An African source of mine recently involved in the diamond trade in Central African Republic (CAR) and the DRC, recently told me a story that was strangely familiar. After setting up shop in Bangui, CAR, with mining rights in the eastern part of the country, he found he could not buy diamonds at the market rate. Instead, he found that buyers stationed along CAR's eastern border with Sudan were paying a premium of 10 percent to 20 percent for the stones. The satellite images of his concessons, which he bought commercially, show numerous unregistered airstrips for the landing of small airplanes arriving from Sudan. His people on the ground tell him the small planes arrive with Arabs who have connections to the Lebanese community of diamond buyers that has traditionally operated in the area.

Sound vaguely familiar? This was the m.o. of the al Qaeda buyers in Liberia and Sierra Leone, paying a premium above the market rate for a virtual monopoly for a small period of time, described in detail in my book.

And don't forget, the CAR has been a favorite haunt of Victor Bout, as well as a primary laundering spot for blood diamonds from different rebel groups in the DRC.

For a more complete look at the CAR's diamond economy, see Christian Dietrich's "Diamonds in the Central African Republic: Trading, Valuing and Laundering," at action.web.ca/home/pac/attach/car_e.pdf.

As with other interesting developments from the grey areas and stateless zones of sub-Saharan Africa, this will likely draw little interest from the intelligence community, unless the U.S. European Command and Gen. Wald decide to get involved. Otherwise, it will be business as usual for a long time.

Two very good sources tell me that Victor Bout, arms trafficker to the world's worst regimes and wanted fugative in two countries, has, until very recently, had a lucrative DoD contract to fly munitions into Iraq for U.S. forces. The company he set up for the business, British Gulf, is still in business.

Peter Hain, a senior British official, dubbed Bout the "Merchant of Death" in 2002 for his notorious willingness to supply weapons to one and all: Charles Taylor in Liberia, the RUF in Sierra Leone, UNITA in Angola, the Taliban and al Qaeda in Afghanistan (and the Northern Alliance at the same time, no small feat). The UN recently asked its member nations to freeze all assets belonging to former Liberian president Charles Taylor and his closest associates--including Bout. A similar executive order has been at the White House, awaiting President Bush's signature, for several months. The U.S. and Britain initially worked to keep Bout off the UN sanctions list, but backed down in the face of adverse publicity. State's Richard Armitage publicly said last month that Bout should be on the UN list. The State Department has been pushing hard for DoD to end its contract with Bout to avoid embarassing publicity. State is also reportedly on board to get the EO signed and acted on. But there has been alot of foot dragging and the EO remains unsigned.

It is too late to stop the embarassment. Word of U.S. and British efforts to protect Bout has slowly leaked out in the European press, most notably the FT. But pragmatism seems to have trumped any possibility of embarassment. Bout had airplanes where airplanes are needed, his specialty. He flew U.S. forces into Afghanistan shortly after 9/11, when no one else could, earning the gratitude of the Bush administration and an apparent quid pro quo not to make his life difficult in the aftermath. Now a contract in Iraq. Seems there must be other people who could fly ammo to the troops there and that enriching one of the world's most notorious criminals was not a necessity.

Some U.S. officials are saying they didn't know who Bout was when his company was hired. But he is not an unknown entity. I did a chapter on him in my book, the Los Angeles Times and others traced his activities in Afghanistan, the New York Times magazine had him on the cover, and the CIA and NSC have known about him for years. A simple Google search could have saved U.S. tax payers from giving financial aid and comfort to Victor Bout.

Here is some interesting news on the "blood diamond" front. Of course, it would have nothing to do with terror finances! Interesting to note that UAE is playing an increasingly important role in the diamond shuffle. As I noted in my book, it is a center for gold, diamonds and Hawala, the life blood of terrorist finances.

AP Exclusive: Smuggled African diamonds entering market through UAE and
Switzerland, investigators say
AP Photo COD101
By DANIEL BALINT-KURTI
Associated Press Writer
KINSHASA, Congo (AP) — Millions of dollars in smuggled central African
diamonds are being routed through Switzerland and the United Arab Emirates
to evade controls at the world's main diamond market, investigators say.

In a confidential report obtained by The Associated Press, the
investigators called for "urgent corrective action" by the Republic of
Congo, the alleged hub of a trade that has been used to fund African
conflicts.

Investigators accuse Republic of Congo — which mines comparatively few
diamonds of its own — of smuggling in diamonds from neighboring central
African nations and falsely certifying the gems as mined on its soil.

Republic of Congo then allegedly sends the diamonds into the world market
through the United Arab Emirates or Switzerland.

Dealing with the smaller diamond centers allows the country to avoid the
rigorous certification process at the world's diamond hub, Antwerp,
Belgium, the investigators say.

Republic of Congo officials — apparently seeking to evade taxes and hide
revenues — also are formally declaring the gem-quality stones in
Switzerland at far less than their market price, investigators concluded:
just 98 cents a carat on average, compared to the average market price of
$75.90 a carat for uncut, unset stones.

The allegations are the findings of a May 31-June 4 mission to Republic of
Congo by a team evaluating compliance for the U.N.-backed Kimberley Process
Certification Scheme.

The voluntary tracking and certification program is the industry's response
to growing world concern about "blood diamonds," which fueled and funded
wars in Liberia, Sierra Leone and Congo in the 1990s.

The illicit trade in gems also is increasingly under international scrutiny
as a suspected means of financing terror.

Forty-five countries have signed on since the world's $6 billion diamond
industry began the process in late 2002. The effort is named after the
diamond center of Kimberley, South Africa.

Republic of Congo, one of the signatories, has been cited for alleged
widespread violations from the start.

Industry watchdogs accuse Republic of Congo of trafficking in smuggled
diamonds from Congo, its much larger, diamond-rich neighbor across the
Congo River.

Victor Kasongo, head of Congo's diamond regulatory body, said Friday that
diamonds were "flying out" of his country because of smuggling to Republic
of Congo, where taxes on the trade are lower and export controls more lax.

In 2003, according to industry giant De Beers, Congo was the world's
fifth-largest diamond producer in terms of value, accounting for 7 percent
of the world market, or about $700 million.

Another neighbor, Central African Republic, also has rich diamond fields.

Republic of Congo, however, has a comparatively small native diamond
production. It would be left out of the global diamond market without the
allegedly smuggled gems from surrounding countries.

In its report, the Kimberley monitoring team concluded that "no guarantee
can be provided that the diamonds flowing through the Republic of Congo are
conflict-free."

Declared diamond exports from Republic of Congo are "approximately 100
times greater than its estimated production," the investigators said.

"It is therefore concluded that almost all its exports are rough diamonds
that have entered the country without any official documentation
whatsoever," investigators said.

Republic of Congo officially reported its overall diamond exports from
April 2003 to May 2004 at a value of $53.8 million.

The country was quoted by investigators as insisting that all its exported
diamonds were mined domestically. Republic of Congo officials did not
immediately respond to requests for comment from the AP on Friday.

The London-based independent group Global Witness says Republic of Congo
and Kimberley Process officials were discussing the allegations.

Investigators said most of Republic of Congo's shipments from at least 2003
onward were going through Switzerland or the United Arab Emirates.

Swiss authorities told AP they could not refuse the diamonds if they came
with the correct certificates but said they had expressed concern to
Kimberley officials.

"We were aware that the diamonds were undervalued and we were uneasy about
this," said Othmar Wyss, spokesman for Switzerland's State Secretariat for
Economic Affairs.

AP-ES-07-09-04 1547EDT

According to the FT, the groups within the intelligence community that find the diamond story credible are finally starting to speak up. While the CIA and FBI publicly deny the connection, Rep. Frank Wolf (R-Va.) has confirmed to me, and now the FT, that the second FBI report, written in March 2004, in fact did verify the link. Why won't they say so publicly? Finally, the military and especially the State Department are starting to get into the game. I'm sure the rash of stories from the Wall Street Journal, the Associated Press, the Financial Times and the book are all leading to Congressional pressure to finally address the issue. It's almost three years late, but better late than never. Here is the FT story.

US suspects al-Qaeda African diamond link: Terrorists could be financing operations through smuggling from Sierra Leone, write Michael Peel andThomas Catan.

By THOMAS CATAN and MICHAEL PEEL
1,029 words
30 June 2004
Financial Times
London Ed1
Page 11
English
(c) 2004 The Financial Times Limited. All rights reserved

The US is stepping up its anti-terrorist efforts in west Africa amid continuing controversy over alleged links between al-Qaeda and the smuggling of Sierra Leonean diamonds through Liberia.

Washington has begun looking more closely at terrorist financing in a region where the US military is increasingly active in efforts to disrupt terrorist networks, according to government officials and a leading Congressman.

A US Congressional panel on the September 11 2001 terrorist attacks concluded this month there was "no persuasive evidence" that al-Qaeda funded itself through trafficking in diamonds from African states experiencing civil wars. But a US government official covering west Africa told the FT the US authorities had started to examine more deeply alleged financial links between the regime of Charles Taylor, exiled former president of Liberia, and groups such as Hizbollah and al-Qaeda.

"We want to find out the infrastructure," the official said. "Taylor has ties to things other than what's happening in Liberia. We want to find out who and what."

The US military has already launched a programme known as the Pan Sahel initiative to train soldiers in four Muslim-dominated west and central African countries - Mali, Chad, Mauritania and Niger - as part of efforts to prevent terrorists establishing bases there.

The US has allocated an extra legal attache to west Africa and plans to send support staff to help countries pursue terrorist finance investigations, a counter-terrorism official said. Another initiative will involve working with west African banking authorities to disrupt flows of terrorist funds, some of which could come from the sale of gold and diamonds.

While east Africa is still the principal focus of US anti-terrorism efforts in the continent, west Africa is next on Washington's concerns, the official said. "In coastal west Africa, what we see is the opportunity for terrorist groups to take advantage of exploitable resources," the official said.

A Federal Bureau of Investigation team this year found "pretty definite" evidence of a link between al-Qaeda operatives and the smuggling of Sierra Leonean diamonds, according to the head of the House of Representatives subcommittee that oversees the FBI. In an interview, Frank Wolf, chairman of the House commerce-justice-state and the judiciary appropriations subcommittee, expressed surprise at the September 11 committee's scepticism about the tie and said he would check that it had access to FBI reports on the issue.

Mr Wolf said he asked the FBI team to visit Liberia to investigate concerns about alleged dealings in diamonds by radical Islamic groups groups such as Hizbollah in Lebanon. The investigation established that al-Qaeda operatives visited Liberia to buy diamonds, although Mr Wolf warned that confidentiality laws prevented him from giving details.

"I can tell you that, to my satisfaction, there is a connection to al-Qaeda," Mr Wolf said. "Now the question is how much, how extensively, is it still going on?"

Global Witness, a UK-based campaigning group, claimed this month that classified briefings given to congressional members by the FBI's terrorist finance team had confirmed that al-Qaeda operatives visited Liberia and Sierra Leone in order to gain access to the diamond trade.

"The FBI should release an unclassified version of their report as soon as possible," said Alex Yearsley, a Global Witness campaigner.

The FBI declined to comment on the alleged al-Qaeda visits.

The smuggling of "conflict diamonds" from Sierra Leone became a big international issue after the rebel Revolutionary United Front took over the country's main diamond mining areas during the 1991-2002 civilwar.

Proceeds from diamond sales helped fund the RUF, which was notorious for chopping off civilians' limbs and abducting children to serve as fighters.

The US government has never officially confirmed claims that al-Qaeda earned about Dollars 20m (Euros 15.5m, Pounds 11.1m) from selling west African diamonds, although officials say a connection with Hizbollah is possible. Diplomats in the region insist a link with al-Qaeda has not been proved despite official investigations of claims first reported in the Washington Post in 2001.

A US intelligence official said it was easy to point to plausible potential financial links between al-Qaeda and west Africa but much harder to find evidence. The official said that Liberia's Mr Taylor dealt with a Senegalese intermediary who had also met Fazul Abdullah Mohammed, an al-Qaeda operative on the FBI's list of 22 most-wanted terrorists. "We never found anything specific, although when you start looking at links you can make any sort of assumption," the US intelligence official said.

Mr Mohammed and two other senior al-Qaeda operatives on the most-wanted list - Mohammed Atef and Sheikh Ahmed Salim Swedan - are reportedly under investigation internationally over visits to Liberia between 1999 and 2002. Mr Atef is believed to have been killed in Afghanistan during the US invasion in 2001. Aafia Siddiqui, believed to be al-Qaeda's only senior female leader, is also reported to be under investigation.

Liberia's Mr Taylor, who is prohibited from talking to the media under the terms of his exile in Nigeria, has also denied involvement in diamond smuggling and helping terrorist groups. Some observers have suggested the US is reluctant to admit that it failed to spot links between al-Qaeda and Liberia before the September 11 attacks.

The US has close links with Liberia, which was founded in 1847 by freed US slaves, although relations deteriorated after Mr Taylor's election in 1997.

Mr Taylor was indicted last year for crimes against humanity by the United Nations-backed Sierra Leone war crimes court. David Crane, the court's chief prosecutor, has on several occasions publicly alleged links between al-Qaeda and west African conflict diamonds.

In an interview, Mr Crane said he believed there was a terrorist presence in the region but declined to go into details. "There are all sorts of things going on that are outside our mandate and we do not pursue," he said.

WORLD NEWS


U.N. Ties Al Qaeda Figure to Diamonds



By GLENN R. SIMPSON
Staff Reporter of THE WALL STREET JOURNAL
June 28, 2004; Page A3



WASHINGTON -- United Nations war-crimes prosecutors have evidence that Aafia Siddiqui, believed to be al Qaeda's only female leader, visited Liberia in June 2001 to assist the terrorism group's alleged diamond-trading operation.



In a dossier, U.N. prosecutors say a witness told them Ms. Siddiqui, 42 years old, was sent "to evaluate the diamond operation in Liberia" in June 2001. It is the first indication that Ms. Siddiqui has been positively seen in Liberia. The dossier is connected to discoveries by the Office of the Prosecutor for the Special Court of Sierra Leone, a special court jointly administered by the U.N. and the Sierra Leone government to prosecute war crimes, indicating that the alleged diamond operation might have been a central component of al Qaeda's finances.



The U.N. and Belgian police believe that the group obtained diamonds from war-torn Sierra Leone and sold at least $19 million of the stones on the Antwerp diamond market in the year before the Sept. 11, 2001, attacks.



In the U.S., the Federal Bureau of Investigation is seeking Ms. Siddiqui for questioning. The FBI has linked the Pakistani geneticist and former Boston resident to weapons purchases in Massachusetts. At a Justice Department press conference last month, FBI Director Robert Mueller labeled her "an al Qaeda operative and facilitator."



The dossier states that Sheik Ahmed Sahm Swedan, an al Qaeda leader who is on the FBI's Most Wanted Terrorist list, was visiting Monrovia, Liberia at the same time as Ms. Siddiqui. "It is clear that al Qaeda has been in West Africa since September 1998 and maintained a continuous presence in the area through 2002," the U.N. documents state.



U.N. Sierra Leone prosecutor David Crane, reached by telephone, would only say "al Qaeda is in West Africa and has been for years." Mr. Crane has brought war-crimes charges against former Liberian President Charles Taylor, now in exile in Nigeria, for the carnage that took place in the Sierra Leone civil war.



The staff of the U.S. commission investigating the Sept. 11 attacks said on June 16 that "no persuasive evidence exists" that al Qaeda "funded itself through trafficking in diamonds from African states engaged in civil wars." The commission gave no details on its sourcing for that conclusion.



But U.S. Rep. Frank Wolf, a senior House Republican from Virginia investigating connections between diamonds and terrorism, said he strongly disagrees. "I think the commission overall has done a good job, but I think they now have to talk to the FBI and other individuals with the information and get that information," he said.



In the years before the Sept. 11 attacks, Liberia's Mr. Taylor hosted a cell of top al Qaeda leaders dealing diamonds in Monrovia, according to information that U.N. investigators have given to members of Congress and the Sept. 11 commission.



At the Justice Department news conference last month, Attorney General John Ashcroft and FBI Director Mueller said they were urgently seeking to capture several top al Qaeda leaders linked to the West Africa cell, suggesting it remains the group's most intact, and therefore most dangerous, wing.



Muhammed Atef, who was al Qaeda's top military commander until his death in Afghanistan, is now thought to have repeatedly visited the cell. "Witnesses say they recognize that man and that woman, and that's not a place you go for tourism," said Rep. Wolf, referring to Ms. Siddiqui and Mr. Atef.



The alleged al Qaeda diamond operation and its connections to Mr. Taylor and rebels in Sierra Leone are detailed in "Blood from Stones," a book published this year by former Washington Post reporter Doug Farah. In 2002, The Wall Street Journal reported that the diaries of a former top lieutenant to Osama bin Laden indicated he traded in precious stones.



Belgian police, who are probing the Antwerp diamond market, have turned over some of their findings to the U.N. The inquiry centers on a firm used by al Qaeda called ASA International, which is allegedly controlled by a Lebanese organized-crime figure named Aziz Nassour, who is believed to be in Beirut, officials say. ASA, which is controlled by a Delaware-registered shell company ASA Holding Inc., has been linked by Belgian authorities to narcotics money laundering and counterfeiting as well as an $87 million fraud against ABN-Amro Bank in Amsterdam and diamond deals with the now-defunct Unita rebel group of Angola.



Write to Glenn R. Simpson at glenn.simpson@wsj.com

I am still surprised when I find that the FBI and CIA lie, not only to me but to Congress and the 9/11 Commission. Turns out the 9/11 Commission was told by the FBI that my reporting was fabricated, my book was rubbish and that no evidence existed of al Qaeda's ties to the diamond trade. Then they overplayed their hand. They claimed to the 9/11 staff that the Belgian police, in its investigation of Samih Ossailly, never found a terrorist connection. Fortunately, other people have the Belgian report and passed it on to the Commission. It shows $19 million flowing to suspected terrorists. It maps the telephone calls between the Lebanese middlemen in the al Qaeda diamond deals and Afghanistan (the last call coming on Sept. 10, 2001, which apparently raised no curiosity from U.S. law enforcement), and the calls to Iraq, Iran and Syria. Again, no curiosity whatsoever from law enforcement. And the dozens of phone calls to Russia, including numbers used by noted arms merchant Victor Bout. No interest at all. Sound strange? While the report does not conclude there are terrorist ties, it has found "indications of terrorist ties." A far cry from "no evidence," as the FBI reported.

The FBI's antics have also infuriated the U.S. prosecutor and investigator heading up the Special Court for Sierra Leone. Both David Crane, the prosecutor and Alan White, the chief investigator, have spent decades in the Defense Department. After quietly helping the FBI locate witnesses, providing transportation and walking the bureau agents through evidence, they are stunned that the FBI has chosen to ignore all the evidence when talking to the Commission. So they are quietly releasing their own findings to members on the Hill. Their findings detail the al Qaeda presence in West Africa and confirm one crucial bit of information from my reporting: the presence of a mysterious Pakistani woman in Monrovia, where she collected a large parcel of diamonds and then returned to Pakistan. I had identified her from her visa to Liberia as Feriel Shahin. Pakistani intelligence had traced her and her two al Qaeda colleagues to the Shaharah-e-Faaisal Hotel in Karachi before disappearing (p. 76). The Court has identified her by her real name: AAfia Siddiqui, who recently appeared on the FBI's list of wanted terrorists, wanted for questioning. Court witnesses have identified Siddiqui as the woman at the safe house. An interesting turn of events.The Court also identified two other al Qaeda operative as being in Liberia that my sources did not mention: Sheikh Ahmed Salim Swedan and Muhammad Atef. Interesting that everyone sighted in West Africa worked extensively in the East African cell until the 1998 bombings of the two U.S. Embassies. My hypothesis has long been that, following the August 1998 bombings, or perhaps immediately before, most of the East Africa cell of al Qaeda simply moved to West Africa, knowing the heat would be on. And what better place to camp than Charles Taylor's back yard?

Both the Belgian police report and the Court findings have been turned over to the 9/11 Commission. One can only hope they take it for what it is worth.