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Corruption Watch: October 19, 2004

19 October 2004, Volume 4, Number 20
By Roman Kupchinsky

Disturbing reports of suspected Al-Qaeda activity have begun popping up throughout the Middle East and North Africa, with suspected terrorists in Lebanon and Libya being linked to the terrorist network and suspicions of its involvement in bombings in Egypt.

In Lebanon, authorities announced on 22 September the arrests of 10 men accused of belonging to an Al-Qaeda cell for plotting to blow up the Italian Embassy were arrested in mid-September (see "RFE/RL Organized Crime and Terrorism Watch," 6 October 2004). The leader of the group, 31-year-old Ismail Muhammad al-Khatib, died of massive heart failure on 27 September while in captivity, Reuters reported on 1 October. The Lebanese police subsequently announced charges against 35 people in the plot.

Immediately after three car-bombing attacks on resort hotels in Taba, Egypt, that killed 33 Israeli tourists on 8 October, "The Jerusalem Post" reported on 9 October that the Israeli intelligence service, the Mossad, announced that it suspected Al-Qaeda of being behind the attack.

Speaking on Israeli television, Israeli Foreign Minister Silvan Shalon said, "The type, the planning, the scope, the simultaneous attacks in a number of places, all this points to Al-Qaeda" "The Jerusalem Post" reported.

A senior Israeli security official told the British "Sunday Times": "Al-Qaeda network hit this time in our backyard. If we don't focus our efforts against Al-Qaeda, next time they will hit Tel-Aviv."

Soon after the blasts, three unknown groups took credit for the Taba attacks. Calling themselves the Islamic Unity Brigades, the World Islamist Group, and the Brigades of the Martyr Abdullah Azzam, all posted Internet claims of responsibility for the attacks.

On 10 October, "The Jerusalem Post" reported that Libyan police had arrested 17 non-Libyans suspected of being Al-Qaeda members. They allegedly entered the country illegally from India and Central Asia, Libyan Interior Minister Nasr al-Mabrouk said. "Preliminary investigations proved that the group...has a connection with Osama bin Laden, but the nature of this relation has not been established yet," al-Mabrouk told AP.

In the Taba bombings, Western, as well as Egyptian intelligence officials are leaning toward the Mossad's theory that Al-Qaeda might have been responsible. If these suspicions turn out to be true, the emergence of Al-Qaeda in Lebanon, Egypt, and Libya could have far-reaching implications. Oil-rich Libya -- emerging from its isolation as a state sponsor of terrorism that has now been rehabilitated in Western eyes -- has so far not been targeted by Al-Qaeda, as have Egypt (since 1997) and Lebanon. Libyan security forces have little experience in combating terrorism, and the country's oil infrastructure is a natural target for sabotage operations. If Al-Qaeda should target Libya, the West might have to do more than praise Libyan leader Muammar Ghadaffi for recanting his past -- it might be forced to help protect him and the citizens of Libya.

In Egypt, the Suez Canal presents a clear target for terrorist attack along with tourist attractions and resorts. The Egyptian security and intelligence services are regarded as highly competent and have had many years of counterterrorist experience fighting the Muslim Brotherhood as well as the Egyptian Islamic Jihad (EIJ), once led by Ayman al-Zawahiri, now the second-in-command of Al-Qaeda. According to a study of Al-Qaeda, "Through Our Enemies' Eyes" by Anonymous, EIJ along with all the other Egyptian organizations that operated in Afghanistan were funded by Osama bin Laden. The last major terrorist attack in Egypt prior to the bombings in Taba took place on 17 November 1997 when fighters from the Gama'at Al-Islamiyah killed 58 foreign tourists and four Egyptians near Luxor.

With much of the West's attention focused on the fighting in Iraq, Al-Qaeda could be sending a message that it is still capable of operating and that it has not been as severely damaged as some Western officials claim. And while the attacks in Taba were directed at Israeli tourists, there are no guarantees that the attackers have placed Egyptian targets off-limits.

The latest edition (No. 23) of the Al-Qaeda-related journal "Sawt Al-Jihad" obliquely touches on the subject of Egypt in an article by Abd al-Rahman Ibn Salem al-Shamari,where he praises the beheading of an Egyptian hostage in Iraq: "Indeed, if the slaying of an Egyptian spy is the destruction of the idol of [pan-]Arab nationalism, then the beheading of Saudi spies and Saudi soldiers will be the destruction of the idols of patriotism, [pan-]Arab nationalism, and territorial nationalism. [It will be the destruction] of the faith of that land's residents in the concept of citizenship and the destruction of their devotion to a domestic front that includes both Muslims and infidels, [as if] there is no difference between them."

In its introduction to its translation of the article, the Middle East Media Research Institute ( explains that "the author emphasized that a Muslim is obligated to be loyal to his religion only, and not to his national identity or to his country, and therefore all non-believers are the same, regardless of whether they are Arabs."

The Lebanese situation is complicated by the presence of Syrian troops in the country despite a United Nations resolution requiring them to leave. At the same time, Lebanese towns and refugee camps in the Bekaa Valley have long been suspected of sending fighters to join the insurgency in Iraq via Syria. A recent car-bomb attack in Beirut and fighting between Iranian-backed Hizballah and the pro-Syrian Amal militia in the south of the country are worrying signs that peace in Lebanon is once again being threatened. If Al-Qaeda begins targeting its enemies in Lebanon, the situation is sure to deteriorate.

Apparently, France takes the threat of a new Al-Qaeda expansion into North Africa seriously. "The Jerusalem Post," in a report on the visit of French Interior Minister Dominique de Villepin to Algeria, wrote on 11 October that an African center dedicated to fighting terrorism and terror financing will be announced during de Villepin's visit.

By Roman Kupchinsky

Will the Kremlin reward state-owned natural-gas monopoly Gazprom for its loyalty with a murky $18 billion deal as a year-end bonus? Many financial analysts in Moscow are leaning toward that conclusion, as Russian officials appear bent on the dismemberment of integrated oil and gas giant Yukos.

Yukos has paid $3 billion of a $3.4 billion tax claim for 2000, according to "The Moscow Times" of 13 October, but the company faces a further $4.1 billion tax claim concerning 2001.

Complaining that Russian tax authorities "are not satisfied" over the speed with which Yukos is paying off its back taxes, however, the Justice Ministry on 12 October announced its plans to sell an unspecified stake in Yukos's main production unit, Yuganskneftegaz, as early as November, "The Moscow Times" reported the next day.

Western and Russian financial observers were quick to point out that the Justice Ministry's reported valuation of Yuganskneftegaz at $10.4 billion is about two-thirds of what they had expected.

Soon afterward, in a move that furthered fears that Yukos is being dismantled, Natural Resources Minister Yurii Trutnev said on 16 October that Yuganskneftegaz risks losing its licenses over what he termed "rather serious" technical violations, "The Moscow Times" reported.

"The Moscow Times" reported on 18 October that an inspection of Yukos licenses last year by the ministry "failed to turn up any serious violations. It was unclear Sunday what significant changes could have occurred since then." In November 2003, President Vladimir Putin said that recalling licenses from Yukos "would give the impression that the state was trying to shut down the company," the paper reported.The sale of Yuganskneftegaz -- the core unit of Yukos that produces roughly two-thirds of its oil, equivalent to the output of Indonesia -- would mean the effective demise of Yukos in its current form.

One analyst at United Financial Group in Moscow reportedly told "The Wall Street Journal" of 13 October, "It's pretty ugly; the fact that Yukos is being broken up at all is a complete scandal."

Investment bank Dresdner Kleinwort Wasserstein estimated the upper limit of Yuganskneftegaz's value at $18 billion in work it carried out for the ministry, according to a number of local and international news reports. Representatives at Dresdner would not confirm those reports, and officials at the Natural Resources Ministry have declined to comment as well.

The sale of Yuganskneftegaz -- the core unit of Yukos that produces roughly two-thirds of its oil, equivalent to the output of Indonesia -- would mean the effective demise of Yukos in its current form.

Eric Kraus, chief strategist for Sovlink Securities, was quoted by "The Moscow Times" as commenting: "The game is proceeding according to plan -- the state intends to rip Yugansk out of Yukos and sell it, presumably to more Kremlin-friendly companies."

The most "Kremlin-friendly" energy companies in Russia are arguably Gazprom and Surgutneftegaz. Both have denied that they are interested in buying Yukos assets, but many analysts have countered that they are skeptical of those denials.

One Russian energy analyst told RFE/RL that he believes Yuganskneftegaz will be sold to Surgutneftegaz and that Gazprom will then take over Surgutneftegaz and form a single, giant Russian energy company that is effectively controlled by the Kremlin.

Lending credibility to this scenario is the fact that the Kremlin recently gave the green light for Gazprom to take over the state-owned oil company Rosneft, and Gazprom is preparing to create Gazpromneft, a wholly owned Gazprom oil subsidiary. This appears to jibe with Gazprom Chairman Aleksei Miller's strategy of transforming Gazprom into a diversified energy company involved in a range of activities beginning with oil and natural-gas extraction and continuing through electricity generation.

The takeover of Rosneft was significant in another aspect -- it increased the state's share in Gazprom from 38 percent to just over 50 percent.

Gazprom recently bought a 10 percent stake in Unified Energy Systems and, as Miller told NTV on 9 October, a "significant" stake in Mosenergo, the city of Moscow's electricity-generation company. Some reports placed the latter stake at 30 percent.

On 18 October, "The Moscow Times" quoted Federal Atomic Energy Inspectorate Director Andrei Malyshev as saying that a fully owned Gazprom subsidiary, Gazprombank, purchased a 50 percent stake in Atomstroieksport, Russia's key nuclear company. That company is involved in the ongoing construction of the controversial $1 billion Bushehr nuclear plant in Iran.

A vastly enlarged, state-owned Gazprom is bound to create consternation among the former Soviet republics as well as in Western Europe. Gazprom presently supplies about one-quarter of Western Europe's natural gas; it is the sole supplier to Estonia, Latvia, Lithuania, and Slovakia; it provides 91 percent of Hungary's gas imports, 79 percent of Poland's, and some 75 percent of the Czech Republic's.

This reliance has prompted the European Commission to call for Eastern European countries to diversify their gas suppliers. But by establishing a series of joint ventures and offshore trading companies with Eastern European companies -- in which it has invested $2.6 billion, according to the "International Herald Tribune" of 1 October -- Gazprom appears to have managed to control the entire chain of supply through investments and subsidiaries.

Gazprom's role in Russian foreign policy has also been of continuing concern to the West. By controlling the pipelines that deliver natural gas to Europe as well as to Ukraine and Belarus, Gazprom has arguably been in a position to exert pressure on these states to ensure they are more amenable to Moscow's policies. Europeans are reportedly concerned that this tendency might easily be extended to include them.

"Novaya gazeta" reported in October 2003 that President Putin told visiting German Chancellor Gerhard Schroeder: "The pipelines are our legacy from the Soviet Union. We intend to retain state control over the gas-transportation system and over Gazprom. We are not going to divide Gazprom. The European Commission had better forget about its illusions. As far as the gas is concerned, they will have to deal with the Russian state."

Commenting in the same article on the situation surrounding Yukos, "Novaya gazeta" made the following observation: "There is, for example, the opinion that the Kremlin put Yukos under pressure because of its financial relations with [opposition political party] Yabloko. This is not even laughable. When have parliamentary elections decided anything in Russia? What counts is that Yukos became a leader in the movement of oil companies toward construction of their own export pipelines independent of the state. This encroachment on the rules is what cannot be tolerated."

More recently, "Newsweek" on 2 August spells out the rationale behind the breakup of Yukos in somewhat different terms: "'A few billion extra dollars would come in handy right now,' says Nikolai Petrov of Moscow's Carnegie Center, laying out a scenario whereby Yukos's prize asset [Yuganskneftegaz] is sold at a deep Gazprom, the state-controlled gas monopoly. Yukos's oil could then be sold at a hefty profit for the benefit of the state, either to fund Putin's new cash subsidies directly or to defray government expenses elsewhere."

Despite Putin's public pledges not to break up Yukos as reported by "Newsweek," recent events suggest that such pledges will not be kept and that deliveries of natural gas are not the only things that will be placed under direct Kremlin control: Oil production and deliveries are likely to follow suit.