UAE’s need for Prince’s firm, as the country already ranked 16th worldwide in 2010 for military expenditure, at $15.74 billion, or 7.3 percent of gross domestic product, according to the Stockholm International Peace Research Institute. If such a high cost for the conventional military cannot guarantee security, but a half billion dollar private force can, it puts into question the rationale for such a high defense budget. Furthermore, it sheds doubt on the UAE’s belief in the Gulf Cooperation Council — dominated by Saudi Arabia — to come to its aid to squash an uprising, as happened when GCC forces rolled into Bahrain this year.

The UAE is clearly worried about instability amid uprisings nearby and has taken a page out of other government manuals by resorting to guns for hire. In March, it was reported that up to 1,000 Pakistani troops had been recruited to serve in the Bahrain National Guard to put down the uprising, as local troops could not be relied upon. In Saudi Arabia, which recently signed a $60 billion arms deal with the US, Associated Press reported that a top secret project is underway with the US Central Command supervising and training a 35,000-strong Saudi force to protect oil infrastructure and, presumably, to crush any unrest. Reports also abound of Muammar al-Qadhafi using mercenaries in his ongoing war against the rebels in Libya.

Last year in Iraq, security was the second most common service provided by contractors to the US government, accounting for approximately 13,000 personnel, or 18 percent of all contractors, according to a recent report by the Congressional Research Service. But while US troop levels have dropped in Iraq since 2008, along with support service contracts as a result, PMCs actually increased by 39 percent, or 3,500 personnel, by the end of last year.

The US Department of Defense does not give a breakdown of contractor services in Afghanistan, but contracts have soared over the past five years, from $2 billion in 2005, to $11.8 billion for some 87,000 contractors in 2010. It appears as though demand for PMCs will remain high so long as governments carry out policies unpopular in the eyes of the public. After all, mercenaries are useful assets to perform tasks that might strain the loyalty of a country’s regular armed forces. Indeed, Reflex Responses will reportedly not hire Muslim mercenaries given that, in the words of Prince, “They could not be counted on to kill fellow Muslims.”

The regional spike in demand for mercenaries and private armies speaks volumes about the insecurities of the UAE and Saudi Arabia. More chillingly, it raises concerns about the destiny of the ‘Arab Spring’ when governments resort to such forces to quell revolt.

Obedient Al Jazeera

Silence on Bahrain puts objectivity into question

Commentary - Executive magazine

Since Al Jazeera’s launch in 1996 its slogan has been “the opinion and the other opinion.” Its objective of telling both sides of the story has won over many audiences, while at the same time making the channel more than a few enemies — namely Saudi Arabia, which set up Al Arabiya in response to the Qatar-based network’s regional and global rise.

Banned at one point or another in nearly every Middle Eastern country, Al Jazeera has for the most part lived up to its truth-seeking pledge, but its slogan is now in danger of being undermined by its lop-sided coverage of the Arab revolts. The year began all roses for Al Jazeera, credited with being instrumental to the overthrow of the Tunisian and Egyptian regimes due to its round-the-clock coverage of demonstrations and its ability to give the uprisings widespread visibility. As a result, Al Jazeera has been praised in the Western media and by the White House, which was apparently glued to Al Jazeera English’s (AJE) coverage of Egypt. British newspaper The Daily Telegraph gushed in April: “The ‘Arab Spring’ uprisings of 2011 are being hailed in Washington as the ‘Al Jazeera moment’,” and Australia’s Sydney Morning Herald trumpeted: “Al Jazeera is changing minds and hearts.”

Missing from these glowing accounts, though, was that the uprising in Bahrain was barely covered by Al Jazeera Arabic, with only slightly better coverage on AJE. Given Al Jazeera’s integral role in the Tunisian and Egyptian revolutions, its muted coverage of the Bahraini uprising since it began in mid-February has come as a slap in the face to the countless demonstrators there. Furthermore, Al Jazeera gave the detention and alleged torture of hundreds of Bahraini demonstrators scant coverage compared to similar events in Egypt, while the channel also failed to air potentially damning footage of the demolition of the symbol of the uprising, the Pearl roundabout, and 16 Shia mosques — a silence that could only be called an abdication of Al Jazeera’s self-proclaimed duty to objectively inform regional opinion.

At the heart of the matter is Qatar’s membership in the Gulf Cooperation Council (GCC), established in 1981 as a security pact among the Gulf monarchies in the wake of the 1979 siege of Mecca. Qatar’s position in the GCC pushed Doha to deploy troops to Bahrain when martial law was declared on March 15, but a casualty of this military intervention has been Al Jazeera’s objective news coverage.

With regard to Bahrain, Al Jazeera seems quite clearly to be acting as an extension of the Qatari government’s foreign policy and leaves the channel vulnerable to accusations of “double standards,” politically acceptable uprisings in the name of democracy — in Libya, Egypt, Tunisia and Yemen for instance — are covered and supported; uprisings against the Qatari national interest — such as in Bahrain — are largely dismissed. Ironically, Al Jazeera was banned in Bahrain last year, which the channel suggested may have been because of a report it aired on the country’s poverty, but which Bloomberg suggested was related to Manama’s wanting to increase Qatar’s rent for use of the Hawar islands.

A 2009 United States diplomatic cable, released by Wikileaks, highlights the geo-political role of Al Jazeera, with US ambassador to Qatar, Joseph LeBaron, noting: “Al Jazeera’s ability to influence public opinion throughout the region is a substantial source of leverage for Qatar… Moreover, the network can also be used as a chip to improve relations. For example, Al Jazeera’s more favorable coverage of Saudi Arabia’s royal family has facilitated Qatari-Saudi reconciliation over the past year.”

Al Jazeera’s “objective coverage” should also come under greater scrutiny in regards to Libya given Qatar’s vested interests there, including Doha’s role in the NATO-led air strikes and the inking of an oil distribution agreement with the Libyan rebels the day before the strikes began. Uncritical coverage of Qatari issues has also been a hallmark of the station since its inception. Thus, while Al Jazeera has generally helped raise the bar on network news coverage and pushed television reportage to a new level, those who’ve championed the channel as some sort of media Messiah immune to the failings of major Western news outlets should take heed — there is “the opinion and the other opinion”, and then there is the opinion of the Emir of Qatar.

Book review: America's Kingdom

Robert Vitalis takes a no-holds barred look at Aramco

By Paul Cochrane, Executive magazine

Saudi Aramco, valued anywhere from $2 trillion to $7 trillion and employing more than 55,000 people, is the world’s largest unlisted company. How it got there is a story that has been told before — from the first discovery of oil to the entrance of the American oil majors, to the development of the so-called “special relationship” between Saudi Arabia and the United States.

But Robert Vitalis’s newly updated book, the product of a decade of research and writing, charts the history from a different perspective, viewing Aramco as a microcosm of the colonial order. It describes an ‘oil-garchy’, the partnership that began decades ago with some of the largest oil companies in the world — Socal, later renamed Chevron, Standard Oil of New Jersey, later Exxon, and Socony-Vacuum Oil, later Mobil — and the relations between Washington DC and Riyadh until Aramco was fully nationalized in 1980, becoming known in 1988 as the Saudi Arabian Oil Company or Saudi Aramco.

It is not a telling of history financed by Aramco or seeking to enter the good books of the Saudis or the oil industry — an independence that aids its veracity. As Vitalis notes: “Companies are like authoritarian countries. They keep records hidden...They open their archives only to those they hire [and] insist on the right to approve what is written... There are no sunshine laws and no Freedom of Information Acts against corporate privilege.”

Indeed, like other tomes exposing the costs of oil development, America’s Kingdom is blacklisted in Saudi Arabia alongside works like the late Saudi novelist Abdelrahman Munif's superlative quintet Cities of Salt.

Vitalis blasts commercially successful accounts of Aramco and Saudi Arabia that conveniently gloss over the company’s less than exemplary past and uncritically repeat Aramco’s creed that it acted differently from other oil companies; the company claims to have helped Saudi Arabia modernize through what Aramco President Frank Jungers called its “farsighted policies” and a “55-year record of cooperation and mutual respect.”

Vitalis exposes the situation of Saudi and non-American workers, their decades-long struggles for better accommodation, wages and rights, how protests were squashed, and the eventual ending of a system that divided labor based on race, imported from the US and similar to the ‘Jim Crow’ laws used in America to pay white workers more than African Americans and Hispanics.

He also exposed as myths many claims that Aramco still expounds; the company’s website states that, “Since 1940, Saudi Aramco schools have provided educational services to dependents of Saudi Aramco employees.” In fact, Aramco’s management worked to prevent Saudis and their dependents from being educated, arguing “the company should not engage in a general education program,” despite a 1942 Labor Law that required Aramco to do so. It was not until 1955 that the labor movement and the Saudi government forced Aramco to “pay for a system of schools, training institutes, and, ultimately, an engineering college.”

The book debunks the notion of Saudi “exceptionalism” — the doctrine that its leadership steered the fledgling kingdom through the miasma of empire and imperialism without external influence; while Saudi Arabia became a state in 1932, what “everyone seems to forget is that (the Saudi Emir, later king) Ibn Saud signed a treaty in 1915 with Great Britain that conceded sovereignty rights for protection,” writes Vitalis. The kingdom has been keen to downplay such reliance on outsiders for its survival ever since, whether on Britain or later on Aramco and the US.

America’s Kingdom is an important contribution to the often-neglected field of oil history, and a powerful critique of the US-Saudi relationship and of Aramco, a company with monumental sway over the world’s energy markets.

Qatar's foreign policy - The Tiny Giant: LNG fuels Qatar's massive global clout

By Paul Cochrane for Executive magazine

In 2004, American magazine The Weekly Standard ran an op-ed on Qatar entitled “A Country With No Politics.” A tongue in cheek title (what country has no politics?) it is nevertheless indicative of how far Qatar has come in just seven years.

Back then, Qatar’s politics were most on display in the frequently ire-raising broadcasts of its most famous asset, the state-owned Al Jazeera news network, which managed to antagonize nearly every Middle Eastern government as well as that of the United States. Since then, Qatar has molded itself into a major economic and political player.

First came the mediator role, which helped Doha to usurp the region’s traditional go-between, Saudi Arabia, by attempting to broker a peace deal in Darfur, resolve the border dispute between Eritrea and Djibouti, and the (now failed) Doha Accord in 2008 that brought together the rival Lebanese political camps. A bevy of cash — rumors abound of the millions of dollars Lebanese political leaders were paid to sit down together — and supposed neutrality enabled the Qataris to play the middleman.

If Qatar is seen as neutral — like a Switzerland or Sweden of the Middle East — it is due to the kingdom’s efforts to befriend virtually everyone. Qatar’s foreign policy has been called paradoxical as a result. It hosts a United States air force base, which Doha financed in part, which was instrumental in the US-led invasion of Iraq in 2003; yet then-President of the United States George W. Bush threatened to bomb Al Jazeera’s headquarters in 2004, and earlier this year leaked US embassy cables leaked by Wikileaks revealed that US Secretary of State Hillary Clinton criticized Qatar’s efforts to tackle terrorist financing for militant Sunni groups. On top of this, Qatar inked a defense pact with America’s nemesis, Iran, in 2010.

Doha was involved in conflict mediation in the Horn of Africa, yet Ethiopia broke off diplomatic ties with Qatar in 2008, alleging the Qataris were funding Islamic militant groups in Somalia — including US-designated terrorist organization Al Shebab — that were attacking Ethiopian troops following Addis Ababa’s invasion of the beleaguered East African state in 2006. Qatar said it was “surprised” by Addis Ababa’s decision. And, while having links to Hamas and to Hezbollah, Doha also has diplomatic and economic ties with Israel, having hosted an Israeli consulate until Qatar broke off relations in 2009 during the war on Gaza. Doha tried twice in 2010 to restore diplomatic ties and was rebuffed by Tel Aviv, but the economic ties remain — if perhaps more symbolic than of consequence — with exports to Qatar totaling some $1 million [AED 3.67 million] and imports $1.9 million [AED 6.98 million] in 2010, according to the Manufacturers Association of Israel.

Cultural normalization with the Jewish state is equally apparent, with Israeli conductor Daniel Barenboim’s orchestra giving a private concert for the Qatari elite during the Arab Cultural Capital events in Doha last year (local press coyly referred to the orchestra as “Western musicians”).

Mehran Kamrava, director of the Center for International and Regional Studies at Georgetown University-Qatar, sees Qatari policy, even in its contradictions, as being a product of its size and location: “Qatar’s foreign policy is typical of small states in the sense that it is driven by a survival strategy. It is a small country in a very rough neighborhood; tensions between Iran and the US, and with Saudi Arabia, with whom relations have not been the most friendly, are on the doorstep .”

“I wouldn’t call [Qatar’s] foreign policy paradoxical — creative it might be, but certainly strategically informed,” he added.

Behind this policy is the al-Thani ruling family. “An elite couple of people make the policy and what they say goes,” said David Roberts, deputy director of Britain’s Royal United Services Institute, a defense think tank in Doha. “The emir can pick up the phone and make foreign policy if he wants.”

Qatar shows its colors

Over the past six months Qatar has substantially flexed clout internationally, including beating global competition to win the bid to host the 2022 World Cup, and in March made arguably its boldest foreign policy moves. On March 18, Qatar sent troops to join the Gulf Cooperation Council’s efforts to “restore law and order” in Bahrain following an uprising that started against the ruling family in mid-February. Just 10 days later, Qatar became the first Arab country to recognize the legitimacy of the Libyan rebel movement when it inked an agreement to market and distribute oil from Eastern Libya. The next day Qatar signed up to be part of the air strikes against Muammar al-Qadhafi’s regime.

As a result, Qatar threw to the wind a $2 billion [AED 7.35 billion] joint investment fund launched in 2007 between the Libyan Investment Authority and the Qatar Investment Authority (QIA), along with further investments of $8 billion in Libya announced in 2008 and 2009. “This is a leadership that is not risk averse,” said Kamrava. “They took a risk by entering an agreement with the Libyan rebels, and it remains to be seen how the events in Libya turn out. It could be a very popular thing, siding with people’s aspirations in the Middle East and North Africa (MENA) and a popular position to take.” If there is a paradox in Qatar’s foreign policy it is most evident in its response to revolts in the Middle East — helping to fight an authoritarian regime in Libya and having stoked support for other Arab uprisings through Al Jazeera on one hand, while propping up another regime in Bahrain on the other.

“Qatar hasn’t directly participated in (military) actions in Bahrain, but as a part of the GCC and done in [the Council’s] name, it undermines Qatar’s support for Libya. It is leading the international campaign while hoping no one will ask questions about tacit support for intervention against democracy in Bahrain and such contradictions,” said Kristian Coates Ulrichsen, a research fellow specializing in the GCC at the London School of Economics (LSE) global governance program. “The perception in other (Arab) countries is that Al Jazeera is controlled by the al-Thani family. Even if not true [the sentiment] is there and could come back to bite Qatar if there is any blowback.”

He added that: “Qatar has made many enemies by covering revolutions and fanning revolutionary fervor, in Libya and Egypt, and works on the premise not to cover Qatar, yet what if something happened there? Would Al Jazeera cover it? I doubt it. If something were to happen I suspect Qatar would have very few friends that would come to its defense, over the perception Al Jazeera has been playing a role in messing with the affairs [of other regimes].”

Yet, while Al Jazeera may be an asset that has made Qatar enemies, the country’s colossal gas and oil reserves play an important role in ensuring its security.

LNG masters of the universe

Despite having the world’s third largest gas reserves, Qatar came later to the hydrocarbons game than any of its regional competitors, due to the fact that the technology needed to extract gas from the depths of the North Field only became commercially viable in the 1990s.

The country has since put an estimated $137 billion [AED 503.23 billion] into developing the North Field and associated projects, increased natural gas output more than five times over since 1995, and reached a new benchmark last year of 77 million tons a year of liquefied natural gas (LNG) once a total of 14 LNG ‘mega train’ production facilities became operational. Coming later to the game has had advantages for Qatar in developing an energy policy that has been to its benefit rather than weighted in favor of international oil companies (IOCs), as was the case in the early years of oil development in Saudi Arabia, Nigeria, Iran and elsewhere.

Qatar took inspiration from Saudi Arabia’s state-owned mega oil company Aramco, which, once nationalized in 1980, developed oil terminals and established a shipping subsidiary with 27 oil tankers. Qatar has gone further than Riyadh, however, by creating an integrated LNG value chain in conjunction with IOCs, which has made it the world’s largest exporter and trans-shipper of LNG, supplying 23 countries.

It has stakes through state-owned Qatargas and Rasgas in gas production, liquefaction through the gas trains developed at Ras Laffan, transportation through its 70 LNG ships, and has jointly financed LNG receiving and re-gasification terminals in consumer countries. In 2009, the South Hook LNG terminal opened in Wales, which provides 15 percent of Britain’s gas, and soon after the Adriatic LNG terminal started providing 10 percent of Italy’s natural gas needs. In April, the Golden Pass LNG terminal opened in Texas and is slated to provide gas to 10 million American homes each year. A fourth international terminal is to be developed, with Qatar inking an agreement with Argentina this year.

The development of such terminals have tied countries into long-term agreements — ranging from three to 25 years — with Qatar for LNG, a policy it has adopted with Asia, which accounted for 57 percent of LNG exports in 2009, with South Korea the top importer, followed by India, China and Japan. Conversely, European markets, including Belgium, Britain and Spain, imported 33 percent of Qatari LNG in 2009, according to the US Energy Information Administration (EIA). Such moves ensure profitability throughout the length of the value chain while causing others to be energy dependent on Qatar. “Locking countries into long term agreements is one of cleverest things they’ve done and a good way to ensure long term security and to have strong leverage,” said Ulrichsen.

Britain, the former colonial power until 1971, is particularly tied to Doha. The relationship will only grow stronger, as by 2025 Qatar is slated to provide 50 percent of Britain’s LNG. Furthermore, the British-Dutch oil major Shell has sunk an estimated $21 billion [AED 77.14 billion] into Qatar, its biggest investment in one single country; America’s ExxonMobil has invested $16 billion [AED 58.77 billion].

“If you look at Qatar supplying Britain with 15 percent, if not more, of its gas needs, then that ties Britain to Qatar,” said Roberts. “If something catastrophic happened to Qatar, it would certainly get Britain’s attention. There are definitely geo-political considerations in addition to the investment.”

Qatar has also made a firm friend in Japan, exporting 7.63 million tons in 2010, and following the earthquake that ravaged the country earlier this year bolstered LNG exports by 4 million tons to become Japan’s fourth largest gas supplier. Although Japan does not have the military reach to protect Qatar, it would bring diplomatic clout and financial assistance in the event of conflict, as happened during the 1991 Gulf War, with Tokyo contributing $12 billion [AED 44.1 billion] to finance the war, the third largest supplier of funds after Saudi Arabia and Kuwait, in order to ensure energy supplies kept flowing from the Gulf.

“When your foreign policy is guided wholly or in part by commercial or economic relations, you cannot rule out Asia. But if there is a tilt towards East Asia it would not be at the expense of the West,” said Kamrava, noting that security interests maintain the Western outlook of the kingdom.

The balance of gas

This position is reflected in Qatar’s locking up of export destinations to ensure that it has friends in the right places. For instance, the price of LNG in the US is $4.41 [AED 16.2] per million metric British thermal unit (mmbtu), whereas in Europe it is $9.55/mmbtu and in Asia $13/mmbtu as of Executive going to print. In essence, Qatar is paying for its security by shipping lower priced LNG to Europe and the US while extracting its most profitable sales in Asian markets — a somewhat similar “deal” Saudi Arabia has with the US in exporting oil at lower transportation costs and with strategic tax breaks in the US.

“The East can never replace the West’s commitment to Qatari security,” noted Ulrichsen. Getting the export balancing act right has been critical to Qatar; when Doha agreed to ship over the next 12 months an extra 60 cargo loads of LNG to Japan, concerns were initially raised in the markets that LNG would be diverted away from Europe.

Qatar now has the extra capacity to meet demand, however, which has effectively turned the country into a swing supplier of LNG in much the way Saudi Arabia is for oil; a strong global position to hold as LNG demand grows in the coming decades. But while such energy agreements ensure Qatar’s is protected internationally, in the Gulf it is a policy that could have rather different ramifications, with a unified natural gas pipeline in the GCC still not in place despite years of planning.

“Qatar has been prioritizing long term agreements at the expense of GCC states as they all have gas shortages, and this could be a bone of contention,” said Ulrichsen.

Furthermore, Qatar’s North Field borders Iran’s South Pars field, which Tehran has not been able to profit from to the same degree as Qatar due to international sanctions on the technology needed for extraction. Iranian officials estimate that more than $200 billion [AED 734.65] is needed to bring development up-to-speed. Qatar’s aggressive development of its side of the field raises concerns for Iran of draining the reserves. To stave off a potential crisis, Qatar declared a moratorium on North Field development from 2005 until 2014 to assess the impact of increased production.

“As Qatar moves ahead and Iran doesn’t, this could generate a feeling of mistrust. Kuwait and Iran have never been able to agree on the maritime boundaries of their gas fields. Just because [Qatar and Iran have an] agreement doesn’t mean [that] it will always be the case,” said Ulrichsen.

Qatar’s bold foreign policy moves this year have ushered in a new era for the country on the world stage. How they will pay off in the medium-to-long run will depend on the success of its role in Libya, and how Doha plays its hand in the Gulf. LNG energy dependency will buy Qatar friends but Doha will also have to play an increasingly precarious balancing act keeping everyone happy — a task further complicated in a region undergoing profound political and social change.

How Qatar will steer through such choppy waters in the years to come is likely only to become more audacious, and perhaps paradoxical, as its rapidly expanding international clout powers its foreign policy strategy.

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Time to rethink a nuclear Middle East

Commentary - Executive

Just days after the Fukushima disaster, work started on the UAE's first nuclear power plant

Three days after an earthquake measuring 9.0 on the Richter scale critically damaged Japan’s Fukushima Daiichi nuclear power plant (NPP), the president of South Korea and the crown prince of Abu Dhabi attended a ground-breaking ceremony of the Braka NPP in the United Arab Emirates; it is the first of four to be built under a $20 billion contract inked in 2009 between the Emirates Nuclear Energy Corporation and a consortium of South Korean and American companies.

The inauguration celebration could hardly have been more inopportune. In the course of a week the incident at the Fukushima NPP went from being rated four on the International Atomic Energy Agency’s (IAEA) International Nuclear and Radiological Event Scale, “an accident with local consequences,” to level five, “an accident with wider consequences.” The Fukushima disaster is the only level five rating since the Three Mile Island meltdown in the United States in 1979. There has only been one level seven, the highest rating, in Chernobyl in 1986, which, according to research by New York’s Academy of Sciences published last year, resulted in the deaths of 985,000 people from cancer and related diseases.

The global “nuclear renaissance” touted just a few years ago seems far less secure, a fact reflected in investor sentiment: uranium prices on the spot market following the Japanese calamity plunged 27 percent to $50 per pound as countries started reconsidering the construction of new NPPs.

If there were ever a time to rethink nuclear power it is now, certainly before the dozen Middle Eastern and North African countries that have signed nuclear cooperation agreements start building NPPs. And the risks need to be seriously assessed, not just in terms of security, the logistics of storing spent fuel for thousands of years and so on, but also in terms of earthquake risk.

The Middle East is chock full of tectonic plates, with the Arabian plate in the middle flanked by the Eurasian, African and Indian plates. One of the most seismically active continental regions on earth is just across the sea from the United Arab Emirates, the Zagros Thrust in Iran. Of equal concern is the fact that modern systems to measure seismic activity have only recently been introduced in Saudi Arabia and Oman, while the UAE set one up just this year.

While there is little chance of a tsunami, an earthquake of a magnitude of 5.1 shook the emirate of Fujairah in 2002, and repeated seismic activity in the locality suggests that other, more sizable earthquakes are likely in the future. “When?” is of course the question, and the world can only hope that those building NPPs will do so with the worst-case scenario in mind; the Fukushima NPP was built at a time when the thought of it having to withstand a 9.0 magnitude earthquake was considered unlikely.

Braka was chosen as the site for the UAE’s first NPP as it is “an area with a very low probability of earthquakes — what is called low seismicity,” Ambassador Hamad al-Kaabi, UAE Permanent Representative to the IAEA, told the press after the Fukushima disaster. Yet it is not just unexpected earthquakes that are a concern when it comes to nuclear power. Transparency has been a major issue in the nuclear industry globally; in a 2008 US diplomatic cable released by WikiLeaks, a Japanese politician said the country’s Ministry of Economy, Trade and Industry, the department responsible for nuclear energy, has been “covering up nuclear accidents and obscuring the true costs and problems associated with the nuclear industry.”

The UAE hardly has a sterling reputation for transparency and accountability — think back to how the Dubai debt imbroglio was handled in 2009. If the Japanese, with 54 nuclear reactors, cannot be relied upon to be transparent, can we be sure the UAE will be?

Let us hope the UAE’s decision to go ahead with nuclear power, just as news of Fukushima’s fallout was dominating headlines, will not be retold through history as the epitomic example of a warning unheeded.

PAUL COCHRANE is the Middle East correspondent for International News Services

Kashmir: A wedding under curfew

Revolve magazine - www.revolve-magazine.com

It is mid week, the middle of the day and the streets of Srinagar are deserted. It’s like this four days out of every six. The “Quit Kashmir Movement” and “All Parties Hurriyat Conference” call for a hartal (strike) to demonstrate for azadi (freedom) and the Indian military responds by imposing a curfew to prevent the Kashmiris from taking to the streets. Road blocks are put in place, military vehicles move into strategic positions and troops go on patrol.

The violence has claimed over 100 Kashmiri lives since June 11, 2010 when the Indian Army shot at unarmed demonstrators. This violence has occurred most often when the Kashmiris challenge the curfew, swarming to junctions and the major arteries of Srinagar, with young men – and women – throwing projectiles, chanting slogans and, in general, resisting India’s occupation. Curiously, the slogans painted and chalked on roads, walls, shop shutters and in the grime of car windows are mostly in English: “Freedom”, “Go India Go Back”, and “Go Indian Dogs”.

The Indian Army is predominantly made up of Hindi speakers, with little Kashmiri known. Kashmiris are conversant in Hindi but lack literacy skills, so the default language of both sides – and useful for international media attention – is that of the former colonizer, Great Britain. Indeed, Britain was instrumental to Partition, promoting a separate Pakistan and after Pakistan invaded and occupied Kashmir in October 1947, Britain lobbied at the UN in favor of Kashmir becoming a Pakistani province.

Foreign Secretary Ernest Bevin told US Secretary of State George Marshall that “the main issue was who would control the main artery leading into Central Asia.” And as the then Chancellor of the Exchequer Hugh Dalton put it, Pakistan was central to Bevin’s ambition to organize “the middle of the planet.” (Read Mark Curtis, Secret Affairs: Britain’s Collusion with Radical Islam (London: Serpent’s Tail, 2010).

On the two days that are hartal and curfew free, Srinagar turns into a mad house, with people trying to pack a week’s business into 48 hours and families stock-piling food for the inevitable next shutdown. This is the Kashmiri status quo. In the midst of all this a wedding was to take place, for life must go on, but the guest list was to prove rather unpredictable and the ongoing situation generating a rather somber tone to the celebrations.

Gilani’s On Board

I had been to Kashmir before in slightly more ‘normal’ times; at least there were no curfews and daily life was able to go on, while there were some tourists but not on the scale of the boon times in the 1970s and early 1980s. Kashmiris I had met in Srinagar on my inaugural visit had family members in New Delhi that I later befriended and stayed with on return visits to India. It was this extended family, that shall go under the pseudonym of Manzar due to the fear – alas very valid – of repercussions from the Indian authorities given their opinions on the occupation, that invited me to join them for the wedding of one of their daughters.

Having endured the bum breaking 24-hour, 1,000 kilometer bus journey between Srinagar and New Delhi before, I decided on the easier option of flying to the Vale of Kashmir instead. One of my fellow travelers was none other than Sayyed Ali Shah Gilani, the Chairman of the Hurriyat Conference (HC). Gilani was warmly greeted by the Kashmiris waiting at the departure gate, going up to shake hands, the young ones to have their hair ruffled and smiles all round. Gilani was clearly admired.

Gilani and the HC call for the hartals to take place and demands hurriyat (freedom), while intractably involved in a decades-long game of cat-and-mouse with the Indian government. On arrival in Srinagar, Gilani was detained by the authorities and later placed under house arrest, contributing to some 140 days spent in the confinements of his property during 2010, along with 40 days of imprisonment under India’s Public Safety Act. One of the Manzar’s commented: “It is a part of daily life for him, like having a cup of chai (tea).”

As a foreigner, I had to register at the airport with a plain clothes member of Indian intelligence, and upon being greeted by the Manzar’s at the entrance, was accosted by a Kashmiri tourist policeman in a disheveled uniform, who took down my particulars only as “Mr. Paul from Ireland.” It was a quick drive through the empty streets of Srinagar to the Manzar’s three-story home near Lake Dal. Once installed, I related that Gilani was on the plane, but this aroused little curiosity. And for a reason indicative of the sectarianism that is as rife in Kashmir as in the rest of India.

This is not the Muslim-Hindu fitna (discord) that has flared off-and-on in Indian politics since the 1947 Partition with Pakistan – a controversial government paper has shown that Muslims are under-represented, and politically and socially disadvantaged in India. In Kashmir, one million Hindu Pandits were forced out over the years due to religious extremism and the perception that they sided with the predominantly Hindu national government rather than with Kashmir.

While this is a lingering scar, contemporary Kashmiri sectarianism is between the majority Sunni population and the Shia, the latter only having marginal political representation in the Hurriyat Conference. It is a similar story for minority Shia in other Islamic countries, such as neighbouring Pakistan, Afghanistan and Saudi Arabia, and an issue in countries where the Shia are in the ascendancy, namely Bahrain and Lebanon.

“I don’t like Gilani,” said Reza, the brother of the bride to be. “Gilani hates Shias.” This is not to insinuate that the Manzar’s dislike Sunnis – indeed, Reza is engaged to a Sunni and one of his father’s best friends is a Sunni – but that the Shia feel discriminated against by the likes of Gilani and other sectarian leaders. Division has become an obstacle for the Kashmiri resistance, as it has with every other occupied people, such as the Palestinians, when the occupying and neighboring powers successfully drive a wedge between, and pit the locals against, each other.

Internal Kashmiri rifts have been exacerbated by the Pakistan’s notorious Inter-Services Intelligence (ISI) sponsorship of militant groups, and bank-rolled by the Saudi Kingdom, ever keen to export its version of Islam, Wahhabiism, spending over $50 billion globally in the past decades. Propped up financially by the unlikely trio of China, Saudi Arabia and the United States, Pakistan has backed Kashmiri militant groups for over 30 years. Former Pakistani President, Pervez Musharraf, admitted in October 2010 in London that the ISI set up groups in the 1980s and early 1990s to attack India.

Another Bad Year

2010 was another bad year in Kashmir. In 1989, a popular rebellion – the Kashmiri intifada – against Indian misrule began, further stoked by militant Islamic groups connected to the ISI in the wake of the end of the Soviet occupation of Afghanistan, sending scores of Afghan veterans and Pakistani Kashmiris across the Line of Control (LoC) that separates Indian Jammu and Kashmir (J&K), and the Pakistani Azad (free) Kashmir (China has the remaining 20 percent called Aksai Chin, which is claimed by India). This proxy war between Pakistan and India, that remnant of the 1947 Partition, put the Kashmiri populace in the middle. Intifada after intifada has occurred since 1989 and the Indian Army has cracked down hard, notably in 2001, when over 1,000 civilians were killed. Over 45,000 Kashmiris have been killed since 1989.

One major difference over the past year from former crises, when feelings rose to a boiling point and Kashmiris took to the streets, is that this time there has been minimal militancy – apart from the stone throwing and rioting. Sympathy with the militants has waned – particularly for Pakistani-backed groups – but anger with New Delhi’s political dillydallying and iron fist policy in tackling the “Kashmir issue” has spiked. The youth are not interested in siding with New Delhi or Islamabad. The youth want independence, or, at worst, autonomy from India.

A poll released in May 2010, carried out by Chatham House on both sides of the LoC, affirms that just 2 percent of respondents in J&K want to join Pakistan, and only 28 percent want to join India. More than four in 10, or 43 percent of the total adult population, want independence, particularly in the Kashmir Valley Division (between 75 and 95 percent), and 82 percent of those polled in Srinagar (in Jammu just 1 percent, Leh 30 percent and Kargil 20 percent). Some 44 percent of Pakistani Kashmiris also want sovereignty over their own affairs. (See Robert Bradnock, Kashmir: Paths to Peace. London: Chatham House, May 2010.)

The results show an overwhelming desire of the estimated 12 million Kashmiris for independence. But this in itself poses a particular problem. The options for the Kashmiris is tied up with UN resolutions dating back to 1948-49 that call for a referendum to take place for the people to decide whether they want to join India or Pakistan. Clearly, if the survey truly reflects the opinions of the people, the Kashmiris want neither, but rather prefer total independence. But independence for Kashmir is the last thing Islamabad or New Delhi wants, despite talks between the two sides that have been off and on since 2003 and gained new momentum in 2011.

K is for Kashmir

The religious dimension of the Kashmir conflict, sandwiched between Muslim Pakistan and Hindu India, has deeply ingrained the mutual hatred over the past 65 years. Pakistan is against an independent Kashmir that unites both sides, losing its border and access to China, not to mention a major dent to its pride and the all powerful military that forms the backbone of the Pakistani nation. Azad Kashmir is so integral to Pakistan that the country’s name means “land of the pure” and is an acronym, according to the popular saying: P for Punjab, A for Afghanistan, K for Kashmir, and STAN for Baluchistan. Take out the K and Pakistan wouldn’t quite have the same ring to it. India’s Hindu populace – which has become far more radical and militant over the past 20 years – would equally be against losing a major part of the Northern provinces, especially to Muslim rule.

While international observers are calling for the LoC to become an international border, for joint institutions to be developed and for the United States to partake in ‘quiet diplomacy’ and utilize its relations with Islamabad and growing alliance – particularly militarily and on nuclear power – with New Delhi, a far more radical solution is called for. One fitting with what India champions itself as, “the world’s largest democracy” – a referendum on what the Kashmiri people want, not Delhi, its puppets or the Kashmiri dynasties that have ruled the region for generations.

Young Kashmiris think this could work – with the state having abundant land and resources and more than enough people for a viable country, plus a flourishing tourism sector if there were peace. Kashmir is land-locked and would require the good will of its neighbors – the very same from which it would secede – for trade to take off. Unified with Azad Kashmir, a free Kashmir would have access to the large markets of China and Central Asia.

But India is not ready: the diabolical Armed Forces Special Powers Act (AFSPA) goes unpunished and lets soldiers, quite literally, get away with murder. In 2010, Mian Qayoom, President of the Kashmir Bar Association, was arrested under the Public Safety Act for protesting human rights violations and sentenced to two years in jail, while peaceful protesters engaged in sit-ins are accused by the police of “offences” and “disobedience to order duly promulgated by public servants” while others were accused of spouting “anti-national slogans.”

The most sensational case was Booker Prize winning author and activist Arundhati Roy, along with Gilani and five others, being booked for “sedition” for making anti-India speeches at an event in Srinagar. In late 2010, Roy said the charge “is meant to frighten civil rights groups and young journalists into keeping quiet.” The case is to go on trial in April 2011. Read her book on what’s really happening in India: Listening to Grasshoppers, Field Notes on Democracy (London: Penguin, 2009).

“Suspect All, Respect All”

A slogan on an army road block: “Suspect All, Respect All”. This is India’s policy in Kashmir, although leaning to suspecting all, rather than respecting all. The slogan drew smirks from the young Kashmiri men I went around Srinagar with, as they saw little respect from the authorities. They related how during curfews Kashmiris were pulled from their vehicles at checkpoints and beaten by soldiers, for no apparent reason. They described how at hartals the army used live ammunition on the unarmed protesters, and how, during curfews, sticking one’s head out of your front door could also result in a beating. There was a sense of despondency about the situation and it being rectified anytime soon.

One of the failures of New Delhi in Kashmir is how little it has done to endear Kashmiris towards India. There has been no “nation building” or investing in infrastructure and improving living standards. Kashmiris view the Indians as exploiting their land – natural resources, water and the hydro-power that provides electricity to New Delhi and the populous state of Punjab while Kashmir experiences power shortages.

A major shortcoming is providing employment. Recent statistics show that 590,000 educated youth in the state are unemployed, while in the Chatham House survey in J&K, 81 percent of those polled said the most significant problem was unemployment, with government corruption and poor economic development in second and third place respectively.

The lack of work in Kashmir was reflected by the Manzar’s, their friends and extended family. A middle class family, the men had to work elsewhere in India to earn a decent wage, while some of the young men helping out at the wedding worked in Singapore, Dubai and Australia. With no opportunities in Srinagar, there was little choice but to head down to Delhi or further afield. But that didn’t mean the problems of Kashmir disappeared. The diaspora in India keep firmly attuned to what is happening through Kashmiri TV channels and newspapers, while trying to keep a low profile, particularly following terrorist attacks in the capital due to fear of anti-Muslim and anti-Kashmir bashing.

Due to the virulent anti-Muslim prejudices of the Indian media, which jumped to conclusions that Muslims were behind the majority of bombings in New Delhi in 2007 and 2008, one of the Manzar’s living in the capital refused to go out on the streets for fear of being arrested. Subsequent evidence has shown that in several cases it was right-wing Hindus behind the bombings rather than the familiar culprit of radical Islamists. Investigations have shown the deep-seated prejudices within the police and security apparatus against Indian Muslims. Indeed, a Wikileaks cable showed that prominent politician Rahul Gandhi told the U.S. Ambassador in 2009 that while “there was evidence of some support for [Islamic terrorist group Laskar-e-Taiba] among certain elements in India’s indigenous Muslim community, the bigger threat may be the growth of radicalized Hindu groups, which create religious tensions and political confrontations with the Muslim community.”

Wazwan!

Weddings in Kashmir are major social events, bringing together families, friends and neighbors. Given the current situation, weddings are one of the few positive occasions and a good way to also bring the diaspora together. Weddings are protracted events, with visits and gift-giving ceremonies between the families of the bride and groom that go on well before the wedding day and in the following weeks. The festivities take place separately for the bride and groom, who are brought together only on the final day, once the imam has formalized the marriage.

The wedding day requires days of preparation, with some 20 cooks working for two days on the menu, the famous wazwan of dozens of dishes. Some 25 sheep, 70 chickens and 100 kilos of rice are prepared for the 280 guests at the wedding, all cooked on open fires and the meat cooked in multi ways – bashed to a pulp to make huge meatballs, called gostaba, mutton cooked slowly in sweet milk, grilled chicken, stewed mutton, and skewered kebabs.

The morning of the wedding, Reza gets a phone call from a guest asking about the extent of the curfew. “Is it a whole valley curfew?” he asks the other seven young men sleeping in the room. Yes, the whole valley. One of the guests managed to get through the checkpoints by showing his wedding invitation, but he had to go through 12 checkpoints and take alternative routes when the Indian Army would not let him through at certain road blocks – 12 checkpoints to cover less than 15 kilometers.

Reza keeps getting calls throughout the day – cancellations and questions about the checkpoints. There is no text messaging as the Indian authorities have banned SMS in Kashmir. Will the groom make it tonight? “Inshallah (God Willing)…” The curfew tends to be stricter in the morning. The preparations continue, the people are resigned, yet they tell jokes and drink tea. The Kashmiris are used to waiting, sitting around chatting and passing the time – no jobs, schools closed, no business, and nowhere to go except for the immediate neighborhood.

The wedding day goes off without a hitch, with enough guests showing up that the large tent erected in an uncle’s garden is not empty, and the groom is able to arrive that evening. But the wazwan is consumed quickly, without a jubilant atmosphere due to the situation and the curfew. In the past, said the elders, the wazwan would have been eaten slower with the festivities carrying on for five days rather than just two. Reza’s uncle remarked that he was one of the last to get married the old way, just before the troubles erupted in 1989.

The end of the wedding is however affected by the curfew. Usually dozens of cars would accompany the new couple to the groom’s house, but Reza forbids too many from going due to the curfew and that the groom’s relatives will not be expecting guests. While the Indian Army says they “respect all,” they don’t allow for special circumstances during curfews, even for weddings.

Returning the Keys

In 2011, the Indian-administered Kashmiris have kept up the struggle for their rights and freedom. To have effect, the hartals will have to continue – as in Azad Kashmir – while Delhi will have to meet the Kashmiri leaders instead of continuously imprisoning them and enter into constructive dialogue with Pakistan to hammer out a solution. Until a viable solution is enacted, Kashmir will remain a bleeding wound of Partition and a paradise lost. It was a place once called the Switzerland of Asia due to its snow-capped mountains, rivers and forests, but this beauty – also under threat environmentally – merely masks the oppression and violence that torments Kashmir.

As the late Kashmiri poet Aha Shahid Ali wrote from his deathbed in the U.S. in 2001, in a poem dedicated to a Kashmiri Hindu friend:

We shall meet again, in Srinagar
By the gates of the Villa of Peace
Our hands blossoming into fists
Till the soldiers return the keys
And disappear.

Photos courtesy of Sarwar B.

The taking down of Lebanese-Canadian Bank

By Paul Cochrane for Executive magazine

Two become one as Lebanon’s alpha banks feel heat from US

The United States Department of the Treasury’s designation in early February of Lebanese Canadian Bank (LCB) as a “financial institution of prime money laundering concern” hit the bank like a missile strike. And, as so often is the case with American ‘operations’ in the region, the collateral damage was high.

Immediately blacklisted the world over and unable to deal in US dollars, LCB was “crippled,” in the words of a source close to Banque du Liban (BDL), Lebanon’s central bank. The Lebanese banking sector went into damage control mode, concerned it could be part of a wider targeting of the industry, with the designation the worst blow to the sector’s reputation since 2000, when Lebanon was placed on the Non-Cooperative Countries and Territories list of the Financial Action Task Force (FATF), a Paris-based inter-governmental body set up to promote the adoption of anti-money laundering and counter-terrorist financing regulations (it was taken off the list in 2002).

The governor of BDL, Riad Salameh, flew to Washington to discuss the charges, where the US reassured him that the measure was not politically motivated, despite LCB’s alleged connection with Hezbollah, which the US designates as a terrorist organization. Nor, he was told, was it related to the fact that Lebanon’s next government will be led by the Hezbollah-backed March 8 coalition.

“The designation of LCB made people scared,” said the source close to BDL. “The Treasury assured BDL that they didn’t target the Lebanese banking sector and said Lebanon is a friendly nation. The US says it is not a political act but the timing of the designation is a bit precarious. I personally believe politics was involved. [But] I’m not saying the evidence is unfounded — the US has promised to provide information — as there is no smoke without fire.”

Rumors began to circulate that three to four other Lebanese banks were in the sights of the Treasury’s Financial Crimes Enforcement Network (FinCEN). “This is a completely unfounded rumor, and Salameh said this publicly. He told us that during the meeting [in Washington] this was not mentioned,” said Makram Sader, Secretary General of the Association of Banks in Lebanon (ABL). LCB’s designation came as a surprise to the ABL. “It is a specific case but really surprised us as Lebanon is dealing with the world through a large network and with over 250 correspondent banks,” he said.

The designation drove LCB’s reputation into the gutter and stimulated a limited run on the bank by depositors. The designation is just a first step before further action against the bank is taken, with LCB allowed, under US law, 60 days to appeal, which they are doing as the management have denied any wrong doing.

But the damage has already been done; to stave off a crippling run on the bank, LCB had to act fast. “LCB’s shareholders decided to sell, as they couldn’t deal in US dollars, which killed the bank. It wasn’t a decision by the US or BDL,” said the source.

With BDL against the acquisition or merger of any of the top three Alpha banks — Bank Audi, BLOM Bank or Byblos Bank — with LCB, for fear that it would create a ‘super-bank’ and kill competition in the market, four other banks sought LCB assets and liabilities. Société Générale de Banque au Liban (SGBL) made the winning offer and, as Executive went to print, SGBL and LCB representatives were in Paris, along with members of BDL and SGBL’s part shareholder, French bank Société Générale, to hammer out a deal. The consolidation will boost SGBL from the 10th largest bank in Lebanon to fifth.

The charges

In the words of US Treasury publication The Federal Register, “FinCEN has reason to believe that LCB has been routinely used by drug traffickers and money launderers operating in various countries in Central and South America, Europe, Africa and the Middle East; that Hezbollah derived financial support from the criminal activities of this network; and that LCB managers are complicit in the network’s money laundering activities.” In the notice, FinCEN lays out a case stating Lebanese-Colombian citizen Ayman Joumaa, who was named a “specially designated narcotics trafficker under the Foreign Narcotics Kingpin Designations Act on January 26, laundered “as much as $200 million a month” from cocaine sales. The proceeds were ‘cleaned’ through foreign exchange houses linked to Lebanon, LCB and its Gambian subsidiary Prime Bank, as well as through Trade Based Money Laundering (TBML) activities involving used car dealers in the US and the trading of consumer goods.

FinCEN then laid out LCB’s connection in rather unclear language and dubious math: “With respect to the exchanges and companies related to Ayman Joumaa, numerous instances indicate that substantial amounts of illicit funds may have passed through LCB. Since January 2006, hundreds of records with a cumulative equivalent value of $66.4 million identified a Lebanese bank that originated the transfer; approximately half of those were originated by LCB, for a cumulative equivalent value of $66.2 million, or 94 percent, thus, indicating that LCB probably is the favored bank for these exchange houses, particularly in the context of illicit banking activity.” FinCEN did not reply to queries by Executive asking how, if $66.4 million is the total and LCB was the origin of half the transfers, this is equal to $66.2 million, or how the latter figure is 94 percent of $66.4 million.

With the BDL still to carry out an internal investigation, as it does not yet have the full American report, the details are still vague regarding the accusations of LCB’s possible money laundering activity or knowingly acting as a financial conduit for Hezbollah. The language within the designation (“may have”, “believed to be” or “probably”) is an indication of its ambiguity.

The bank has also been suspected through what is legally referred to as “guilt by association,” with LCB managers accused of having ties with Iranian officials through Hezbollah’s Tehran-based envoy Abdallah Safieddine. The bank is also implicated via a Lebanese shareholder in LCB subsidiary Prime Bank who is “known to be a supporter of Hezbollah.”An indication of the political motivations of the designation is the discrepancy between the punishments of LCB and Jordan-based Arab Bank, which was forced to pay $24 million in 2005 for allegedly inadequate controls against money laundering at its New York branch.

“Why wasn’t LCB fined? They wanted the bank closed. It’s a wake up call for the Lebanese banking sector and the threat posed by Hezbollah,” said a senior compliance officer (CO) at a Lebanese bank who requested anonymity. “The US has the power to sanction a bank anytime and put anyone away. We’re helpless here and need to be very careful to protect the banking sector. I’d give up a suspicious customer, even if it lost millions to protect the bank.”

Collateral damage?

LCB is not the only financial institution to have been shaken by FinCEN’s designation; all Lebanese banks and foreign exchange houses’ relations with the US have been affected.

“The effect from American banks was bad, by two banks in particular; we were not allowed to send from a Lebanese exchange house to an exchange house anywhere via the US. They don’t want any payments from banks related to the exchange dealers. It has created panic and is putting exchange dealers out of business,” said the CO. “The US banks also don’t want us to deal with used car dealers. But they cannot penalize other banks for what happened or consider all transfers as suspicious,” the CO added. “Deal with us or not, period. The banking sector is not loose and American banks shouldn’t be scared of Lebanese banks; banks are cooperating and closing accounts with exchange dealers, even good exchange dealers.”

The FinCEN links LCB and Joumaa to foreign exchange dealers in Lebanon. But those interviewed denied involvement. “We don’t know Joumaa. We’re a Category A listed exchange company and don’t know him,” said a manager of Hassan Ayash Exchange in Beirut. “This designation against us is not right, from A to Z. I will of course appeal with a lawyer and provide all the documentation and transfer records.” Another exchange manager noted: “Hezbollah doesn’t need the money; it gets it from Iran. So why would they use my exchange? And if I have to close my company [because of the designation], Hezbollah will not look after me.”

Joumaa is also linked to Elissa Holding, based in downtown Beirut, which owns Phenicia Shipping, the Elissa Exchange bureau in Sarafand, near Saida and companies in the Republic of Congo and Benin. The Elissa Holding manager, who was not at the holding’s office on a visit by Executive, did not answer further calls. The US also labeled Caesar’s Park Hotel in Beirut, next door to Hassan Ayash Exchange, as a meeting point for money launderers and a front company.

Jalal Joumaa, general manager of Caesar’s Park Hotel, declined to comment on the issue or on whether he would appeal. The exchange houses, Elissa Holding and the hotel are still operating, with no apparent action taken against them by the Lebanese authorities.

Upgrading the law

Ayman Joumaa was publicly designated as a drug kingpin in late January, two weeks before LCB was labeled a prime money laundering concern; this ought to have set off warning bells at LCB’s compliance department, at exchange houses and with Lebanese regulators. If the FinCEN report is to be believed and Joumaa has links to LCB that stretch back to 2006, what it would suggest is that there are certain weaknesses in Lebanon’s anti-money laundering (AML) regime.

The BDL has said that, in line with recent US requests and following a mutual evaluation of the country’s AML regulations in 2009 by FATF’s regional body, MENA-FATF, it will upgrade procedures. Current proposed laws include cross-border cash regulations, declarations and disclosures, and the addition of another 10 predicate offenses to the current seven.

“The procedures also have to be more explicit on terrorist financing, as according to MENA-FATF they are not clear,” said the source close to BDL.

Lebanon is also being pushed to ratify the United Nation’s International Convention for the Suppression of the Financing of Terrorism (1999). That it has not shows there “is no political commitment, and this sheds doubt on how committed the government is to the whole process,” said the source.

The ABL, however, said it has been in favor of signing the convention since 2000. “Reputational risk is important to us and we will double and review the procedures, as the authorities are doing. And we will try to push and accelerate the introduction of new laws and regulations to fill all the gaps,” said Sader.

The designation of LCB has certainly been a wake-up call for Lebanese banks and how the sector is regulated. “Banks have learned a lesson, for example closing exchange bureaus because they believe, [as do I], that it has a lot of risk,” said the source. As to LCB’s guilt and whether the designation was a carefully timed political move, only time will tell. According to Sader, “LCB’s appeal could take months or years.”

The GCC and Bahrain

A super-sized photo of Bahraini King Hamad Al Khalifa at a roundabout in Manama prior to the demonstrations that started mid-Feb (Paul Cochrane)

In 2008, I wrote an article about the Gulf Cooperation Council (GCC)'s common market, what I termed the GCM - http://backinbeirut.blogspot.com/2008/01/looks-good-on-paper-advent-of-gulf.html

Giving some background, I wrote about the GCC's creation, which I think is worth reiterating given the Saudis, the Emiratis and the Qataris deployment of armed forces to crush the demonstrations in fellow GCC country Bahrain, while Kuwait has sent warships but not ground forces (currently onboard the vessels). Amid all the hubbub surrounding this development, many people don't know the history of the GCC or that under the council's rules, the 'intervention' is totally legal. The GCC consists of Saudi Arabia, Kuwait, the UAE, Oman, Bahrain and Qatar.

Here's what I wrote:

“Since the establishment in 1981 of the Cooperation Council for the Arab Gulf States, to use its official title, the regional body has to a large degree failed in its objectives, which, much like the EEC, were initially not about economic unification but rather to act as a forum for conflict prevention. After all, the body was established following a proposal by Saudi Arabia for an internal security pact among the Gulf monarchies after the armed uprising in Mecca in late 1979, and given further impetus after the Iran-Iraq war erupted in 1980.
The objectives of the council were to coordinate internal security, procurement of arms and national economies of member states, and to settle border disputes under the leadership of the Supreme Council. Yet despite the creation of a Saudi-led Rapid Deployment Force in 1984, the GCC could not broker a ceasefire between Baghdad and Tehran, and failed to present a united front in 1990 when Iraq invaded Kuwait. Even a committee to facilitate talks between Iran and the UAE over Iranian military exercises in the Straits of Hormuz in 1999 came to nothing.”

How effective the current use of force by the GCC will be in Bahrain remains to be seen, with an estimated 15 people killed and over 1,000 injured since the anti-government protests started in mid-February. What is happening there deserves far more media coverage (with Al Jazeera Arabic's silence an indicator of Gulf monarchical unity), for how the GCC handles the situation in Bahrain will dictate what it will do in the rest of the Gulf if there are further uprisings and unrest.

Bahrain is also a very interesting case, given its small population of 800,000 and that the populace has no access to arms – unlike many other countries in the region – and being an island only connected by a bridge to the mainland (and that is to Saudi Arabia), means the smuggling in of weapons is near impossible. The Bahrainis, unlike the Libyans, have no option but to resist peacefully or with crude homemade weapons. If the uprising is successful, it will be a case study in how to overthrow a regime without any recourse to (serious) violence and would be a further example of the power of the people following the successes in Tunisia and Egypt. Since the GCC's military move into Bahrain however, I am not very optimistic about a positive outcome.

Guns for hire: Pakistani soldiers in the Middle East

On March 20, it was reported that a 1,000 Pakistani troops had been recruited to serve in the Bahrain National Guards to put down the intifada there. This is not the first time Pakistani soldiers have come to the region to prop up the monarchies. During the Black September events in 1970 by Jordan's King Hussein to crush the Palestinians, the US-trained Zia ul-Haq (later Saudi-sponsored President of Pakistan) lead a group of mercenaries (see Tariq Ali, 'The Colour Khaki', New Left Review, Jan/Feb 2003,p.6)

Between 1983 and 1987, Pakistan deployed 20,000 troops to Saudi Arabia to protect the royal family. In 1991, 'following Saddam Hussein's invasion of Kuwait, Pakistan dispatched roughly 6,000 soldiers to join the multi-national force defending the Saudis from any spillover of hostilities.' (see The East Moves West, Geoffrey Kemp, pg 106)

Saudi Arabia's oily ambiguity

Exaggerated fuel reserves could have major implications

Aramco's headquarters

Comment for Executive magazine

While the cache of diplomatic cables recently released by WikiLeaks may have caused a number of international stirs, the majority have been largely ignored, causing little political, diplomatic or economic fallout. The revelations in early February that Saudi Arabia overstated crude oil reserves by up to 40 percent falls in the latter category, generating little more than newswire buzz. But should that have been the case?

With Saudi Arabia a top oil producer, the cable could have sparked a reaction on the world markets, driving the price of oil even higher and causing havoc with future oil supply projections. The kingdom itself would have had its position as the de-facto head of the Organization of the Petroleum Exporting Countries (OPEC) challenged, and its sovereign risk ratings would have been battered, given the country’s overwhelming dependency on hydrocarbons to balance the books.

But there was no reaction on the markets, nor was there a flurry of stories in the press querying Saudi Arabia’s oil reserves and reigniting the debate about “peak oil.” The only reaction from the Saudi side was by the man who told United States diplomats in 2007 that the reserves were overstated. Sadad al-Husseini, a former vice president and head of exploration at Aramco, Saudi Arabia’s oil monopoly, said he had been “misrepresented” by the diplomats and the press and “did not question in any manner the reported reserves of Saudi Aramco.”

Major economic publications also dismissed the revelations: Petroleum Intelligence Weekly, considered “the bible” of the energy industry, called the cables a “false alarm” while a Wall Street Journal (WSJ) blog downplayed concerns because of Husseini’s apparent volte-face.

So is the cable just an example of US diplomats playing a game of what the WSJ referred to as “Chinese whispers?” Or was Husseini pressured into denying his original statements, meaning Aramco really has fiddled with the figures? It is, of course, hard to know, and that is the crux of the problem. Even if the contents of the cables are false, Aramco has not been transparent with its figures since the company was nationalized. According to a former Aramco employee, only the company’s nine-member executive committee is privy to the actual figures, despite the need of departments to have access to such information to carry out research, implement long-term plans and so on.

Like Aramco employees, the world is expected to believe what the company tells us, as they have always delivered enough oil to the market; but should we, in the same way the world took at face value the kingdom’s stated gold reserve until the Saudi Arabian Monetary Agency revealed last year it had 180 tons more than it originally accounted for? After all, Aramco is still peddling the lie that it is the world’s largest producer of oil. Exporter yes, producer no. In fact, Russia became the world’s biggest producer in 2009, according to the BP Statistical Review of World Energy 2010, with an average output of 10 million barrels per day (bpd), or 12.9 percent of total production worldwide, whereas Saudi produces 9.7 million bpd.

A primary reason the cable didn’t result in a media frenzy was that the revelations were nothing particularly new. Many oil experts have queried Aramco’s figures before, noting in particular that 90 percent of all the oil that Saudi Arabia has ever produced has come from seven giant fields that are now maturing, three of which are more than 50 years old.

In the case of these US embassy cables, the debate centers around Husseini questioning Aramco figures that put Saudi Arabia’s reserves at 716 billion barrels, of which 51 percent are recoverable. It is the recovery figures that are the questionable part, as the global recovery average is some 30 percent, which suggests Aramco is being overly optimistic about what it will be able to extract.

The real estimates need to be revealed. If Aramco’s numbers do come up short, the ramifications on the world economy of a Saudi oil shock would be devastating. Perhaps the best solution would be for the world to start moving more quickly toward alternative fuels rather than relying on debatable recovery estimates.

ADDITION (March 25): A source close to Aramco spoke with a retired senior player at the company a few weeks ago (early March) and asked him whether Al Hussaini's original doubts about Saudi's inflated reserves were true. The former executive, who had been involved in exploration, confirmed that they had "played too much" with the recovery levels of oil in place, but would not go on the record with the press to go public on this contentious issue.

Clearly Al-Hussaini was pressured by Aramco management/KSA government to do a u-turn. What is striking is how industry publications and the WSJ took Al-Hussaini's statement in February as 'gospel truth' and didn't investigate further. Then again, how informed the author of the WSJ blog article, Angus Mcdowall, is about oil is questionable, given that he reiterated the lie that Saudi is the top oil producer - "Saudi Arabia set to remain the world’s biggest producer for some time yet" - see (http://blogs.wsj.com/source/2011/02/09/saudi-oil-reserves-and-the-wikileaks-chinese-whispers-effect/) - when, as I state in the commentary, it is in fact Russia with 10.23m bpd as of March, 2011 and Saudi with 10.121m bpd. - See http://www.bloomberg.com/news/2011-03-02/russian-oil-output-remains-near-post-soviet-record-in-february.html and http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/03/23/investopedia51363.DTL

PAUL COCHRANE is the Middle East correspondent for International News Services

Photo via Wikicommons

Book review: Secret Affairs by Mark Curtis

Britain's collusion with radical Islam

By Paul Cochrane for Executive magazine

Britain has played a nefarious role in the Middle East’s history. We all know that London re-drew the region’s borders after World War I as part of a “divide and rule” strategy, but few are aware of Britain’s divisive and often contradictory efforts in the region that have remained a core part of its foreign policy. Instead, the United States and Israel tend to get all the “credit” when it comes to the dark arts of Machiavellian political subterfuge.

In ‘Secret Affairs: Britain’s Collusion with Radical Islam,’ author Mark Curtis uses declassified official documents and leaked reports to lay bare Britain’s policies of destabilization and the political-economic ties Britain developed to ensure energy security and financial co-dependence. What Curtis exposes is as damning to Britain as the WikiLeaks US embassy cables have been to Washington, revealing the decisions made away from public scrutiny and what really makes up official policy. It is not, unfortunately for the establishment and its cheerleaders, conspiracy theory.

“It is clear that Britain has an interest in divide and rule in the Middle East. If it sounds conspiratorial, it is there, spelled out in the planning files,” said Curtis to Executive. “The most obvious is dividing the Middle East after 1918, and throughout the 1950s and 1960s - which I refer to in the book – by keeping oil countries under separate political control so no one can gang up on the West.”

Shady goings-on

‘Secret Affairs’ is an eye opening read that charts the beginnings of British collaboration with radical Islamic forces, a relationship that began during the occupation of India over 150 years ago, was used extensively post-1945 and continues to this day. Britain worked with Islamist groups, particularly the Muslim Brotherhood, and friendly authoritarian Islamic regimes in Egypt, Syria, Saudi Arabia, Iran, Iraq, Bosnia, Indonesia, Pakistan and Afghanistan to ensure that communism, nationalism, pan-Arabism and anti-Western policies didn’t take hold.

Britain would cultivate relationships on both sides of the political fence, showing a willingness to work with essentially anyone, whether the Mahaz-i-Milli Islam (National Islamic Front of Afghanistan), the Libyan Islamic Fighting Group or the ayatollahs in Iran, to achieve short-term goals, irrespective of the longer-term implications, in order to maintain a balance of power.

“In [my] analysis of British foreign policy, it is not all down to economics,” said Curtis. “The collaboration with Islamist groups in the Middle East has been about power status, to not be relegated to a bit player on the fringes. It has seen those groups as essential allies in a region where Britain has often lacked dependable allies. In a lot of the episodes where Britain collaborated with Islamic groups, it was essentially to do the dirty work that the US couldn’t do due to Congressional oversight and the fear of being found out.”

The dirty deeds include assassination attempts – for example on Egypt’s Gamal Abdel Nasser, Libya’s Muammar al-Qadhafi, and Lebanon’s late Ayatollah Mohammad Fadlallah – military assistance and the dissemination of propaganda tools, such as Korans and Islamic literature. British operatives also orchestrated “false flag” operations, such as the one in Iran in 1953 when mosques and public figures were attacked by agents and paid supporters appearing to be members of the communist Tudeh Party. British intelligence also worked in collaboration with Ayatollah Kashani, the mentor of Ayatollah Khomeini, to stir up sentiment against nationalist Prime Minister Muhammad Mossadiq.

Alongside maintaining its power status and ensuring energy security, Britain also worked to make sure oil-producing countries invested their petro-dollars in London to shore up the city’s global financial position. To do so, Britain needed to maintain its status as a power broker and to curry favor with regimes, regardless of the means. One example of this is the “fabricated invasion” of Kuwait by Iraq in 1958, during which Britain intervened to protect its newly-independent former colony against a threat that they had themselves concocted, as British files explicitly show. “Britain wanted to exaggerate the threat to Kuwait so [Britain] would continue its protection and Kuwait would keep investing revenues in the British banking system,” said Curtis.

Blow back

Such covert operations — all documented in ‘Secret Affairs’ — have been just one part of Britain’s foreign policy that has gone against London’s purported democratic ideals. The backing of Islamist forces, and its hidden alliance with two chief state sponsors of radical Islam, Saudi Arabia — which has spent more than $50 billion to spread the Wahhabi brand of Islam around the world and is a major sponsor of Islamist groups — and Pakistan, have also had major negative repercussions.

By preventing independent and secular governments from coming to power in much of the Islamic world, Britain’s policies have nurtured the current socio-political malaise and resulted in what the late Chalmers Johnson famously termed “blow back,” when the very forces the West aided and abetted came back to bite the hand that once fed them. Curtis shows how Britain in the 1990s allowed Islamist groups to operate out of London, which they believed could be used to destabilize governments in, among other places, Syria, Iraq and Libya. This was possible through a ‘covenant of security’ between radical Islamists and the security services.

A former Cabinet Office intelligence analyst explained: “The long-standing British habit of providing refuge and welfare to Islamist extremists is on the unspoken assumption that if we give them a safe haven here they will not attack us on these shores.”

This pact meant Britain could keep tabs on such groups’ memberships and finances, and enabled British intelligence access to groups linked to militancy from Afghanistan to Yemen. Even Al Qaeda had an office, the Advice and Reformation Committee, in London until 1998.

Alongside the US and Saudi Arabia, Britain equipped and bankrolled Islamist groups in Afghanistan, Pakistan and Bosnia that were later involved in the September 11 attacks in the United States, terrorist attacks in Saudi Arabia, and the July 7, 2005 bombings in London. Indeed, as Curtis’s research shows, the history of the ongoing “war on terror” is rooted in covert support for the Afghani Mujahedin in its fight against the Soviets and for the terrorism infrastructure co-established with Pakistan’s notorious Inter Services Intelligence (ISI), which trained fighters for operations in Central Asia, India, Bosnia, the Middle East and elsewhere.

It also goes further back in time, to the British-backed partition of India in 1947, which led to the creation of the Islamic Republic of Pakistan and the current imbroglio in Kashmir. Curtis quotes former Indian Ambassador Narendra Sarila as saying, “Many of the roots of Islamic terrorism sweeping the world today lie buried in the partition of India.”

More than 60 years later, Britain is still using divide and rule as a strategy and is contending with the repercussions of what in many ways its foreign policy has created. “There is still this resort to rely on particular Islamist forces to achieve objectives, whether in Southern Iraq [post-2003], where Britain worked with Islamist forces and now [has] a de-facto working arrangement with the Taliban, in the sense that Britain is reliant on them for an honorable exit from Afghanistan,” said Curtis. In a previous book, Curtis called Britain’s foreign policy a “web of deceit.” In his latest, he has further shown how that web was spun and, crucially, how British foreign policy has nurtured global terrorism and instability.