Smart money Chris Petit is fascinated by the power of illegal capital, revealed in Loretta Napoleoni's Modern Jihad and Jeffrey Robinson's The Sink
Saturday December 13, 2003 The Guardian Modern Jihad: Tracing the Dollars Behind the Terror Networks by Loretta Napoleoni 295pp, Pluto, £17.99 The Sink: Terror, Crime and Dirty Money in the Offshore World by Jeffrey Robinson 382pp, Constable, £18.99 As the legal system was to the last century, money laundering is to this: two key, secret activities that really make the world go round. The annual return generated by the illegal economy amounts to a staggering $1.5 trillion or thereabouts (it's hard to be precise). The bulk is recycled by western financial institutions, and the removal of this liquidity, in Loretta Napoleoni's opinion, would probably plunge western economies into deep recession. Dirty money is integral to the system. The phrase money laundering was coined during Watergate. According to Jeffrey Robinson, Meyer Lansky, the American gangster, was the first modern criminal to grasp the benefits of financial hygiene by the simple precaution of capital flight. Frank Sinatra famously told the Nevada Gaming Commission, when accused of having smuggled $2 million in an attaché case into Havana on behalf of the Mob in 1947, "Show me an attaché case that can hold $2 million and you can have the $2 million." The Sink offers a lively anecdotal guide to the laundry business and related scams extending from cable piracy to internet casinos, pyramid selling, telemarketing fraud, disguised loans, kickbacks, false end-user certificates for everything from cigarettes to arms, to something called death-spiralling, a scheme devised to run a company's share price into the ground while selling to mug punters. But for human ingenuity at its most calculated, Modern Jihad comes up with the example of opium-addicted camels being used to carry unaccompanied contraband across the Iranian desert, travelling from one fix to the next. This giant, invisible game of Monopoly comes with one high card - epic greed - involving sums rarely less than fabulous: a $3.2 million kickback on an $8 million deal; the Duvaliers of Haiti pocketing $16 million of a $22 million IMF loan that wound up in the Channel Islands; Marcos's 1,241 tons of gold stashed at Zurich airport. This taste for wholesale, tax-free acquisition is accompanied by a talent for brass-neck denial, best of which comes from a prime minister of Antigua: "The big hurricane destroyed those documents"; always a useful call in off-shore Caribbean banking. One of life's more useful bits of advice is "follow the money", a lesson often ignored. Napoleoni's utterly compelling, heroically researched and indispensible analysis follows nothing but, eschews what she calls the "trap of politics", sets out to trace Islamist terrorism to its financial roots and show how, as with everything else, there are grey areas. Osama bin Laden's acquisition of the Gum Arabic Company Ltd, which supplies 80% of world demand, gave him a monopoly in a vital ingredient that makes ink stick to newspaper and prevents sediment forming in soft drinks. The company fell under Clinton's 1997 sanctions against Sudan but was later exempted when US trade giants, including the Newspaper Association of America, protested that Gum Arabic was their only viable source. The alternative was to buy from their main competitors, the French, at much higher rates. Trade between Bin Laden's company and the US continued. Napoleoni traces the rise of Islamic terrorism to the cold-war policy of sponsored counter-insurgency developed by the USSR and US. In the 1980s, the process became increasingly privatised and was matched by the terrorists' search for economic independence, which turned the armed struggle into a multimillion-dollar business and freedom fighters into entrepreneurs. The chapter on the PLO's wealth, estimated by the CIA in 1990 at $8-$14 billion, is worth a book in itself. The end of the cold war was seen by many Muslims as marking the decline of the supremacy of western culture, and reading Modern Jihad it's hard to disagree. Financial corruption fed terrorism. William Casey, Reagan's CIA chief, used Pakistan and its BCCI bank as fronts to train Afghan rebels against the Soviets. Covert operations required a "black network" within the bank and its state equivalent, the notorious ISI. The bank financed and brokered covert arms deals, complete with full laundry service. The short and logical step from there was a BCCI/ISI/CIA move into drug smuggling to feed the needy, and leaky, money pipeline to the Mujahedin. The Pakistan-Afghan connection became the biggest single supplier of heroin to the US, meeting 60% of demand, with annual profits a stratospheric $100-$200 billion. Minus ideology, the process starts to look like one big money-go-round, with the new war being played out in a spectrum of failing states (Colombia), failed states (Sudan) and collapsed states (Somalia), all offering breeding grounds for terror. It's also payback time for the Crusades. Bin Laden's 1996 appeal to Muslims sounds eerily similar to that made by Pope Urban II in 1095. Even more remarkable are the similarities between the economic climate that produced both, analysed with lucidity by Napoleoni, who emphasises that trade, both covert and legitimate, precedes terror, with the present conflict between "the big capital of the west and its eastern oligarchic alliances on the one hand and the masses of the east and an emerging merchant and banking class on the other". Modern terrorism is about smart money, as understood by Bin Laden, aided by the invisibility of the internet, the old hawala system - an untraceable money flow where cash deposited in one country can be collected in another - and cemented by the mosque network, which provides as complex and comprehensive a web as its monetary counterpart. The sophistication of Bin Laden's financial portfolio, and his network's ability to manipulate the global stock market, match those of leading capitalist corporations: the financial killing made by his people from September 11 resulted in perhaps the biggest insider-trading operation ever. Modern jihad is the last act in Kipling's great game, and the economics of oil, as usual, lie close to the surface. A murky financial network of dynastic ties shows that little separates the Bushes from the Bin Ladens - apart from a financial consultant and a merchant bank or two. ==================================== To this day, no one has come up with a set of rules for originality. There aren't any. [Les Paul]
