Money and Terror: Is there an End to American Addiction to Oil?

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"Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world," said President George W. Bush in his February 1, 2006 State of the Union Address, delivered before a Joint Session of Congress.

The hypothesis we try in this paper to test is the following : President Bush’s pledge about putting an end to the US oil addiction is not a workable issue, neither on the short-term nor on the mid-term, as long as oil is still the main source of energy for humankind.

We will demonstrate :

1- that the OPEC and Saudi Arabia are still acting as the masters of the oil markets;

2- that the US businessmen and politicians are still bound to the oil industry and policy is depending upon it ;

3- that as a consequence of this double dependence (economical and political), the US self-declared policy of encouraging reform and democracy in the Middle East is seriously handicapped as a wide portion of the terror financial network still escapes the US control.

OPEC and Saudi Arabia Data rates and performances

Assuming the U.S. Energy Information Administration’s (EIA’s) January 2006 "reference case" forecast for world oil prices and production, EIA forecasts that OPEC net oil export revenues for 2006 will increase by 10 percent over 2005, to $522 billion. In 2007, EIA expects OPEC net oil export revenues to fall 5 percent, to $495 billion (Click here to read PDF version of this article which also includes the pertinent tables and images).

  • OPEC net oil export revenues for 2005 are estimated $473 billion (see table above), a 43 percent increase from 2004 revenues of $330 billion, and a 10 percent increase from revenue forecasts made back in June 2005.
  • The growth in OPEC oil export revenue forecasts compared to June 2005 results mainly from much higher crude oil prices (around $6 per barrel) than had been anticipated at that time.
  • Iraq earned an estimated $23.4 billion in oil export revenues during 2005, more than twice the $9.8 billion earned in 2003. EIA expects that Iraq’s oil export earnings will increase only slightly in 2006, to around $25 billion, and then fall in 2007 (to $23.7 billion) on slightly lower oil prices.
  • Saudi oil export revenues increased sharply (49 percent) in 2005 compared to 2004, and are projected to increase again (6 percent) in 2006 before falling (-7 percent) in 2007.
  • Saudi Arabia maintains the highest share of OPEC oil export revenues (at 32 percent of the OPEC total in 2005). During 2006, Saudi Arabia’s share of OPEC oil export revenues is expected to decline slightly, to 31 percent, as Nigeria’s share increases to 10.1 percent (from 9.5 percent in 2005). [1]

OPEC net oil export revenues for 2005 (see table in PDF version of this article) are now estimated at around $473 billion, up 43 percent from 2004 levels. For 2006 and 2007, OPEC net oil export revenues are forecast at $522 billion and $495 billion, respectively.

A simple glance at the figures of the table (see table in PDF version of this article) would convince us that the revenues would logically follow up the prices; that if the latter go high –” and they would expectedly increase in the upcoming years, for the demand on oil is on an ascending pitch –” the OPEC would draw important profits. So, how is this to fit in with the idea that the US administration could keep the prices at a “convenient” level? We think that this issue will grow more problematic in the future; and the USA and its Western allies would be compelled to very hard choices.

As to Saudi Arabia itself, between mid-2003 and mid-2006, this country showed strong economic performance due to high oil prices, increasing oil production and export earnings, paired with structural reforms, economic diversification, and stable macroeconomic policymaking. Saudi Arabia remains heavily dependent on oil and petroleum-related industries, including petrochemicals and petroleum refining. The IMF reported that in 2005, oil export revenues accounted for around 90 percent of total Saudi export earnings, 70-80 percent of state revenues, and 44 percent of the country’s gross domestic product (GDP). In order to defend their most significant source of economic growth, national oil company Saudi Aramco is increasing its oil production capacity to 12.5 million barrels per day (bbl/d), by 2009. [2]

Saudi Arabia ranks as the first largest crude oil producer in the world, and is a leader in OPEC’s production quota decisions. As such, this state was a critically important player behind the oil price collapse of late 1997 through early 1999, and also in actions taken by world oil producers which have led to a tripling in oil prices by the fall of 2000. For January-July 2005, EIA estimates that Saudi Arabia produced around 10.9 million bbl/d of total oil — including crude oil, natural gas liquids, and "other liquids"oil, and also including half of the Saudi-Kuwaiti Divided Zone’s 610,000 bbl/d). This was up sharply from Saudi Arabia’s 8.5 million bbl/d of total oil production in 2002 (see graph in PDF version of this article). Currently, Saudi Arabia is estimated to be producing around 9.6 million bbl/d of crude oil, well in excess of its current quota level of 9.099 million bbl/d (effective July 1, 2005). In addition to crude oil, Saudi Arabia produces around 1.3 million bbl/d of natural gas liquids (NGLs) and "other liquids," not subject to OPEC quotas. [3]

Saudi Arabia maintains the world’s largest crude oil production capacity, estimated to be around 10.5-11.0 million bbl/d. In May 2006, Saudi Aramco announced the details of an $18-billion plan to increase capacity to 12.5 million bbl/d by 2009 and 15 million by 2020.

During fiscal year 2004, Saudi Arabia originally had been expecting a budget deficit. However, this was based on an extremely conservative price assumption of $19 per barrel for Saudi oil — and assumed production of 7.7 million barrels per day (bbl/d). Both of these estimates turned out to be far below actual levels. As a result, as of mid-December 2004, the Saudi Finance Ministry was expecting a huge budget surplus of $26.2 billion, on budget revenues of $104.8 billion (nearly double the country’s original estimate) and expenditures of $78.6 billion (28% above the approved budget levels). This surplus is being used for several purposes, including : paying down the Kingdom’s public debt (to $164 billion from $176 billion at the start of 2004); extra spending on education and development projects; increased security costs (possibly an additional $2.5 billion dollars in 2004) due to threats from terrorists; and higher payments to Saudi citizens through subsidies and other means. For 2005, Saudi Arabia assumed a balanced budget, with revenues and expenditures of $74.6 billion each.[4]

Challenges

In spite of the recent surge in its oil income, Saudi Arabia continues to face serious long-term economic challenges, including high rates of unemployment (around 15%-20%), one of the world’s fastest population growth rates, and the consequent need for increased government spending. All of these place pressures on Saudi oil revenues. The Kingdom also is facing serious security threats, including a number of terrorist attacks (on foreign workers, primarily). In response, the Saudis reportedly have ramped up spending in the security area (reportedly by 50% in 2004, from $5.5 billion in 2003). According to E.I.A.’s report, the Saudi petroleum pipeline and export network (and energy sector in general) remains a terrorism target. In February 2006, Saudi security prevented an attempted suicide bomb attack at the Abqaiq petroleum processing facility, after Al-Qaeda leadership called for renewed attacks against the country’s economic backbone.

Saudi Arabia’s per capita oil export revenues remain far below high levels reached during the 1970s and early 1980s. In 2004, Saudi Arabia earned around $4,462 per person, versus $22,174 in 1980. This 80% decline in real per capita oil export revenues since 1980 is in large part due to the fact that Saudi Arabia’s young population has nearly tripled since 1980, while oil export revenues in real terms have fallen by over 40% (despite recent increases). Meanwhile, Saudi Arabia has faced nearly two decades of heavy budget and trade deficits, the expensive 1990/1991 war with Iraq, and total public debt of around $175 billion. On the other hand, Saudi Arabia does have extensive — around $110 billion — foreign assets, which provide a substantial fiscal "cushion."

Rightly, Rachel Bronson observes that “during the Cold War, Saudi Arabia’s religiosity was considered an asset in the struggle against godless communism. Today, its religious activism poses a significant threat. Saudi money has supported some of the most anti-American mosques and schools across the globe”. [5]

There is, however, much more to say about this subject. Let us mention for example the report of Freedom House in 2005, Saudi Publications On Hate Ideology Fill American Mosques, with a foreword by James Woolsey, former Director of CIA(1993-95), and Chairman of Freedom House. In his introduction adapted from a testimony before the House Committee on International Relations Subcommittee on the Middle East and South Asia, Woolsey says : “Until less than thirty years ago, our relations with the Saudis were generally smooth. We were on the same side in the cold war, and the Saudis valued our support (and we theirs) against Soviet influence in the Mideast. Of course the oil embargo of 1973 created major stress, but the watershed year was 1979, when Khomeini came to power in Iran and extremists took over the holiest of Islam’s shrines, the Mosque in Mecca, which was under the protection of the Saudi King; it was reclaimed by the Saudis only after substantial loss of both life and face.” That is the year Woolsey defined as that of the beginning shift in Saudi endeavor. He says : “The Saudis chose after the twin shocks of that year to strike a Faustian bargain with the Wahhabi sect and not only to accommodate their views about propriety, pious behavior, and Islamic law, but effectively to turn over education in the Kingdom to them and later to fund the expansion into Pakistan and elsewhere of their extreme, hostile, anti-modern, and anti-infidel form of Islam. The other side of the bargain was that if the Wahhabis would concentrate their attacks on, essentially, the U.S. and Israel, the Saudi elite would get a more-or-less free ride from the Wahhabis and the corruption within the Kingdom would be overlooked.” This is quite a strange talk coming from a man who was in charge of the most important intelligence Agency in the USA (CIA), for the inevitable questions are then : Where was America in that “Faustian” Bargain? Was Washington being marginalized by this queer shift in Saudi policy? If such was the case, then how would we explain the tight cooperation that went on and on years during between the Saudi authorities, the Pakistani ISI and the CIA over topics of mobilization of the international Islamist network and assistance to the Mujahideens?

Following the consequences implied by Woolsey’s argument, we are indubitably confronted to a dilemma of logic : Either Washington was aware of the shift in Saudi policy and despite this decided to carry on its tight cooperation with Riyadh. Therefore, there is no excuse for the American behavior and no reproach at the Saudi. Or, Washington was unaware of the Saudi shift , which has been discovered recently (!!!), and this is even worse. May a Superpower afford to be so naïve? What would we say if such were really the case with the ex-Soviet Union during the Cold War, although there is definitely no possible comparison with Saudi Arabia that has never been perceived as an enemy in the USA, at least in the same period?

The answer to these questions should be sought in the US-Saudi connection, called “oil connection”. To be sure, this network is neither recent nor amazing. This is a matter of States’ Interests. Yet, it happens that the Bush administration, which met one of the most dangerous threats since the end of the cold war (9-11, that is) on the US soil, is also one of the most connected to the oil network.

The Bush-Oil connection

“The Bush administration’s ties to the oil and gas industry are beyond extensive; they are pervasive”, says an essay by Michael Renner. “They flow, so to speak, from the top, with a chief executive who grew up steeped in the culture of Texas oil exploration and tried his hand at it himself; and a second-in-command who came to office with a multi-million dollar retirement package in hand from his post of CEO of Halliburton Oil. Once in office, the vice president developed an energy policy under the primary guidance of a cast of oil company executives whose identities he has gone to great lengths to withhold from public view”.[6] Many observers noted that since taking office, the president and vice president have assembled a government peopled heavily with representatives from the oil culture they came from.

Let us recall that Bush himself is a former Texas oilman. His company, Arbusto, was on the verge of bankruptcy when it merged with Spectrum 7 in 1984. Harken Energy bought Spectrum in 1986, and Bush was given a seat on Harken’s board. He went on to become managing general partner of the Texas Rangers baseball team before entering politics. Vice President Dick Cheney was the CEO of Halliburton, the world’s largest oil field services company, until he joined the Bush ticket in 2000. Halliburton’s activities in the Middle East have drawn scrutiny. The company’s European subsidiaries sold spare parts to Iraq’s oil industry, despite U.N. sanctions. Halliburton and its subsidiary Kellogg Brown & Root have reaped huge profits from the rebuilding of Iraq following the U.S.-led invasion of the country in 2003. Critics charge that Halliburton has received preferential treatment in the awarding of government contracts in Iraq. The company also has faced trouble at home. It agreed to pay $4 billion to settle myriad asbestos and silica-related lawsuits, and faced a class-action suit alleging accounting fraud.

Here is a list (see the list in PDF version of this article) of corporations with connections to people in the Bush administration. In cases where no corporate connections exist, the chart’s company field has been left blank. As in previous administrations, those without extensive corporate connections are the exception, not the rule:

We do not need to emphasize the obvious. However, we should still underline the fact that the American oil industry’s main work is still –” and will remain for many years to come –” in the Middle East and with those “unstable countries” M.Bush has pointed to in his 2006’s State of the Union Address.

What is worthy noticing too is the fact that as soon as May 2001, a report of the National Energy Policy Development Group, led by Vice President Cheney, acknowledged that U.S. oil production will fall 12% over the next 20 years. As a result, U.S. dependence on imported oil which has risen from one-third in 1985 to more than half in 2003 is set to climb to two-thirds by 2020.

Aware of the scope of these ties, we may now wonder: how serious was President Bush when he pledged to put an end to America’s addiction to oil? And when will that happen? These questions may become even much complicated if we put them inside the context created by the 2001 terrorist event, so that we could thus talk of a relationship haunted by the shadows of 9/11.

Terror Funds

According to press reports in mid-August 2002, families of more than 600 victims of the September 11 attacks have filed a suit in the U.S. District Court of Alexandria, Virginia against three members of the Saudi royal family, seven banks, and eight charitable organizations. The lawsuit, which also named Osama bin Laden, members of his family, and the government of the Sudan, sought approximately $1 trillion in damages from these individuals or organizations for allegedly helping finance the Al Qaeda network.

According to excerpts reported in the press, the lawsuit states that “the financial resources and support network of these defendants –” charities, banks and individual financiers–”are what allowed the attacks of September 11, 2001 to occur.” Saudi media and business spokesmen have described the suit as an attempt to extort Saudi money deposited in the United States and exert political pressures on Saudi Arabia; some have called for withdrawing Saudi investments in the United States, estimated by one media source at $750 billion and another at between $400 and $600 billion. A London Financial Times article on August 21, 2002, quoted estimates that Saudi investors have withdrawn between $100 billion and $200 billion from the United States in the wake of 9/11, but other sources quoted in the article expressed skepticism that a mass exodus of Saudi money was under way. [7]

Since the outset, the question about the funds that helped opening the way to the terrorists has been raised, and it was not so much because the American intelligence ignored that al Qaeda has built a little financial empire, but because assumably the CIA and other intelligence agencies could not ignore it. Unfortunately, the reality did not match the assumption : 9/11 has not been feasible only because of a severe gap in the security measures and a grave failure in intelligence gathering and analysis, but it was also a great lack of curiosity in all what concerns the financial data of the terrorists. The fact that Usama bin Laden is a millionaire is well known and almost pointless. Yet, the questions that should have mattered since a long time for the intelligence and security apparatus in any concerned country were about : what did he do of his money? Where did he invest it? How did a man retaining and training and entertaining thousands of militia-men and jihadists could do that without the existence of a financial network and some accounts and records? Even an ordinary family cannot afford to ignore budget and accounts , so what about an organization like al Qaeda? Where did money come from and where did it go? It is amazing that these questions became crucial only after 9/11, although the previous operations of Al Qaeda should have raised them.

In this context, we point out to the opinion of the Saudi dissident Saad al Fagih about the nature of al Qaeda and its finances. In an interview with PBS Front Line, [8] Al Fagih tried to reduce the size and the importance of both Al Qaeda organizational structure and finances, suggesting that it does not require a lot of money to plan and execute terrorist operations. This is quite unlikely in our view, at least because of all the international financial and human network necessarily mobilized to sustain al Qaeda’s activities. One must be very simple-minded to believe that all those people (thousands) would survive only thanks to prayers and fresh water. However, for Al Fagih, the reports on Bin Laden assets are not serious. He told PBS : “I read a few reports on the American press about bin Laden’s financial assets and the way Americans are trying to … trace them … using satellites and Internet. It made me laugh a lot. Because I know there is none of that. Bin Laden does not use banks I was told. But bin Laden, in his personal capacity, is supposed to be bankrupt now. He had three massive setbacks in his financial story. … First there was the freezing of all his assets … around 250, 300 million dollars. It’s inside Saudi Arabia and it is part of his share in the company. It is under the microscope of the Saudi regime. It can’t go here or there. … And then he had a big loss in Sudan. Because he volunteered to do one of two projects [for] the Sudanese. The big road–they call it the challenge road. And he spent something like 250 or 300 million dollars on that project. Assuming that the Sudanese would pay him at one time, but they … paid him hardly 10 or 20 million. So in practicality, he lost all this money. And then came the last, the set back. When this man [Sidi Tayyib] defected to the Saudi regime. And he knew quite a bit about his remaining small companies here and there. And he told the Saudis about them. Now he knew that his man would defect. So he prepared himself by selling those companies with significant loss before the defection of [Sidi Tayyib] …” And most interestingly, when asked “why does he survive now?”, Al Fagih says “Well, he survives for two reasons. Number one, there is some other source, other than his own money, … his indirect family support and rich Muslims supporting him to back up jihad. And the other reason that he survives is that neither he nor his followers need money. They are living a very, very simple life. And for their operations, they don’t need a lot of money. You can buy a [rocket propelled grenade] in Yemen for cheaper than foreign audio tape recorders. You can buy TNT in Somalia cheaper than sugar. So explosives are not that expensive and the [people] have already been trained. And the logistics needed are very little. And people are volunteers. They are not paid. They are not mercenaries. So the cost of a big operation like bombing Riyadh or bombing Khobar could come to a few thousand dollars. Very easily.”[9]

So, they are volunteers and are not paid! Then, how do they live? We are talking about thousands of people, in Afghanistan, Pakistan, and other regions. They have weapons because they are cheap! How do they eat? Where do they live? What about their families? If there were no funds backing them, would they really carry on fighting for so many years? Even with the best good will in the world, with the deepest belief, a man still behaves as a man: he needs to eat, to shelter himself and to grant his own safety and survival (not to talk of his family if he is married). How does bin Laden and al Fagih or anyone else propose to make those thousands of jihadists survive if they have no money? What about the Palestinian fighters who have preceded them on this field? Does anybody think that those fierce patriots are not paid? This is indeed easier to check out today with the Palestinian Authority. Yet, we do know that the Fidayeens have always been paid by the PLO. This is a fact. Therefore, to pretend that al Qaeda jihadists are not paid, is either a naïve pretension or a misinformation.

Already in 1998, some American observers were speculating about whether Bin Laden’s personal fortune were funding his network and comparing it to other sources of funds, but without detailed data, though. Katzman writes in this context : “Bin Ladin’s personal wealth gives him options that other terrorist organizations lack. Not only can he buy protection from state hosts but he can maintain a thriving network without need of state assistance. In contrast, such groups as the Abu Nidal Organization, the Palestine Liberation Front, and the Popular Front for the Liberation of Palestine became inactive when state sponsors cut their funding in the second half of the 1980s. Hezbollah maintains its operations against Israeli forces in south Lebanon because it gets Iranian aid, estimated at $80 million to $100 million per year; without this, Hezbollah would likely not be able to raise enough money to sustain those operations.” [10]

The same Katzman adds : “Bin Ladin’s wealth, in contrast, appears sufficient to sustain his approximately three thousand fighters spread out in east and north Africa, the Middle East, former Yugoslavia, and parts of east and central Asia. His wealth also enables him to become patron of Egypt’s Islamist organizations, Islamic Group and Al-Jihad. These groups had looked to Sheikh Omar Abdel Rahman for leadership but with him in jail in a medical facility in Missouri for plotting to destroy New York landmarks, his residual network has had to turn elsewhere for support, and bin Laden has filled the gap”.

If such was the case, how come that neither the US government nor its allies took measures in order to cut the terrorists from their source of funds until the aftermath of 9/11?

Maybe the first answer of which one can think is that the Americans were then focusing on several groups believed to have ties with terrorism, and we should not omit also the fact that state-funded terrorism was linked –” directly –” to the “Rogue States” in the political and strategic paradigm prevailing prior to 9/11. At that time, « Middle Eastern terrorism »[11] was divided into three categories : “(1) State terrorism, in which a government relies on its own agents or national apparatus to conduct acts of terrorism; no organized terrorist groups are involved, though foreign nationals might be subcontracted under certain circumstances. (2) State-assisted terrorism, in which organized terrorist groups receiving material assistance and possibly direction from governments, carry out the acts of violence. (3) Independent terrorism, in which the terrorist groups receive minimal or no assistance and virtually no direction from national governments.” [12]

There was also a lot of attention focusing on Libya, Syria, Iraq, – which were considered to be the “traditional patrons” of terrorism- and particularly on Iran as a supporter and a fund backer for Islamist activism, either in Lebanon –” through Hezbollah –” or outside it, for example in Sudan. Although this latter country is mainly Sunnite, some reports viewed it as possibly slipping toward the Iranian sphere of influence since the beginning of the nineties. [13] Nobody ever wondered, as far as we know, for instance whether this has anything to do with Bin Laden’s choice of Sudan as a refuge for his close people, his funds and himself, as a manner to counterbalance the increasing Iranian influence. The West was then focusing on the Iranian connections and almost forgetting that the greatest part of the radicalism Islamist is Sunnite and since centuries in rivalry with Shiism. The Economist for example wrote: “From Iran, Mr. Turabi will admit only to getting oil and army vehicles, though diplomats testify to three guerrilla training camps run by Iran in the east of Sudan.” [14]

Americo-American controversy

This situation has apparently raised an argument inside the USA. In a memo published on the site of the PNAC, Gary Schmitt wrote : “This past Sunday, pundit Fareed Zakaria alleged that the Project for the New American Century (PNAC), which he characterized as "Bill Kristol’s advocacy group," paid no attention to Al Qaeda in the 1990s. Similarly, Zakaria wrote last month in the New York Times, "One searches vainly through the archives of the Project for the New American Century, the main neoconservative advocacy group, for a single report on Al Qaeda or a letter urging action against it before 9/11."

Then Schmitt started answering Zakaria : “In fact, the directors and fellows of the Project published several articles on the subject of the war on terrorism and Al Qaeda prior to September 11. In September 1998, after the embassy bombings, William Kristol and Robert Kagan wrote an editorial in the Weekly Standard in which they expressed concern that the Clinton administration’s cruise missile strikes in Afghanistan and Sudan had not "made a dent in the terrorist networks" and questioned whether the Clinton administration "really has the stomach for such a war."

In an essay in the book Present Dangers, edited by Kristol and Kagan and published in September 2000-a month before the bombing of the U.S.S. Cole, Project Senior Fellow Reuel Marc Gerecht discussed the necessity of taking action to "check the lethality, if not the growth, of Taliban/bin Laden-style Islamic radicalism." [15]

Yet, even if there was some analysis of Al Qaeda activities in the pre-September 11 period, it has not acquired the depth and the abundance of details that characterized the papers following the event. Anyway, for what concerned the financial part of the analysis , it would not be inaccurate to say it was void, and on this level Zakaria was probably right. We have thus to acknowledge that there was a “diffused attention”: the Clinton administration for example was still hoping until its last days to make a deal in the Middle East between Palestinians and Israelis. The Iraqi situation –” on the humanitarian level –” was disastrous. And with that, there were the “traditional” –” say –” challenges (or Bêtes noires) of the USA : the “rogue states”, and the loose network of terrorist groups not necessarily thought to be a part of Al Qaeda, about which there was much talk in the media (Abu Sayyaf for example, or the Algerian GIA).

The result of that “diffused” attention is that Al Qaeda was not yet occupying the first position in the terrorist ranking. [16] The second result is that its sources of funds were still let in the “darkness”.

Occult international financial network

What we know today is that al Qaeda reportedly has been exploiting for years the free market and the freedoms of the democratic countries and the right to the banking secrecy and even the good will of charitable people unaware of what would become of their donations, and nobody seemed really to care about this occult self-financing system until 9/11.

To operate effectively though, transnational terrorists and criminals need ready access to money and the ability to maneuver it quickly and secretly across borders. On a large scale, such money maneuvers can ripple across entire regions, embroiling global markets and threatening vital American economic interests as well as destabilizing other countries politically. The ability to move vast quantities of wealth rapidly and anonymously across the globe–”sometimes combining modern-day wire transfers, faxes, and Internet connections with centuries old practices, such as the hawala, of personal connections and a handshake–”gives terrorist and criminal networks a strategic advantage over many states. Yet it also might be their vulnerability.

In September 2001, President George W. Bush listed 27 terrorist organizations and individuals whose assets were to be blocked in American financial institutions. Since then, more than 202 entities and individuals have been identified for punitive financial action worldwide. The principals behind the Al Qaeda financing network reportedly are Al Barakaat and Al Taqwa/Nada Management Group. Al Barakaat is a Somali-based international financial conglomerate with operations in over 40 countries, including the United States. The organization’s founder, Sheikh Ahmed Nur Jimale, reportedly is closely linked to Usama bin Laden and has used Al Taqwa/Nada Group to facilitate the financing and operations of Al Qaeda and other Islamist organizations. Before its U.S. operations were closed down, Al Barakaat reportedly wired at least $500 million in annual worldwide profits to the company’s central money-exchange office in the United Arab Emirates. Al Qaeda allegedly received a flat 5 percent cut of that money, amounting to approximately $25 million a year.

The events of September 11 pushed money laundering and the financing of terrorism to the forefront of domestic and foreign policy concerns in the USA. As a paper of the Strategic Forum reports, [17] « since September 11, $34 million in terrorist assets, including $27 million belonging to Al Qaeda and bin Laden, have been frozen in the United States. A total of 161 nations have blocked the assets of known terrorist organizations, amounting to another $70 million. Action also is being taken to disrupt severely the misuse of the hawala system and other underground remittance systems used by bin Laden, Al Qaeda, and other terrorist organizations ». [18]

Not surprisingly, Usama bin Laden excels at amassing and distributing large sums of money to support his terrorist schemes. His main sources for financial support include his personal wealth, estimated between $280 million and $300 million, funds siphoned from overt Muslim charities, and wealthy well-wishers, especially in the Gulf States. Allegedly, a wide variety of international banks in the Gulf are used to manipulate and move funds using business front organizations owned by bin Laden. Mohammad Jamal Khalifa, bin Laden’s brother-in-law, was reportedly responsible for managing parts of the financial network that deal with major investments in Malaysia, Mauritius, the Philippines, and Singapore. Bin Laden has- according to some reports- funded a number of network cell operating expenses, including accommodations, safe houses, cars, and payments to operatives for the recruitment of new members. His contributions have further purchased explosives and key components for explosive devices.

At least $5,000 is known to have been transferred from bin Laden holdings to operatives in Yemen to fund the attack against the U.S.S. Cole in 2000. The investment for bin Laden to mount the September 11 attacks is estimated to have been approximately $500,000, while the total costs to the United States for cleanup, property losses, and Federal Government bailouts will exceed $135 billion. [19]

The file against Saudi Arabia

In the summer of 2002, there were rumors in the American media about a briefing given by an analyst from the Rand Corporation on June 10, 2002, to the Defense Policy Board, a high-level advisory group that advises the U.S. Defense Department on defense policy. According to the rumor, the briefer asserted among other things that “Saudi Arabia supports our enemies and attacks our allies” and that “the Saudis are active at every level of the terror chain, from planners to financiers.” Commenting the rumor, ex-Secretary of Defense Donald Rumsfeld told reporters on August 6 that the briefing represented the analyst’s own opinion and went on to say: “It did not represent the views of the government, it didn’t represent the views of the Defense Policy Board.” State Department spokesman Phil Reeker told reporters that these opinions “do not reflect the views of the President of the United States or of the U.S. Government.” He added that Secretary of State Powell made that clear in a telephone call to Saudi Foreign Minister Saud al-Faysal.

In November 2002, "News media" reported that Princess Haifa, the wife of Saudi Ambassador to the United States Prince Bandar bin Sultan, had provided funds–” approximately $100,000 according to one article–” over a four-year period to a Jordanian woman (married to a Saudi citizen) who was in need of medical treatment. The recipient, in September 11 hijackers. On November 23 and 24, a senior policy advisor to then Saudi Crown Prince Abdullah –” the current king – said there is no evidence that Saudi Arabia provided money to the hijackers and that his government is determined to uncover all the facts; a Saudi Embassy officials said the Saudi investigation will probably be widened to scrutinize all gifts provided by the Embassy. Ex-Ambassador Bander told the New York Times on November 26 that Saudi Arabia is a partner with the United States in its anti-terrorism campaign, while his wife expressed outrage that donations to the needy were being linked to terrorism.

There is actually much to say about these reports alleging links between the Saudi authorities and the terrorists, for they emanated from several and varied people inside the USA and outside it. The Israelis were not in the rear for that kind of work. On the contrary, they contributed to the effort of “unveiling” what was called the Saudi conspiracy at a degree unequaled. It goes without saying that they have never been satisfied with the “special partnership” between the USA and the Saudi Kingdom, out of jealousy. Moreover, they may be also convinced that behind “Hamas” there is Saudi Arabia and nobody else. [20]

Thus the long series of Saudi funding terrorism went on, with however a noticeable “shift” in the visions and the alliances : it was no longer the American left-wing and liberal writers who attacked Saudi Arabia for everything, from its intolerance toward other religions on its soil to its puritanical conservatism and its victimization of the women, as they used to do prior to 9/11. The new thing was that neo-conservative Americans have been since that date leading the “orchestra”, which was labeled in Saudi Arabia “campaign against Islam”.

As the official 9/11 Commission report acknowledges, though "origins of the funds remains unknown". So there is a lot of speculation about the matter. The report says that in fact , "Bin laden and his aides did not need a very large sum to finance their planned attack on America. The 9/11 plotters eventually spent somewhere between $400,000 and $500,000 to plan and conduct their attack. Consistent with the importance of the project, al Qaeda funded the plotters. Khaled al Sheikh Mohammad provided his operatives with nearly all the money they needed to travel to the United States, train, and live. The plotters’ tradecraft was not especially sophisticated, but it was good enough. They moved, stored, and spent their money in ordinary ways, easily defeating the detection mechanisms in place at the time." [21]

According to the same report, it does not appear that any government other than the Taliban financially supported al Qaeda before 9/11, although some governments may have contained al Qaeda sympathizers who turned a blind eye to al Qaeda’s fund-raising activities. Moreover, the report adds that “Saudi Arabia has long been considered the primary source of al Qaeda funding, but we have found no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization.” This conclusion does not exclude the likelihood that charities with significant Saudi government sponsorship diverted funds to people linked to al Qaeda, without being aware of those ties. Still, al Qaeda reportedly found fertile fund-raising ground in Saudi Arabia, where extreme religious views are common and charitable giving was both essential to the culture and subject to very limited oversight, as it sought money from wealthy donors in other Gulf states, which, in our eyes, does not imply that all those donors were always aware that they were actually funding international terrorism. Actually, the money of Zakat is not accounted for in any Arab or Muslim state. If religious authorities are allowed to charge the sum people have to give as Zakat at each Eid, they do not interfere with who would acquire it ; neither do the government. Thus, people are free to give money to whoever they deem deserving it. The Westerners who do not know a lot about the system of Zakat are thus induced to think that the fund-backers and all those who support charities and individuals always know how the money would be dealt with. Nothing is more inaccurate.

However, the report adds : "to date, the U.S. government has not been able to determine the origin of the money used for the 9/11 attacks. Ultimately the question is of little practical significance. Al Qaeda had many avenues of funding. If a particular funding source had dried up, al Qaeda could have easily tapped a different source or diverted funds from another project to fund an operation that cost $400,000–”$500,000 over nearly two years."

So, there are still many items in the financial terror network that escape control.

Is bin Laden as wealthy as he is said to be?

The authors of 9/11 Commission report think that Bin Laden did not fund al Qaeda from his personal fortune . It seems that the organization relied primarily on a fund-raising network developed over time. Thus, the CIA now estimates that it cost al Qaeda about $30 million per year to sustain its activities before 9/11 and that this money was raised almost entirely through donations. For many years, the United States thought Bin Laden financed al Qaeda’s expenses through a vast personal inheritance. Bin Laden purportedly inherited approximately $300 million when his father died, and was rumored to have had access to these funds to wage jihad while in Sudan and Afghanistan and to secure his leadership position in al Qaeda. In early 2000, the U.S. government discovered a different reality: roughly from 1970 through 1994, Bin Laden received about $1 million per year–”a significant sum, to be sure, but not a $300 million fortune that could be used to fund jihad. Then, as part of a Saudi government crackdown early in the 1990s, the Bin Laden family was forced to find a buyer for Usama’s share of the family company in 1994.The Saudi government subsequently froze the proceeds of the sale. This action had the effect of divesting Bin Laden of what otherwise might indeed have been a large fortune. Nor were Bin Ladin’s assets in Sudan a source of money for al Qaeda. When Bin Laden lived in Sudan from 1991 to 1996, he owned a number of businesses and other assets. These could not have provided significant income, as most were small or not economically viable. When Bin Laden left in 1996, it appears that the Sudanese government expropriated all his assets: he left Sudan with practically nothing. When Bin Laden arrived in Afghanistan, he relied on the Taliban until he was able to reinvigorate his fund-raising efforts by drawing on ties to wealthy Saudi individuals that he had established during the Afghan war in the 1980s. Al Qaeda appears to have relied on a core group of financial facilitators who raised money from a variety of donors and other fund-raisers, primarily in the Gulf countries and particularly in Saudi Arabia. Some individual donors surely knew, and others did not, the ultimate destination of their donations. Al Qaeda and its friends took advantage of Islam’s strong calls for charitable giving, zakat. These financial facilitators also appeared to rely heavily on certain imams who were willing to divert zakat donations to al Qaeda’s cause. Al Qaeda also collected money from employees of corrupt charities. It took two approaches to using charities for fund-raising. One was to rely on al Qaeda sympathizers in specific foreign branch offices of large, international charities–”particularly those with lax external oversight and ineffective internal controls, such as the Saudi-based al Haramain Islamic Foundation. Smaller charities in various parts of the globe were funded by these large Gulf charities and had employees who would siphon the money to al Qaeda. In addition, entire charities, such as the al Wafa organization, may have reportedly participated in funneling money to al Qaeda. In those cases, al Qaeda operatives controlled the entire organization, including access to bank accounts. Charities were a source of money and also provided significant cover, which enabled operatives to travel undetected under the guise of working for a humanitarian organization. [22]

While we emphasize that these official views about Muslim charities have at last prevailed, forbidding some of them sometimes without sound evidence, we should recall that if infiltrating some big intelligence institutions was not that hard for many spies and double agents, with all the « professionally granted » security they are endowed with, then what about Charities and little associations ? It is obvious that the latter are an easy target for any party willing to divert them from their initial course.

Arabs and Muslims charge Saudi Arabia

Reaching this point, let us honestly acknowledge that the Western observers are not alone in charging Saudi Arabia and other Gulf States of the responsibility of funding the Islamist nebulae. We are certainly not hinting to the Israelis,- it is a different matter, – but merely to Arab and Muslim observers , whereas some of them enjoy a certain renown in the Arab media. Let us take for example, the journalist Riad Najib El-Rayyes (founder of Al Rayyes Books). He writes : ” The oil regimes in the Arab peninsula, thought that in order to protect their wealth and stability, it would be well advised to declare the allegiance of oil to Islam. Thus, they began since the seventies to fund all the Islamist, salafist-fundamentalist movements, no matter their own commitments and loyalties in any country where such groups require their assistance”.[23] Another writer –” a Saudi –” did not hesitate after the murder of Saudi prince Talal Bin Abdulaziz Al Rasheed, by Islamists in Algeria, to say : “Those who killed him are those who want the word silenced (…)We have bred monsters. We alone are responsible for it. I have written as much before my personal tragedy and will continue to do so for as long as it takes. We are the problem and not America or the penguins of the North Pole or those who live in caves in Afghanistan. We are it, and those who cannot see this are the ones to blame.” [24]

However, while this paper is not exactly about the Arab reactions as to the issue linking terrorism and Saudi Arabia, we may still add other significative examples, to show that not all of those who blamed the policy of Saudi Arabia are Westerners or Israelis, but possibly people angry with Saudi Arabia, if not Saudi citizens. The following is a citation from a story published on the Egyptian magazine Ruz al Youssef , by the deputy-editor. W. Al Abrashi says : “I can state with certainty that after a very careful reading of all the documents and texts of the official investigations linked to all acts of terror that have taken place in Egypt, from the assassination of the late president Anwar Sadate in October 1981, up to the Luxor massacre in 1997, Saudi Arabia was the main station through which most of the Egyptian extremists passed, and emerged bearing with them terrorist thought regarding Takfir –” thought that they drew from the sheikhs of Wahhabism. They also bore with them funds they received from the Saudi charities. Apparently, we had to wait all these years and the September 11 explosions had to happen, and many other explosions that harmed Saudi Arabia’s stability, for the Saudi authorities to understand the two dangers: ‘The danger of Wahhabi Takfir Fatwas [and] the danger of charities, most of whose money ultimately flows to the treasuries of extremists”. [25]

Now on the one hand, it is true that if all what has been said about that issue cannot be entirely inaccurate, some of it goes beyond real objectivity and turns out to be over-exploitation of a tragedy for political interests. [26] Speaking honestly, we did not see these documents upon which M. Al Abrashi was building his argument, nor did he care to show them to his readers. Secondly, we have to say that there is no such a Takfir fatwa issued by the Wahhabi establishment, as far as we know, although we must acknowledge that some fatwas have been issued by Wahhabi opponents and dissidents or those called “Sahwa Sheikhs”.

On the other hand, as we have already hinted, this issue cannot summarize the economic relationship between two countries , despite the extreme gravity of 9/11. It would be fair to recognize that both parties share responsibility for failing to foresee and interpret accurately the consequences of such common politics , like funding the jihadists and many Islamist groups since the Soviet invasion of Afghanistan.

We think that the responsibility has to be shared, because as several scholars and observers noticed, « The Islamic jihad was supported by the United States and Saudi Arabia with a significant part of the funding generated from the Golden Crescent drug trade ». [27] Thus, in March 1985, President Reagan signed « National Security Decision Directive 166 », which authorized stepped-up covert military aid to the Mujahideen, and it made clear that the secret Afghan war had a new goal: « to defeat Soviet troops in Afghanistan through covert action and encourage a soviet withdrawal. The new covert US assistance began with a dramatic increase in arms supplies –” a steady rise to 65,000 tons annually by 1987, as well as a “ceaseless stream” of CIA and Pentagon specialists who traveled to the secret headquarters of Pakistan’s ISI on the main road near Rawalpindi, Pakistan. There, the CIA specialists met with Pakistani intelligence officers to help plan operations for the Afghan rebels ».[28] After a quite interesting analysis, Chossudovsky states : « Jane Defense Weekly confirms (…) that half of Taliban manpower and equipment originated in Pakistan under the ISI (…) In other words, backed by Pakistan’s military intelligence (ISI) which in turn was controlled by the CIA, the Taliban Islamic State was largely serving American geopolitical interests (…) No doubt, this explains why Washington has closed its eyes on the reign of terror imposed by the Taliban including the blatant derogation of women’s rights, the closing down of schools for girls, the dismissal of women employees from government offices and the enforcement of the {Shari’a laws of punishment} ».[29]

Is Saudi Arabia worse than other Arab States?

We may answer : Maybe yes, maybe no. It depends on the state concerned.

“The Saudi ruling elite is also paying for its repression and links to Washington, especially when contrasted with its formalistic Muslim piety”, says Doug Bandow.[30] Explaining what was happening in these last years, he says : “with 70 percent of government revenues (and 40 percent of gross domestic product) derived from oil sales, the drop in energy prices since the early 1980s has caused economic pain in Saudi Arabia ; per capita GDP has dropped from $28,600 in 1981 to less than $7,000 in 2002. Unemployment is estimated at 15 percent overall and 20 percent for those under 30”. That has helped generate deep undertones of unrest, but the discontented feel helpless to promote political change. Criticism tends to be expressed through religious leaders. Before his death, Saudi novelist Abdurrahman Munif warned that the “situation produces a desperate citizenry, without a sense of dignity or belonging.” Neil MacFarquhar of the New York Times notes : “In another country Mr. bin Laden might have become an opposition politician rather than a holy warrior. But Saudi Arabia brooks no dissent.”

Yet, while focusing on this negative side in Saudi Arabia, some observers fail to see that it is just a detail in a worse picture. If held together –” with all its details –” the picture of the Arab world does not offer to the observer much hope about freedom and democracy. So far the Arab regimes were not front-runners for democracy. To be sure, Bin Laden’s recruits (the army of al Qaeda, that is) come from all the Arab and Muslim countries, assuming : 1) that none of them could join the democratic opposition, because there is simply no such a thing as what we call democratic opposition ; 2) that even if such an opposition exists , the radical Islamists being as they are -prone to violent action –” would not join it.

“Senior clerics live well on the government payroll and therefore lack credibility”, says Doug Bandow. Yet, he omits to say that such is still the case in the rest of the Arab world. Saudi Arabia does not hold the exclusivity of that demeanor. [31] Better : Maybe those clerics are allowed more freedom in Saudi Arabia than their colleagues in other Arab countries, wherein the sermons of Friday and the Eid prayers are written down by a bureaucrat in the Ministry of religious affairs and circulated all over the country for the imams’ usage. The reason for that is simple : the ruler must be granted that people in the mosques hear but praises for his own rule.

The Americans do know anyway that the ability of some Muslim governments to helping the United States win greater understanding for its policies and objectives “is limited by their own lack of credibility” as a Blueprint for action asserts.[32] Decades of controlled press reporting, government-owned broadcasting–”which did little beyond televising footage from government meetings–”and extravagant lies have undercut public trust, the report says. How would the Bush administration manage to get beyond this situation? So far, the result of six years of Bush’s struggling with these issues is rather meager.

A « related barrier to trust has been erected by Usama bin Laden and his spokesmen, who have argued that impious Muslims and infidels have constructed a vast edifice of lies intended to conceal the true nature of reality from honest Muslims », says the Blueprint. [33] The implicit claim is that any assertion by the United States or its « Muslim puppets » is necessarily false. The truth can be inferred as the opposite of whatever the United States says. As an example, when the United States elected to support the road map for Israeli-Palestinian peace, bin Laden denounced it as a sly maneuver that was actually intended to enslave Palestinians. Similarly, Western intervention on behalf of Muslims in the Balkans has been dismissed as a ruse to further the denigration of Muslims. Another impediment to a U.S. partnership with local governments in an effort to foster dialogue and improve America’s image lies within these governments themselves. The Blueprint gives the example of the Egyptian and Saudi governments, which « do not only permit but deliberately echo and reinforce anti-American themes in a bid to buttress their popular legitimacy. This policy, generally defended in a disingenuous way as respect for free expression, is a key element of their strategy for clinging to power while avoiding serious reforms ». [34] The conclusion the authors deduce is : “We therefore need to bear in mind, as we contemplate ways to enlist these governments in a campaign to improve Muslim understanding of the United States, that we will in effect be asking them to undercut their own perceived interests”. [35]

Actually, such a behavior has to be understood within its context : American policy in the Middle East is not very popular. Yet, what the blueprint called « disingenuous way » may be the recourse of the weak not the powerful in what concerns international relations. The Arab regimes –” Saudi Arabia and Egypt are by no means the only cases –” represent the weak party, indeed, in front of a Superpower having its own interests and goals. Understandably, their governments do not wish to be taken for « puppets ». Anyway, this is also the case of other nations. Even among Western allies, there is more and more distancing following criticism and opposition to the American schemes. Either in France or in Germany, such positions kept the governments away from the war against Saddam Hussein. In Great Britain, M.Tony Blair’s position has been threatened by opponents in his own party, because of his « unconditional » alliance with M. Bush. Today, he would withdraw his troops from Iraq; and this is obviously not playing in the Bush’s game.

More questions seeking answers

The extreme importance of the relationship between the USA and Saudi Arabia and the difficulty of reducing it to the dark dimensions created by a disaster that nobody could really control, does not need to be overemphasized. R. Bronson put the focus on the greatest challenges facing the two countries, such as the growing number of young, poorly educated, unemployed Saudis. “According to the United Nations, 39 % of the population is under the age of 15. In 1980, Saudi gross domestic product was 15,500 per capita, $ 2,500 more than the comparable US figure. Now it’s closer to $ 7,500, almost $ 25,000 less than the US amount. Job creation has not kept pace with the growing population, and Saudi Arabia’s education system –” which emphasizes memorization and religious training –” is producing graduates ill-equipped to work in a modern, globalized economy. Debate had begun in Saudi Arabia before September 11 about how to handle these challenges. Since then these problems have appeared on Washington’s radar screen –” because unemployed and disaffected youth seem to provide recruitment pool for al Qaeda and other extremist groups.” [36] The same R. Bronson [37] suggested that the following issues were likely to be raised during the presidential campaign:

« – Should the United States actively promote democracy in Saudi Arabia and, if so, how?

– Is Saudi Arabia doing enough to clamp down on terrorist financing?

– Is there anything the United States can do about the large number of undereducated Saudi youth?

– Would a more rigorous energy conservation policy make Americans more secure? » [38]

The questions upon which the 2004 presidential campaign focused were however more concerned with the Iraqi problem than with Saudi Arabia. Yet, Bronson’s questions sound however still attracting the attention of both American and Saudi leaders and thinkers, beyond the simple event of the presidential elections in the USA. Their pertinence to the US-Saudi current state of relations make them of a particular interest to Republicans and Democrats.

In November 1999, for example, King Fahd himself stated that "the world is heading for…globalization" and that "it is no longer possible for [Saudi Arabia] to make slow progress." In the context of successfully becoming integrated into the global economy, Fahd also emphasized the importance of regional unity among Gulf states , economically, politically, and militarily. Along these lines, a customs union among GCC countries was agreed upon at the December 1999 GCC summit, which would take effect only in March 2005. Currently, goods from GCC countries are exempt from all Saudi import duties, as long as 40% of their value has been added within the GCC and the producing company is owned at least 51% by GCC citizens. The GCC has also agreed to impose a common set of Value Added Taxes (VATs) since 2005.

Yet , the security and economic matters being quite close , some additional questions remain seeking an answer. According to the Petroleum Economist, “The consequences of a disruption to Saudi oil supplies amid already tight supply and demand conditions would be devastating for the global economy.” [39] Saudi Arabia takes the security of its oil very seriously. Although details of the kingdom’s security budget are classified, a recent assessment in Jane’s Intelligence Review, in the past two years the Saudi government has allocated an extra $750 million to enhance security at all its facilities.

In the spring of 2004, however, the growing band of jihadists in Saudi Arabia succeeded in sending shock waves through the global energy industry without even firing a single shot at any physical oil infrastructure. A twenty-five-hour rampage of attacks on foreign oil-workers in Al-Khobar, the heart of Saudi refining operations, topped a month of increasingly bloody attacks that seemed to mark an intensification of the militants’ campaign against Western interests in the kingdom.

To summarize briefly the current challenges , it is believed that socioeconomic and political malaise in Saudi Arabia raises concerns over the internal stability of the regime in the medium term. Some American observers think that it would be imprudent to place much weight on the Saudi pillar as long as serious structural and political internal reform remains off the agenda. Saudi Arabia is said to be the case of a conservative regime blocking any avenue of domestic dissent except that which it most fears–”radical Islam–”and therefore tries to manage. It is also believed that to build a more stable regional system that will pose less of a burden to external powers and reverse the growth of extremism, reform of the region’s political, economic, social, and–”as just noted–”defense structures is essential. Reform also at last seems feasible, now that some of the Gulf Arab regimes admit that they must permit pluralism and provide better administration. But the Iraqi situation, and the Iranian nuclear dossier are sending threatening messages to everybody. Today, we are afraid the democracy issue is being delayed on the political agendas of the main actors, because of the fear of instability.

“The key-question”, writes The Middle East Report [40] “is not whether democracy is compatible with Islam but whether democracy is compatible with oil”. This is indeed growing more complicated because of the links between oil and money, money and politics, politics and terror. Is this a vicious circle? It seems to be so.

Yet, the view may be flawed with a prejudice. Oil money is not necessary dirty money, unless it is linked to dirty business. Oil is like any other good : it does not hold within itself any moral issue. It is the way we deal with it that projects “good and evil” values.

The Gulf has an advantage, thus : it owns the means to achieving its own reform, to master its own destiny. Neither Saudi Arabia nor the other GCC states rely on the foreign assistance for their own subsistence and survival, as do other countries of the region, Israel included.

The wealthy Gulf is, we think, more able to accomplish safely forward steps toward democracy, if the region was not plagued with the unresolved conflicts caused directly or indirectly by the Israeli uncontrolled ambitions. But why democratization should be necessarily an “obligation” for oil and gas rich states under pressure, and “just an option” for states like Egypt, Tunisia, Mauritania, Sudan, and the like? Why the US administration found that it was “moral” to put her weight in the balance in Iraq, while feigning to ignore that far away from this country, other states were performing worse dictatorship with full US financial and political back up? When we use the terms “worse dictatorship”, we mean it, because at least, the Saddam regime was acknowledged by everybody as a human and political failure. But the regimes of other allies of the USA are not, since they are advised to use “cosmetics” after performing torture on their citizens.

Therefore, if the Bush administration feels that it is her responsibility to pressure for democratization, when did she act to change anything in other parts of the Arab world where opposition is considered as an “illness” and opponents as “traitors”?

Anyway, to talk of democratization and reform while the whole region is going mad with violence, or is about to fall into another war, because of the Iranian dossier, or because of the Israeli dissatisfaction, or because of O

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