Saturday, 9 April 2016

How the Seychelles saved Syria

Against the backdrop of recent territorial gains, the cessation of hostilities and a peace process in Geneva that is rumbling along, President Bashar al-Assad seems more secure than ever after five years of conflict in Syria.
When people ask how he managed to stay in power despite the country having its economy collapse in half, hundreds of thousands killed, one in two Syrians being forced from their homes and the conflict dragging in four of the five UN P5 members of the Security Council, you wouldn't necessarily think about the Seychelles.
Yet as the Panama Papers, the biggest leak in global history, has shown, the idyllic archipelago of 115 islands in the Indian Ocean off East Africa has played its part in keeping Assad in the Presidential Palace in Damascus.

What this demonstrates is that what appears from a distance to be an insular, authoritarian regime far more proficient in the tools of medieval warfare than modern capitalism, has actually used the levers of globalisation well to protect its interests.

Evasion of sanctions 

What the 11.5 million leaked documents reveal is that three Syrian companies close to the government - Maxima Middle East Trading, Morgan Additives Manufacturing and Pangates International - used the already infamous Panama-based law firm Mossack Fonseca to create shadow or shell companies in the Seychelles to avoid the increasing pressure of global sanctions.
Considering how near the regime was to collapse before the Russian intervention, this evasion of sanctions is fairly significant. The Panama Papers suggest it paid for fuel that kept Syria's Air Force helicopters and airplanes in the air.
Modern tactics of moving money through tax havens, loopholes and front companies allowed for pre-modern tactics of dropping barrels filled with explosives on urban areas.

Another way of looking at it is that tax-dodging has cost lives.
The state and nature of Syria's economy was among the triggers of the conflict back in 2011. David Butter's major Chatham House report into the Syrian economy outlined how "economic grievances were an important factor underlying the uprising against the Assad regime".
Aron Lund, from Carnegie, explained that "for decades, the Syrian regime has been mired in corruption, benefiting from the exploitation of state regulations, bribery, and organised crime at every level of the system".
Bashar al-Assad's presidency saw an opening up of the Syrian economy with the introduction of private banking and a stock exchange among a huge raft of changes.
Yet as the renowned Syria scholar Raymond Hinnebusch wrote back, in 2012 the pressures of privatisation led the Syrian leadership to appropriate public sector assets for themselves, to enrich presidential families and ministers and private investors allied with them in "networks of privilege".

Nowhere is this network of privilege more apparent than in Assad's maternal cousins Rami and Hafez Makhlouf. Some estimates put their worth at $5bn before the war, with control of up to 60 percent of the Syrian economy.
They have been the target of international sanctions, including US sanctions, since 2008 and 2007 respectively, and the EU since 2011, suspected of controlling key gateways to Syria's oil and telecoms business.
Yet via a firm in Panama, the Makhloufs were able to continue to operate.
Frederik Obermaier, co-author of the Panama Papers story and an investigative reporter at the German newspaper Suddeutsche Zeitung, told Democracy Now: "they [Mossack Fonseca] realised that he [Makhlouf] was the cousin, and they realised that he was sanctioned, and they realised that he's allegedly one of the financiers of the Syrian regime. And they said, 'Oh, there is this bank who still does business with him, so we should still keep with him, as well'."

A focus on the traditional attributes of the economy of the state (ie, its industries, export and imports, etc) needs to be complemented by an understanding of the economy of the regime and the networks of privilege and corruption that comprise its core.

What has happened in Syria is that a corrupt economy became a corrupt war economy that was able to take advantage of a system blown open by the Panama Papers.
It's worth remembering that this is not the first leak to embarrass the regime. Another set of leaks, emails from 2011, showed Minister of Presidential Affairs Mansour Azzam sending Assad potential options for Russian private jets among rumours of an exit strategy being put together.
It would appear that Assad is no longer in urgent need of an exit strategy. However, he could use the private jet to visit the Seychelles or Panama to thank those who have helped him to remain in power.
The Panama Papers have shone a light on the economic activities of the regime that have stayed for too long in the shadows and, with the amount of information leaked, we know that there is lots more to come.

Wednesday, 6 April 2016

The Beginning of the End of Evil in the World?

Just two weeks ago, following the terror attacks on Brussels, the Daily Observer published an editorial titled "Terrorism May Be Too Lucrative to End".

In that editorial, we argued that ending terrorism was as easy as following and drying up the money; but that because there is a whole value chain involved where too many power players would have too much to lose, the political will has been missing in action.

We quoted the late Harry Greaves, who in his Let's Lecture series explained that the U.S. Government is able to closely monitor the financial dealings of Politically Exposed Persons (PEPs) and their associates.
"Many officials in government are of the mistaken notion that if they steal public money and salt it away in a bank outside of the country, they are home free. Not quite...," Greaves wrote.
"...if you transfer money through the international financial system, you create a paper trail.
"Every US dollar transaction, no matter where it originates or terminates, passes through New York and the Federal Reserve system. And don't think you can conceal your deception by putting the money in an account of a relative or close friend... There is a legal principal called tracing. If ill-gotten gains can be traced to you, they can be confiscated..."

Two weeks later, we are pleasantly surprised to see the findings of what has become known as "the Panama Papers". The papers comprise 11.5 million documents leaked from Mosseck Fonseca, a Panamanian law firm that allegedly helped the world's wealthy hide their cash in order to avoid paying taxes for the last 40 years. The findings were published by International Consortium of Investigative Journalists (ICIJ).
According to the ICIJ, the firm’s clients include "dozens blacklisted by U.S. authorities because of evidence they’d been involved in wrongdoing, such as doing business with drug lords, terrorist organizations or rogue nations like Syria and North Korea...

"Based on a trove of more than 11 million leaked files, the investigation exposes a cast of characters who use offshore companies to facilitate bribery, arms deals, tax evasion, financial fraud and drug trafficking."
There is sure to be political fallout from this in nations whose leaders (present and former) and their associates have been named in the papers.

But two things are important here. One is that this sets an excellent precedent as the beginning of the end of organized evil in the world. This is not just about political leaders hiding oil money. This casts a much wider net to include the drug trade, terrorism and human trafficking, to name some of the major problems destabilizing our world today. It shows that following the money is entirely possible.
What is also important to note is that Panama is not the only tax haven in the world. Others include Ireland, the Cayman Islands and the Seychelles, to name a few. As such, we hope to see the Ireland, Seychelles, Cayman Island and other papers emerge.

We also hope to see the banning of tax havens all around the world so that criminals have no place to hide their loot.

We as members of the fourth estate congratulate the ICIJ, Süddeutsche Zeitung (the German publication to which the papers were leaked) and other participating media partners in the investigation, for a groundbreaking investigation that is not just another scandal, but one that could have a very tangible
impact on ending corruption of all kinds in the world.

As it turns out, the Bible was spot on when it said "The love of money is the root of all evil."
That means that if we follow the money, we can uproot all evil. Not just some -- ALL evil.