US Secretary of Defense Colin Powell acknowledged that the life-line of terrorism is money. Three years since 9/11 it has become apparent that economics, not politics or ideology, is the engine of the armed struggle.
This is the unexpected and disconcerting truth unveiled by an economic analysis of five decades of modern terrorism.
During the period of decolonization after WWII, armed organizations were economically dependent from rich sponsors, i.e. former colonial powers. In 1949 in Indochina, France trained and bankrolled the Maquis, a guerrilla army whose aim was to contain Soviet expansion in the French colonies.
State sponsored terrorism became a familiar feature of the Cold War. The United States and the Soviet Union funded terror groups to fight wars by proxy on the periphery of their own spheres of influence. The high cost of this type of wars, coupled with its unpopularity at home, forced Western powers to resort to a mixture of legal and illegal revenues to channel money overseas.
In 1984, amid widespread opposition to America’s involvement in Nicaragua, the Reagan administration managed to get Congressional approval for a financial aid package of million, which was used to arm 2,000 Contras.
Although this figure was increased every year thereafter until the Iran Contras scandal erupted, it was insufficient to meet the high costs of bankrolling the Contras. To bridge the gap, several covert operations were put in place.
Oliver North set up a scheme to defraud US insurance firms and banks, generating close to billion per year for the Contras.
In another illegal project, US weapons acquired by the CIA were sold to the Islamic Republic of Iran, using Israeli and Saudis businessmen, who charged handsome fees, as brokers. Iranian payments were then channeled through numbered Swiss accounts controlled by the Contra leadership.
Unsurprisingly, American taxpayers ended up paying for the cost of both legal and illegal funding; the full economic burden of state sponsored terrorism always falls on the domestic economy of the sponsor.