China Is Not Ten Feet Tall
How Alarmism Undermines American Strategy
Nestled between Mount Lebanon to the west and the Anti-Lebanon Mountains to the east, the lush green fields and quaint rustic shacks of the Bekaa Valley look remarkably idyllic from a distance. Famous for its wheat and wine, this vale on the Syrian-Lebanese border has been a breadbasket in the Levant region since the time of the Romans. When I visited in the summer of 2016, however, amid the rich orchards and sweet vineyards were nearly one million shell-shocked and hollow-eyed refugees, huddled together in crowded and underserviced settlements.
Syria’s raging civil war has claimed hundreds of thousands of lives and turned the country’s formerly shining cities to rubble. The resulting anarchy has given birth to a multitude of new jihadist groups, each more violent than the last. In the chaos, Bekaa has become a magnet for terrorized civilians fleeing violence, extremism, and persecution.
Among these refugees was Nazih al-Lahej (a pseudonym), a father of three, who had sent his two teenage sons across the Mediterranean to Germany and then smuggled his wife and daughter into Lebanon. His family had spent their last cent securing safe passage along the risky human trafficking networks, escaping with only the clothes on their backs. They had just barely managed to flee Raqqa, the self-declared capital city of the Islamic State (ISIS), a group that locals across Iraq and Syria derisively call by its Arabic acronym, Daesh.
Notorious for its savagery and sadism, ISIS was known to forcibly recruit and indoctrinate young children. “There was no other solution!” Nazih said mournfully, his wife nodding in agreement, “because if [our sons] had stayed, they would have been brainwashed.” ISIS, he said “offers games and toys to the kids so that they start appreciating them, and then they start giving them [extremist] classes.” Despite their terrible fear of sending their sons on the dangerous journey across the sea, the parents would not risk losing their teenaged boys to the psychotic tyranny of the extremists.
With tears in his eyes, Nazih said, resolutely, “Death is better than Daesh.”
This refugee family in the Bekaa Valley, and millions of others just like it, are desperately poor and utterly powerless. As many starve, however, a few have grown fat. In Syria, savvy entrepreneurs have built empires worth hundreds of millions of dollars, taking advantage of the chaos to expand both licit and illicit trade. And they have done so with the aid of the Islamists. Indeed, powerful traffickers of antiquities, oil, and narcotics working the Iraqi–Syrian border have made secret alliances with ISIS in order to lower their costs and increase their profits. Behind the scenes of poverty and devastation that make headlines, these elites have built lives of decadence and opulence.
Profiting from civil war, however, is not unique to Syria. In fact, it is a regular feature of conflicts around the world. To understand these civil war economies on the ground, I traveled from the mountainous border region of Pakistan and Afghanistan to the unruly Somali capital of Mogadishu. Through my fieldwork, I discovered a strange alliance between two seemingly disparate groups: the local business class and militant Islamists. At first blush, it might seem that zealous jihadists and wealthy business owners are strange bedfellows. Yet there is a rational and strategic reason that profit-driven business elites end up in bed with ideologically motivated Islamists: the jihadists lower their taxes.
War zones are tough business environments. They can be thought of as a free market for security, in which multiple and competing warlords rule over their turf, extracting rents from their base in exchange for security. To pass through a warlord’s territory unharmed, you have to pay “taxes” for protection to both the warlords in charge and the militia checkpoints along the roads. To navigate through each subsequent area safely, you need local partners to arrange for both the payment and the logistics of transportation. The greater the number of factions, the higher the risk, the more complicated the delivery, and the more expensive the taxes on your business.
These are the real and measurable costs of civil war, marked on every price tag in the bazaar, whether on a sack of sugar or a crate full of guns. When law and order collapses, the lines between legal and illegal business dissolve, resulting in a complex blend of commercial activities. Yet it is not only the hardened smugglers and criminal bosses that are affected by these security dynamics but also business elites involved in more ordinary affairs. Take for example Somalia’s Coca-Cola business, which was hit hard in the early 2000s by heavy warlord and militia taxation. Because soft drinks are a non-essential good (meaning that people have the option to simply forego them), the higher taxes crushed consumer demand. “I couldn’t sell Coke outside of Mogadishu,” explained the head of Somalia’s Coca-Cola Company distribution in his posh office in Dubai. “My average production was 500 cases per day and 15,000 cases per month. But my actual production capacity was 285,000 produced per month, but I couldn’t sell this because of the insecurity on the roads.” For nearly all businesses, ethnic and tribal fragmentation increases taxes and reduces profits.
This fragmentation is what gives Islamists their competitive edge. Unlike ethnic or tribal warlords, who only appeal to their own kin, Islamists can tax across those divisions, offering protection to business elites from multiple ethnic and tribal groups. The ethnic warlord and the Islamist are running rival protection rackets, charging the business class “taxes” in exchange for security; but while the ethnic warlord is forced to tax his narrower ethnic kin base, the Islamist can use religious identity to override local divisions and attract business buy-in across ethnic and clan lines. The Islamists are therefore able to offer the business class a simplified, low-cost, single-payer security model that cuts across ethnic and clan lines—a cost-effective alternative to paying taxes to multiple warlord protection rackets. Indeed, by selling security across local divisions, the Islamists can also offer a lower tax rate than rival ethnic or tribal warlord protection rackets; the wider their consumer base, the lower their prices. As the chairman of one of the largest business associations in Mogadishu told me, “For every $100 we were paying to the warlords, we could give the Islamic Courts $35 to remove them.” In war, the Islamists offer a better deal, and this deal has in turn fuels the rise of their power.
In war, the Islamists offer a better deal, and this deal has in turn fuels the rise of their power.
The smugglers’ market on the outskirts of Beirut was a clamorous maze of clothing stalls, confectionaries, and cheap Chinese electronics. Underneath a heavily spray-painted highway overpass, hundreds of vendors set up makeshift booths to sell housewares and tchotchkes at heavily discounted prices. Every week, thousands of shoppers weave through these crowded back alleys, haggling over merchandise to get the best deal. Among the sundry stalls are a collection of quaint souvenir shops, each showcasing replica antiques from the region for the occasional tourist. Clay pots claiming to be fashioned in the Roman era sell for $20. A gold-colored sword hangs on the wall, with freshly added marks of distress to mimic the crusader era. The real antiquities, however, lie further into the market.
Since the outbreak of wars in Iraq in 2003 and in Syria in 2012, the illicit sale of antiquities has systematically grown into a billion-dollar industry. As armed groups ransacked museums and historical sites, they built an elaborate trafficking network to sell stolen artifacts to shady art dealers around the world. So profitable is this illegal business that some jihadists have even pretended to destroy these priceless antiquities, publicly declaring them un-Islamic, while secretly hoarding them for sale. By faking the widespread destruction of these artifacts, buyers were tricked into believing that the surviving relics were rare; the militants could then sell the stolen goods at inflated prices on the black market.
Winding through the makeshift market in Beirut in July 2016, most of the colorful antiques I saw in the storefronts were clearly cheap replicas for the casual tourist; proximity to the Syrian and Iraqi conflicts, however, also brought in the valuable stolen goods, such as rare artifacts from the Byzantine Empire. Like all such markets, both licit and illicit merchandise can be found for a price.
“I have mostly Ottoman artifacts,” one shopkeeper said. “For Byzantine, go further ahead and turn right. Ask for Abu Athar.” At first glance, Abu Athar’s shop looked exactly like the rest of the souvenir stalls, with piles of fake shiny swords, rusted lanterns, and terra-cotta clay pots out front in a motley display. A towering man with a heavy brow, Abu Athar had more than cheap trinkets in his collection, however. “These things are very expensive,” he said quietly, as he showed me a large plastic box of small Byzantine artifacts that he kept under the counter for safekeeping. The tiny statues, which could fit in the palm of your hand, cost around $500 each. “The bigger pieces we keep off-site, depending on how much you’re willing to spend.” Indeed, Abu Athar was known to possess cuneiform tablets last seen in museums in Iraq.
These smugglers’ markets are stocked by the region’s powerful underground networks. When ISIS first rose to power in 2014, it used its connections to that web—especially to Iraq’s lucrative oil trafficking industry—to acquire funds and muscle out rivals. “Since 2011, [ISIS] was cultivating these ties,” Renad Mansour, a scholar at Chatham House who works on the ground in Iraq and Syria along these smuggling routes, told me. “These guys were creating networks for years, slowly trying to establish preferable business relations with major stakeholders and elites.” When ISIS launched its 2014 offensive, their relationships with the underground business class helped them quickly seize territorial control across Iraq and Syria.
At that critical moment, ISIS entered a space in which other actors had already set themselves up for failure. In Iraq, the Shiite-dominated government then headed by Prime Minister Nouri al-Maliki had alienated Sunni business communities with its corruption. “Maliki really started creating a difficult business space for [the business class],” Mansour explains. “His [army] people in these areas were taxing people outside of the formal [system]. They were asking for bribes; they were forcing bribes.”
ISIS capitalized on similar frustrations with President Bashar al-Assad in Syria. While other groups fleeced the smugglers, ISIS offered the Syrian business class a simplified low-tax alternative. Yezid Sayigh, a senior associate at the Carnegie Middle East Center, said, “There was a very strong feeling among Syrians of wanting to be finished with this constant rapacious system, and they found that the opposition militias and armed groups did more or less the same [in terms of extortion]. So for farmers, traders, anyone who needed to move goods around, the relief for not having to pay a fee at every single road block was immense.”
With ISIS, Sayigh explained, “when you pay a tax, like a trade important tax or an income tax, to one local body or office or border checkpoint, that was the end of it. You could travel throughout [ISIS] territory after that and never have to pay that tax again, unlike the system under Assad or under the Syrian opposition, where every time you come to a checkpoint you pay an informal tax.” Thanks to its offers of lower tax rates and their ties to the business class, the jihadists won the support of local elites in the underground economy between 2013 and 2014, giving them an essential financial boost at a critical moment of expansion.
The intimate connection between jihadists and the illicit economy is a global phenomenon. In Afghanistan in the 1990s, the Taliban won the crucial support of the traders hustling in the Afghan–Pakistani border region. These local economic power brokers financed the Taliban during the very early stages of their formation, before the Pakistani government got in the game. “In the beginning it was the traders of Afghanistan who wanted the trade routes to Central Asia to be open,” the late director-general of the Pakistani Inter-Services Intelligence, Hamid Gul, explained in an interview. “Before Taliban appeared on the scene, by the fall of 1994, the warlords had set up no less than 72 posts between Chaman [at the Pakistan border] and Torghundi [at the Turkmenistan border]. And at each post these traders had to pay the price, and sometimes with their life. So really, people were fed up and they started funding the Taliban when they appeared.”
A similar story unfolded in Somalia in the first decade of this century. After years of rapacious warlord rule, the local business community financed a new grassroots Islamic political movement called the Islamic Courts Union (ICU), which brought together local clan-based Islamic courts between 2004 and 2006 to create a unified political organization. In 2006, as extortion on the roads increased, an astonishing 70 percent of the members of the Mogadishu business community abandoned the heavily entrenched clan warlords and collectively switched their financial support to the ICU. “The reason that the business community supported the ICU was because of the illegal taxes,” a prominent Mogadishu-based economics professor who had been tracking the extortion rates by warlords and their militias, told me. “The ICU didn’t say they wanted taxes. They only asked for khidmat [service charges] or zakat [charity]. People felt they were better off.” The ICU had lowered the price of doing business in Somalia; within six months, the Islamists controlled 90 percent of the Somali countryside.
In the rough deserts of northern Mali, where Islamist rebels have fought the government since 2012, business elites and jihadists are even more entangled. Years before surging to power, the jihadists had invested in building deep ties to the region’s cigarette and narcotics trafficking mafias. “These are very formal networks, worth millions of dollars, and based on mutual interest,” a peace researcher based in Bamako explained. Fighters from al-Mourabitoun, an al Qaeda–affiliated group, literally married into prominent smuggling families so that they could merge with the ethnic and tribal communities that run these illicit businesses and gain access to their networks. In time, the jihadists came to dominate the illicit trade, leveraging their position in the rough Algerian–Malian border regions to establish strong ties to both transnational cartels and local gangs across North Africa. (The leader of al-Mourabitoun, Mokhtar Belmokhtar, became so involved in the cigarette-smuggling industry that he earned the nickname “Mr. Marlboro.”) Having won control of these routes in the mid-2000s, the jihadists later shifted their attention to the booming cocaine trafficking networks in West Africa, which feed demand in Europe. Mali, where jihadists now enjoy steady revenues from this criminal underworld, has become one of the world’s epicenters of Islamist violence.
Connections with business elites and smugglers do not merely help jihadists control territory, however. They also help when the groups are trying to survive on the margins. For example, because ISIS is rapidly losing territory and taxation revenues, its leadership has proactively retreated into the criminal underworld, relying on local business leaders to help them stay financially afloat. Mansour and the Iraq expert Hisham al-Hashimi argue that after losing its strongholds, ISIS “will no longer be able to offer security to smuggling networks.” Instead, they say the group has already adopted a “new approach [that] centers on its ability to launder its massive cash reserves, plundered from major cities such as Mosul, in a manner that will allow it to continue to draw upon them without intervention from hostile powers.” Their goal is to hide and protect their financial assets, shift their war-fighting efforts to cheap and dirty attacks, and hunker down for a long and drawn-out fight.
From the Sahel desert to the Hindu Kush mountain range, jihadist groups have survived and endured this way, retreating into the underground economy whenever they are defeated on the battlefield. After the Taliban lost territory in Afghanistan in 2002, they pulled back from governing and leaned on their relationships with the smuggling networks. After Somalia’s al-Shabaab lost the port city of Kismayo in 2012, which had provided them with tens of millions of dollars in taxation revenue, they moved deeper into the criminal business world and focused on launching cheaper terrorist-style attacks. In Mali, since losing territory in the northern Azawad region in 2013, Al-Mourabitoun and other allied jihadist groups have hustled to reassert control over key trafficking routes. Across these cases, the evidence shows that the underground economy acts as a safety net when jihadists are under siege.
It is not guaranteed, however, that the business class will accept retreating jihadists with open arms. In the long run, Islamists always prove to be a bad investment. Once they succeeded in pushing out their political rivals, the Taliban in Afghanistan, the Islamic Courts in Somalia, and ISIS in Iraq and Syria all ratcheted up taxes and frustrated business development. The business elites remember that the Islamists fleeced them, and they are acutely aware that they may be betrayed again. The jihadists may have muscled their way back into the underground economy, but it is not a happy marriage.
Such frustrations aside, however, the relationship may still prove profitable. As jihadists focus their efforts on waging long-term insurgencies, the resulting lawlessness will be a boon for illicit trade, especially for savvy entrepreneurs who are willing to deal with unsavory actors. These business elites are motivated by economic interests, not religious convictions; they are pragmatists, not ideologues. If the jihadists can offer lucrative opportunities to profit from the chaos, they will continue to find a haven in the underground economy. From the outside, these conflicts appear to be driven by ideas and identities; but inside these war zones, everyone is talking about money.