Identifier
Created
Classification
Origin
09PESHAWAR105
2009-05-22 11:36:00
CONFIDENTIAL
Consulate Peshawar
Cable title:  

INDIGENOUS FUNDING FOR SWAT MILITANTS

Tags:  PTER MOPS PGOV ECON PK 
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RUEHPW/AMCONSUL PESHAWAR 5037
C O N F I D E N T I A L SECTION 01 OF 04 PESHAWAR 000105 

SIPDIS

E.O. 12958: DECL: 5/22/2019
TAGS: PTER MOPS PGOV ECON PK
SUBJECT: INDIGENOUS FUNDING FOR SWAT MILITANTS

CLASSIFIED BY: Lynne Tracy, Principal Officer, U.S. Consulate
Peshawar, U.S. Department of State.
REASON: 1.4 (b),(d)
SUMMARY AND COMMENT

-------------------



C O N F I D E N T I A L SECTION 01 OF 04 PESHAWAR 000105

SIPDIS

E.O. 12958: DECL: 5/22/2019
TAGS: PTER MOPS PGOV ECON PK
SUBJECT: INDIGENOUS FUNDING FOR SWAT MILITANTS

CLASSIFIED BY: Lynne Tracy, Principal Officer, U.S. Consulate
Peshawar, U.S. Department of State.
REASON: 1.4 (b),(d)
SUMMARY AND COMMENT

--------------




1. (C) As major operations against militants once again commence
in Swat district in the Northwest Frontier Province (NWFP),
press reports and Consulate contacts provide insight into the
methods of funding that Swat militants have realized from their
effective control over large parts of the district. In addition
to highway extortion, kidnapping and robbery, Swat taliban have
used their power in the region to take a cut of illegal trade in
emeralds and timber. The long-term damage they have done to the
Swat economy has helped intensify the widespread poverty, making
it easier for them to conscript desperate locals. While
indigenous funding streams may not be the primary source of
militant finance, the case study of Swat shows that militants
have reaped economic gains when allowed by the Pakistani
government to operate freely. End Summary and Comment.



EMERALDS

--------------




2. (C) Multiple Consulate contacts confirmed local press
reporting that Swat militants have operated three emerald mines
in and around Swat over the several periods of truce between the
Pakistani military operations of September 2007-February 2008,
January 2009, and May 2009. On April 1, about 70 militants
surrounded the second largest emerald mine in Shangla District,
NWFP, just across the border with Swat. Militants reportedly
built trenches and bunkers around the emerald mine at Gujar
Kalay and invited locals to begin digging, promising them 50
percent of the daily find. Promising a percentage of the
profits, taliban commanders enlisted over 1,000 locals with
shovels and pickaxes to descend into these three mines to find
emeralds.




3. (C) Beginning under the Wali (Prince) of Swat, the region has
produced emeralds since the 1960s. During the 1980s, mines in
Swat yielded over 250,000 carats of emeralds, worth $22 million
in rough, uncut form. Since 1997, the NWFP government has

authorized private operators to run the mines under leases
obtained through an auction system. Swat has not produced
adequate volume in the last decade to meet the needs of major
emerald buyers from the US and Europe. A representative from
the Pakistan Mineral Development Corporation states that mining
ventures in the country have been failing for the last two
decades because of disorganized efforts to blast and dig,
compromising the quality and quantity of gems.




4. (C) According to Consulate contacts, once a week, usually on
Sunday, the taliban held an emerald auction in Mingora, with
miners retaining two thirds of the profit and the militants
taking one third. These contacts estimate that militants earned
$10,000 - $12,500 profit each week. According to a retail
jeweler in Islamabad, most miners work in remote areas, where no
authorities or official concessions are present, making it easy
for the taliban to "tax" at will. The jeweler observed rising
prices for local emeralds over the period of militant activity
in Swat and attributed the cost increase to a "taliban tax," 25
percent of value, he said, and a broker's fee of 25 percent.
Abdul Karim Shah, director of the Gem and Gemological Institute
of Peshawar (GGIP),said that emeralds from Swat were smuggled
to India, and transported to Thailand, Switzerland and Israel.
He estimated that militants could earn up to $3 million a year
from the three mines.

PESHAWAR 00000105 002 OF 004






5. (C) A taliban commander at Gujar Kalay emerald mine was heard
by a contact saying, "it is a great opportunity for the people
because there is so much poverty and unemployment here." While
GGIP's Shah claims that the taliban will take quick profits but
destroy the emerald mines, a press report claims that a taliban
soldier at Gujar Kalay said that the militants had issued orders
to "lessen the amount of destruction." One Consulate contact
said that the Mines Department and Forest Department were
"pretty corrupt as well, and the taliban just picked up from
where the government left off."



TIMBER

--------------




6. (C) Revenue from the unlicensed production of emeralds by the
Swat taliban parallels profits from illegal sales of timber in
Swat, which have been going on for over a year. Local contacts
report that militants took control of over 80 percent of Swat's
forests after the Forest Department abandoned its posts in
September 2007. Militants have invited locals to join them in
running the illegal timber business. Commonly referred to as
the timber mafia, militants collaborate with drug peddlers, drug
addicts, unemployed youth and other fugitives, permitting them
to fell trees in areas under their control. Because security
checkposts have been disbanded, transport of illegal timber is
easy. Illegal timber is being used in the construction and
furniture businesses. For example, one contact told Post that
in August 2008 he was offered a truckload of Diyar wood from
Swat, usually sold at 2,000 ($25) rupees per cubic foot,
discounted to 1,200 rupees ($15) per cubic foot. Despite the
reduced black-market prices, many have observed wood prices
rapidly increasing in 2009 due to deforestation. Estimates say
Swat's illegal timber trade was worth from $5 million to $10
million a year. Militants also cut trees and sold fruit from
some orchards in Swat.



EXTORTION

--------------




7. (C) Consulate contacts state that militants have generated
most indigenous funding for the insurgency in Pakistan from
three sources: charging fees at checkposts; kidnapping for
ransom; and stealing, which includes robbing banks. As
militants have done elsewhere throughout the NWFP and FATA, the
Swat taliban established checkposts on many roads in the
district, collecting between 5 and 100 rupees from car drivers
as a "road tax." Even taxi and bus passengers must pay this
tax. Militants also have collected hundreds of rupees each from
truck drivers, in addition to pilfering their goods. According
to the Khyber Political Agent (PA),the taliban may have earned
more than $50 million per year by collecting fees at checkposts
throughout the region; checkpoints in Swat district, however,
would have generated relatively little of this due to its
distance from major trucking routes. (Comment: While we have
no means to verify the Khyber PA's estimate of militant
earnings, the Khyber Pass route with its high volume of
commercial traffic provides ample opportunity to shake down
transporters. The Khyber PA position is one of the most coveted
because of its lucrative "side-earnings.")




8. (C) Kidnapping for ransom has also been a major source of

PESHAWAR 00000105 003 OF 004


revenue for militants in the NWFP in FATA, though Swat's
contribution to the overall total has likely been relatively
low. According to local contacts and interviews with released
abductees, ransoms range from $5,000 to $100,000 per person.
With over 500 kidnappings in the Peshawar area over the last
year, kidnappers may have earned up to $20 million in this
burgeoning business. Besides strong-arms, militants are rumored
to hire advance men, similar to accountants, who study a
potential victim's value before the kidnapping.




9. (C) Militants have systematically stolen and looted property
in NWFP and FATA, including in Swat. Tacitly acknowledging the
public relations backlash, Tehrik-i-Taliban Pakistan (TTP)
released a statement on January 26 admonishing its followers not
to commit crimes. According to the NWFP Minister for Home and
Tribal Affairs and several security officials in the area, the
TTP statement shows that Pakistan's purported "militant leaders"
do not have a firm grip on the insurgency. From November 2007,
militants in Swat systematically looted homes and offices,
dismantling home fixtures and carrying away millions of dollars
worth of furniture, appliances, electronic goods and office
equipment; the pace of this looting accelerated in the time
period around the collapse of the Swat peace deal in early May
(reftels). Militants also intermittently robbed banks in Swat
during the last eighteen months, again accelerating this
activity in early May.



LONG-TERM ECONOMIC EFFECTS

--------------




10. (C) According to Sharafat Ali Mubarak, president of Sarhad
Chamber of Commerce and Industry (SCCI),"the taliban have
driven the NWFP economy into the ground" by violence, threats,
stealing, looting, and kidnapping for ransom. A group of
prominent businessmen and political leaders told Post in early
April that over the last four years militants have forced
hundreds of businesses to close, caused up to 100,000 people to
lose their jobs, and decreased the trucking business by 50
percent and regional tourism by 75 percent (septel).




11. (C) Widespread press coverage in August and September 2008
reported that the taliban allowed fruit in Swat to rot on the
vines during the summer harvest, costing locals over $40
million. Approximately 30 percent of Swat Valley consists of
fruit orchards with a short shelf-life. In the past,
agriculture in Swat provided employment for 70 percent of its
residents, with a typical fruit orchard employing 1,000 laborers
who earned income by spraying and pruning fruit trees, and
picking, packing, and transporting the fruit. During a normal
summer harvest, 500 to 600 trucks carrying fruit leave Swat each
day. But during the summer 2008 harvest, half of Swat's
laborers were out of work, 80 percent of the fruit rotted, and
vegetable production decreased 50 percent. Prior to the
collapse of the Swat peace deal, some Consulate contacts
predicted that militants in Swat would enlist locals for the
2009 fruit and vegetable harvest and take a share of these huge
agricultural profits.




12. (C) According to widespread press accounts, and confirmed by
Consulate contacts, the taliban have systematically destroyed
Swat's tourism industry, burning down sites such as Pakistan's
only ski resort at Malam Jabba. Over 75 percent of Swat
valley's 900 hotels and restaurants have closed and the rest
have almost no guests, causing over 20,000 people associated
with tourism to lose their jobs.

PESHAWAR 00000105 004 OF 004





WILL THE TALIBAN DEVELOP AN ECONOMIC STRATEGY?

-------------- -




13. (C) While business and economic contacts painted a picture
of the taliban as opportunists and scavengers undermining the
economy in NWFP and FATA, other contacts, including several
local officials in the NWFP, worried that, as the taliban gain
ground, they are also developing an economic dimension to the
insurgency. Profits from illegal trade in emeralds and timber
and extortion activities assisted by miitants' on-the-ground
control enhanced the Swat taliban's ability to fund the
insurgency and helped create widespread poverty, which then them
in conscripting desperate locals with promises of jobs and
economic justice. Many contacts in the NWFP, including the
governor, the chief minister, and the police chief, have
continually cited a militant's salary of over 10,000 rupees
($125) per month as the main incentive drawing young men to
their ranks.



COMMENT

--------------



(C) Prior to the renewal of military operations in May 2009,
taliban commanders seemed to have made themselves the new
landlords in large parts of Swat, seizing property, providing
income to locals and taking a share of the profits. Militants
did not mine emeralds or cut down trees; locals did. The
taliban's level of effective control over parts of Swat allowed
it to raise revenue indigenously, if at considerable cost to
Swat's overall economic health. The resulting economic
desperation of locals almost certainly enlarged the pool of
potential recruits to the Swat taliban. The last eighteen
months in Swat provide a case study in the long-term political
and economic costs to the Pakistani government of effectively
ceding territory to the militants.
TRACY