Strangling Hamas

With Middle East peace talks coming and the Muslim Brotherhood on the rocks, now’s the time to bankrupt Gaza’s Islamists.

After six trips to the Middle East and tireless shuttle diplomacy, Secretary of State John Kerry somehow convinced the Palestine Liberation Organization (PLO) and Israel last week to agree upon "a basis" to hold peace talks. Kerry has a long road ahead if he is to bridge the gap between the two sides. He may not know it yet, but he has a secret weapon. He can help cripple Hamas.

The PLO and the Israelis cannot agree on much, but their hatred for Hamas is mutual. And the United States can leverage this by attacking the violent Islamist faction while it is at the most vulnerable point it has been in years.

The downfall of the Muslim Brotherhood government in Egypt earlier this month has been widely described as a blow to Hamas and its de facto government in the Gaza Strip. But the real damage has been to the Islamist group's pocketbook. The Egyptian Army's ongoing operations against the subterranean tunnels connecting Egypt to the Gaza Strip, which have long served as key arteries for bulk cash smuggling, are wreaking havoc on Hamas's finances. One senior Israeli security official told me that, in the current environment, an additional reduction of 20 to 30 percent in Hamas' revenues could "destroy" the movement.

Hamas's budget for running the Gaza Strip, which it violently took over in 2007, is estimated to be $890 million this year (Hamas doesn't submit to an outside audit, so consider this a ballpark figure). Until last year, the faction relied heavily on Iran and Syria for a great deal of its cash, but the civil war in Syria prompted Hamas to loosen its ties to the "Axis of Resistance." Funding from Tehran has dropped off precipitously since then, forcing the faction to turn to the Muslim Brotherhood bloc to make ends meet.

Qatar pledged $400 million to the group last year, when the emir visited Gaza. Turkey is believed to provide additional support -- as much as $300 million, according to some estimates. However, it is unclear how much of these funds are earmarked for the Hamas government bureaucracy, and how much is slated for the building of mosques, hospitals, and other Gaza Strip infrastructure that has been badly damaged during skirmishes with Israel over the years. It is also unclear how much of this is funneled to Hamas' military arm, the Izz al-Din al-Qassam Brigades.  

In addition to these funds, a whopping $1.4 billion per year reportedly flows from the Palestinian Authority (PA) to Gaza. Hamas and the Fatah movement fought a bloody civil war in 2007, but that has not stopped the PA from earmarking these funds for the people of Gaza, whom they still purport to rule. The PA has been careful not to provide any funds directly to Hamas, for fear of invoking the ire of Congress. These funds primarily pay the salaries of "civil servants" who lost their jobs after Hamas overran the Gaza Strip. In essence, the PA pays these former bureaucrats not to work for Hamas. The PA also directly subsidizes Gaza's electricity production and reportedly underwrites other municipal services. Nevertheless, it is a fair assumption that Hamas, which rules Gaza with an iron fist, pockets a portion of the PA funds anyway.

Hamas has also augmented its income over the past decade by taxing goods that come through the tunnels connecting the Gaza Strip to Egypt. The tunnels were first created as a means to smuggle weapons to the coastal enclave, but after Hamas conquered Gaza, prompting Israel to impose a blockade, the tunnels became a key artery for a wide range of goods necessary to keep the economy running. Hamas, as Gaza's de facto rulers, reportedly took in at least $365 million a year from the tunnel trade. 

But none of this matters much when Egypt's junta is engaged in a relentless effort to shut down the tunnels. Specifically, the crackdown has made bulk cash smuggling -- the key to Hamas's financial independence -- exceedingly difficult.

The reversal of fortune for Hamas is remarkable. During Egyptian President Mohamed Morsy's year in office, Egypt was a key Hamas base of operations. Senior Hamas figure Mousa Abu Marzouk was based in Cairo, and Hamas even held a round of internal elections in the Egyptian capital. In addition, it is widely believed that elements of the Brotherhood's financial network were bankrolling Hamas, even as Egypt's economy cratered.

These activities did not please the Egyptian military -- and for good reason. Last year, Gaza-based fighters attacked an Egyptian military outpost near the border with the Gaza Strip, killing 16 soldiers. Mounting concern that Hamas members might be sneaking in to Egypt with dangerous weapons led to a crackdown on the tunnels.

Since Morsy's ouster, the military has been unleashed: It has arrested at least 29 Brotherhood financiers, including at least one significant contributor to Hamas's coffers, according to a senior Israeli security official. It has also reportedly deployed 30,000 troops to the Sinai and purportedly destroyed roughly 800 of the 1,000 tunnels connecting Egypt to Gaza. Ala al-Rafati, the Hamas economy minister, recently told Reuters that these operations cost Hamas $230 million -- about a tenth of Gaza's GDP.

All of this presents U.S. Secretary of State Kerry with a rare opportunity to try to hasten the group's financial demise. And it is in his interest to do so.  The group, after all, carried out suicide bombings against Israeli civilian targets in the 1990s to torpedo the peace process. It's a fair bet that Hamas will launch a new campaign of violence now that talks are ramping back up.

What can Washington do, exactly?

For one, Congress and the administration could stop wringing its hands over whether the toppling of Morsy was a coup and instead openly encourage continued operations against the tunnels (while also holding the army to account as it navigates complicated transition). Congress, which dishes out some $500 million per year to the Palestinians, could also quietly work with the Palestinian Authority to scale back the funds that flow to Gaza.

From there, the United States could attempt to use whatever leverage it has to convince both Turkey and Qatar to cut back on their funding of Hamas. Admittedly, Washington doesn't have much pull in Ankara and Doha these days -- they have more sway with us -- but Congress could pull strings to speed up delivery of or withhold the advanced weapons systems that both countries are eagerly awaiting, depending upon how the conversation goes. Turkey, for example, is expecting Sidewinder missiles and Chinook helicopters, and it would like to purchase Predator and Reaper drones. Qatar, for its part, is expecting delivery of Large Aircraft Infrared Countermeasures (LAIRCM) Systems, and 500 Javelin-Guided Missiles.

Turkish Prime Minister Recep Tayyip Erdogan, a strident proponent of Hamas on the world stage, is unlikely to be swayed. Erdogan insists that Hamas must be part of the political equation when negotiating peace with Israel. Qatar, however, presents possibilities. The former emir, Sheikh Hamad bin Jassim bin Jabor al-Thani, recently abdicated the throne for his son, Tamim. The new emir is still learning his way on the world stage, and it is possible, some analysts suggest, that he could be persuaded to adopt new policies that promote moderation in the Middle East.

While the math is fuzzy, one thing is clear -- the Egyptian army's tunnel operations are slowly strangling Hamas. If one or more of the Islamist movement's other funders cut back their aid even a little, its financial crisis will only deepen. The more acute the crisis, the more Gazans will grow frustrated with their Islamist rulers. A Muslim Brotherhood government just fell unexpectedly in Cairo -- if Hamas doesn't watch its back, it could happen again in Gaza.

For John Kerry and his tenuous peace initiative, this is a window of opportunity that should not be ignored.


Democracy Lab

Corrupting Perceptions

Why Transparency International’s flagship corruption index falls short.

For nearly 20 years, Transparency International has published a Corruption Perceptions Index that ranks countries (176 last year) according to how corrupt they are perceived to be by a small group of individuals. This approach was chosen in light of the difficulty of measuring actual corruption and the expense of running broad surveys. Transparency International does some great work, pushing issues of transparency and accountability up on the agenda, and there are very many serious and deeply committed people involved. The problem with the Index, however, can be found in the name. Perceptions are not facts, and in this case they may be an unhelpfully distorted reflection of the truth. 

Imagine a situation in which lawmakers in a lower-income country end up shutting major business figures out of a commodity deal. Suspicions of corruption are raised -- but, importantly, with zero evidence. There may have been foul play, but then again, there may not have been. As we all know, stuff happens and it's only natural to want to find someone to blame. But now, with the perception that corporate dealings aren't exactly kosher, that particular country, regardless of the absence of evidence, will be affected in its CPI ranking. 

Then let's say journalists pick up the original story ("Major companies shut out of commodity deal"). It could be due to crony capitalism, or it could just be what happened. To find out more, to whom do they turn to confirm their suspicions? The Index of course! A narrative then begins to develop. "Country X, which is identified by TI's Corruption Perceptions Index as one of the most corrupt countries on earth...." 

This in turn supports a much wider perception of Country X as corrupt. That consequently worsens country X's score in the next round of surveys. And so on. And so on. 

That is, until, a new government decides to rebuild relations with major corporate players. Not necessarily out of any commitment to fighting corruption, and not necessarily with any effect on actual corruption, but out of a fierce desire to stop scoring so badly on that damned index which gets so widely reported. 

What's missing from this vicious cycle is not only evidence of actual corruption in Country X, but any information about how corruption is or isn't affecting the citizens of Country X. 

You'd imagine that many of the staff and chapters of an organization producing such an index would protest internally; and I'm told they do. You'd imagine that even the original creator of the index, Johann Graf Lambsdorff, would call for an end to it -- and indeed he did, four years ago:

"In 1995 I invented the Corruption Perceptions Index and have orchestrated it ever since, putting TI on the spotlight of international attention. In August 2009 I have informed Cobus de Swardt, Managing Director of TI, that I am no longer available for doing the Corruption Perceptions Index."

The underreporting of Prof Lambsdorff's withdrawal from the Index -- though perhaps fostered by the absence of a detailed explanation for the decision -- stands in stark contrast to the ongoing coverage of the Index itself. 

The Corruption Perceptions Index (CPI) is derived by aggregating 13 different perception surveys. There is a striking commonality in the people whose perceptions are actually assessed: "a group of country economists," "recognized country experts," "two experts per country," "experts based primarily in London (but also in New York, Hong Kong, Beijing and Shanghai) who are supported by a global network of in-country specialists," "staff and consultants," "over 100 in-house country specialists, who also draw on the expert opinions of in-country freelancers, clients and other contacts," "4,200 business executives," "100 business executives ... in each country," "staff," "100 business executives from 30 different countries/territories," "staff (experts)," "100 business executives per country/territory," and finally "over 2,000 experts and 66,000 other individuals from around the world have participated [to date]." 

The point here is not that any of these underlying sources are bad, or wrong, or anything other than what they claim. The point is that in aggregating them, the result lacks any sense of diversity. The correlations between the various components run between 80 and 100 percent, because overwhelmingly the same kinds of people are being asked for their perceptions. Now clearly the opinions of an internationally focused elite, typically from a corporate background and perhaps a similar education, may be particular informative in certain circumstances; one or more of the component surveys might be a very useful source for a company considering setting up in business in a new jurisdiction. But do these sources, when aggregated, produce a broader truth about the public's experience of corruption in a given country? 

Earlier this year, University of Minnesota law professor Stuart Vincent Campbell made a number of criticisms about CPI as a tool, even for companies considering their duties under the Foreign Corrupt Practices Act. He gives the interesting example of Brazil, judged by the Corruption Perceptions Index as having a serious corruption problem. 

Perhaps unsurprisingly, the view changes when the experiences of a group of a country's citizens are considered instead of restricting the view to elite perceptions only. Campbell writes that, in contrast to the CPI ranking which in 2010 put Brazil 69th, behind Italy and Rwanda, "The 2010 Global Corruption Barometer [based on a broader survey of Brazilian citizens] found that only 4 percent of Brazilians had paid a bribe, which is a lower percentage of bribe-givers than the survey found in the United States or any other country in Latin America." Interestingly, the Barometer is published by one of my favorite anti-corruption organizations: yes, Transparency International. 

Now, the Global Corruption Barometer isn't perfect. Questions have been raised over the quality (and low cost) of some of the underlying national surveys, with only around 1,000 respondents per country. The most recent release attracted attention because of the absence of a score for China, leading the organization to explain that they had been unable to find a national survey partner to work on this sensitive issue. However, Pew had surveyed more than 3,000 Chinese citizens on attitudes to corruption, among other things, in 2012 (and in 2008).  

On the whole, however, the Barometer is a much more appealing approach than the CPI -- down to the name, which suggests an attempt to get a sense of the corruption climate, rather than the hard ranking the term "index" implies. The Barometer may not be perfect; but what it does is to take a more broadly representative group of citizens in order to try to understand better the actual experience of corruption in different countries. 

When the Corruption Perceptions Index was launched in 1995, there were legitimate arguments for its construction. The cost, back then, of broad citizen surveys was probably prohibitive -- and certainly for an organization of TI's size then. Corruption is, almost by definition, hidden -- so perhaps impossible to measure with great accuracy. It's easy to see how the argument could have been made for using imperfect and narrow expert perception surveys to put some numbers on an important but under-reported phenomenon, and attract media attention to the issue. 

But the world is different now. Transparency International is a global force, and has no shortage of media attention; in general the media emphasis on corruption in lower-income countries is, if anything disproportionate. The media can't be criticized too much for preferring simpler rankings and narratives -- and non-governmental organizations play on this. (Just to be on the safe side, I should note that one of the reasons I worked with the Tax Justice Network to create the Financial Secrecy Index of tax havens was to make the point that some major drivers of corruption begin at home, and to do so in a way that would help the story be reported.) But with the Global Corruption Barometer, TI has already created what looks to be -- or with greater investment, is capable of becoming -- a superior alternative to the Corruption Perceptions Index. This can do more than drive media profile; it can help to focus policy effort where it is most needed. 

The CPI embeds a powerful and misleading elite bias in popular perceptions of corruption, potentially contributing to a vicious cycle and at the same time incentivizing inappropriate policy responses. The index corrupts perceptions to the extent that it's hard to see a justification for its continuing publication. For the good of the organization, its important aims and the many people committed to its success, Transparency International should drop the Corruption Perceptions Index.