Israeli counterintelligence meets new challenges of diamond market

The ever-faster going integration of the Middle East into the world diamond market inevitably affects the mutual relations between Arab countries and Israel. A top-ranking officer of the Israeli Security Service SHABAK who wished to stay anonymous agreed to comment some aspects of this problem for Rough&Polished.

Rough&Polished brief. SHABAK, the Security Service of Israel, was created in 1948 as an armed forces unit to counter espionage, subversion and sabotage. Currently it includes three operational departments:
-         Department for Arab Countries which is responsible for counter intelligence and anti-terrorist operations, political counteractions and for keeping records related to Arab terrorists;
-         Department of Non-Arab Countries which is responsible for studying the activities of foreign intelligence services and diplomatic missions on the territory of Israel;
-         Bodyguard Department which is responsible for protection of top officials, safeguarding government buildings and embassies, military facilities, scientific and research institutions, industrial facilities and the Israeli national airline “El Al”.

Besides, SHABAK has at its disposal five supporting services. All in all, this service has  about 5,000 emloyees. SHABAK has a significant force of intelligence agents both in Israel and abroad.

R&P: During the last five years, the oil producing countries in the Middle East due to the oil boom have gained an unprecedented financial power, which in its turn brings about a rapid development of the gold market and the market of rough and polished diamonds in this area. How does it influence the work of SHABAK?

S: Of course, these markets are connected with financing Arab radical organizations and in recent years, this connection is evidently growing.

R&P: Could you give a particular example?

S: In the summer of 2005 Usama Zakia Bashiti has been arrested, one of the HAMAS “treasurers”.  He was responsible for financial funding of the terrorist team “Brigades of Izaddin al-Kasama” led by Mohammed Shaar (alias Abou Ibrahim). They received money from Dubai through Bashiti’s relative Mahmud Shaar who took part in dealer transactions involving gold and diamonds. The tranches accounted for hundreds of thousands of dollars.

R&P: The diamond business in Dubai is rapidly growing. In the first six months of 2007 the turnover of the Dubai Diamond Exchange exceeded $2.2 billion – up 17% to the previous year. What was the contribution of Israeli diamond dealers to this?

S: Today the Emirates are probably the only Arab country where Israeli diamond dealers may go to and do their business almost without ruffle or excitement. For this purpose, any non-Israeli passport would suffice which does not essentially pose a problem. This is why the Israeli contribution to the turnover of the Dubai Diamond Exchange is the major one and as I believe, it amounts to not less than 80%.

R&P: One can only rejoice seeing such an unparallel consensus between the Jewish and Arab business. Is it possible that the parties managed to avoid usual problems?

S: Actually, the diamond business in Dubai has no problems – the environment there is really friendly. However, our citizens coming to the Emirates at once become a target of close attention from Arab secret services. Every year we register scores of recruiting approaches and this tendency is growing in direct proportion to the development of the diamond market in the Emirates.

R&P: What is behind this veil of secrecy over the intention to open an Israeli diplomatic mission in Dubai?

S: The UAE being a member of the Arab League is still adhering to some of the rules of the anti-Israeli boycott, this is why the talks were difficult and are proceeding at closed sessions.

R&P: Is it possible to consider the establishment of a diplomatic mission as a counter-measure against growing activity of Arab secret services in relation to Israeli diamond dealers?

S: Any citizen of Israel may directly address to this mission any his or her problems arising in the Emirates. As for SHABAK, our mutual understanding with the Ministry of Foreign Affairs has always been at a high level.

R&P: It is quite evident that growing presence of Israeli diamond dealers in the Emirates creates favorable conditions for the work of Israeli secret services in the Middle East both for intelligence tasks and for active counter-intelligence. In which direction will this opportunity be used primarily?

S: If we theoretically suggest that such an opportunity exists, then the main stream of our work would be to examine the channels of financing radical organizations.

R&P: Three years ago, examination of remittances through Western Union and First Data permitted your service to block some part of financial flows to HAMAS and “Islamic Jihad”. However, this money was documented and you had an opportunity to examine the documents. And what can be done about the “havala” non-documentary remittance system, one of the world centres of which is located right in Dubai?

S: Non-documentary swap systems similar to the Arabic “havala” or the Chinese “fei ch'ien” pose a certain threat since they very often serve as instruments of financing criminal and terrorist activities. Gold, gems and jewellery are circulating within the “havala” system and the development of corresponding markets in Dubai certainly is feeding this system giving it new financial energy. However, the paradoxically expanding Israeli presence on the appropriate markets in the Emirates generates a hope for getting adequate information about these processes even in the environment where standard methods of financial monitoring are impotent.

R&P: Business is always following a path of greatest profit. The “havala” system offers unique opportunities as compared with the “civilized” remittance and payment methods: a 1-3% commission, round o’clock operation and no documents and taxes. The development of the Dubai Diamond Exchange in this context first of all leads to appearance of an institute of qualified Israeli diamond evaluators in the Emirates and as a consequence to expanding opportunities of using diamonds in the “havala” system in the form of deposits. Taking into account the sufficiently widely used pattern of transactions between Israeli diamond dealers where the only “document” is their handshake and the exclamation “Mazal U'Bracha!”, will the mutual infiltration of these practices pose a threat?

S: I have never heard about a transaction between Israeli diamond dealers, even a non-documentary one, which would be beneficial to Arab terrorists. However, speaking seriously, the threat of using diamonds in the “havala” system in connection with the development of the Dubai diamond market does exist. As well as the methods permitting to meet this challenge adequately.

R&P: New world centres of diamond trade are rapidly growing not only in the Middle East but in the South-East Asia as well. The turnover of the Shanghai Diamond Exchange in the first six months of 2007 grew by almost 120% substantially outstripping the Dubai success. Of course Israeli diamond dealers play a significant role in the China market as well. Would it be right to consider the new unit created in SHABAK – the “Chinese Department” - as a reaction to this process?

S: We shall be always there where we are required to be by state security and common sense.