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|Gal Luft||July 21st 2008|
Cutting Edge Energy and Security Desk
Much has been reported about the complex system of terrorist financing and the money trail facilitating the September 11 terror attacks. Individuals and charities from the Persian Gulf--mainly from Saudi Arabia--appear to be the most important source of funding for terrorist organizations like Al-Qaeda. According to a Council on Foreign Relations report of an Independent Task Force on Terrorist Financing, Osama bin Laden and his men have been able to accumulate millions of dollars using legitimate businesses such as charities, nongovernmental organizations, mosques, banks and other financial institutions to help raise and move their funds.
How does it work? Take Saudi Arabia for example. This Gulf monarchy is a state in which no taxes are imposed on the population. Instead, Saudis have a religious tax, the zakat, requiring all Muslims to give at least 2.5 percent of their income to charities. Many of the charities are truly dedicated to good causes, but others merely serve as money laundering and terrorist financing apparatuses. While many Saudis contribute to those charities in good faith believing their money goes toward good causes, others know full well the terrorist purposes to which their money will be funneled.
What makes penetration and control of money transactions in the Arab world especially difficult is the Hawala system--the unofficial method of transferring money and one of the key elements in the financing of global terrorism. The system has been ongoing for generations and is deeply embedded in the Arab culture. Hawala transactions are based on trust; they are carried out verbally leaving no paper trail.
The Saudi regime has been complicit in its people's actions and has turned a blind eye to the phenomenon of wealthy citizens sending money to charities that in turn route it to terror organizations. Furthermore, Saudi government money funneled into madrassas where radical anti-Americanism is propagated has been instrumental in creating an ideological climate which generates terrorism.
Former CIA director James Woolsey described the Saudi-sponsored Wahhabism and Islamist extremism as "the soil in which Al-Qaeda and its sister terrorist organizations are flourishing."
Barrels and bombs
It is no coincidence that so much of the cash filling terrorists' coffers come from the oil monarchies in the Persian Gulf. It is also no coincidence that those countries holding the world's largest oil reserves and those generating most of their income from oil exports, are also those with the strongest support for radical Islam. In fact, oil and terrorism are entangled. If not for the West's oil money, most Gulf states would not have had the wealth that allowed them to invest so much in arms procurement and sponsor terrorists organizations.
Consider Saudi Arabia. Oil revenues make up around 90-95% of total Saudi export earnings, 70%-80% of state revenues, and around 40% of the country's gross domestic product (GDP). In 2002 alone, Saudi Arabia earned nearly $55 billion in crude oil export revenues. Most wealthy Saudis who sponsor charities and educational foundations that preach religious intolerance and hate toward the Western values have made their money from the petroleum industry or its subsidiaries. Osama bin Laden's wealth comes from the family's construction company that made its fortune from government contracts financed by oil money. It is also oil money that enables Saudi Arabia to invest approximately 40% of its income on weapons procurement. In July 2005 undersecretary of the Treasury Stuart Levey testifying in the Senate noted “Wealthy Saudi financiers and charities have funded terrorist organizations and causes that support terrorism and the ideology that fuels the terrorists' agenda. Even today, we believe that Saudi donors may still be a significant source of terrorist financing, including for the insurgency in Iraq."
If Saudi Arabia is the financial engine of radical Sunni Islam, its neighbor Iran is the powerhouse behind the proliferation of radical Shiite Islam. Iran, OPEC’s second largest oil producer, is holder of 10 percent of the world’s proven oil reserves and has the world’s second largest natural gas reserve. With oil and gas revenues constituting over 80 percent of its total export earning and 50 percent of its gross domestic product, Iran is heavily dependent on petrodollars. It is a hotbed of Islamic fundamentalism and supporter of some of the world’s most radical Islamic movements such as the Lebanese Hizballah. Iran’s mullahs are fully aware of the power of their oil. Its supreme leader Ayatollah Ali Khamenei warned in 2002: “If the West did not receive oil, their factories would grind to a halt. This will shake the world!” As the world’s demand for oil increases, Iran grows richer --Iran’s oil revenues have jumped 25 percent in 2005—and more than able to snub the U.S. and its allies in their efforts to prevent Tehran from developing nuclear weapons.
The line between the barrel and the bomb is clear. It is oil wealth that enables dictatorial regimes to sustain themselves, resisting openness, progress and power sharing. Some semi-feudal royal families in the Gulf buy their legitimacy from the Muslim religious establishment. This establishment uses oil money to globally propagate hostility to the West, modernity, non-Muslims, and women.
This trend is likely to continue. Both the International Energy Agency and the Energy Information Agency of the U.S. Department of Energy currently project a steady increase in world demand for oil through at least 2020. This means further enrichment of the oil-producing countries and continued access of terrorist groups to a viable financial network which allow then remain a lethal threat to the U.S. and its allies.
Draining the swamp
There are many strategies proposed by counter-terrorism experts to obstruct terrorist financing. Many of them are effective and, indeed, some of the steps that have been taken since September 11, such as freezing bank accounts and improving the scrutiny over international monetary transfers, contributed to a reduction in Al-Qaeda's financial maneuverability. But the only way to deal with the problem strategically is to reduce the disposable income and wealth generation capacity of terrorist supporters.
Hence, America's best weapon against terrorism is to decrease its dependency on foreign oil by increasing its fuel efficiency and introducing next-generation fuels. If the U.S. bought less oil, the global oil market would shrink and price per-barrel would decline. This would invalidate the social contract between the leaders and their people and stem the flow of resources to the religious establishment. It will likely increase popular pressure for political participation, modernity and reformed political and social institutions.
Reducing demand for Middle East oil would force the petroleum-rich regimes to invest their funds domestically, seek ways to diversify their economies and rethink their support for America's enemies. Only then financial support for terrorism could radically diminish.
Gal Luft is Executive Director of the Institute for the Analysis of Global Security and co-founder of the Set America Free Coalition He heads up The Cutting Edge News Energy and Security Desk