Mounting Costs of the Financial War
Against Terrorism

U.S. and international moves to block terrorist funds since Sept. 11 have been extraordinarily swift. Over $61 million in Taliban and al Qaeda assets have been frozen worldwide, with additional tens of millions of dollars in other terrorist money also frozen.

The administration of U.S. President George W. Bush in October dubbed its financial anti-terror strategy Operation Green Quest, reflecting its recognition that denying terrorists of funding is as crucial an element in the anti-terrorism war as the military campaign under Operation Enduring Freedom. "Those who do business with terrorists will do no business with the United States," Bush recently reiterated.

However, military and financial strategies parallel one another not only in their import and apparent success, but also in the complexity of their impacts on countries around the world. Examining some of the political, economic and social costs of the financial war on terrorism shows that U.S. ability to deal with its indirect consequences will be increasingly linked with its ability to keep the international coalition intact.

 
Political Cost: Tensions with the Arab World
A recent asset freeze order from Bush demonstrates the far-reaching political effect of a single step in the counter-terrorism campaign. On Dec. 4, 2001, the Bush administration ordered the freezing of assets of three financial groups it accused of financing Hamas, a militant Palestinian organization designated as terrorist by the United States, and which claimed responsibility for the recent suicide bombings in Israel that killed 25 people. Soon after Bush's announcement, eight American Muslim organizations responded with an outcry, claiming that the administration was again manifesting its pro-Israel proclivity and asking Bush to retract the order. The Holy Land Foundation for Relief and Development, one of the three groups targeted and the largest Muslim charity in the United States, denied any link to Hamas and stressed that the foundation is strictly humanitarian in its mission.

Commotions were far greater in the Middle East, where Beit El-Mal Holdings and al Aqsa Islamic Bank, the other two suspect organizations, are located. The asset freeze order intensified the already heavy diplomatic pressure the United States has been exerting on Yasser Arafat to crack down on militant groups responsible for acts of terrorism in Israel. Arafat thus responded two days after Bush's order by placing Sheik Ahmed Yassin, the spiritual leader of Hamas, under house arrest - a move that led to violent clashes between Palestinian security forces and the hoard of Hamas supporters that gathered in protest.

Arafat now confronts enormous risk and uncertainty as Washington extends the war on terror - at least on the financial front - beyond Afghanistan. Despite Arafat's rhetorical commitment to counter-terrorism and his expressed desire for a settlement to the bloody 15 month-old Israeli-Palestinian conflict, the Palestinian populace remains largely sympathetic to Hamas's causes and actions, which to them are legitimate responses to Israel's brutal occupation of their territory. While the United States calls for an end to extremist militancy as part of the global anti-terrorism campaign, recent counter-terrorism efforts, including moves related to terrorist assets, have thus added another dimension - and more violence - to the thorny Middle East conflict.

On an even broader scale, the series of asset freeze orders from the Bush administration is deepening the sense of unease and ambivalence about U.S.-led campaign in the entire Arab region. While Arab nations have voiced their unequivocal support for counter-terrorism, they remain wary of many of the U.S. approaches in the war, not the least in the matter of terrorist finances. From the start of the campaign, countries such as Saudi Arabia, Egypt, Jordan and Syria have urged Bush to focus narrowly on blocking off Osama bin Laden's financial network rather than simultaneously targeting other terrorist groups. After freezing the assets of the three organizations related to Hamas, Arab governments warned Bush that the order may help undermine his administration's efforts to maintain the anti-terrorism coalition. Aversion to U.S. unilateralism is pervasive in the region, with Arab countries persistently calling for any action to be taken under UN auspices. Egypt's foreign minister, for instance, declared that the United States alone is bound by the asset freeze lists it generates, and that Egypt is committed only to UN resolutions.

Since Sept. 11, the Israeli-Palestinian conflict has become intertwined with the anti-terrorism war. Middle East countries are simultaneously home to some the most wanted of terrorist entities and to the most vital U.S. supporters in the current campaign. The administration will thus need to consider how further counter-terrorism measures will affect its allies in the Middle East and, given the set of U.S. priorities, carefully weigh out the costs and benefits of the measures.

 
Economic Cost: The Collapsing Somali Economy
Not unlike Afghanistan, today's Somalia is a country that has been devastated and impoverished by a decade of factional wars, severe drought, hyperinflation, a livestock export ban, lack of central government, lawlessness, and a dearth of foreign aid. On Nov. 7, when the U.S. Treasury Department accused al Barakaat, a major banking and remittance transfer company, of funneling money to al Qaeda and ordered its assets to be frozen, many Somalis saw themselves suddenly bereft of their only form of sustenance, leaving them with little or no income for the time being.

According to UN officials, the largest source of income for Somalia is money sent from relatives abroad. Known as one of the largest companies in Somalia, al Barakaat served as the predominant money transfer medium for Somali people, sending about $140 million a year in remittances. Those who depended on the company for receiving income from abroad numbered in the hundreds of thousands, and another several thousands worked for the company in Somalia. The closing of the bank, together with the enduring problems of the failed state, recently led UN officials to project for Somalia a rare and disturbing future-the collapse of the entire national economy.

Further exacerbating the situation is speculation that the country may become a target if the U.S.-led war moves beyond Afghanistan. In preparation for any anti-terrorism operation there, both the United Nations and the European Union have reduced the desperately needed relief flights to the country since Sept. 11. With the U.S. Embassy in Mogadishu closed for over a decade, Somalia has alarming resemblances to the political, economic and humanitarian state of affairs of post-Soviet Afghanistan.

Aware of what such resemblances may portend, UN and U.S. AID officials have met in Somalia since the censure of al Barakaat to examine the conditions there. The United Nations is seeking $250,000 to set up an alternative money transfer system, and is seeking other ways to counter the effects of the company's closure. Such aid is needed not only for the Somalis in dire situations, but also for retaining the cooperation of Somali leader Abdiqassim Salad Hassan who, having promised Bush his full support, is now expecting the United States to take more than an arms-length approach toward Somalia. As Bush takes further strides in choking off terrorist funds, he may increasingly find that economic and social assistance to countries affected by the anti-terrorism war is key for winning their political allegiance.

 
Social Cost: The Fate of Islamic Charities
Some of the social consequences of financial crackdowns on terrorists derive from a bizarre conceptual irony of this aspect of counter-terrorism: dozens of entities on Bush's asset freeze list claim that, far from violence and terrorism, they in fact promote welfare and humanitarian relief. Many even claim to be providing financial assistance to the very people affected by the current war.

The chief executive of the recently-targeted Holy Land Foundation, for instance, claims that the charity raised $13 million from American Muslims last year, which it spent on humanitarian causes in the West Bank and Gaza, as well as on earthquake victims in Turkey, refugees in Kosovo, Chechnya, Jordan and Lebanon, food pantries across the United States, and in setting up a fund for families of victims of the Sept. 11 attacks. Its mission statement declares that the organization seeks to "find and implement practical solutions for human suffering through humanitarian programs that impact the lives of the disadvantaged, disinherited, and displaced peoples."

In mid-December, the U.S. Treasury Department ordered the raiding of two more Muslim charity organizations in the Chicago suburbs. Like Holy Land Foundation, both groups immediately denied having any ties to terrorists, with one of them stating that the raids are "a terrible, terrible, terrible, tragic mistake" on the part of the U.S. government.

Nevertheless, the United States asserts that it has grounded evidence that the targeted organizations are linked to bin Laden or other terrorist organizations. The U.S. government claims, for example, that the money raised by the Holy Land Foundation is eventually used by Hamas to support schools that encourage children to become suicide bombers. Just how much evidence the Bush administration shares with its allies is unknown, although the Saudi government has often complained that asset freeze orders are not accompanied by sufficient proof. The legitimacy of U.S. crackdowns on these charities aside, in the global alert for suspect Islamic organizations, two sensitive and potentially explosive issues rise to the surface.

The first is that for many Muslims, donating to Islamic charities is a fundamental practice in their faith. The Koran stipulates that Muslims must give zakat, or charitable donations, calculated at 2.5 percent of a person's income. In this light, the reason for the outrage resulting from the Treasury's raiding of the largest Islamic foundation in the United States is obvious - the move touches on the sensitivities of Muslims who had dutifully given their zakat to the foundation. The Treasury's intensification of the financial attacks on terrorism during Ramadan, furthermore, was seen by many Muslims as a highly provocative decision. In the spirit of devotion, purity and charity, Muslims customarily donate more than the usual amount during the Muslim holy month. The recent crackdowns have thus led leaders of Islamic organizations around the world to argue that targeting Islamic charities will only fuel the perception that the U.S.-led war is a war against Islam.

Secondly, many of the charity organizations currently under scrutiny do in fact accomplish their stated humanitarian missions. The Saudi-based International Islamic Relief Organization, despite being accused of having past links to bin Laden and Filipino Muslim extremists, still operates an orphanage in the southern Philippines. The recently raided Global Relief Foundation, which raised about $5 million last year, sends contributions to clinics in Israeli-occupied territories and refugee camps in Kosovo. In Southeast Asia, charities are credited with having played a vital social role since 1997, when the financial crisis crippled effective governmental action in Asian societies. In fact, in corruption-ridden Indonesia, many people are said to give more credibility to charities than to the government for the provision of social safety nets.

Because many Muslims remain wary of orders from Washington, success in U.S. efforts to disrupt terrorist funds will depend significantly on Bush's ability to persuade cooperating governments to take their own initiatives to monitor suspect charities and other organizations. Thus far, the Bush administration has been able to secure worldwide cooperation in this regard, receiving support even from governments that remain cautious about their role in the anti-terrorism war. The government of Kuwait has agreed to invite international auditors to oversee finances of Islamic charities in the country. Saudi Arabia, despite experiencing tensions with the United States over financial aspects of anti-terrorism, allowed an American delegation in charge of establishing mechanisms to oversee charities into the country in early December. It also established a Self-Supervisory Committee to coordinate the financial counter-terrorism efforts. Washington's diplomacy with its allies appears to have paid off so far, and will remain essential for maintaining the global coalition in the months ahead.

 
Conclusion
Denying existing terrorists of funds is a core part of the anti-terrorism campaign. And the operation is as difficult and complex-with broad implications for countries around the world-as it is indispensable. Measures taken in the past three months have already affected large segments of people from Somalia to Southeast Asia to Saudi Arabia.

The Bush administration is well aware that it cannot take the support of foreign governments for granted, and that continued support is crucial for combating global terrorism. With this awareness, the degree of consideration the U.S. leadership affords to religious and cultural sensitivities, ally governments' exhortations, and to the war's impact on ordinary citizens, will greatly determine whether the United States can keep this campaign a global effort-as it must be to attain its goals-or will increasingly have to do it alone. But the United States also knows that solutions to global problems must come from global sources. As air strikes in Afghanistan were accompanied by humanitarian food drops, so the financial strikes on terrorist assets will increasingly require political and economic accompaniments for people who are negatively affected-before they become disaffected with the war.

 

By Reyko Huang CDI Research Assistant

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