China: Year Zero

1979 and the birth of an economic miracle.

It is inevitable, perhaps, that we tend to focus on leaders when we examine grand political and economic transitions. But they are not the only actors in these dramas. Deng Xiaoping and his colleagues triumphed precisely because they unleashed the creativity and the entrepreneurial urges of millions of Chinese. Many of them -- shocking though it might be to think -- were not even members of the Chinese Communist Party.

In January 1979, around the time that Deng was preparing for his trip to the United States, a young man named Rong Zhiren returned to his hometown of Guangzhou, historically known as Canton, the largest city in Guangdong province, up the river from Hong Kong. Rong had just turned 30, but he had relatively little in the way of concrete achievements to show for someone of his age. The reason was the Great Proletarian Cultural Revolution. A central part of the Cultural Revolution was Mao Zedong's campaign against intellectualism, book learning, and the "Four Olds" (old habits, old ideas, old customs, and old culture). In 1966, he had ordered the closure of China's institutions of higher education. Over the ensuing years, 17 million students were dispatched to the countryside to learn the virtues of the simple life from the peasantry. University entrance examinations did not resume in China until autumn 1977. By early 1979, only 7 million students had made it back to the cities.

As the Cultural Revolution played out, the overwhelming majority of students stayed where they were assigned, which usually meant wasting their best years tilling the land in remote agricultural communes. Rong did not. Sent out to the countryside in 1969, he snuck away as soon as he had the chance. He spent the next decade dodging the police and living from odd jobs, such as drawing and tutoring. He lived with friends, moving from place to place. In December 1978, back in Guangzhou but still on the run, he heard a radio broadcast publicizing the results of the historic Third Plenum in Beijing, the meeting that sealed the triumph of Deng's pragmatic course of economic reform. Like millions of other Chinese, Rong understood that something fundamentally transformative was under way -- and that included an opening for entrepreneurship. "I knew this policy would last because Chinese people would want to get rich," as he later put it. In January 1979, he decided that he would be one of the first to take a chance. He applied for a business license. The bureaucratic obstacles sounded daunting: One of the requirements was a complete physical checkup to ensure that he had no infectious diseases. But it turned out to be a cinch. Rong sailed through the procedure in just a few days. (Nowadays it takes nearly three weeks.) The Guangdong government, eager to get things going, was already trying to encourage business creation.

Rong started his business on March 18 -- an auspicious date because the number "18" sounds like the phrase "you'll definitely get rich" in Mandarin. Following the advice of people in the neighborhood where he had been working, he decided to open a small restaurant specializing in breakfast. His signature dish was classic Guangdong comfort food: congee (rice porridge) with peanuts and spareribs. He set up his restaurant -- really a glorified tent on a wood frame he put together himself -- at an intersection close to two high schools, assuming that he could market his cheap breakfasts to hungry students. His startup capital was 100 yuan (roughly $65 at the official, highly inflated exchange rate), 60 of which he had borrowed from his girlfriend. The furniture and a big cooking pot were loans from friends. He was nervous at first. The idea of running one's own business was frowned upon by many educated people, who regarded such things as beneath their dignity. But those worries began to fade away as he immersed himself in the daily routine of his business, and the money started rolling in. Almost immediately, the restaurant was an enormous success.

In May 1979, Tom Gorman, a Hong Kong-based American businessman, set off on another one of his trips to the Canton Trade Fair. As part of his job with a Hong Kong publisher of trade magazines, he had already made the trip to the fair several times, so he knew the routine. In the 1970s, foreigners who wanted to do business with the world's most populous country had to follow a peculiar procedure. They could enter the People's Republic only at one point, from Hong Kong. There they boarded a train at Tsim Sha Tsui station in Kowloon, across the harbor from Hong Kong Island, marked by its splendid colonial clock tower, and headed north through lush green semitropical countryside to the border crossing at Lo Wu. There they disembarked and walked across the ironically named Friendship Bridge, a rudimentary wooden structure that spanned the slow-flowing Shumchun River, carrying their baggage with them. On the other side the visitors were greeted by scowling border guards wearing uniforms adorned with the insignia of the Chinese Communist Party, who examined the proffered visas and granted the privilege of entry.

And so it went in that spring of 1979. Just as every time before, the guards directed Gorman to a customs waiting room, where he filled out an enormous number of forms documenting every item in his possession. Officials checked his vaccination records. (If you didn't have all the shots required, they would administer the missing ones on the spot, so it was good to be prepared.) By now it was midday, and the next stop for Gorman and his fellow travelers was the special border-crossing restaurant, which offered a remarkably sumptuous lunch, supplemented with Qingdao beer. Lunch was followed by an obligatory nap period, in a waiting room equipped with spittoons and armchairs adorned with antimacassars. There was little alternative. Southern China is sweltering in the summer, and there was no air conditioning in the People's Republic. And the train from Shumchun Station to Guangzhou departed only at infrequent intervals. Looking back years later, Gorman would compare the move from frenetic Hong Kong to the sleepy post-Mao mainland "like the transition from snorkeling to wearing a diving bell." You were no longer your own master. The powers-that-be would let you know when you were needed.

Gorman arrived at his hotel in Guangzhou to find the familiar routine in place. At that time the only way to do business in China was to establish contacts with one of the 14 ministries that controlled each of the country's industrial sectors (chemicals, steel, light industry, etc.). This was easier said than done. Chinese officials were still strikingly stingy with information, another legacy of the Cultural Revolution, when association with foreigners could cost you a stint in a labor camp or worse. You could always go to the trade-fair building and seek out the people you wanted to meet (assuming that you already knew who they were), but that was no guarantee of success. Still, there was little choice. You certainly couldn't expect them to come to you.

All this is why Gorman and the handful of other Americans at the fair sat up and took notice when a group of Chinese functionaries at the fair approached them with an offer: Would the Americans be interested in taking a look at an investment opportunity? It was not too far away from Guangzhou; it would require an overnight trip. The Americans said yes.

On the appointed day, they set off from Guangzhou in a van that jolted down hideous dirt roads for hours. At one point it broke down, and everyone had to get out and walk to a spot where the Chinese hosts were able to arrange for another ride. The walk was not a total loss; the little group passed by a rural private market where local farmers were hawking all manner of produce, a vignette none of the Americans in the group could ever remember having seen before.

Finally, after a full day's journey in the intense heat, they arrived at their destination. It turned out to be just across the border from Hong Kong -- not far from the Lo Wu crossing where all foreigners made their entry into mainland China. (In these days you couldn't fly directly to Beijing from the outside world.) The bewildered Americans followed their hosts to the top of a dike, where the Chinese guides gestured at the vista spread before them. It was not clear what they were meant to look at. All that the Americans could see was the usual South China landscape: There were rice paddies, worked by peasants and their water buffalos in the time-honored manner, and duck ponds. There were a few trees, and here and there a modest peasant dwelling. What the Chinese were describing seemed to bear no relationship to the observable reality. This, they told the Americans, was the location of something called the Baoan Foreign Trade Base. The party had designated it as a special location for foreign investment. According to the plans under consideration, it would soon be the site of chemical factories and textile mills and manufacturing plants. And, oh yes, there would also be plenty of hotels for the foreign businessmen. It was going to be a wonderful chance to make money.

The Americans thought the Chinese were crazy. "It stretched everybody's imagination," Gorman said. "I don't think there was one of us who listened to the briefing and thought, ‘Yeah, that sounds feasible.' It was, emphatically, ‘Come on, what are you smoking?'"

The next day, after an uncomfortable night spent in the only existing local hotel (which had no electricity or running water), the Americans attended a briefing where the Chinese unrolled blueprints that depicted acres of factories, warehouses, and other facilities. The plans betrayed a startling ambition. "It was really hard to believe," Gorman recalled. "Nothing in China at that point happened quickly -- except politics. Business and construction didn't happen on those kinds of timelines."

The Baoan Foreign Trade Base was located in a village that was named, like the nearby river, Shumchun. It later became known under a different version of the name: Shenzhen. It was a place that had attracted Deng's attention at least as early as the 1978 Work Conference (just before the Third Plenum), when he had floated the idea that the party should "enable some regions to perform better and become more prosperous." Deng had calculated that if only 5 percent of the counties and 5 percent of the citizenry became "relatively prosperous," this would translate into 100 counties and 40 million residents -- the equivalent of a medium-sized country and presumably a powerful catalyst for change. Shenzhen was the first on his list of 19 places targeted for early prosperity. "Obviously, he had taken notice of this place at a very early date," writes former aide Yu Guangyuan. "In his view, a major factor in Shenzhen's quest to become prosperous sooner than others was its capacity to conduct foreign trade." During the Work Conference, in fact, Yu himself had told party officials from Guangdong of his own idea -- inspired by an ad a friend had brought from Hong Kong -- to construct office buildings in Shenzhen under the auspices of the Chinese Academy of Sciences (Yu's home institution) and rent them to people from Kowloon, just over the border, where soaring land prices were already driving rents into the stratosphere. Yu even envisioned simplifying border-control procedures for visitors from Hong Kong.

Gorman and his compatriots, all of whom had experienced firsthand the xenophobic legacy of the Cultural Revolution years during their visits to China, could hardly be blamed for feeling skeptical. What they were not yet able to appreciate was the fact the Chinese were deadly serious about their plans to invite overseas investors into new "special districts" that were already well into the planning stages.

Lower-level officials -- especially in Guangdong -- were undoubtedly keen on the idea. But this was one case where Deng could claim full credit for driving the initiative forward. He had spent his years in exile brooding over how to stimulate the Chinese economy, and he had concluded, after his return to power in the early 1970s, that his country had to tap into the global marketplace for technology, know-how, and management expertise. His 1974 trip to United Nations headquarters in New York City had been the first to jolt him into an understanding of just how far behind China had fallen.

After his third return from political oblivion in 1977, Deng took a series of trips around the region that reinforced this view. His itinerary included a visit to Japan, where he saw the evidence of that country's extraordinary postwar rise to the pinnacle of the global economy, as well as one to Singapore, which though far smaller in absolute terms was also demonstrating just how powerful the East Asian formula of single-party rule and market economics could be. Deng's private comments to his speechwriting team in 1978, when he gushed about the Japanese and Singaporean workers who could use their bonuses to buy houses and cars, make it clear just how influential these experiences were.

Nor was that all. Deng and his colleagues -- at least those who wanted to pay attention to the outside world -- were also acutely aware of the extraordinary rise in living standards already engineered by Hong Kong and Taiwan, which -- like Japan, Singapore, and South Korea -- had also made strategic decisions to reject "self-sufficiency" and to actively participate in global trade. Taiwan, in particular, had reaped a variety of benefits from its "export-processing zones," areas with special commercial, legal, and tax regimes designed to entice foreign investors to take advantage of a well-trained but low-wage labor force. The Taiwanese were gambling that the shortfalls in tax and customs revenues would be balanced out by the know-how they would acquire in management and production techniques (not to mention the extra employment). By the late 1970s, their gamble that was paying off to spectacular effect, and the example was not lost on their compatriots on the mainland.

But the impetus for a creative approach to foreign investment did not come only from the top. There was also some intense lobbying going on at the regional level -- particularly in one of the areas that stood to gain the most from trade with the outside world. That was Guangdong province, directly adjacent to Hong Kong. Its capital, Guangzhou, was the home of the traditional trade fair because it had a long history, dating back to imperial times, as one of the few places where foreigners were allowed to do business with Chinese. The direct proximity of Hong Kong, whose population included many Cantonese-speaking migrants from Guangdong, meant that the province still had access to an extensive web of contacts with the outside world, including the huge network of overseas Chinese. All this meant that a certain amount of illegal trade had continued even during the darkest days of Maoism. (Indeed, considering the huge and intricate possibilities for smuggling offered by the Pearl River Delta, the gateway to Guangdong, it could have hardly been otherwise.) Many Guangdong residents received remittances from their relatives in Hong Kong or places more distant, and these funds were major source of revenue for a region that had otherwise been severed from its natural trading hinterland after 1949.

Guangdong party officials knew all of this very well, and they were eager to seize upon the new talk in Beijing of opening up the country to investment. They had prevailed upon the party bureaucracy to let them open a few modest channels for trade with Hong Kong, but they were already thinking big. Their plans received a major boost in 1978, when a set of high-ranking party officials, including several from Guangdong, set off on a fact-finding trip to Western Europe that affected them in much the same way that Deng's journeys had unsettled him. They were impressed not only by the modern air-traffic control systems at Charles de Gaulle Airport in Paris and the automated milking sheds on a Dutch farm, but also by the willingness of their hosts to expose them to new insights and by the eagerness of European businesspeople to marshal funds for investment in production facilities in China.

In January 1979, just two weeks after the end of the Third Plenum, the new party boss in Guangdong, Xi Zhongxun, got approval from Beijing to start drawing up plans for "special zones" that would be opened up to foreign investment. The first zone opened shortly after that in Shekou, a corner of Shenzhen. The Chinese Merchant Steamship Company, a Hong Kong firm set up and owned by the government in Beijing, had been lobbying for a place where old ships could be taken apart for scrap, which could be sold at high profits to the resource-hungry capitalists in Hong Kong. The fact that the company in question was technically "foreign" but actually controlled by the People's Republic made the experiment that much easier to implement. "Shekou thus became the first place in China to allow foreign direct investment and the first area where decisions about a company inside China could be made by people located outside the country," noted Yu Guangyuan. (Xi Zhongxun, the official responsible for the creation of the Shekou zone, was the father of Xi Jinping, the current Chinese president.)

Economic trends in the outside world gave the officials in Guangdong an additional incentive to open up their province to the outside world. Neighboring Hong Kong was experiencing one of the characteristic disadvantages of a surge in economic growth: a sharp rise in wages. This was rapidly eroding the colony's international competitiveness, and Hong Kong businesspeople were casting desperately around for new sources of labor. The most obvious place was just over the border.

C. K. Feng was a junior executive with Eltrinic, a small Hong Kong firm that made small electrical devices: a bug zapper, an electric can opener, snow-melting equipment for the U.S. market. Eltrinic's production was fairly labor-intensive, and the rising wages were hitting it hard. So when one of the company's bosses heard from a contact on the mainland that the Communist Party was soon going to start inviting in foreign manufacturers, Feng took notice. "I volunteered to go the mainland to open up and find workers there," he said later. "I was so concerned about the workers' shortage in Hong Kong." He first traveled to Baoan -- the same spot that Gorman visited a few months later -- in late 1978, and soon began plans to construct a small factory building and to transport machinery there from Hong Kong. The mainland authorities gave Feng a special Hong Kong travel permit, actually a thick book used to record a variety of data. This presumably privileged access did not seem to reduce the number of papers that had to be filled out at each crossing, however. Each time he entered China, Feng said, "it was like crossing into a different world."

In spring 1979, after jumping through countless bureaucratic hoops, Feng opened the first Eltrinic factory in Shenzhen. It employed 20 local workers. (The company's total work force at the time was around 700, almost all the rest of them in Hong Kong.) The first year was spent training them. The factory's intended production -- heating elements for blow dryers -- required a certain amount of skill, and the mainland workers were starting from scratch. None of them had ever seen a blow dryer. But they weren't fussy. "The workers produced whatever you wanted them to produce," Feng recalls. "They didn't care." Maintaining communications between the factory and headquarters in Hong Kong was no easy task. The only local telephone was located in the village administration office, and placing calls was hair-raisingly frustrating business. The villagers, however, were extremely happy. When the production line was inaugurated, they killed a dog -- a much-valued local delicacy -- for a banquet to celebrate the occasion. The somewhat more fastidious Hong Kongers were bemused.

The founding of Feng's factory preceded the formal establishment of the "special zones" on 26 August 1979 -- and that, in itself, says quite a lot about how development in China was progressing at this time. Even as Guangdong was pressing Beijing for formal latitude to manage its own affairs and attract foreign investors, the first contacts between the province and foreign investors were already being made.

These areas were granted exceptional conditions to attract foreign investment, but they could also be easily quarantined from society as a whole. The latter point conveniently placated party conservatives, who worried that the populace might succumb to the corrosive effects of capitalism. Ironically, potential foreign investors shared their appreciation; to them, Deng's enclave strategy offered a vital degree of protection against political backlash from the Maoists. To be sure, the SEZs needed time to show results, but that was not a problem. Reform in China was supposed to be slow; the country had experienced tumult enough. The main thing was that the cornerstones of a new economy -- one driven by efficiency rather than ideological correctness -- had been laid. The new revolution could begin, albeit in its own, cautious way.

No one embodied that revolution better than Rong Zhiren. The restaurant that he opened in that spring of 1979 proved a big success. Three years later, by now an affluent Guangzhou entrepreneur, he received the privilege of meeting Deng Xiaoping at a social event for Guangdong Province luminaries. The fact that a local businessman was deemed worthy of such a gathering said a great deal in itself; a few years earlier Rong would have been imprisoned for the same activities that now gave him prestige. Deng, he says, always remained an example. "I took heart from his three-time rise and fall," Rong says. "Deng's return [in 1977] sent me an important message." If you persevered, you had a chance to do more than just survive. You might even prosper.


National Security

Mrs. Ballarin's War

The improbable tale of a West Virginia heiress the Pentagon hired to take on Somalia's jihadists.

The MV Faina, a Ukrainian-owned merchant ship, was hugging the coastline of Somalia as it steamed toward Mombasa, Kenya, in September 2008. But it would not reach its final port of call. As it navigated a particularly treacherous stretch of water, more than a dozen armed men swarmed the ship in motorized skiffs, taking the crew hostage. When they went down into the ship's hold, the pirates couldn't believe their luck: The ship was carrying a clandestine cargo of 33 Russian T-72 tanks, dozens of boxes of grenades, and an arsenal of antiaircraft guns. The pirates had no way of knowing it, but the cargo had been part of a secret effort by Kenya's government to arm militias in southern Sudan in their fight against the government in Khartoum -- a violation of a U.N. arms embargo. The Somali pirates had become experts in setting ransoms based on the value of their cargo, and soon after the ship's capture they began demanding as much as $35 million for a safe release of the crew, the ship, and its sensitive cargo.

American Navy vessels surrounded the ship within days, but the hostage negotiations dragged on for weeks as the Ukrainian ship owners refused to cave to the pirates' demands. The pirates decided they wanted a new mediator for the negotiations, and scrawled a message onto a white sheet they draped over the Faina's railing.

The message was just one word long: AMIRA.

Within days, Michele "Amira" Ballarin, a flamboyant West Virginian heiress, was at the center of the tense hostage negotiations with a group of pirates holding a ship full of Russian tanks. By the time the pirates made their demand, Ballarin had already been working with a group of Somali clan elders to negotiate the ransom and end the standoff, although she would later deny that she had any financial interest in the negotiations. Her interest was purely humanitarian, she said, providing satellite phones so that pirates could communicate with Somali elders on shore and so the Faina's crew could communicate with their families. But the ship's Ukrainian owners grew angry about the meddling of this strange woman from West Virginia. Hers was an unwanted presence; they figured she was only driving up the price of getting their crew and cargo released. "She has to understand that offering criminals a huge amount of money, which by the way she doesn't have -- she is only giving them false hope," said a company spokesman.

Ukraine's government even intervened. In early February 2009, just weeks after the Obama administration took office, Ukraine foreign minister Volodymyr Ohryzko wrote a letter to Secretary of State Hillary Clinton about the woman who, he said with a flourish, had "become an intermediary of the sea corsairs." Ballarin's actions, the Ukrainian minister went on, "incite the pirates to the groundless increase of the ransom sum," and he asked Clinton "to facilitate the exclusion of [her] from the negotiation process with the pirates."

Hillary Clinton would have had no reason to know who Michele Ballarin was before receiving the letter from the Ukrainian minister, but plenty of other American officials did. By the time President Obama came into office, Ballarin had been given a contract with the Pentagon to gather intelligence inside Somalia, just one of the myriad projects for which she had tried to gain the approval of the United States government, with varying degrees of success.

*  *  *

Since 2006, Ballarin had been trying to organize a Sufi resistance to fight Wahhabi militant groups in Somalia. After several trips to the region in which she met with the leaders of the country's feckless Transitional Federal Government, the wealthy American heiress had developed something of a cult following in some sectors of the Somali political class. She claimed to train and breed Lipizzaner stallions -- the famous white horses that performed dressage -- and wore her wealth wherever she went. She traveled with Louis Vuitton bags, expensive jewelry, and Gucci clothing. If the idea was to dazzle the residents of one of the world's poorest countries, it had the intended effect. Somalis began referring to her by a one-word moniker, the Arabic word for "princess." They called her "Amira."

It was a long way from West Virginia, where she had first made a name for herself during the 1980s as a Republican candidate in a staunchly Democratic state. She had tried to piggyback on Ronald Reagan's popularity in the hopes of winning a congressional seat representing Morgantown, the location of West Virginia University. Just 31 years old at the time, she had funded much of her 1986 campaign with money from her first husband, a man several decades older than her who had landed on the Normandy beaches on D-Day and amassed a small fortune as a real-estate developer. But she also hustled to raise money on the campaign trail by showing off her skills as a concert pianist during political fund-raisers. Trying to paint the Democratic incumbent as out of step with the values of West Virginian families, she criticized her opponent during the final weeks of the campaign for his vote to spend taxpayer money to print Playboy in Braille. She even made hay of his refusal to show up to one debate by cutting up a piece of cardboard, pasting his face on it, and debating him anyway. She was roundly defeated in the election.

After the death of her first husband, she married Gino Ballarin, a bartender at Manhattan's 21 Club who later became a manager at the private Georgetown Club, in Washington. The couple threw parties at their home in Virginia, eventually earning themselves a listing in The Green Book, a directory of "socially prominent Washingtonians" that was a bible for the city's old-money elite. In 1997, she spoke to a reporter about how pleased she was to get into The Green Book with all her friends, neighbors, and other "supporters of equine sports."

"The book symbolizes old ways of doing things which have really rattled against change," she said. "It symbolizes a gentler way of going about living."

The Ballarins by then were living on an estate in Markham, Virginia, with the grand name Wolf's Crag. It was once the home of Turner Ashby, a Confederate cavalry commander who gained fame during Stonewall Jackson's Shenandoah Valley campaign and earned the nickname "The Black Knight of the Confederacy." But Michele Ballarin seemed to have bigger plans than living a genteel life of polo matches and lawn parties. During the 1990s and early 2000s she began a number of business ventures, from real-estate development to international finance to selling body armor.

As she describes it, it was a casual meeting with a group of Somali Americans set up by a friend of hers from the Freemason lodge in Washington that sparked her interest in the war-racked country, and the transformation of Michele into Amira began. She started traveling to Africa, and soon the devoutly Christian woman who played the organ at her church each Sunday became entranced by the teachings of Sufism, a mystical branch of Islam once dominant on the Indian subcontinent and North Africa. Sufism had lost ground after the breakup of the Ottoman Empire had spawned more muscular forms of Islam, but it is still practiced widely in Somalia. Ballarin became convinced that promoting Sufi groups inside the country was the best way to diminish what she saw as a toxic influence of strict Wahhabism that had gained a foothold in the Horn of Africa with the help of rich Saudi donors, who sent money there to build radical schools and mosques.

Her public work in Somalia made her appear like just another rich do-gooder pushing airy-fairy development projects, but there was a darker side to her projects. When the Islamic Courts Union took control in Mogadishu in 2006, she saw an opportunity to take advantage of the vast ungoverned areas in Somalia to set up bases for a resistance movement to drive the Islamists out of power, as well as to nurture business ventures in the country. The horsewoman of Virginia would insert herself into the chaos.

Using a number of different front companies with vague and portentous names like BlackStar, Archangel, and the Gulf Security Group, Ballarin hatched several new ventures designed to make her an indispensable partner to the American military and intelligence services. She converted an historic hotel in rural Virginia, into a secure facility -- with reinforced walls and encrypted locks -- that she hoped the CIA or Pentagon might use to store classified information. She was unsuccessful in getting any government agencies to rent the space.

She hired a number of retired American military officers and spies to help her get meetings with senior members of Washington's national security establishment. Working with a former Army sergeant major named Perry Davis, a stocky retired Green Beret with years of military service in Southeast Asia, Ballarin briefly considered the idea of scouting for bases on remote islands in the Philippines and Indonesia she thought could be used to train indigenous troops for clandestine counterterrorist missions, but mostly she kept her focus on Africa.

In August 2007, she wrote a letter to the CIA in which she announced herself as the president of Gulf Security Group, a company based in the United Arab Emirates with a "singular objective": hunting and killing "Al Qai'da terrorist networks, infrastructure and personnel in the Horn of Africa." The letter went on: "Gulf Security Group is owned and controlled by the undersigned United States citizens with no foreign interests or influence. We have deep relationships with indigenous clans and political leaders in Somalia, Kenya, Uganda and throughout the Horn of Africa, including the Islamic Courts Union, and those who control their militant and jihadist activities. These relationships will enable successful mission outcome without fingerprint, footprint or flag, and provide total deniability."

To such a breathtaking proposal, a CIA lawyer sent back a terse response. "The CIA is not interested in your unsolicited proposal and does not authorize you to undertake any activities on its behalf. I am returning your proposal," wrote John L. McPherson, the agency's associate general counsel.

Having been denied the opportunity to kill for the CIA, Ballarin next proposed spying for the military. In this, she had greater success. In the spring of 2008, Ballarin and Perry Davis arrived at a nondescript office building across from the Pentagon, where they had a meeting at the headquarters of the Combating Terrorism Technical Support Office. The CTTSO is a small outfit with a modest budget for giving seed money to classified military counterterrorism programs, and a contact inside the Pentagon had helped set up the meeting for Ballarin. But few inside the CTTSO office knew the first thing about the well-dressed woman standing before them. Introducing herself as the head of a company called BlackStar, Ballarin was blunt. "I'm going to fix Somalia," she said.

Ballarin and Davis outlined a plan to set up a humanitarian food program that would be a cover to collect intelligence. Pallets of food aid would arrive by ship at a Somali port, be loaded onto trucks, and be driven to aid stations her team was planning to set up around the country. According to the plan, the Somalis who arrived at the food stations would give their names and other identifying information, and in return they would receive identification cards. The information gathered at the food stations, Ballarin told the military officials, could be fed into Pentagon databases and used both to map Somalia's complex tribal structure and, possibly, to help the United States hunt the leaders of al Shabaab.

Ballarin said she would fund much of the program out of her own pocket but was looking for both the Pentagon's blessing and additional funding. Ballarin and Davis gave few specifics about how they intended to make the operation work, but they managed to sell the plan. Shortly afterward, the Pentagon office promised BlackStar an initial sum of approximately $200,000, with a pledge for more if the program began to show promise. For the first time, Michele Ballarin had received the American government's imprimatur for clandestine work in Africa.

*  *  *

A number of factors had converged to pave Michele Ballarin's path for the intelligence-gathering operation in Somalia. The first, and most obvious, was the lack of any solid information about a country that some in Washington had vague fears about becoming a terror state in the mold of Afghanistan as it was before the September 11 attacks. The CIA was consumed by the drone war in Pakistan and supporting military operations in Iraq and Afghanistan, leaving the agency with few resources for spying inside Somalia. Besides, with the CIA still feeling burned by 2006's disastrous covert campaign with warlords there, few in Langley had much interest at the time in wading back into the Somali muck. They also weren't sure it was worth it: During his exit interview with reporters at the end of the Bush administration, CIA director Michael Hayden dismissed the al Shabaab movement as insignificant.

At the same time, however, the Pentagon was beginning a push to escalate clandestine activities throughout Africa: from the Horn, across the Arab states of the northern part of the continent, to western countries like Nigeria. The creation of U.S. Africa Command in the fall of 2008, the Pentagon's first military headquarters devoted exclusively to operations in Africa, was another sign of increased attention to the world's second-largest and second-most-populous continent, after years of relative neglect. The Pentagon had a brand new military command post in Stuttgart, Germany -- but not the intelligence to support any operations.

Nor a clear idea about exactly whom to support inside Somalia. Just months after President Barack Obama took office, the new administration announced a decision to ship 40 tons of weapons and ammunition to Somalia's embattled Transitional Federal Government (TFG), the United Nations-backed government that was considered by Somalis to be as corrupt as it was weak. By 2009 the TFG already controlled little territory beyond several square miles inside Mogadishu, and President Obama's team was in a panic over the possibility that an al Shabaab offensive in the capital might push the government out of central Mogadishu. With an embargo in place prohibiting foreign weapons from flooding into Somalia, the administration had to get U.N. approval for the arms shipments. The first weapons delivery arrived in June 2009, but Somali government troops didn't keep them for long. Instead, they sold the weapons that Washington had purchased for them in Mogadishu weapons bazaars. The arms market collapsed, and a new supply of cheap weapons was made available to al Shabaab fighters. By the end of the summer, American-made M16s could be found at the bazaars for just $95, and a more coveted AK-47 could be purchased for just $5 more.

Clearly, the campaign in the Horn of Africa was still being waged in a haphazard and scattershot manner, with the United States conducting an outsourced war using proxy forces and warlords. Somalia was considered a threat, but not enough of a peril to merit an American military campaign there. So the doors opened for contractors like Ballarin, who offered to fill the intelligence void.

*  *  *

The contract the Pentagon awarded Ballarin gave her clout during her frequent trips to East Africa, where she boasted about her ties to the American government during private meetings with various Somali factions. Each trip brought new business opportunities, and as Somalia emerged as the world's epicenter of international piracy, she saw the windfall that could come from acting as an intermediary in the ransom negotiations. Ballarin's primary contact from the Pentagon office that awarded her the contract had pushed her to develop relations with the clans in Somalia with close ties to the pirate networks, and by the time the pirates displayed the AMIRA sign from the Faina's hull she had designs on becoming the go-to ransom negotiator. She said publicly that her interests in negotiating were purely humanitarian, but privately Ballarin told some of her employees that taking a cut of the ransom payments could be lucrative as the scourge of piracy worsened. "She had this dream of handling all of the negotiations, and getting rich," said Bill Deininger, a former colleague. In one interview she told a reporter that her goal was to "unwind all seventeen ships and all 450 people" that Somali pirates were currently holding.

Deininger was one of a number of disgruntled former employees who became disillusioned with Ballarin and quit working for her when they thought she had failed to deliver on her many promises. Some retired military officers she had hired to work for her various companies put up some of their own money when they joined Ballarin's service, and felt burned when they didn't recoup their investment. Although the Pentagon gave her seed money for her information-gathering project in 2008, she struggled to get a steady stream of money from government contracts, and cut ties with many of her partners.

And yet she maintained the appearance of a lavish lifestyle in the rolling hills of Virginia beyond the Washington beltway. She continued to court senior American military and intelligence officials, often at the large brick mansion that she rented, which doubled as an antiques store and sat on 110 acres that was once the domain of horse farms but more recently had become part of Washington's sprawling exurbs. She entertained American and African officials in the mansion's dining room, a space decorated with antique vases, hunting prints, and a large gallery of photos of Ronald Reagan and Pope John Paul II. Bedecked in jewelry and sometimes caressing a string of prayer beads, she presided over the meetings at the head of a large antique table. At regular intervals, Davis would get up and refill visitors' teacups with a sweet blend of Kenyan black tea with cardamom, cloves, and other spices.

Ballarin continued to make trips to East Africa, building up ties to factions inside Somalia united by their adherence to Sufism. And she eventually developed a catchphrase for her work inside Somalia: She was providing "organic solutions" to problems that had festered for decades, solutions that couldn't be enacted by foreign governments or what she saw as meddlesome outside groups like the United Nations.

During an interview with the Voice of America she spoke about a "soft-sided" approach, eschewing violence. "The Somalis have seen enough conflict, they've seen enough private military companies, they've seen bloodshed, they've seen enough gunpowder, they've seen enough bullets," she said. "All the ugly things that have created a generation of young people who don't know anything else. Why would anyone who cares deeply about this culture want to perpetuate that? It's not the way forward; it really isn't."

But her definition of an "organic solution" was clearly elastic. In early 2009, not long after the Farina standoff was resolved (with no evidence of Ballarin's direct involvement in extracting a $3 million ransom from the Ukrainian ship owners), she tried to help a group of Somali hit men kill five prominent al Shabaab operatives who were gathering for a meeting in Mogadishu. All they needed, she said, were silencers for their handguns.

In her telling of the story, the details of which a former American government official confirmed, she was sitting in her suite at the Djibouti Palace Kempinski, the only five-star hotel in the tiny, impoverished nation. The hotel was hosting an international conference to select the next leaders of Somalia's anemic transitional government -- a literal gathering of the clans. After negotiations in conference rooms and poolside, Sharif Sheikh Ahmed, a moderate former commander of the Islamic Courts Union, was chosen to run the country. In the middle of one night, a group of Somalis knocked on Ballarin's door and took her to meet a senior official of Somalia's new transitional government. There, the Somali official told her that he had been in contact with a senior al Shabaab operative who was interested in switching sides and joining the government.

The informant knew about an upcoming gathering of al Shabaab leaders and was offering --

with America's blessing -- to kill them all. His list of needs was short: His men would need some training with handguns, and silencers to ensure that the operation could be carried out as discreetly as possible. And the defector wanted the United States to put up money to help the widows and children of the slain al Shabaab leaders.

When Ballarin returned to the United States, she and Davis contacted a small group of military officers they knew at the Pentagon. As she saw it, this was not a difficult decision, and she later recalled with a measure of anger what she told the military officials with whom she had met. "This is manna from heaven! Take it!" she recalled telling the military men.

But the Americans balked. If the Joint Special Operations Command was going to bless the operation, the Americans were going to do it themselves. But Ballarin thought that having Somalis -- rather than American commandos or other foreign proxies -- kill the top echelon of al Shabaab in one blow would be especially crippling for an indigenous terror organization. "This is an organic solution," she said. "You don't dispatch SEAL teams. This is Somali-style, and this isn't pleasant stuff we're talking about."

When she recalled the episode several years later, she spoke wistfully about what might have been. "All they wanted was silencers."

AFP/Getty Images