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Bosnia's Muslims Dodged Embargo

By John Pomfret
Washington Post Foreign Service
Sunday, September 22 1996; Page A01

VIENNA -- Last September, European police backed by anti-terrorist squads raided the office here of a seemingly obscure organization, the Third World Relief Agency, headed by a one-time Sudanese diplomat named Elfatih Hassanein.

Since then, poring over several van loads of documents, they have pieced together one of the untold stories of the Bosnian war: how Bosnia's Muslim-led government evaded a United Nations arms embargo and purchased hundreds of millions of dollars worth of black-market weapons.

In the documents and in the bank accounts of the Third World Relief Agency, Austrian investigators have tracked $350 million they say flowed from Muslim governments and radical Islamic movements to Bosnia. At least half was used to purchase weapons illegally and smuggle them to the Bosnian government army, according to Western intelligence estimates.

The agency has operated several civilian projects in Bosnia since 1992, including a chicken farm, a news agency and a women's sewing collective, and has purchased some equipment for the government, including satellite telephones. But Western officials say Hassanein, who studied medicine in Yugoslavia and set up the Third World Relief Agency in 1987, apparently turned it into the chief broker of black-market weapons deals by Bosnia's Muslim-led government and the agent of money and influence in Bosnia for Islamic movements and governments around the world.

A Western banker in Austria referred to Hassanein as the "bagman" of Bosnian President Alija Izetbegovic. "If the Bosnian government said we need flour, he ran after flour. If they said we need weapons, he ran after weapons."

The story of the Third World Relief Agency, reconstructed from documents and interviews with police, banking officials and intelligence sources, makes clear how much the Bosnian government depended on outside aid to obtain and pay for desperately needed weapons. It also shows how the embargo drove the Muslim government into alliances with some of the world's most radical states, as well as terrorist movements -- contacts that continue to haunt the U.S.-led Balkan peace process.

The agency took funds and support for Bosnia from wherever it could find it, and the bulk of the cash originated in the Middle East: Iran was a big contributor, as was Sudan, which like Iran is on the U.S. State Department's watch-list of countries that support terrorism. Saudi Arabia was the largest contributor, according to banking officials and intelligence sources, and donations also came from pro-Western countries like Pakistan, Turkey, Brunei and Malaysia.

But militants in the terrorist underworld are also believed to have used the relief agency to get money to the Bosnian government, including the wealthy Saudi Arabian emigre Osama Binladen, a suspected sponsor of militant Islamic groups around the Middle East. Binladen, a resident of Sudan until last year, is reportedly now in Afghanistan, where he has issued statements calling for attacks on U.S. forces in the Persian Gulf.

Investigators say the agency also had ties to Sheik Omar Abdel Rahman, a radical Egyptian cleric who was convicted of planning several terrorist bombings in New York and is linked to the group that carried out the World Trade Center bombing in February 1993. Intelligence agencies say they have tapes of telephone calls by Rahman to the agency's office, during which he discussed its commitment to sell the sheik's videotapes and sermons in mosques around Europe.

Hassanein, identified by Western sources as a member of Sudan's ruling National Islamic Front, built his arms smuggling operation with Islamic activists from Bosnia who, like him, had ties to Izetbegovic, the Bosnian president. Several of these men now hold senior positions in the Bosnian government and, according to U.S. officials, they form the core of a radical Islamic movement that has resisted U.S. attempts to exert influence over the army and security services.

A senior Western diplomat in the region said the Clinton administration knew about the Third World Relief Agency and its activities beginning in 1993. Still, the United States took no action to stop its fund-raising or arms purchases, in large part because of the administration's sympathy for the Muslim government and ambivalence about maintaining the arms embargo.

"We were told [by Washington] to watch them but not interfere," the diplomat said. "Bosnia was trying to get weapons from anybody, and we weren't helping much. The least we could do is back off. So we backed off."

He acknowledged that the Clinton administration, now that it is trying to bring peace to Bosnia, is troubled by the influence gained by Bosnian Muslim hard-liners through their work with the agency. "That is a major downside," he said.

Austrian and German authorities also refrained from shutting down the agency. Austrian officials said they did not act because it is not illegal to negotiate a weapons deal on Austrian soil as long as the transaction takes place elsewhere. The Austrian officials, speaking on condition of anonymity, also acknowledged that public pressure to support Bosnia's Muslims allowed them to turn a blind eye to the agency's activities.

Devout Muslim and Arms Broker

Elfatih Hassanein is a rotund man in his fifties with a salt-and-pepper beard. He is impeccably polite in his fax transmissions and, according to people who know him, is a devout Muslim who regularly interrupts meetings to pray. A banker friend speaks of the man's natural altruism and genuine interest in Bosnia's Muslims and support for their cause.

In a 1994 interview with Gazi Husrev Beg, a magazine focusing on Islamic affairs, Hassanein called for the creation of an Islamic state in Bosnia. "Bosnia, at the end, must be Muslim Bosnia," the magazine quoted him as saying, otherwise "everything has lost its sense and this war was for nothing." Hassanein added that war in Bosnia had helped the cause of Islam by awakening a religious sense among Bosnia's secular Muslims. "However, it is still not good, and I think that we have to find more suitable methods to spread the correct teachings of Islam among Bosnian Muslims," he said.

Hassanein agreed to be interviewed for this report but subsequently failed to respond to numerous phone calls and visits to his office in Sarajevo.

He met Izetbegovic in the 1970s while attending medical school in the Yugoslav capital, Belgrade, now the capital of Serbia, one of two regions comprising Yugoslavia. Izetbegovic, then an Islamic scholar, visited Belgrade frequently and met there with Muslim intellectuals. In a 1983 trial in Sarajevo, Izetbegovic, who was under indictment for fomenting Muslim nationalism, said in his testimony that Hassanein was a good friend, according to case documents.

Hassanein founded the Third World Relief Agency in 1987 with his brother, Sukarno Hassanein. Western officials say the original purpose of the organization was to encourage the rebirth of Islam in Eastern Europe and the then-Soviet Union. It is not clear if Sudan formally backed the agency, but Western intelligence officials say Hassanein is believed to have been responsible for the Sudanese Islamic Front's policy in Bosnia, Afghanistan and Pakistan.

When war broke out in Bosnia, Elfatih Hassanein was ready to play his role.

His agency received the official backing of the Bosnian government and by late 1992 had opened offices in Sarajevo, Budapest, Moscow and Istanbul -- all key locations for the smuggling and purchasing of arms. In October 1992, Haris Silajdzic, then Bosnia's foreign minister, visited First Austrian Bank here and vouched for Hassanein's credibility as the financial representative of the beleaguered Bosnian state, sources said. In 1993, Izetbegovic wrote a letter again assuring the bank that the Sudanese man had the full confidence of the Bosnian authorities, the sources added.

Suddenly, money began to pour into the the Third World Relief Agency. In one month alone, July 1992, $20 million entered its account at the First Austrian Bank. In October of that year, one Saudi Arabian government official strolled into the bank's staid headquarters in downtown Vienna with two suitcases filled with cash. He deposited $5 million. From 1992 to 1995, $350 million passed through the agency's hands, bank officials said.

In what may have been an attempt to facilitate his new work, Hassanein acquired a diplomatic passport in March 1992 and became a Sudanese cultural attache. The move allowed him to transport large amounts of cash through Austria and into Croatia and Slovenia without being subjected to police checks, Western officials said.

The agency's first large operation came to the attention of Western intelligence agencies in September 1992, when Soviet-built transport planes began arriving in Maribor, Slovenia, from the Sudanese capital, Khartoum. While the cargo was marked humanitarian aid, it contained more than 120 tons of assault rifles, mortars, mines and ammunition, intelligence sources said. Investigators say the arms originally came from surplus stocks of Soviet weapons stored in the former East Germany and were probably purchased by the Bosnians in Europe. It is not known whether Sudan played a role in the deal other than as a point of transport.

Chartered Russian helicopters ferried some weapons to the Muslim-controlled towns of Tuzla and Zenica in Bosnia. The choppers refueled in Croatia's Adriatic port of Split. Investigators said a Russian-American joint venture called Eco-Trends, an aircraft leasing business, is believed to have provided the helicopters. An official for the Moscow-based firm recalled something about the case but added that many unsavory Russian characters used the name of the firm to win contracts abroad.

The Maribor weapons deliveries stopped in September 1992 when Croatia closed arms smuggling routes in apparent preparation for severing an alliance between its Bosnian Croat proxies and the Bosnian Muslims. The remaining 10,000 assault rifles, 750,000 rounds of ammunition, rockets and explosives sat in the warehouse in Maribor until Slovenian officials revealed their contents almost a year later. Their value was placed at about $10 million.

Austrian agents earlier had identified the relief agency as the financier of the deal, police officials said, after discovering it was paying storage fees for the weapons in the airport.

In 1993, German police got another glimpse of the organization's work when they stumbled across a weapons deal being negotiated in Germany by Bosnian Muslims and Turkish arms dealers, according to August Stern, a prosecutor in the German state of Bavaria. Germany indicted about 30 Bosnians and Turks on weapons and racketeering charges in connection with the illegal arms deal, which was negotiated on German soil.

While Stern declined to provide information on the deal, Western sources said it involved $15 million worth of light arms. Stern said the relief agency was implicated as the financial broker of the deal. Malaysian and Turkish troops who were participating in the U.N. Protection Force then operating in Bosnia smuggled the arms into the country from Croatia, several Western sources said. Commanders of the U.N. force, which was disbanded last year, were unaware of the smuggling, investigators said. Like the Maribor shipment, the weapons are believed to have come from arms stocks in Europe of the old Soviet Red Army, Western officials said.

Stern said charges against some of the Bosnians and Turks were dropped because he had insufficient evidence against them. He said he was still waiting for evidence gathered by police here in Vienna.

Raid on Vienna Headquarters

German investigators -- and agents from Austria's anti-terrorist task force -- raided the headquarters of Third World Relief Agency as well as several houses here last September, seizing enough documents to fill three minivans.

The records showed that over the years it had moved hundreds of millions of dollars through its account at First Austrian Bank. Documents provided to The Washington Post show the agency transferring a total of $2.6 million to accounts in places such as Liechtenstein and Monaco, -- locales known for their loose banking laws. One bank transfer claims the money is for tractors; another states that the money is for a documentary film.

Bank officials noted that $80 million flowed into the agency's account in 1992; $231 million in 1993; and $39 million in 1994 and 1995. The chief of a Western intelligence agency estimated that more than half of the $350 million was used to buy weapons for the Bosnian Muslims.

Another Western source said that the organization also was forced to move large amounts of money to Croatia to bribe Croatian officials to allow the weapons to cross their country. The price of such passage skyrocketed in 1993 when Croat nationalists launched their own war for a separate state inside Bosnia. Money also was smuggled into Sarajevo on flights of the office of the U.N. High Commissioner for Refugees; Bosnian government officials used the money to buy weapons from both Serb and Croat middlemen who operated inside Bosnia, the official said.

"Many of Bosnia's weapons came from its enemies. [The relief agency] was critical to this system because they provided the cash and could bring it into Bosnia," he said.

By the time police raided its offices, the agency appeared to be winding down its activities. Western officials said it seemed that most of the agency's work preceded the opening of a direct weapons pipeline between Iran and Bosnia that passed through Croatia starting in May 1995. That pipeline received the tacit approval of the Clinton administration in April 1995 when the Croatian government asked the United States if it opposed such a link and the United States declined to respond.

Austrian police sources said Hassanein left Austria for Istanbul in 1994 after he learned he was being investigated for money laundering and arms smuggling. He stopped using a diplomatic passport in 1993 to make it more difficult for Austrian authorities to expel him, they said.

Despite his departure, a bureau of the agency continued to operate in the Austrian capital -- manned by Hassanein's brother -- even after the 1995 raid. So far this year, officials said $500,000 has moved through its account. Neither Hassanein nor his brother have been charged with any crimes in Austria.

"They did a lot of talking here but as long as they did not move weapons through our territory, we could not arrest them," one Austrian investigator said.

Hassanein remains close to Izetbegovic. In August, the Bosnian government awarded the Third World Relief Agency with a gold medal for its relief work here. Hassanein also hosted Izetbegovic on a private visit to Istanbul last month where Izetbegovic met other Sudanese officials. Hassanein traveled to Bosnia this month as a guest of the president.

© Copyright 1996 The Washington Post Company

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