Shariah's Trojan Horse

Frank J. Gaffney Jr.
The Washington Times
http://www.frontpagemagazine.com/Articles/Printable.aspx?GUID=0948CAB2-4DD5-41CE-AC4C-90B9F05D191F

Suddenly, a new national debate is beginning about the national security, economic and other implications of Persian Gulf potentates using their petrodollars to buy up strategic American assets. Most recently, the emir of Dubai's purchase at fire-sale prices of 4.9 percent of the largest U.S. bank, Citigroup, caused a level of unease not seen since he tried to buy his way into many U.S. port facilities.

Almost completely unremarked thus far has been a parallel — and in many ways far more insidious — effort to penetrate, influence and dominate America's capital markets: so-called "Shariah finance ." Some estimates suggest an amount nearing $1 trillion is now being invested around the world under this rubric. If trends continue, all other things being equal, such funds may grow to many times that amount within a few years.

Shariah is, of course, the term used by adherents to the totalitarian ideology practiced by the Saudi Wahhabis, the Iranian mullahs and the Taliban to describe the all-encompassing theocratic code they use to justify repressive rule at home and to extend their dominance elsewhere . While often depicted by its promoters as Koranic in character, it is in fact largely man-made, the product of dictates and rulings by caliphs and scholars over many centuries.

For non-Muslims, Shariah is best known for its sanction for the brutalization of women, homosexuals and Jews. Beheadings, amputations, flagellation and stoning are among the prescribed punishments for those who transgress this barbaric code, punishments plucked from primitive tribal practices in the Arabian deserts dating back to medieval times.

As a recent, excellent paper by my colleague at the Center for Security Policy, Alex Alexiev, points out Shariah finance, however, is a relatively contemporary innovation.

It was not until mid-20th century that Islamofascist ideologues like Abul ala Maududi and Sayyid Qutb introduced the notion that faithful Muslims must invest their wealth only in vehicles that comply with Shariah's putative prohibition on interest . In the decades after, relatively few in the Muslim world followed this admonition as most Muslims regarded with appropriate skepticism financial schemes that generally were not reliable investments, especially those that went to almost-farcical lengths to conjure up returns without acknowledging they amounted to interest payments.

Until now. In recent years, the windfall revenues to the Persian Gulf oil-exporting nations have translated into an opportunity for the Islamists who dominate their societies to enlist the West's leading financial institutions as partners in promoting Shariah finance . In overseas capital markets and increasingly on Wall Street, "Shariah advisers" are hired at great cost to bless investment instruments as compliant with this religious code. As a result, three ominous things are occurring:

• First, Shariah finance creates a mechanism for systematically legitimating the underlying, repressive theopolitical regimen — and, thereby, advancing its adherents' bid to govern all Muslims and, in due course, the entire world.

Presumably, Western bankers and investment houses would be horrified to know they are helping promote such arrangements. One would think their governments would be, too. Yet, the former so avidly pursue Mideast wealth that few seem prepared to engage in even the most superficial due diligence about the implications of Shariah finance. And British Prime Minister Gordon Brown, for example, has declared he intends to make London the Islamic finance capital of the world. His government intends to issue its own sukuk (or "Shariah-compliant" bonds) sometime next year.

The trouble is that, having embraced one aspect of Shariah, it will be vastly more difficult, if not as a practical matter impossible, to deny Islamist activists their demands to accommodate other aspects such as: footbaths in public institutions, prayer rooms and time off for prayers in both public and private sector establishments, latitude for cabdrivers and cashiers to decline to do business with certain customers or handle certain products , an Islamist public school in Brooklyn, etc.

Like Shariah finance, each of these is but a beachhead in the Islamofascists' patient, determine and ultimately seditious campaign to subvert and supplant Western free societies.

Elsewhere in some of those societies, such inroads have been expanded to include: demands for Shariah-compliant schools as in Britain; a push in Canada for separate Shariah courts for all matters within the Muslim community; Shariah tolerance for honor killings of women attempted in Germany; destruction of non Shariah-compliant businesses in dedicated "Muslim enclaves" in France ; and in various countries, Shariah-approved assassinations of critics of Islam and anyone leaving Islam worldwide.

• Second, the Shariah advisers hired by Western capitalists to determine whether investments are "halal" (the Muslim equivalent of kosher) are generally among the foremost adherents to the Islamist creed and associated with organizations that promote it. As one of them put it, Shariah investing is simply "financial jihad" against the unbelievers .

• Third, under the direction of these Shariah advisers, at least 2½ percent of the proceeds of the investments they control are donated to Zakat funds. Some of these "charities" have been known to contribute to organizations like Hamas, Hezbollah, the families of suicide bombers in Palestinian communities and Islamist madrassas in places like Pakistan. As investment advisers start promoting Shariah finance vehicles and Islamic indexes like Standard & Poors and Dow Jones, non-Muslim Americans will find themselves tithing to these dubious causes, as well.

Before the Trojan horse of Shariah finance is fully wheeled inside the gates of the American capital markets, federal regulators, corporate boards of directors and U.S. shareholders need to understand whether such investing conforms with the good governance and accountability required under Sarbanes-Oxley, the transparency depositors are entitled to under our banking laws and legislation barring material support to terrorism . To do otherwise is to invite the introduction of the instrument of our undoing into our capitalist system and the freedom-loving society it underpins.

Frank J. Gaffney, Jr. is the founder, president, and CEO of The Center for Security Policy. During the Reagan administration, Gaffney was the Assistant Secretary of Defense for International Security, the Deputy Assistant Secretary of Defense for Nuclear Forces and Arms Control Policy, and a Professional Staff Member on the Senate Armed Services Committee, chaired by Senator John Tower (R-Texas). He is a columnist for The Washington Times, Jewish World Review, and Townhall.com and has also contributed to The Wall Street Journal, USA Today, The New Republic, The Washington Post, The New York Times, The Christian Science Monitor, The Los Angeles Times , and Newsday.
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Citi of Arabia
Abu Dhabi takes Manhattan--and Washington, too?

Thursday, November 29, 2007 12:01 a.m.

Investors seem delighted that Abu Dhabi is injecting $7.5 billion into Citigroup, bidding up stocks in general on new confidence that the mortgage solvency crisis might ease. We hate to spoil the party, but it strikes us as unfortunate, if not a tragedy, that America's largest bank had to go hat in hand to Arab sheiks because of bad management and blundering U.S. monetary policy.

The Citi play is being spun as a master-stroke by Robert Rubin, the chairman of the bank's executive committee. The bank gets a capital infusion without having to cut its dividend, and gives up only a minority stake while Abu Dhabi gets no seat on the board. Even better from a political point of view, Abu Dhabi will be able to convert shares for no more than a 4.9% stake, which comes in just below the 5% level that requires approval by the Federal Reserve. Mr. Rubin even seems to have greased the skids on Capitol Hill, with New York Senator Chuck Schumer already forgetting his campaign against Dubai Ports World.

Citigroup did have to shore up its balance sheet, and we suppose petrodollars are a better source of capital than U.S. taxpayers under a "too big to fail" doctrine. On the other hand, where were Mr. Rubin and the bank board when Citi was betting so much on subprime? Given the 11% the bank is paying Abu Dhabi, Citigroup's other equity holders might also be better off down the road had they taken a dividend cut instead.

Most important, no one should be under any illusions that Abu Dhabi's investment is a normal commercial transaction. It comes from a sovereign wealth fund controlled by a foreign government , which has political as much as business interests; from an Arab government that has a troubling history with American banking laws; and it offers a Middle Eastern entree into the U.S. financial system that since 9/11 plays a pivotal role in the war on terror.

Readers of these columns might recall in particular Abu Dhabi's adventures in Beltway banking. It was Sheik Zayed, the father of the current ruler of Abu Dhabi, who owned the infamous Bank of Credit and Commerce International, or BCCI, whose fraudulent tentacles spanned the globe, including the highest levels of Washington politics a decade and a half ago.

The current emir, Sheik Khalifa bin Zayed al Nahyan, is not his father--who always maintained that he was a victim of the BCCI fraud himself. And Robert Morgenthau, the Manhattan District Attorney who investigated BCCI, tells us that Abu Dhabi "has been responsible" since BCCI.

On the other hand, the bank was forced to settle for hundreds of millions of dollars after lying to evade American banking laws. Mr. Morgenthau also recounted that the elder Sheik Zayed once called to inform the State Department that, if Mr. Morgenthau indicted anyone in the royal family over the scandal, he would pull his billions out of the U.S. and make no further investments here.

Mr. Morgenthau says this message was passed to him via the Justice Department. His reply: "Tell them that you don't control that cranky S.O.B. in New York." As a long-time New York DA, Mr. Morgenthau could stand up to such political pressure the way the Justice Department might not. In certain corners of the world, large investments come with political expectations.

Perhaps the Abu Dhabi of today has moved beyond such threats. The United Arab Emirates have helped us in the war on terror, and the U.S. is the ultimate defense for the oil-rich emirates on the edge of the Arabian peninsula. One can argue that investments like Abu Dhabi's draw both sides more closely to each other, and so are mutually beneficial.

Yet everyone should also admit that this investment means that Arab interests will now have inordinate sway over America's largest bank. Abu Dhabi's 4.9% stake combined with the 3.9% stake of Saudi Prince Alwaleed bin Talal makes them the bank's dominant hareholders, and who knows how many other smaller holdings are in Middle Eastern hands. The small Gulf states may be governed separately from Saudi Arabia, but they are closely linked by geography, family ties, and national interests. For purposes of political influence, they often behave as part of the same tribe.

In that regard, the 4.9% gambit looks all the more troubling as a way to avoid Fed scrutiny. If the investors' motives are merely commercial, why go to such lengths? The wire-transfer system is crucial in the war on terror, and at a minimum the Fed and U.S. Treasury need to know that Citigroup will continue to cooperate in sanctions against terror states and tracking terror financing. Citigroup's enforcement unit should be given a thorough scrubbing.

Speaking of the Fed, no one should forget that its monetary mistakes helped to make possible Citi of Arabia. Its easy money policy this decade created a subsidy for debt that led to the housing bubble and Citi's mistakes in the mortgage and SIV markets. It also fed a global commodity boom that has enriched the oil producers and other countries that have a low propensity for domestic consumption. Their petrodollar windfall has to go somewhere, and so it is gobbling up U.S. assets. This recycling may help Citigroup now, but it has also weakened American influence more broadly as the dollar has continued to decline. And it left Abu Dhabi better positioned than American finance companies to rescue Citigroup.

No one favors open capital markets more than we do, and foreign investment is a crucial part of American economic success. But since 9/11, commercial calculations must also consider national security. We'd feel better if this deal were inspected by U.S. officials, and we especially agree with Mr. Morgenthau when he says, "It's a sad day for American financial markets when you've got to turn to Abu Dhabi to get bailed out."


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