Exploiting Vulnerabilities in Lebanese Hezbollah’s Continuing Narcotics Finances

Exploiting Vulnerabilities in Lebanese Hezbollah’s Continuing Narcotics Finances

Doug Livermore

Executive Summary

Lebanese Hezbollah, in the face of dwindling external financial support from the Iranian government between 2006 and 2012, diversified its funding streams by establishing lucrative and expansive narcotics smuggling and sales networks around the world. This narcotics trade is now arguably Hezbollah’s largest consistent source of revenue, enabling it to conduct terrorist activities, fund its charitable projects in Lebanon, and portray itself as a legitimate political and resistance movement. Since 2012, the savage civil war in neighboring Syria brought renewed and increased levels of support from the Iranian government, particularly those provided by the Iranian Revolutionary Guard Corps (IRGC). IRGC operatives have trained, advised, equipped, and led into combat tens of thousands of Lebanese Hezbollah fighters in support of the tyrannical Syrian regime of Bashar al-Assad. However, as the Syrian conflict enters its endgame, it is likely that Iranian support will again wane from its “wartime” zenith, making Hezbollah’s illicit narcotics networks of continuing importance to the future finances of this transnational terrorist group.

Regardless of the reliability of future Iranian government funding, Hezbollah’s likely continued involvement in the narcotics trade creates vulnerabilities that the international community can exploit to hinder Hezbollah’s violent and destabilizing activities throughout the region. The international community should increase its already persistent and comprehensive pressure, both on Hezbollah’s narcotics networks and the financial mechanisms on which the group relies to launder, transfer, and access the funding generated through the illicit drug trade. The U.S. has led this effort through the passage of the “Hezbollah International Financing Prevention Act” in 2015.[i] While it is unlikely that the international community can completely stop Hezbollah from generating funding through the narcotics trade, any efforts to limit the flow of narcotics revenue to the group will drastically increase their “cost of doing business”. In turn, this will reduce the overall funding available to Hezbollah to undertake its nefarious agenda.

Shifting Lebanese Hezbollah Revenue Streams

Since its inception, Lebanese Hezbollah has relied heavily both on charitable donations from its global contributors and on massive Iranian government support to fund its governance efforts and terrorist operations in the Middle East and around the world. In the early 1980s, the Iranian government sought to consolidate the disparate Shia Muslim militant groups then operating in Lebanon against the Israeli occupation, leading to the creation of Hezbollah in the early 1980s.[ii] For the first two decades of its existence, Hezbollah operated openly as an Iranian proxy committed to the expulsion of “the Americans, the French and their allies definitely from Lebanon, putting an end to any colonialist entity on our land.”[iii] Hezbollah conducted guerrilla attacks to harass the Israeli occupation forces, which finally withdrew from Lebanon in 2000.[iv] Additionally, Hezbollah conducted rocket attacks and armed raids into northern Israel, which killed dozens of Israeli civilians and resulted in the capture of several Israeli soldiers.[v] More than just a popular resistance movement, Hezbollah was a potent proxy in the Iranian “shadow war” against Israel.

These raids culminated in the 2006 Lebanon War, when Israeli forces retaliated for Hezbollah provocations, exacting a heavy toll on the group and, collaterally, Lebanese civilians.[vi] In 2008, Hezbollah secured a veto-proof majority in the Lebanese government in addition to legislatively cementing its ability to field its own armed elements.[vii] Many experts believe that Hezbollah now maintains a paramilitary force larger and more capable than the official Lebanese Armed Forces (LAF).[viii] It has taken Hezbollah nearly a decade to achieve its immense paramilitary capability and capacity, an effort that has largely been funded by Hezbollah’s involvement in the international narcotics trade.

Inconsistency in Iranian financial support following the end of the 2006 Lebanon War caused Hezbollah to seek sources of more reliable revenue. At this stage, Hezbollah was already engaged in marijuana cultivation in Lebanon and smuggled the product throughout the Middle East, though for unimpressive profits.[ix] However, Hezbollah’s leadership recognized that, to secure the level of funding required to expand and sustain its operations, a more lucrative product was needed. In pursuing this goal, Hezbollah forced its way into several illicit marketplaces by leveraging the far-flung Lebanese diaspora, especially in Central and South America. Hezbollah used these Lebanese contacts to form relationships with the key Central and South American drug cartels involved in the narcotics trade.[x] Through such relationships with the drug cartels, Hezbollah secured access to considerable quantities of illicit narcotics that it then smuggled and sold across North Africa, Europe, and the Middle East. Between 2006 and 2012, the Iranian government provided critical support to this effort by allowing Hezbollah to smuggle the cartels’ narcotics on its state-owned Iran Air flights across North Africa and the Middle East.[xi] In most cases, Hezbollah shared the resultant profits gained at the “point of sale” with the drug cartels and IRGC intermediaries, which required financial mechanisms to launder and transfer funds either as money or goods of similar value.

The Central and South American drug cartels were only too eager to enter into such profitable illicit business arrangements with Hezbollah. However, in many cases, the cartels and even the Lebanese expatriates serving as middlemen, were unaware that their efforts were intended to materially benefit Hezbollah. Many of these deals occurred in the murky “gray area” where Iranian intelligence, Hezbollah operatives, and legitimate Lebanese business overlapped. Regardless, several experts in the field assess that the drug cartels cared little about the ideology of their partners—as long as their “product” was moved and sold at a profit.[xii] It seems that the only stipulation placed by the cartels on Hezbollah and its proxies was that they refrain from engaging in terrorism in the cartels’ territory or overtly mix drug smuggling networks with terrorist efforts. Far from a moralistic aversion, such restrictions had more to do with protecting the cartels’ lucrative narcotics trade by isolating it from the increased scrutiny afforded Hezbollah’s terrorist activities.

Given the enormous amounts of money Hezbollah has made in the narcotics trade, it is not hard to understand Hezbollah’s eager acquiescence to these limitations. By focusing exclusively on drug smuggling and money laundering in the Americas, Hezbollah keeps international attention limited within on the challenges posed by the narcotics trade that is already pervasive in the region. This explains the relative absence of Hezbollah terrorist activities in Central and South America, with a notable exception being the 1994 Hezbollah bombing of the “Asociacion Mutual Israelita Argentina” Jewish center in Buenos Aires.[xiii][xiv] Aside from this event, Hezbollah seems content to use Central and South America as a powerful engine in its revenue generation and money laundering enterprises. When discussing the threat posed by Hezbollah’s global networks, most experts agree that the group would be very wary of operationalizing or using its narcotics and money laundering networks for other more violent purposes.[xv] Doing so would bring unwanted attention to these networks and likely damage Hezbollah’s most profitable revenue stream.

In order to materially benefit from this narcotics trade, Lebanese Hezbollah also implemented a wide-ranging and complex web of financial mechanisms to purchase the drugs, fund the smuggling networks that transport the drugs to market, launder the proceeds of the sales, and access the “cleaned” funds for use--either for legitimate social programs or illegitimate terrorist and other militant purposes. Hezbollah has further leveraged the Lebanese expatriate community around the world to establish businesses, financial institutions and accounts, money transfer services, and other diverse means to accomplish the goals of placing, layering, and integrating illicit funds originating from narcotics.[xvi] Hezbollah-controlled businesses around the world, including those in the U.S., play an important role in these efforts, often engaging in trade-based value transfer for goods of similar value and laundering of bulk cash.[xvii] The high portability and cash value of so-called “conflict diamonds” has seen Hezbollah become heavily engaged in that illicit trade across West Africa.[xviii] Less controversial goods, everything from generic medicines to counterfeit luxury items, have also seen widespread use in Hezbollah’s money laundering efforts.[xix] Under these schemes, illicit funds generated at the point of sale for narcotics are then used to purchase more benign goods for shipment back to the point of origin. Once the goods arrive in the country of origin, they are sold, and the drug cartels then receive their share of the profits.

Banks and money transfer services are also vital for the laundering and transfer of funds both through official and unofficial channels. One of the highest-profile instances of a US attack on Hezbollah narcotics networks involved the exposure of the Lebanese Canadian Bank (LCB) as a Hezbollah front used to launder money for Colombian and Mexican cartels.[xx] The U.S. Drug Enforcement Agency and Department of the Treasury exposed LCB as a Hezbollah front, leading to several indictments and the dismantlement of the narcotics-supporting financial network. Banks and institutions such as LCB are used to launder narcotics-associated funds and transfer the proceeds to areas where Hezbollah intends to support its agenda.[xxi] The funds are transferred through a mixture of witting and unwitting agents using personal and business accounts to mix illicit funds with legitimate monies. While banks and established institutions can more easily transfer large sums of money, they are subject to greater regulation and scrutiny. By comparison, money transfer businesses usually only deal in smaller sums and are less scrutinized by most financial regulators. When it comes to the involvement of many smaller banks and businesses in Hezbollah’s money-laundering activities, there are insufficient resources or economic interest on the part of Western nations to closely examine such exchanges.

Today, at the apex of Iranian monetary and material support to Hezbollah, the organization’s incoming revenue from its involvement in the narcotics trade far outstrips Tehran’s largesse. Hezbollah’s involvement in the narcotics trade is essential to continue funding the group’s operations since Iran’s contributions do not come close to covering Hezbollah’s current expenses. Despite claiming that all its expenses are covered by Iran, Hezbollah’s economic situation betrays the impossibility of this claim. At the height of the Syrian civil war and ongoing fight against the Islamic State of Iraq and al-Sham (ISIS), Iran was providing Hezbollah somewhere between $100 and $200 million dollars per year in direct funding and equipment.[xxii] By comparison, in 2011, the U.S. Drug Enforcement Agency and Department of the Treasury disrupted the LCB and narcotics smuggling ring led by Hezbollah member Ayman Joumma, that generated over $200 million every month.[xxiii][xxiv] Another important advantage of Hezbollah’s continued involvement in the narcotics trade is that it produces greater benefit to individual members throughout all associated networks. As long as the majority of profits make their way to Hezbollah’s coffers, the enrichment of individual operatives is of little concern. Narcotics is good business for Hezbollah and every indication is that Hezbollah will continue to expand its involvement in the drug trade.

In addition, revenue generated through narcotics trafficking does not include the expectation of “quid pro quo” that comes with Iranian state support. In return for a maximum of $200 million per year from Tehran, Hezbollah has provided tens of thousands of its best fighters to engage in Iran’s proxy wars in Syria, Iraq, Yemen, and elsewhere. From Hezbollah’s perspective, that exchange has come at a disturbing price. In particular, Hezbollah’s involvement in the sectarian Syrian civil war has damaged its legitimacy as a broad-based political movement.[xxv] Hezbollah’s current leader, Hassan Nasrallah, has recently faced growing dissent as Hezbollah losses have mounted in these campaigns of “foreign adventurism”.[xxvi] Finally, the colossal expenses required to fund these Hezbollah deployments throughout the region have severely strapped Hezbollah’s coffers. Even with Iran’s support, it is unlikely that Hezbollah would be able to fund these paramilitary operations without the additional narcotics revenue. Given these factors, it is highly probable that Hezbollah will seek to expand its narcotics trade to pay for current and future operations, while also trying to minimize Iranian control over the group to the greatest extent possible.

Current and Future Lebanese Hezbollah Threats

Lebanese Hezbollah has a long and well-documented history of violent and destabilizing activities that have caused death and destruction throughout the Middle East and further abroad. For years, Hezbollah has tried to shed its reputation as a terrorist group and rehabilitate its image to one of a legitimate political movement. However, the group’s continuing involvement in senseless violence throughout the Middle East has only highlighted the threat that Hezbollah continues to pose to global peace and stability. The current and projected threat posed by Hezbollah only reinforces the importance of restricting the group’s access to revenue streams associated with narcotics smuggling and sales. Restriction of these revenue streams will ultimately limit the ability of Hezbollah to propagate its violent ideology.

Originally formed under Iranian direction in the early 1980s to consolidate Shia Islamist groups opposing Israeli occupation of Lebanon, Hezbollah engaged in a persistent campaign of terror against Israeli military and civilian targets in Lebanon, Israeli, and elsewhere. As previously discussed, Hezbollah’s original mandate established its objectives of expelling foreign influence from Lebanon and opposing the alleged anti-Muslim conspiracy between the “Zionists”, Americans, and the former colonial powers. Hezbollah conducted one of the first officially-recognized suicide bombing campaigns against Israeli targets.[xxvii] Additionally, Hezbollah targeted other foreign elements in Lebanon and the region, most notably through their 1983 bombings of the U.S. Marine Corps Barracks in Beirut and the Khobar Towers in Saudi Arabia in 1996.[xxviii] The withdrawal of foreign forces from Lebanon clearly did not satisfy Hezbollah, which continued to attack Western and Israeli interests around the world. Hezbollah has savagely attacked government, military, and civilian targets around the world, often acting as a proxy force of the Iranian government.

More recently, Hezbollah has threatened regional stability in Iraq, Syria, Yemen, and elsewhere. In a continuing theme, Hezbollah engaged in many of these campaigns at the behest and under the direction of the Iranian government. It is often unclear where Hezbollah and Iranian interests fundamentally diverge, since recent years have seen disagreements between Nasrallah and Tehran. Iranian efforts to minimize Nasrallah’s influence have likely further encouraged Hezbollah’s efforts to diversify its revenue streams away from Iran. Regardless, during the U.S. invasion and occupation of Iraq, Hezbollah deployed many of its fighters to organize, train, arm, and assist Shia resistance groups that killed hundreds of American troops.[xxix][xxx] These Hezbollah fighters served under the direction of IRGC commanders, several of which were captured or killed by U.S. and Iraqi security forces. The U.S. withdrew its forces from Iraq in 2011 after failing to secure a “Status of Forces Agreement” (SOFA) with Baghdad, and Hezbollah has maintained a presence in the country ever since.[xxxi] At the same time, Hezbollah has continued its terror campaign against Israel, regularly launching rockets and raids against military and civilian targets inside Israeli territory.

In the last several years, Hezbollah and the IRGC have deployed additional troops to support Iranian objectives throughout the Middle East. Since the 2014 emergence of ISIS in Iraq, Hezbollah again deployed hundreds of its best fighters to enable Iraqi Shia militant groups (SMGs).[xxxii] These SMGs, many directed by Hezbollah and IRGC commanders, have been critical to the Iraqi effort to defeat ISIS and exert Shia influence in the historically Sunni-dominated areas of Western Iraq. The international community has legitimately accused Hezbollah-supported SMGs of widespread and horrific atrocities against Sunni, Yazidi, and Peshmerga ethnic populations across Iraq. Since at least 2013, Hezbollah has also deployed tens of thousands of fighters to neighboring Syria, where they serve as frontline troops supporting the brutal regime of Bashar al-Assad.[xxxiii] Hundreds of Lebanese citizens have fallen while fighting Sunni and Peshmerga rebels trying to topple Assad’s regime, and the strain on Lebanese society has created a growing chorus of discontent with Hezbollah.

Finally, Lebanese Hezbollah and IRGC operatives now play a critical role in supporting and perpetuating the ongoing civil war in Yemen.[xxxiv] That civil war has already killed tens of thousands of innocent civilians and led to what is arguably the worst famine in the modern era.[xxxv] The minority Houthi population of Yemen seeks to overthrow the recognized Yemeni government, which is friendly to Saudi Arabia, a longtime regional rival of Iran. As in Iraq and Syria, Hezbollah and IRGC operatives have organized, trained, equipped, and led Houthi rebels that currently occupy the Yemeni capital. The advanced weapons provided to the Houthis through Hezbollah’s smuggling networks include coastal defense cruise missiles, remote controlled “suicide” attack boats, and even ballistic missiles that the Houthis (or Hezbollah and Iranian agents) have used to attack international airports and other critical infrastructure across Saudi Arabia and in the United Arab Emirates.[xxxvi] All of these violent and destabilizing activities are at least partly funded and enabled using money raised through Hezbollah’s involvement in the international narcotics trade.

Hezbollah is constantly expanding its extensive criminal and terrorist networks around the world. Historically, Hezbollah has used these networks to attack Western and Israeli interests, and could potentially do so in the future. As previously discussed, Hezbollah has preferred not to use criminal networks to enable terrorist attacks, in order to isolate these lucrative revenue sources from the enhanced scrutiny that terrorism attracts.[xxxvii] Regardless, these narcotics networks materially contribute to Hezbollah’s activities and could readily be repurposed to support terrorist attacks should the Iranian regime face an existential crisis. Even though there is little indication that Iran would ask Hezbollah to make such a move, it is in the best interests of the international community to persistently and comprehensively constrict Hezbollah’s narcotics networks in order to remove their damaging potential.

Exploitation of Lebanese Hezbollah’s Narcotics Vulnerabilities

As already noted, Lebanese Hezbollah’s continued reliance on narcotics-based revenue requires that it maintain a complex and expansive web of financial mechanisms to launder, transfer, and materially benefit from the illicit funds. The Hezbollah drug trade creates significant reputational and law enforcement vulnerabilities for Hezbollah that the U.S. and its allies should exploit to further constrict Hezbollah’s narcotics smuggling and sales. However, Hezbollah’s financial networks that support its narcotics smuggling are even more vulnerable to exploitation given the enormous monetary and reputational risks that institutions involved with Hezbollah take by dealing with Hezbollah and its narcotics trade. While it is unlikely that the international community can ever completely disable Hezbollah’s narcotics trade, persistent and comprehensive pressure on its smuggling and financial networks will drastically increase the “cost of doing business” and ultimately limit funding available to Hezbollah for its regional and global terrorist activities. Every narcotics dollar that Hezbollah must use for its smuggling networks, financial mechanisms, and image-repairing propaganda is one less dollar available for buying guns, bullets, rockets, and paying fighters to spread violence across the Middle East and the world.

In nearly every country around the world, narcotics smuggling and sales are illegal and carry significant penalties. With this in mind, attacking Hezbollah’s narcotics networks from a purely law enforcement angle accomplishes the goal of constricting Hezbollah’s revenue stream without involving a complicated and controversial legalistic discussion of Hezbollah’s role both as a Lebanese political movement and a terrorist group. The U.S. and many of its key allies consider the entirety of Hezbollah to be a “foreign terrorist organization” (FTO), while a smaller group differentiates between Hezbollah’s political and militant wings.[xxxviii] However, Hezbollah portrays itself as a unitary actor with a single leadership structure, and is seen by many as a legitimate political movement, particularly given Hezbollah’s overt involvement in the Lebanese government and Lebanese daily life through its social programs.[xxxix]

Many past efforts to punish Hezbollah and its proxies involved in the narcotics trade have been decried as racially-based and unjust retribution against the Lebanese people. Western emphasis on Hezbollah’s terrorist activities and radical ideology makes it difficult for some partners, especially in majority Muslim countries, to overtly support efforts to attack Hezbollah’s narcotics and financial networks.[xl] Hezbollah spends considerable amounts of its ill-gotten revenue on vital social welfare programs and propaganda in Lebanon and elsewhere, buying it considerable good will on the Arab street.[xli] In many parts of Lebanon, Hezbollah has largely replaced the Lebanese government in providing governance and basic services.[xlii] Against this backdrop, it is understandable why Arab allies might be hesitant to move against Hezbollah’s narcotics networks if prompted on terrorism charges rather than traditional drug-related charges. By focusing on the law enforcement approach to attacking Hezbollah’s narcotics networks, the U.S. and its allies can provide a commonly accepted legalistic framework that most countries can openly and enthusiastically support. The U.S. should strengthen international law enforcement efforts with key partners while diplomatically pushing for more consistent narcotics-related national laws around the world. Hezbollah’s involvement in the international narcotics trade creates exploitable vulnerabilities that the law enforcement community can and should pursue in order to limit Hezbollah’s generation of revenue.

Hezbollah’s continuing involvement in narcotics smuggling and sales also poses considerable reputational risk to the group and its proxies given the widespread societal norms against selling and using drugs in much of the Middle East. The sale and use of narcotics is considered particularly sinful in every sect of Islam. This helps explain the lengths to which Hezbollah goes to try to discount the verifiable evidence of and recriminations lodged against its narcotics empire. Recently, Nasrallah made the unprecedented move of claiming that all of Hezbollah’s finances were paid by the Iranian government to try and shift attention away from Hezbollah’s involvement in narcotics.[xliii] Previously, it would have been unimaginable that Hezbollah would openly admit to being a “bought and paid for” lackey of Tehran. The comprehensive effort to “name and shame” Hezbollah-affiliated organizations and their proxies involved in the smuggling of narcotics and laundering of the proceeds has shined a bright light onto the group’s extensive involvement in the reviled trade. U.S. Drug Enforcement Agency indictments and Treasury Department designations related to narcotics smuggling and money laundering should be widely publicized and promoted by our key allies in the Middle East, as this will further expose the association between Hezbollah, its proxies, and the international narcotics trade.

Such associations also carry considerable reputational risks for banks, money transfer services, and other businesses who may or may not know that they are aiding and abetting Hezbollah in the smuggling and monetization of narcotics. After the U.S. Congress passed the Hezbollah International Finance Prevention Act (HIFPA) in 2015, the Lebanese central bank closed several hundred Hezbollah-linked accounts that it feared would tarnish the bank’s reputation and access to global financial markets.[xliv] Continuing and strengthening efforts to hold banks and other financial institutions responsible for their support of Hezbollah’s narcotics empire will further undermine this lucrative source of funding. Additional designations and internationally-coordinated efforts to sanction banks and other financial institutions that abet Hezbollah’s narcotics smuggling and money laundering efforts will force Hezbollah to spend additional profits on new methods to continue its operations.

Partly due to Hezbollah’s efficacy as a narcotic smuggling organization, drug abuse has risen exponentially across the Middle East. This, in turn, has caused growing dissatisfaction with Hezbollah and severely undermined the legitimacy of the organization. While Hezbollah got its start in the drug trade early in its history with marijuana cultivation and smuggling throughout the Middle East during the 1980s, it was its entry into the international narcotics market that saw the introduction of much harder drugs to its “offerings”. South and Central American cartels provided Hezbollah with heroin and cocaine, drugs with which Hezbollah flooded the European and Middle Eastern markets. Ironically, since then, Iran has seen a terrifying increase in hard drug addiction, much of it likely passing through Hezbollah’s smuggling networks. Only recently, the Iranian government has taken steps to crack down on the trade, finding that many of its own government agents are involved in the smuggling and sale of narcotics.[xlv] Growing anger in Iran and Lebanon with Hezbollah’s involvement in the international narcotics trade is another important vulnerability that the U.S. and its international allies can and should exploit to undermine Hezbollah’s legitimacy, funding, and operational capabilities.

Conclusion

In 2006, Lebanese Hezbollah was faced with a dire financial situation as Iranian monetary and material support waned, leading it to seek more reliable and profitable revenue streams. While Hezbollah had engaged in small-time marijuana cultivation and smuggling throughout the Middle East, it needed something more profitable. The group found just such an opportunity in the international narcotics trade, leveraging its contacts in the Lebanese expatriate community in Central and South America to form business arrangements with the most brutal drug cartels in the region. With newfound access to highly profitable heroin and cocaine, Hezbollah expanded its smuggling networks to deliver these products by way of North Africa to the largely untapped markets in Europe and the Middle East. Within a decade, Hezbollah was generating monthly revenue several times larger than Iran’s entire annual contributions. To support the laundering and transfer of these funds, Hezbollah also created an expansive network of banks, money transfer services, and other businesses to materially benefit from the drug trade. Despite Iran’s renewed support to Hezbollah since 2014, narcotics revenue continues to far exceed Iranian support. As such, Hezbollah will continue to rely on narcotics revenue to fund its destabilizing activities around the world.

In response, the international community should continue to consistently and comprehensively move to constrict Hezbollah’s narcotics smuggling and money laundering networks. There are considerable vulnerabilities created by Hezbollah’s continued reliance on narcotics revenue that can and should be exploited. As the narcotics trade is illegal nearly everywhere in the world, law enforcement efforts can constrict the flow of Hezbollah’s drug trade independent of any diplomatic considerations for the group’s involvement in the Lebanese government and broader society. Moreover, involvement in the drug trade creates considerable reputational risks both for Hezbollah and any organizations or individuals that participate in the smuggling or laundering of funds. Past campaigns to “name and shame” Hezbollah and its associates have drastically increased the cost, reduced the profit, and undermined the legitimacy of those engaged in the narcotics trade. While it is unlikely that these efforts will ever completely strangle Hezbollah’s drug trade, these coordinated efforts will reduce the funds available to Hezbollah to kill innocent victims and spread its ideology of destruction.

End Notes