The militia economy in the Middle East

Money plays a big role in the success of militias. Often gained through intimidation and illegality, the funds help finance and grow their operations.

Across MENA, the proliferation of militias combines corruption, smuggling, looting, intimidation, and parasitism to swell their coffers at the expense of state treasuries.
Mona Eing
Across MENA, the proliferation of militias combines corruption, smuggling, looting, intimidation, and parasitism to swell their coffers at the expense of state treasuries.

The militia economy in the Middle East

Many, if not most, would argue that armed resistance in a country under attack or occupation is heroic.

Travel the world’s cities, and the story of statues is the same: the immortalisation in stone or bronze of those who helped free a nation or keep it free via armed conflict.

The problem with armed resistance is that the ‘resistance’ bit often fades, yet the ‘armed’ bit remains, despite the state supposedly having a monopoly on violence and the legal use of force.

When their cause fades, armed resistors can either be integrated into any new system or castigated as invaders, usurpers, manipulators, and string-pullers.

The latter is especially so if the armed group relies on a foreign power for its arms or is somehow separate from society in other ways.

From here, it is a short path to becoming a ‘militia’, whose members typically wreak havoc and destabilise the nation in which it operates.

Lucie Aubrac, French Resistance hero of World War I, famously said: “Le verbe ‘résister’ doit toujours se conjuguer au présent” – the verb ‘resist’ must always be expressed in the present tense.

It means that resistance does not exist for any armed action outside the framework of defending sovereignty and independence.

She added that if resistance fighters remain armed without ongoing acts of resistance against an occupier, they become militiamen and gangsters.

Even Nelson Mandela once said: "If you receive money as a price for your struggle, you will turn from a fighter to a mercenary!"

GoFundMy Militia

Most non-state armed groups worldwide, of which there are thousands, were never formed to resist an occupier. Most are opportunists, regardless of how they justify themselves and their actions.

Wherever there is civil war, the splintering of political and economic systems, or the fracturing of society, militias appear.

By force, they make themselves decision-makers. When the state apparatus dissolves or is subordinated to them, they surreptitiously replace the state and soon have the last say over all matters of national importance.

Importantly, militias carve out influence and dominance not only in the political sphere but in aspects of the economy. The two are intricately linked.

Money plays a big role in the success of militias. Often gained through intimidation and illegality, the funds help finance and grow their operations.

Militias in the Arab world – in Iraq, Lebanon, Syria, Libya, Sudan, and Yemen, for instance – have turned into empires of financial corruption. None started out that way.

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What they do and how they do it depends on where they are and who backs them, but most militias aim to muscle in on the state's role and resources. Deals are 'booby-trapped' to ensure that the militia benefits, which in turn keeps the war and conflict going.

Living off its host

Militias rarely benefit from a state's plans for economic development, peace-building projects, a welcoming investment environment, trade corridors, supply chains, or national security initiatives.

Instead, they seek to establish parallel entities that annex and supplant state institutions and dominate economic sectors and resources.

They impose royalties and seize customs revenue by controlling land border crossings, ports, and airports. There is much to smuggle, including weapons, oil, drugs, and money, via individuals, gangs, or other militias.

The rise of the militias and the disintegration of the state is one of the most prominent reasons for the migration of those considered vital to economic growth and prosperity: the young, educated, and experienced.

As they flee injustice and ignorance for opportunities abroad, the militia thrives on theft and salaries from the state treasury.

The most dangerous thing about the economy of armed militias in Arab countries is the normalisation of their economic and financial presence in the daily life of the country, the people, and the state budget.

The insertion of militias into functioning economies leads to financial distortions, social disintegration, factional tyranny, partisanship, and religious fanaticism. Militias exploit this to gain followers by offering social services, financial assistance, and the security of salaries.

Money plays a big role in the success of militias. Often gained through intimidation and illegality, the funds help finance and grow their operations.

Iran's long arm

Iran's reach stretches to Lebanon, Syria, Iraq, and Yemen, all countries with rampant corruption and only the vaguest semblance of a functioning state.

Militias active in these countries rely on religious rulings to justify their illegal economic activities.

The hegemony of the Islamic Revolutionary Guards Corps (IRGC) over Iran's economy began in the late 1980s under the pretext of "reconstruction" after the Iran-Iraq war. By 2005, it tightened its grip on roughly a third of the labour market and economy.

Across dozens of sectors, it manages thousands of companies worth tens of billions of dollars, employing tens of thousands of people. It occupies most government positions, so lo and behold, it is to the IRGC and its companies that thousands of official contracts go to implement public projects.

The Revolutionary Guards have been selling oil for years. The revenues replenish its military arsenals and finance Iran's proxies abroad. Not content with just oil sales, it also smuggles drugs and weapons and operates an international money laundering network.

The Quds Force is the IRGC's foreign arm and is generously funded through the state budget. According to the Stockholm International Peace Research Institute, allocations to it almost tripled in 2022, up to $22bn from $8bn in 2021.

According to the Stockholm International Peace Research Institute, state allocations to Iran's Quds Force almost tripled in 2022, up to $22bn from $8bn in 2021.

Lebanon's parallel state

Sectarian parties, including several former militias, wrecked Lebanon during the country's civil war, imposing 'civil administrations' and 'national funds.'

Militia leaders then seized power for decades, draining Lebanon's resources, forcing its citizens to flee, and establishing a society of corruption, cronyism, and nepotism.

Within this unprecedented financial, banking, monetary, economic, social, and living-standard collapse, Hezbollah thrived by copying the IRGC model. Lebanon's militias have looted the state and taken over its judiciary.

They award themselves government contracts and exploit institutions, making them organised crime networks to serve the militias' interests and inject money.

In most countries, parties finance their activities and programmes from membership subscriptions, fundraising, and contributions from those who support their orientations. However, in Lebanon, they are paid directly from the state treasury because they permeate state institutions.

Read more: Non-state actors no more: The evolution of militant groups in the Middle East

These militias have thousands of people on public sector payrolls — in the army, security services, ministries and departments, civil and religious organisations, educational and health institutions, and state media companies.

By taking public money, they take taxpayers' money and loot the Lebanese. This includes life savings and inheritances held in private banks that went bankrupt overnight.

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The Cedar of Hezbollah

At the forefront is Hezbollah, which has Lebanese membership but Iranian affiliation. It has worked to build an independent militant system for nearly four decades.

Hezbollah runs a parallel economy through its commercial, catering, financial, and healthcare institutions that do not fall under the authority of the state but are supplied by Iran directly.

They are also supplied indirectly through funds from smuggling. Its evasion of tax and customs duties has saved it around $600mn over recent years.

Hezbollah's mirror state and its domination of Lebanon's vital facilities have deprived the state treasury of tax receipts and contributed to the depletion of the central bank's dollar reserves.

All the while, it has benefitted from the central bank's support for foodstuffs, basic consumer goods, gasoline, and diesel. These goods, worth $2bn, are then smuggled into Syria to support the regime of Hezbollah client, President Bashar al-Assad.

Hezbollah also established black markets for trade in drugs and turned Lebanon into a cash-based economy.

This gives it absolute financial and economic control over the country since it allows Hezbollah to avoid international sanctions and banking restrictions aimed at combating tax evasion, money laundering, and the financing of terrorism.

Hezbollah established black markets for trade in drugs and turned Lebanon into a cash-based economy. This allows it to evade international sanctions aimed at combating tax evasion and money laundering.

It aims to secure the salaries of its members and provide generous aid to its supporters, companies, and media mouthpieces.

Two banks — the Lebanese Canadian Bank and the Jammal Trust Bank — were listed as Hezbollah financiers and liquidated on US orders in 2011 and 2019, respectively.

In 1982, Hezbollah founded its own bank, the Al-Qard Al-Hassan Association, which operates outside the legal financial and monetary system.

It now has dozens of branches across the country and flourishes despite the weakness of commercial banks, many of which collapsed due to the financial and monetary crisis.

Al-Qard Al-Hassan has provided more than two million loans worth more than $4.5bn, mostly guaranteed in kind by gold jewellery. Its number of "shareholders, dealers, and subscribers" now exceeds 400,000.

Iraq's $6.3bn hole

The US invasion of Iraq in 2003 eroded the power of the army and government, fuelled unrest and conflict, and allowed a host of new militias to control state institutions.

In deteriorating economic and social conditions, these militias recruited thousands of young Iraqis for fighting, espionage, terrorist attacks, and other missions.

Many are linked to Iran, including the Popular Mobilisation Forces (PMF) and Iraqi Hezbollah. They make their money through the government institutions they control and from illicit business activities on the side.

These militias engage in corruption, smuggling, and blackmail, extorting and exploiting the country's wealth, supplementing their own budgets from the country's budget.

Fighting between them has destroyed national infrastructure, prevented economic recovery, and kept unemployment high. University graduates now routinely head abroad after qualifying.

Today, the Iraqi government spends about 2% of GDP on its informal armed forces. The budget for militia salaries increased from about $1bn in 2018 to $2.7bn in 2023.

Iraqi Shiite fighters from the Hashed al-Shaabi (Popular Mobilisation) paramilitaries advance in a desert area near the village of Tall Abtah, southwest of Mosul, on November 28, 2016.

Read more: Rogue operators: An in-depth look at Iraq's powerful militias

Collusion between officials, political parties, militias, gangs, and businessmen facilitates the looting of public funds and customs evasion worth millions of dollars.

According to the European Centre for Counterterrorism and Intelligence Studies, Iraq's Ministry of Finance admitted in March 2021 that it should receive $7bn from customs annually but received only around 10% of this.

According to estimates by the Iraqi National Oil Company, the volume of gasoline smuggling reached 7 million litres/day, about half the country's total daily production.

Sold on the black market to Iran's proxies in Syria and Lebanon, this illicit practice is estimated to have cost Iraq about $2bn in lost oil revenue between 2017-19.

Iraqi militias are also known to use shell companies to launder money, extort merchants, and impose 'taxes' and fees on the entry of goods. By some estimates, all this earns them around $11bn annually.

According to a report by the London School of Economics (LSE), studies from just one town showed that militias there collected an estimated $300,000 a day in kickbacks.

They have diversified, too. Militias are even reported to have taken control of the scrap metal trade around Mosul, shipping the material abroad for profit rather than using it to support reconstruction at home.

Iran plays a major role in Iraq's financial sector. It owns more than a dozen banks in the country, and these operate independently.

Iraqi militias are also known to use shell companies to launder money, extort merchants, and impose 'taxes' and fees on the entry of goods. This earns them around $11bn annually.

Iranian banks have also bought shares in Iraqi banks that manage tens of billions of dollars, siphoning some back to Tehran.

The Iraqi Centre for Strategic Studies estimates that corruption, mismanagement, and Iranian influence have cost Iraq a staggering $600bn since 2003.

In Iraq, 'mismanagement' includes fake projects and fake jobs. An estimated 9,000 works programmes, valued at $200bn, are entirely fictitious.

Furthermore, the government now supposedly employs six million people, with another four million retirees. Their salaries, often for work unknown, drain the treasury.

Syria's drug trade

Alongside Lebanon and Iraq, a third arena of influence for Iran is Syria, considerable elements of which remain broken following the civil war.

The Syrian regime of Bashar al-Assad is no stranger to militias, who have become known for their production in Syria of Captagon, a commonly-used brand name of fenethylline, a psychostimulant illegal in most countries.

The industry is worth billions of dollars, and in 2021, a New York Times investigation revealed that an elite division of Syria's armed forces, commanded by Bashar al-Assad's brother, was also heavily involved in the production and distribution of Captagon.

Read more: Does al-Assad hold the keys to dismantling the Captagon trade?

The article revealed that the 4th Armoured Division, commanded by Maher al-Assad, controls manufacturing facilities, packing plants, and supply networks.

A year earlier, the United States' Caesar Act came into effect. This sanctions the Syrian regime for war crimes.

According to the British government, four-fifths of the world's Captagon now comes from 11 main factories and 80 smaller plants in Syria, leading analysts to ask whether the country had now become a narco-state.

This picture, taken on July 27, 2022, shows a view of sacks of confiscated captagon pills at the judicial police headquarters in the town of Kafarshima, south of Lebanon's capital, Beirut.

Vast shipments of tablets, often numbering in the millions, are routinely intercepted at borders and ports in states such as Jordan and Saudi Arabia.

The situation in Syria differs from that in Lebanon and Iraq because the Syrian ruling regime is more brutal and destructive than the militias themselves.

That Syrian soldiers are attracted to the drug trade is not surprising. A Syrian soldier's pay typically ranges from $15 to $35, compared to $1,100 offered by Russian forces to recruits to join the militias they support in Syria.

Yemen's Houthis

Iran's southerly outpost is in Yemen, where its subversive influence has plunged the country into years of civil war.

Iran's support for the Houthis, both financially and militarily, has let this tribal militia seize state institutions. It took the capital, Sana'a, in 2014, causing the minister to flee.

Read more: Houthi militias: A minority group with a majority stake

Like other militias in the region, the Houthis have created parallel and competing entities to bring in revenue and enhance influence.

The General Authority for Zakat, the General Organisation for Electrical Industries and Renewable Energy, and the Supreme Economic Council are all examples of how the Houthis are emptying the pockets of ordinary Yemenis.

This is in addition to the Department for the Coordination of Humanitarian Affairs and Disaster Recovery, which is illegally linked to the militia-controlled Ministry of Planning and International Cooperation.

According to the UN, the Houthis now get $1.3bn annually from taxes and zakat (religious donations).

They have also established their own 'justice system' to control courts, judges, court secretaries, and notaries of sale and purchase contracts, with the aim of controlling the real estate sector, which generates substantial additional revenue.

Dominant at home, they have now branched out to international waters, conducting piracy in the Straits of Hormuz and Bab-el-Mandeb and the Red Sea.

According to the UN, the Houthis get $1.3bn annually from taxes and zakat (religious donations). They also have their own 'justice system' to control courts and notaries of sales contracts.

Analysts suspect that, although this purports to side with Palestinians, it is in fact a form of blackmail of the international community on behalf of their Iranian benefactor.

Such tactics are not beneath them. The Houthis began looting soon after their coup in 2014, seizing what was left of the country's cash reserves, estimated at $5bn.

Iranian oil smuggled to the Houthi militias contributes to their wealth. There are now about 30 oil companies affiliated with the group's senior leadership, who control many of Yemen's ports and borders.

Around 65% of Yemen's imported fuel now comes in via areas controlled by the Houthis. This could increase if they take more land further south.

Libya's smuggling network

In North Africa, there is a country with two competing centres of power home to an estimated 300 militias: Libya.

Years after the overthrow and killing of former dictator Muammar Gaddafi, no single government has emerged capable of extending its authority across the country.

The two parties to the conflict are the legitimate government in Tripoli in the west and the Tobruk government loyal to Khalifa Haftar, leader of the Libyan National Army, in the east.

Libyan National Army (LNA) members, commanded by Khalifa Haftar, pose for a picture as they head out of Benghazi to reinforce the troops advancing to Tripoli, in Benghazi, Libya April 7, 2019.

Read more: Libya's politics of division

General National Congress in Tripoli, also known as the National Salvation Government, agreed to integrate militias into state military and security institutions and to expel mercenaries and foreign forces in June 2022.

It was as much in recognition that Libya's economy had been under the control of militias since 2011, a phenomenon known as the "militarisation of the economy".

This demonstrates the extent of influence militias now enjoy at the expense of statehood. With militias sprouting like mushrooms, the state committed to supporting all armed formations, building corruption from the outset.

When militias in Libya have fought, it has not been over sovereignty but over smuggling routes for weapons, drugs, fuel, and people, which can be far more lucrative. People smuggling alone is worth up to $200mn in Libya, a launch pad for Europe.

This "economic cartel" activity has grown in recent years and is now worth around 60% of the overall economy. Sales of hydrocarbons account for 20% of militias' income.

Given the enrichment opportunities afforded by the Libyan currency on the black market, the Central Bank of Libya's decision-making process is vulnerable to bribery or pressure from militias.

Of far higher value, however, are the oil fields and ports. In the years after Gaddafi's fall, militias held Libya to ransom by shutting both down, inflicting an eye-watering $160bn in estimated lost revenue for the country over five years.

In April 2022, they closed six oil fields and export terminals. Oil production went from one million barrels per day to 400,000, according to the National Oil Corporation, costing Libya – an OPEC member – hundreds of millions of dollars.

Libya's "economic cartel" activity is now worth around 60% of the overall economy. Sales of hydrocarbons account for 20% of militias' income.

Sudan and its gold

In Sudan, a civil war lasting ten months shows no signs of ending. It is being fought between two army generals. At stake is the governance of a gold-rich country that has remained largely ungoverned since a military coup in 2019.

Militias here, which largely adhere to tribal loyalties, have been accused of committing all manner of violent crimes against Sudanese civilians.

Some accusations have been levelled at the Rapid Support Forces (RSF), led by the First Vice President of the Transitional Sovereignty Council, Mohamed Hamdan Dagalo, known as 'Hemedti', although all parties stand accused.

The militias in Sudan have fought over land, water, oil, borders, and the multimillion-dollar gold trade. The RSF has enlisted the help of Russia's mercenary outfit, the Wagner Group, which is active across several African states.

Julius Maxim

Read more: In Sudan, he who has the gold makes the rules

According to reports, Wagner has plundered Sudan's gold to help pay for the war in Ukraine, yet they were first invited to Sudan back in 2017 by former dictator Omar al-Bashir, who used the precious metal to entice them to support him.

After al-Bashir was ousted, unemployment and poverty shot up, and the Sudanese Army essentially looted about 80% of the public purse through its affiliated companies.

It has sought to use the money to buy loyalty, much as al-Bashir did, but the RSF appears to be winning the PR war despite the heinous accusations being levelled against it.

Economists estimate lost revenue from Sudan's civil war at about $100mn per day, while the value of public goods and property stolen by armed groups since 2019 may now top $40bn.

Economists estimate lost revenue from Sudan's civil war at about $100mn per day, while the value of public goods and property stolen by armed groups since 2019 may now top $40bn.

Heroes and villains

Armed resistance in a country under occupation is heroic. Less heroic are groups that are armed, in countries that are broken, feeding off the state and the innocent while taking direction from abroad.

These groups are militias.

An armed resistance movement is values-driven, seeking to change the political landscape in a specific time and place for no personal profit.

Militias, by contrast, feed on conflict, war, dispute, and weakness in the search for power and wealth. They bleed the state dry until its economy is subordinate to them. From this, they make quite a living.

Expect them to continue.

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