Wednesday, August 10, 2011

Hezbollah: Party of Fraud

Matthew Levitt

Summary:

Hezbollah has long relied on foreign patrons for funding. But with Iran's economy suffering and Syria in turmoil, the group has adopted mafia tactics to fill its coffers. Western countries should shine a spotlight on Hezbollah's crime wave in order to hurt the group's reputation and undermine its support.


In June, Lebanon’s new prime minister, Najib Mikati, announced the formation of a government dominated by members and allies of the Shiite terrorist organization Hezbollah. The creation of the new government has made Hezbollah the most dominant political force in Lebanon just six years after the “Cedar Revolution,” which placed the group on the defensive and forced its Syrian patrons to leave the country. With control of the Lebanese government, a vast social-service network, an army of soldiers and operatives, and an arsenal of more than 40,000 rockets, Hezbollah has arguably never been more powerful. Hezbollah would not have achieved its current stature without the assistance of its creator and chief sponsor, Iran. Since founding Hezbollah in 1982, Iran has armed, funded, and trained the organization, transforming it into a potent terrorist and fighting force. Yet Hezbollah has not relied entirely on Iran to finance its operations. Instead, it has raised funds through criminal activities, including counterfeiting currencies and goods, credit-card fraud, and money laundering. In 2002, for example, Hezbollah operatives in North Carolina were convicted for smuggling cigarettes across state lines and sending a significant portion of their profits -- estimated to be more than $1.5 million -- back to their commanders in Lebanon.

This high-profile case first alerted many to the global extent of Hezbollah’s criminal operations. But since then, Hezbollah’s criminal network has grown in size, scope, and savvy. Wary of the instability plaguing its patrons in Tehran since the Green Movement uprising in 2009, Hezbollah has expanded its illicit activities to gain greater financial independence (an expansion sure to continue following this year’s uprising in Syria, Hezbollah’s other major benefactor). A series of international investigations into Hezbollah’s criminal activities over the past several years has revealed that the organization has developed a far more sophisticated, organized, and global crime network. This system has helped sustain the organization in spite of the challenges confronting Iran and Syria, bringing in tens of millions of dollars in profit each year. But it has also exposed Hezbollah to criminal prosecution in Western countries. Some of these nations have avoided prosecuting Hezbollah for its terrorism-related activities, seeing the organization less as a terrorist front than a militant group engaged in political and social activities in Lebanon. But these countries may be more willing to target, and thus weaken, Hezbollah for its criminal activities.

Hezbollah has long relied almost exclusively on its relationship with Iran and Syria for funding. Since the early 1990s, Hezbollah has operated with a guaranteed annual contribution of at least $100 million a year from Tehran. Early last decade, Iran doubled that investment to more than $200 million a year, and its financial support for Hezbollah reached its pinnacle in 2008-9. According to Israeli intelligence estimates, Iran, flush with revenues from oil prices that had risen as high as $145 per barrel in late July 2008, ramped up its funding to defray Hezbollah’s soaring costs as it attempted to rebuild following its 2006 war with Israel. Hezbollah required unprecedented assistance to restock its weapons supplies, invest in reconstruction, and buy favor within both the various sectarian communities and Lebanese towns and villages that suffered damage during the war. It was especially desperate for support in advance of Lebanon’s June 2009 elections, when the group attempted to compete with its Sunni political rivals, who were funded by Saudi Arabia. According to a report by the global intelligence company STRATFOR, as the election neared, Iran allegedly pledged as much as $600 million to Hezbollah for its political campaign. By 2009, Israeli intelligence estimated that, since the summer of 2006, Iran had provided Hezbollah more than $1 billion in direct aid.
Signs of Hezbollah’s increasing reliance on criminal activity have been appearing all over the globe.

This influx of Iranian money led Hezbollah to hire more people and invest in more programs, assuming that Iran’s inflated support would persist. Yet just as Hezbollah accustomed itself to a larger budget, Iran became a much less reliable donor. By mid-January 2009, oil prices had fallen to $36 per barrel and remained under $60 until May, drastically reducing Iran’s oil profits. International sanctions against Iran’s nuclear program, meanwhile, became harsher. Combined with crippling subsidies for basic commodities and soaring inflation, these factors severely hampered Iran’s economic growth. Then, as the economy crashed, Tehran’s ruling clerics blatantly stole the country’s June 2009 elections, spurring months of protests by the Green Movement.

According to Israeli intelligence, these economic pressures forced Tehran to slash its annual budget for Hezbollah by 40 percent in early 2009. (It remains unclear whether Iran has since increased its funding.) As a result, Hezbollah was forced to enact austerity measures, reducing salaries and paid staff and placing several building projects on hold. Hezbollah operatives feared for their jobs, and Hezbollah beneficiaries feared for their handouts. The ensuing cutbacks caused tension within the organization as certain programs and activities were prioritized over others.

Suddenly constrained after years of abundant Iranian funding, Hezbollah turned to its preexisting criminal enterprises to boost its assets. The organization views its illicit income as critical for providing social services to an expanding swath of the Lebanese electorate, paying the families of its fighters, and investing in its growing arsenal of rockets and other advanced weapons.

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