Dispatch

Bosnia Burning

Is the war-traumatized, fractured, and corrupt Balkan state finally experiencing a political revolution?    

SARAJEVO — Nearly 20 years after the end of brutal ethnic conflicts surrounding the collapse of Yugoslavia, black smoke billowed across the Sarajevo skyline in early February, as hooded youths attacked administrative buildings and burned police cars. "The city smelled like it smelled in 1992," says Nidzara Ahmetasevic, a journalist and activist, the day after some of the most significant unrest in Bosnia since the country's war.

Unlike in the 1990s, however, people are not fighting one another. Instead, they're taking aim at their corrupt and ineffective government, which is rooted in the U.S.-brokered Dayton Accords of 1995. The agreement ended the Bosnian War and divided the country into two entities: Republika Srpska, dominated by Serbs, and the Federation, dominated by Bosniaks and Croats.

"In the end, Dayton has entrenched exactly that which it was meant to call bad. It has cemented in place an unaccountable political oligarchy," says Jasmin Mujanovic, a Balkans researcher at York University. "Much of the responsibility for this [situation] has to be on the shoulders of the European Union and international community."

Now, the question on everyone's mind is whether the protests can usher in much-needed, constructive change -- or whether things will slide quickly back to the status quo. The stakes are high. "It has been the same for 20 years now, politicians putting the money in their own pockets. I believe violence is the last resort, but now it is our only option," says schoolteacher Alisa Kavac, who brought her 8-year-old daughter along to the protests in Sarajevo. "It's impossible to raise children in this country."

The demonstrations began on Feb. 5 in the city of Tuzla after the closure of a number of formerly state-run factories due to botched privatization plans. After three days, the peaceful protests descended into street violence, when crowds were held back from entering the local courthouse. Some 600 protesters, including factory workers demanding 50 months of back pay and the return of pension and health insurance contributions, hurled rocks and eggs before setting government buildings on fire. Later that day, the crowd swelled to around 5,000. Police responded with tear gas and rubber bullets, arresting 23 people. Twenty-seven people were reportedly injured in the clashes.

Parallel demonstrations quickly appeared in more than 30 cities and towns across the country. Many were small-scale and relatively peaceful, but protesters in several major cities, including Mostar, Zenica, and Sarajevo, followed in the footsteps of Tuzla, clashing with police and vandalizing or burning administrative buildings. According local media sources, Sarajevo's Kosevo hospital said it treated more than 100 people on Feb. 7. Three police officers were described as seriously injured. Overall, several hundred people are thought to have been hurt, with more than 44 arrested since the outbreak of the unrest.

The protests precipitated a wave of politicians, mainly at the local level, quitting their posts, including entire administrations in Tuzla, Sarajevo, and Zenica. On Sunday, Bosnia's police coordination chief resigned amid claims of police brutality against detained activists, including minors. (Photos posted on Twitter reportedly show other law enforcement officials removing their riot gear and joining the protests.) Demonstrators are still demanding the wholesale resignation of Bosnia's government.

Ostensibly, the protests can be linked to widespread public discontent over Bosnia's rampant unemployment and beleaguered economy. Nationwide, joblessness stands at 44.5 percent; it is a staggering 60 percent in the 15-to-24-year-old age bracket. The average wage is around $545 per month -- one of the lowest in Europe.

But these economic woes are fueled by a much more deep-seated problem: a political system mired in corruption and nepotism. In the aftermath of the Bosnian War, dodgy backroom deals to dole out businesses nationalized during the socialist era -- including the Tuzla factories -- were some of the first examples of the long list of dubious tactics deployed by the political elite to line their own pockets. Often sold under favorable conditions to the cronies of politicians, the businesses had new bosses who were frequently either incompetent or outright crooked. The resulting combination of inefficient management, skimming, and the state turning a blind eye to it all drove several vitally important local industries to the point of collapse.

Alongside the Tuzla cases, the high-profile foundering of furniture producer Krivaja and the looming bankruptcy of aluminium producer Aluminij Mostar capture how poorly managed privatization is crippling the economy. "There are many examples of this kind of practice everywhere," says Darko Brkan, a Sarajevo-based political analyst. "For 15 years, the state has ignored these problems, thousands of people have lost their jobs, and, as we now clearly see, the consequences have been devastating."

But raiding the coffers of factories and other businesses through privatization schemes is just the tip of iceberg. According to Transparency International, Bosnia and Herzegovina is one of the most corrupt countries in Europe, ranking 72 out of 177 on the NGO's world index.

In a high-profile case of alleged corruption, in late April 2013, Zivko Budimir, the president of the Federation, was arrested on suspicion of involvement in organized crime, abuse of office, and accepting bribes for pardoning convicted criminals. But, after just one month in custody, Budimir was back in his post -- released due to an apparent lack of evidence against him.

Many blame these problems -- or at least their foundations -- on the Dayton Accords. By inscribing ethnic divisions into governing structures, the argument goes, Dayton has served to stifle political diversity, competition, and accountability. Voters perpetually cast their ballot along ethnic lines regardless of the results produced by their politicians. The complex and cumbersome administrative system established under Dayton has also provided a convenient mask for the ineffectiveness of corrupt and squabbling politicians.

Last year, political bickering over the assignment of ethnicity on official document cards left thousands of newborn babies without identification. Infighting among authorities also meant they missed July 2013 deadlines set by the European Union (E.U.) -- which Bosnia aspires to join -- to bring laws governing agricultural exports up to regional standards; farmers lost millions as a result. In addition, more than $60 million of much-needed E.U. funding was suspended in October after the Bosnian government failed to comply with a ruling by the European Court of Human Rights, regarding the country's prohibitions on minority groups (such as Roma and Jews) holding some political positions.

Faced with these problems, public discontent has been building for many years. Yet because civil society in war-traumatized Bosnia has recovered only slowly, it has taken a long time for frustration to tip over into action. "People are afraid of each other. So even though nearly everyone has agreed for a long time that the political establishment as a whole is hopelessly corrupt and profits from stove-piping conflict, when it comes time to actually organize a response to this, it has previously been timid," says Mujanovic.

Some optimistic analysts are dubbing the protests as a "Bosnian Spring," characterized by multiethnic opposition to the state. "This is not just a flash in the pan," says Mujanovic. "This is the Bosnian people waking up. We can see that the people have really had enough of this situation, of these politicians."

"Now people are fed up.... We don't want to think about ethnic differences any more," says Emir Hozdic, a civil rights activist in Sarajevo, standing outside the city's main government building that is now scarred by fire. "When people are hungry, they don't ask what your ethnic background is."

Yet the rallying cry of a multiethnic "Bosnian Spring" should be treated with a healthy dose of caution. There are many people with a vested interested in maintaining the status quo -- not least the politicians whose popular support relies on it. And perhaps no one is more invested than Milorad Dodik, the long-time leader of Republika Srpksa. "We are ready to prevent any attempts to import protests and violence from the Federation," he announced in a barbed statement that implicitly labeled the recent demonstrations as an unwanted Bosniak disruption in the country. Dodik, a Serb nationalist, also warned that anyone who attempted to protest in Republika Srpska would face "criminal prosecution."

Thus far, demonstrations outside the Federation have remained limited. On Sunday, in the town of Bijeljina in Republika Srpska, there were two rival protests held: one against the local government, the other in support of Serb authorities.

Exactly what will happen next is unclear. In the short term, the void left by the wave of resignations in local government will need to be addressed, but the vacancies won't be filled easily. "I don't think many people will be stepping forward to take these positions. Either there aren't realistic local options for alternative leaders, or people won't want to do the job in these circumstances," says Brkan, the political analyst in Sarajevo.

Protesters are demanding that the government hold elections scheduled for October early, a move now seemingly backed by two parties in the country's ruling coalition. But while this could certainly help diffuse tensions and fill abandoned seats, it would first require an amendment to the electoral laws in Bosnia's constitution, as there are currently no legal provisions for holding a snap vote.

Something needs to be done quickly, Brkan says, as a prolonged absence of local authorities in some areas "will likely spark more unrest."

The long-term future is even more uncertain. Many protesters are calling for an end to the Dayton regime, but how that can be achieved is unclear. Dayton affords each of the country's three major ethnic groups veto power on proposals to change the government -- and the groups don't agree on what a reformed political system would look like. For its part, the international community has tried both economic sanctions and cajoling to push the country toward political and economic progress. But nothing seems to work. "Even using these potent weapons, it has not been possible to force amendments to the constitution," says Matthew Parish, a former legal advisor to the international supervisor of Bosnia's Brcko District. (Such supervision was provided for in Dayton.) "And this is because, in the end, the animosity between the three groups in sufficiently strong, at least at a political level, to override both the international community's efforts and the good of the country."

In the last few days, the demonstrations have calmed down, but thousands of people continue to protest in cities across the Federation. Those still in the street are adamant that they have little choice but to be there. "If our politicians cannot do this for our country, then we must do it for ourselves," says 24-year-old Adin Muratovic, who has been active in the protests since they started in Sarajevo. "If we cannot change something now, then it seems we have no future at all here in Bosnia. It has been like this my whole life.... This can be our chance for something better."

With additional reporting by Mitra Nazar in Sarajevo.

 

STR/AFP/Getty Images

Dispatch

The Crooks Return to Cairo

Egypt's government is happily letting exiled billionaires and convicted Mubarak cronies buy their way back home.

CAIRO — As crowds packed streets throughout Egypt during the 2011 uprising that overthrew autocrat Hosni Mubarak, it wasn't only the politicians and generals in Cairo who were scrambling to protect their interests. With the old regime teetering, business tycoons connected to the regime packed up their bags -- and their billions -- and fled the country.

One of them was Hussein Salem, who was nicknamed the "Father of Sharm el-Sheikh" for his ownership of multiple hotels in the coastal resort city. Salem made billions of dollars in the energy, arms, and hospitality industry in Mubarak's Egypt -- he was so close to the former president that the two even invested together, according to documents obtained by Foreign Policy. It was a lucrative alliance for Salem: In the early 2000s, Mubarak granted him a monopoly over gas exports to Jordan, Israel, and Spain. Salem used this deal to sell gas at below-market rates for years, according to an Egyptian court ruling, costing the country more than $700 million.

Salem hasn't been back to Egypt since Mubarak's fall -- and for good reason. As post-uprising Egypt looked to recoup the millions stolen by Mubarak and his cronies, a series of court cases focused on the corrupt business practices of Salem and his family. In October 2011, Salem -- along with his son, Khaled, and daughter, Magda -- were found guilty of making illicit gains on their gas sales, and sentenced in absentia to seven years in jail. In June 2012, he was convicted of selling gas to Israel at below-market prices, and sentenced in absentia to 15 years in jail, and ordered along with other defendants to pay $412 million in fines. 

Salem, however, holds Spanish citizenship, which has allowed him to dodge the Egyptian legal system. He is now living in Majorca, Spain, and is wanted by Interpol along with his son and daughter. Spanish courts, however, have refused to extradite him to Egypt because the two nations do not have judicial or legal bilateral cooperation agreements and the courts' uncertainty about the fairness of Egypt's legal process.

But for the first time since Mubarak was toppled, Salem's fortunes -- and that of other Mubarak-era businessmen -- may be shifting for the better. Since Egypt's generals ousted Islamist President Mohamed Morsi last July, Salem said he has been ecstatic and is planning his return to Cairo, his lawyer Tarek Abdel-Aziz told FP. The billionaire Mubarak confidant phoned in to a popular television program in January to offer a deal to the new military-backed government: Cancel my convictions and I'll give Egypt millions.

Egyptian officials publicly welcomed the offer.

"Mr. Hussein Salem and other noble businessmen ... your initiative is really appreciated," said Hany Salah, a cabinet spokesman, during the phone-in on local channel CBC. "Anyone who proposes a noble and good offer, then the least we can do is listen to him for the best of our beloved country."

Since the overthrow of Morsi, Salah continued, Egypt is more open to initiatives of "reconciliation" -- and he expects other Mubarak-era fugitive businessmen to propose similar deals. Reconciliation deals can either be reached by committees appointed by the prime minister and justice minister, or they can be brokered by the general prosecutor, who is appointed by the president.

Reconciliation, however, seems to mean little more than dropping corruption charges in exchange for cash. During another phone-in on Jan. 9, Salem offered the government a $3.6 million fund to boost tourism and repair police stations, churches and mosques in exchange for his freedom. That's actually a drastic decrease compared to his pre-coup proposal: In May 2012, just before Morsi became president, Salem offered at least half his estimated $1.6 billion in wealth in exchange for settling the charges against him, according to Abdel-Aziz.

Three years after protests against the sort of business cronyism that gutted Egypt's economy, the country is now considering turning to the very people who robbed the country for a financial bailout. Despite protesters' widespread demands for social justice, post-revolutionary Egypt has witnessed precious few improvements: Transparency International ranks Egypt 114 out of 177 countries on its "Corruption Perception Index," and its position has actually fallen since 2011.

The relationship between Mubarak-era business tycoons and the Egyptian government appeared to have been severed long ago, as the prosecutions targeting these businessmen were launched by the interim military government that followed Mubarak. But "reconciliation" could allow the new military-backed government to reestablish the same powerful networks of loyal businessmen that flourished under Mubarak.

The process "opens the door for more corruption and escaping justice," said Ghada Ali Moussa, a political scientist who heads up the Governance Center, a government agency dedicated to preventing corruption and advancing transparency. "[Salem's prospective reconciliation deal] will be an ideal prototype for others to follow."

Other businessmen with ties to the Mubarak regime are also lining up their reconciliation offers. Mubarak's minister of foreign trade and industry, Rachid Mohamed Rachid, is in similar talks with the government and is set to put in another offer, Moussa said. Rachid, who was sentenced in absentia to 20 years in jail and at least $330 million in fines for squandering public funds and profiteering, fled to Dubai during the 2011 uprising.

Army chief Abdel Fattah al-Sisi's consolidation of power could also increase Egypt's willingness to cut reconciliation deals. While much normal government business has been on hold under the current interim government, a strongman in the presidential palace and a new parliament could change that.

"There will be a climate for such reconciliation to materialize," Ibrahim el-Henedy, Egypt's deputy justice minister and head of the Illicit Gains Authority, the body in charge of investigating corruption, told FP. "It's all about the offer of reconciliation: Which is better for Egypt, to reconcile or not?"

Even though Salem was "among the worst" of the country's corrupt businessmen and has been ordered to pay some of the biggest fines, Henedy said, the government was still interested in striking a reconciliation deal.

Salem's lawyer, Tarek Abdel-Aziz, also believes that the time is ripe to settle his client's disagreements with the Egyptian government. He told FP he is working on an official reconciliation offer, which will be submitted to the authorities now that Morsi has been ousted. His client is "very optimistic," the lawyer said.

"Now, thank God, there is an existing system that takes care of all Egyptians," Abdel-Aziz said. "Today we have a new regime -- hopefully a just regime that will move things forward."

Abdel-Aziz denied that Salem was tied to Mubarak and said the charges were politically motivated. However, a leaked document from the Illicit Gains Authority shows that the Salems and the Mubaraks -- together with other businessmen tied to the old regime -- invested together in an offshore fund registered in the Cayman Islands, a Caribbean tax haven.

The investment fund, which was called the Egypt Fund, invested in 18 Egyptian companies in the cement, banking, real estate, steel, oil, food, and agriculture industries. The head of investor relations at EFG Hermes bank, Hanzada Nessim, wrote in an email that her bank set up the Egypt Fund in 1997. When asked whether EFG Hermes was aware of the investors behind the fund, Nessim wrote that the bank was fully informed of the investors' identities and that no allegations of wrongdoing had been levied against them at the time.

While Salem and Mubarak were not personally listed as contributors, the fund included companies owned by their children: Clelia Assets Corporation, owned by Khaled and Magda Salem, invested $3 million; and Pan World Investments Corporation, owned by Gamal and Alaa Mubarak, invested $250,000. The offshore fund would have provided significant tax breaks to its investors, as well as allowing them to shield their investments from prying eyes.

Salem not only bilked Egypt -- he also stole from the United States. In 1979, his company, the Egyptian American Transport and Service Corporation (EATSCO), was granted a contract to ship military goods from the United States to Egypt. The deal came in the wake of the Camp David Accords, when U.S. military sales started to flood in to Cairo, making shipping a potentially lucrative business.

Salem, however, tried to boost his profits by charging the U.S. Defense Department for inflated shipment costs. Between 1979 and 1981, according to U.S. court documents, EATSCO submitted false invoices for 34 shipments, which overcharged the Pentagon by $8 million. In 1983, Salem pled guilty to felony charges in the U.S. District Court in the Eastern District of Virginia. The fines and civil claims settlements paid by Salem and the companies involved in the scheme totaled more than $4 million.

Most of Salem's millions came from sweetheart deals in Egypt, where he received preferential treatment from his allies at the top echelons of government. In April 2011, Mubarak-era spy chief Omar Suleiman testified before an Egyptian prosecutor that Salem's company, the East Mediterranean Gas Company, was handed the monopoly over gas exports to Israel, Jordan, and Spain in the early 2000s, bypassing the usual bidding process. Suleiman was asked to testify as Egypt's intelligence services were allegedly involved in brokering the gas deals.   

Suleiman said Salem had been friends with Mubarak for more than 20 years, and that his experience in business dealings with Israel was the reason he was chosen for the deal.

"[Salem] had dealt with the Israelis before with MIDOR," Suleiman said, referencing Salem's time as chairman for the Middle East Oil Refining Company, an Israel-Egyptian project established in 1993 to build a joint refinery on the North coast of Egypt and to extend an oil pipeline to Israel.

Seven years later, Salem sold 37 percent of the East Mediterranean Gas Company for $4.2 billion, according to the Israeli business news website Globes.

It's not hard to see why Salem is pushing so hard for reconciliation. If Egypt refuses to cut a deal and negotiates an extradition agreement, it could win back his frozen assets in Switzerland, Hong Kong, and Spain. The extradition would allow Egypt to convict Salem in person, and many countries -- including the ones where Salem stashed his wealth -- require such a final verdict if they are to return his stolen assets.

If successfully extradited back home, Salem would also be obliged to pay more than $4 billion in fines and restitution, and he would serve 22 years in prison based on his combined sentences by Egyptian courts.

A reconciliation deal, on the other hand, would not only place Salem back in the good graces of the Egyptian government, it would also effectively end foreign investigations into whether his wealth is the result of illicit gain.

"It would be very difficult for the Swiss authorities to continue prosecution against Hussein Salem if the Egyptian authorities drop any charges against him," said Olivier Longchamp, officer for international financial relations at the Swiss NGO Berne Declaration. "Money can only be seized if it has been proven to be of illegal origin."

Now, three years after a revolution against Mubarak-era cronyism, Salem appears closer to his goal than ever before. In an ironic turn, he is now hailing the military-backed government for combating the same underhanded business dealings of which, for many Egyptians, he is the symbol. As he put it in January, "the era of corruption and injustice is gone now."

EPA/MOHAMED OMER