Water Wars in the Land of Two Rivers

Insurgents may threaten Iraq's dams as much as its oil -- with potentially dire consequences.

NOTE: This story was updated Wednesday afternoon.


The turmoil in Iraq already has the world worried about the safety of the country's mammoth oil fields. Now Iraqis must imagine massive waves of water crashing downriver from the country's shaky dams, which are smack in the terrorists' crosshairs.

On Monday, Islamist insurgents in the Islamic State, formerly known as the Islamic State of Iraq and al-Sham, renewed their offensive in Iraq's Anbar province, moving toward the key hydroelectric dam of Haditha. The dam's security has concerned U.S. officials for years and protecting the country's second-biggest dam was a priority objective during the 2003 invasion.

Meanwhile, Iraq's biggest dam, the Mosul dam, is right next to a hotbed of Islamic State activity and poses catastrophic risk even if the terrorists don't open the floodgates or blow it up. If the dam fails, scientists say Mosul could be completely flooded within hours and a 15-foot wall of water could crash into Baghdad.

ISIS fighters first moved toward the Haditha Dam, located in western Iraq on the Euphrates River, last week. On Monday, the insurgents and other tribal Sunni troops resumed the advance, according to the Institute for the Study of War.

On Wednesday, Sunni connivance around Haditha increased, with reports that disparate militant groups and tribal leaders were negotiating the surrender of the town of Haditha, which would open the whole of Anbar province to ISIS.

The latest advances come as the beleaguered Iraqi government, led by a recalcitrant Shiite, continues to refuse to discuss political reconciliation among Iraq's Sunni, Shia, and Kurdish sects, which have found themselves increasingly at loggerheads with each other.

The Obama administration and its allies have been pressing Iraqi Prime Minister Nouri al-Maliki to either make a serious effort to reconcile with the country's embittered Sunni and Kurdish minorities or step aside so a new leader could take the fight to ISIS. In remarks Wednesday, however, the embattled Iraqi prime minister dismissed those demands and said fighting ISIS on the battlefield was more important than striking the political deals necessary to keep his country's warring factions from pulling further apart. 

"The battle today is the security battle for the unity of Iraq," he said on state television. "I don't believe there is anything more important than mobilizing people to support the security situation. Other things are important, but this is the priority."

Maliki's remarks came as insurgents kept Iraqi soldiers from reclaiming Tikrit, the birthplace of former Iraqi leader Saddam Hussein; the United Nations released new figures showing at least 2,400 Iraqis died last month, making it one of the bloodiest periods since the 2003 U.S. invasion.

Iraq's government has tried to push back against the rebels with increased airpower, including the first installment of fighter jets from Russia--and, by some accounts, from Iran. U.S. air assets, especially armed drones, have also been thrown into the fight against the Islamist insurgents.  

Iraq's hydroelectric facilities represent a soft underbelly in the fight against ISIS. A compromised Haditha Dam would be a serious threat to western and southern Iraq: It provides power for the capital and controls water supplies for irrigation downstream. Using Haditha, ISIS could flood farmland and disrupt drinking water supplies like it did with a smaller dam near Fallujah this spring. By threatening Karbala and Najaf, holy cities for Shiites, the Sunni insurgents hoped to pressure the Shiite-led government in Baghdad. (On Tuesday, ISIS apparently attacked an iconic Shiite mosque north of Baghdad; when al Qaeda attacked that mosque in 2006, it sparked massive sectarian violence.)

The Haditha Dam is a crucial chunk of Iraqi infrastructure. And its massive reservoir--Lake Qadisiyah--is a potential weapon of mass destruction. During the 2003 invasion of Iraq, a small unit of U.S. Army Rangers seized Haditha Dam to prevent Saddam Hussein's forces from destroying it and causing a massive flood. In 2005, insurgents twice attacked Haditha with explosive devices but did not major damage.

As U.S. troops withdrew from Iraq, Haditha's security became more troublesome. A 2009 assessment by the Special Inspector General for Iraq Reconstruction, or SIGIR, found that a $1 million U.S.-funded effort to boost Iraqi government security at the site was inadequate; a chain-link perimeter fence, for example, was poorly built and sections were already falling down when Americans inspected the site.

"Destruction of the dam would greatly affect the functioning of the country's electrical grid and would cause major flooding downstream," the report warned.

Dams are vulnerable in other countries, too. For decades, the United States has tried to help Afghanistan complete the Kajaki Dam in the troubled Helmand province in the southern part of the country. The partially finished dam has become a source of intermittent electricity for the impoverished region--but also a source of revenues for Taliban officials who have at different times been a de-facto government in the area.

Kajaki, too, has a history as a potential tool of terrorists. Before the 2001 U.S. invasion of Afghanistan, Taliban officials toyed with the dam's water flow to put pressure on Iran, which is downstream. In 2007, NATO troops repelled a Taliban attack on the dam. After the final U.S. withdrawal from Afghanistan, Kajaki and its massive reservoir could represent another potential weapon in the hands of insurgents.

In Iraq, if the Haditha headache weren't enough, a compromised Mosul Dam is a migraine. It lies just north of a new ISIS stronghold. What's worse, it could unleash a torrent of destruction even without sabotage.

Built in the late 1980s, it has owned the title of "most dangerous dam in the world" for years, according to a 2006 assessment by the U.S. Army Corps of Engineers. It was built on an unstable foundation of water-soluble rock in an area prone to sinkholes. As a result, it is injected with grout around-the-clock to maintain structural integrity. Gen. David Petraeus, the former U.S. commander in Iraq, urged Iraqi Prime Minister Nouri al-Maliki to prioritize bolstering the dam in 2007. A U.S.-funded, $27 million plan to address the most glaring problems was found wanting by SIGIR that same year.

Although apparently unmolested by ISIS so far, a worst-case scenario could unfold even if it becomes just collateral damage.

If the ISIS offensive disrupts the dam's intensive maintenance, it could further deteriorate or even be breached. Researchers say it could send as much as 50 million gallons of water per second crashing toward Mosul that would cover more than half the city under 25 meters of water within hours. Further down the Tigris River, Baghdad itself could be under 4 meters of water within three days. It would also wipe out more than 250 square kilometers of prime farmland.

"The only measure which can reasonably be taken to reduce the risk to downstream populations" is building another dam downstream, researchers concluded earlier this year. Construction started on the Badush Dam in the 1990s but never completed.

Mosul Dam's regular maintenance appears to continue uninterrupted by ISIS, said researchers at Lulea University of Technology in Sweden, who have studied the dam. The dam's manager declined to discuss the facility's state or the risks posed by ISIS.

Photo by Jaime Razuri - AFP - Getty


Record Fine for French Bank

U.S. uses dollar power to penalize BNP Paribas for violating sanctions.

The precedent-setting fine French bank BNP Paribas agreed to pay U.S. authorities -- nearly $9 billion -- highlights the long reach of Washington's financial sanctions and an obscure part of the global financial system that makes that reach possible.

The giant French bank pleaded guilty Monday to violating sanctions against Iran, Sudan, and Cuba. Between 2004 and 2012, BNP used "sophisticated schemes" to move more than $8.8 billion for blacklisted entities through the U.S. financial system, according to the Justice Department.

In addition to the guilty plea, the firm agreed to fire 13 people and cease processing certain types of U.S. dollar transactions for one year. Suspending the bank's ability to facilitate dollar payments is a new type of penalty with unpredictable consequences. The ban also highlights a crucial part of the plumbing of the international financial system that gives Washington the ability to hold foreign banks to U.S. sanctions laws, even if their customers have nothing to do with the United States.

When a bank converts foreign currency into dollars, the transaction is routed through a U.S. dollar-transfer system. That nexus with the U.S. financial system gives American authorities jurisdiction over the transaction and subjects the bank to U.S. law. The mechanism, known as "dollar clearing," is essential for international banks because most global business and trade is conducted in dollars. BNP routes hundreds of billions of dollars through New York every day, according to Reuters. (Foreign banks do not need U.S. subsidiaries to route international transactions through the United States.) BNP is a member of a private transfer system in New York called the Clearing House Interbank Payments System, which processes $1.5 trillion worth of transactions daily.

When the United States blacklists a company or an individual, not only do American banks and U.S. branches of foreign banks have to comply, but so do the financial institutions that process dollar payments. The dominance of the U.S. dollar in global trade gives American authorities the ability to go after banks all over the world.

"The U.S. is really the only country that can do this because the U.S. dollar is the reserve currency and the oil trade is denominated in dollars," said Zachary Goldman, a former Treasury Department sanctions official who now heads the Center on Law and Security at New York University.

For BNP, not being able to move dollars into or out of the United States for a year will be problematic. Though straight wire transfers are not a huge business for banks, converting other currencies into dollars is an integral service to trade financing, investments, and other international deals. If the bank isn't able to provide that service, it will have to find another bank to do it, which means it risks losing business.

"It will increase their costs some; it might delay the sending of funds," said Nancy Atkinson, a senior analyst with Aite Group. "Clients might choose to leave the bank and go to someone else."

BNP has extensive operations in the United States, including investment banking offices in New York, Chicago, and San Francisco, as well as 700 retail branches spread across 20 states through subsidiary BancWest Corporation. Jean-Pierre Lambert, a Keefe, Bruyette & Woods Ltd. analyst, estimated the ban could cost BNP $40 million, according to Bloomberg.

The $8.9 billion fine is several times over the previous record for sanctions violations, which London-based HSBC paid in 2012. HSBC was dinged $1.9 billion for doing business with drug cartels in Mexico and customers in sanctioned countries, including Iran, Libya, Sudan, Burma, and Cuba.

The giant fine is a result of the scale of the misconduct and the lengths to which the bank went to cover it up, according to the Justice Department. In less than a year, between July 2006 and June 2007, BNP processed $6.4 billion worth of transactions for blacklisted Sudanese entities and individuals, including $4 billion for a bank owned by the Sudanese government. And BNP went ahead with the business despite warnings from several lawyers and senior compliance personnel, according to documents released by DOJ. "This practice effectively means that we are circumventing the US embargo on transactions in USD by Sudan," one compliance officer warned in 2005. The bank processed $1.7 billion in transactions for customers in Cuba. When some payments to Cuba were blocked, BNP lumped transactions together and stripped them of identifying information to conceal their recipients, according to DOJ. Through 2012, BNP did more than $650 million worth of business with Iran, including working with a company in Dubai that was a front for an Iranian oil company.

"BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities," Attorney General Eric Holder said in a statement. "Sanctions are a key tool in protecting U.S. national security interests, but they only work if they are strictly enforced."

The settlement brings to a close a years-long investigation and months of negotiation between the bank and U.S. prosecutors but the result could still reverberate in U.S.-French relations. For instance, French Foreign Minister Laurent Fabius said on June 6 that the fine could hold up trade talks between Europe and the United States. French President François Hollande had pressed President Barack Obama for a lighter penalty, but Obama dismissed the idea that he could intervene.

Harvard Law School professor Hal Scott said the BNP fine is excessive and will unduly hurt shareholders but said the government should throw the book at the bank officials who flaunted the sanctions.

"I actually like the idea that we insist as part of the settlement that they get rid of the people involved; that's making the people who did it pay, rather than the shareholders," said Scott. "In my perfect world, the French government would agree to put those people in the United States and they'd be put in jail. That may be the best solution for everybody."