Merchant of Death: Money, Guns, Planes, and the Man Who Makes War Possible

by Douglas Farah

  As the international community debated how to respond to the carnage, the Muslim world raced to aid the Bosnian Muslims. Hundreds of battle-hardened mujahideen who had fought with Osama bin Laden in Afghanistan descended on Bosnia. Giddy at having defeated the former Soviet Union and anxious to prove that Allah would perform another miracle, the militant fighters viewed the Bosnian conflict as an opportunity to establish an Islamic state near the heart of Europe.11

  The fundamentalist Islamic regime of Sudan, a country where Bout was already developing close ties with senior leaders, was at the forefront of the efforts to supply Bosnia. The vast desert nation had just installed a regime that would soon embrace Osama bin Laden and other terrorists from around the Islamic world. The Sudanese effort was aided and abetted by the fundamentalist Islamist regimes of Saudi Arabia and Iran. Despite religious differences between the Sunni Muslims of Saudi Arabia and Sudan on one side and Shi’ite Iran on the other, the donors were able to put aside their sectarian disagreements to work for a common Islamic good.

  The primary weapons broker for the Muslim side was an obscure organization called the Third World Relief Agency (TWRA).12 TWRA was no-run-of-the mill charity. From 1992 to 1995, when it was shut down by Austrian officials, some $400 million flowed through the organization’s coffers, including donations from a who’s who of Muslim radicals and al Qaeda supporters. Among the prominent TWRA supporters was bin Laden, who was moving his newly minted al Qaeda operation from Afghanistan to Khartoum, Sudan.13

  The infusion of cash beginning in early 1992 allowed for the Bosnian miracle the mujahideen prayed for. In July 1992 TWRA received more than $20 million for a single account in the First Austrian bank. Three months later a Saudi government official walked into the same bank with two suitcases stuffed with cash and deposited another $5 million.14 Flush with money, TWRA embarked on a weapons-buying spree. By September 1992 an Il-76 was making weekly flights from Khartoum to Maribor, an airport in Slovenia, next to Bosnia.15

  The plane had been hired from Bout’s fleet. “The TWRA agency had their first big operation in September 1992,” said a multiagency European intelligence assessment of the Maribor operation. “They hired a Russian transport plane, from well-known sanctions buster and arms trafficker Victor Bout, out of Khartoum, the Sudanese capital, to transport equipment over to the Maribor Airport marked as humanitarian aid. However, instead of humanitarian assistance, the plane carried over 120 tons of Soviet manufactured rifles, RPG’s, mines and ammunition.”16

  It is not clear how TWRA found Bout or how he found them.17 But because of the lack of American understanding in the early 1990s about both the Bosnian conflict and the radical nature of the Islamic forces arming Bosnian Muslims, the Clinton administration allowed the weapons shipments by Bout to proceed.

  A senior Western diplomat in the region said the Clinton administration knew about TWRA and its activities beginning in 1993 but 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 American 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.”18

  Militant Islam was not yet perceived to be a national security threat in 1992. None of the fund-raising and other terror-related activities that would recur in al Qaeda’s future campaigns were yet illegal, and the pervasive roles of nonstate actors, from terror-based charities to weapons merchants such as Bout, were not even dimly perceived as threats in U.S. policy and intelligence circles.

  Austrian officials, in a refrain that would become familiar in the hunt for Bout, also failed to move against TWRA. They had documented the organization’s weapons-trafficking activities but were unable to take action because none of the shipments actually passed through 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.19

  Viktor Bout set up shop in Sharjah, in the United Arab Emirates, in the spring of 1993. He needed a secure hub for his growing operation. As Bout grew from footloose trafficker to international businessman, he need a more organized, stable operation. Sharjah was perfectly located for flight routes to Afghanistan, Bosnia, Africa, and other places where his business was expanding. The first known record of a Bout firm is a trade license issued by the United Arab Emirates’ Ministry of Justice on March 11, 1993, to the Transavia Travel Agency. The firm’s business activities were listed as “travel, cargo, tourist.” The license was registered to “Victor Butt” and an Emirati businessman who served as Bout’s local sponsor in Sharjah. 20 “Transavia was just a travel agency,” scoffed longtime Bout associate Richard Chichakli, who worked in Sharjah during the mid-1990s and later ran a Bout-network firm called Trans Aviation Global Group, Inc.21 But U.S. officials said Bout repeatedly used several permutations of the Transavia name for his air operations.22

  Alexander Sidorenko, the veteran paratroopers and air industry figure who worked early on with Bout, said he brought Bout and his brother Sergei to the emirates, touting the UAE’s prospects as a strategic business location. “I introduced them to the sheikhs, to representatives of big air companies,” Sidorenko said.23 Bout has said only that his business took off exponentially in 1993 after his planes started flying out of the UAE. Russians began flocking to the emirates soon after the Soviet Union collapsed, first as vacationers, then as consumers and merchants.

  The emirate of Dubai, where many visiting Russians disembarked, offered cut-rate and duty-free shopping and a wealth of Western products that the amazed visitors could not obtain even in the most exclusive stores in Moscow. Eager to profit on a wave of conspicuous consumption once condemned as decadent and bourgeois, expatriate Russians settled into Dubai by the thousands, hawking everything from jewelry and electronics to prostitutes. “Dubai became one big mall full of Russians,” recalled an American diplomat stationed in the region. “They’d come off the planes with empty shopping bags. The nouveau riche would buy up TVs, VCRs, every electronic item they could get their hands on. Pretty soon you had the Russian Mafia in place and hundreds of hookers in the streets and hotel rooms.”24

  Bout shrewdly realized that he could make a windfall by bringing the UAE’s products directly to Russian buyers. His planes were soon flying appliances and other coveted goods out from Dubai and Sharjah and back to the motherland. His profits soared as he sold everything from flowers to IKEA furniture to pencils.

  The UAE seemed a perfect match for Bout’s profit lust. The federation of seven sheikhdoms welcomed foreign-owned companies with economic incentives, low taxes, and weak, laissez-faire oversight. There were no requirements for banks to practice basic “know your customer” policies, and there were virtually no financial regulations on the books. Money laundering was not criminalized until 2002, and then only under strong international pressure.

  Unified as an independent nation in December 1971 after decades as a British protectorate, the emirates had plunged into three decades of feverish growth. The UAE was governed by Sheikh Zayed bin Sultan al Nayhan, an autocratic Bedouin whose extended royal family steered the new nation’s commercial expansion. The sheikh centered the UAE’s national government in his home base of Abu Dhabi, the largest and richest of the sheikhdoms, where the royal family kept lucrative interests in the vast oil reserves beneath the dunes.

  Dubai, a bustling gulfside emirate to the north, made up for a lack of natural resources by exploiting its role as a vital sea and air center connecting the Arabian peninsula to Pakistan, India, and the Middle East. It also became the center of the world’s gold trade, a vital commodity in the Pakistani, Indian, and Arab cultures.

  Arab traders, pirates, and smugglers had operated out of Dubai’s souk, or marketplace, for hundreds of years, and even into the 1990s, they still plied t
he waters off Dubai in their dhows, curved wooden sailboats that carried every conceivable cargo, legal and black market. Under the commercially savvy Makhtoum family, Dubai pulsed with economic growth. The special gold souk takes up several city blocks of the downtown areas, jammed with stores that sell only gold and gold jewelry. It is so safe that the businessmen walk the narrow corridors with suitcases full of gold or cash, with no security. No matter what time of year, the gold souk is lit up with so many lights at night that it makes New Year’s Eve on Times Square in New York look dim in comparison.

  Glass- and aluminum-faced office towers sprang up over the waterfront, and lavish new hotels tended to the whims of wealthy sheikhs and tycoons. The most spectacular was the Burj al Arab, fashioned in the shape of an angular dhow sail, where diners were taken by submarine to an underwater restaurant and prime suites cost $15,000 a night, each equipped with a butler.

  The young crown prince of Dubai, Sheikh Mohammed bin Rashid al Makhtoum, was the architect of Dubai’s fever-pitch growth and a major investor in the emirate’s massive development projects. A horse fancier who owned stables in Kentucky, the prince backed the Dubai World Cup, the world’s most lucrative racing stakes. He was also a self-proclaimed poet and inventor, funding the cross-breeding of a llama and a camel that he called “Rama the Cama.” And as the UAE’s defense minister, he openly admired the Taliban in the late 1990s, playing a key role in the emirates’ decision to recognize the militant Islamic regime.

  Under the prince’s watch, Dubai’s seaport became a free-trade zone that lured foreign investors by eliminating taxes and duties. Dubai International Airport rapidly grew into the busiest air hub in the Middle East, a sprawling glass-and-steel complex constantly chilled to below seventy degrees despite the unrelenting desert heat that surrounds it. The structure hosts more than a hundred airlines and has miles of motorized walkways and a sprawling, duty-free bazaar crammed with cheap electronics, jewelry, perfume, and liquor stores. To keep wealthy passengers amused, Dubai officials staged a monthly raffle at the airport, charging visitors $100 and up to buy tickets for giveaways of Porsches, Mercedes, and Rolls-Royces. “In one sense, they were mimicking the American business culture, but it was the most freewheeling commercial atmosphere I’ve ever seen,” said the American diplomat. “Their desire to stimulate business growth was so great that they lost control over everything, good businesses and bad.”25

  Sharjah, an emirate southwest of Dubai, also coveted business growth, but was late to the race. The emirate’s city center was a drab cluster of brown office buildings and mosques where residents practiced a strict form of Islam similar to the puritanical tenets of Saudi Arabia’s Wahabism. Liquor sales were forbidden, and officials had once banned the wearing of short pants. The ruler, Sheikh Sultan bin Mohammed al Qassimi, had tried to distinguish the emirate as a center of Muslim learning by building Islamic universities. But by the 1990s, impatient Sharjah officials turned to their sleepy airport as an economic engine.

  A one-runway field that opened in 1977, Sharjah International Airport could not hope to catch up to rival Dubai as a hub for passenger airlines. But officials began wangling financial incentives to lure foreign-owned air freight firms in the hope of turning the airport into a major cargo center. By the time Bout arrived in Sharjah in 1993, airport officials were touting plans to open a major free-trade zone similar to Dubai’s seaport, eliminating taxes and import and export duties for companies that relocated there. As work crews broke ground in 1995 at an abandoned military base near the airfield, Sharjah officials hired a Syrian-born former U.S. Army sergeant as the free-trade zone’s new commercial manager. He was Richard Chichakli, who would soon become Bout’s close friend, confidant, and business associate. “Sharjah always felt it was living in the shadow of Dubai,” Chichakli said later, explaining the emirate’s desperate push for expansion.26

  Richard Ammar Chichakli emerged from a large, influential Syrian family that he later described as decimated by a wave of politically motivated murders and jailings. Chichakli escaped by studying in the early 1980s at Riyadh University in Saudi Arabia, where he claimed to have met and befriended Osama bin Laden and many of his siblings. The two students often sat over sandwiches, singing. Bin Laden was “a lot of fun” in those days, Chichakli recalled. Chichakli moved to Texas in 1986, obtained American citizenship, and joined the U.S. Army, serving in the first Gulf War and earning several decorations. He remained a soldier until 1993, specializing in aviation, interrogation, and intelligence.27 Then he returned to the Middle East, relocating to Sharjah to tout the emirate’s free-trade zone to skeptical businessmen and diplomats. “The U.S. attaché there laughed at us,” Chichakli recalled. “He didn’t think it would work.”28

  Chichakli’s efforts paid off handsomely. The free-trade zone opened in June 1995 with 55 foreign firms, a number that quickly doubled in 1996 and grew to more than 2,300 companies by 2003. Sharjah’s airport was soon crowded with more than 160 air cargo firms and freight forwarders. A trim, blunt-spoken man known among friends as “Stone Face” for his somber countenance, Chichakli moved easily among Russian airmen and emirati princes, sheikhs, and moneymen, constantly talking up the virtues of his free-trade zone.

  One of his earliest converts was Viktor Bout, who moved his air offices into the zone and also invested in the facility. The two men had met at an air show in 1993. “We used to sit ass to ass on the runway and smell the kerosene,” Chichakli recalled.29 They remained friendly as Bout’s operation grew at Sharjah, adding dozens of planes, hangars, and a cavernous avionics shop that would eventually employ scores of mechanics and crewmen. Bout’s primary operation in Sharjah was San Air General Trading FZE, a holding company that controlled several other companies that operated in Sharjah. A similarly named firm later opened a branch in Richardson, Texas.30

  When Chichakli left his free-trade-zone job in 1996, he began doing consulting work for Bout. Returning to the Dallas suburb of Richardson, he earned an accounting degree at the University of Texas, Dallas, and began working as a CPA. According to a 2000 résumé cited by U.S. Treasury officials, Chichakli identified himself as the controller and chief financial officer for Air Cess, Air Pass, and Centrafican Airlines—all key Bout-linked firms. (Chichakli later denied those roles, insisting the résumé was a fake.)

  Chichakli blithely downplayed his work for Bout, saying he only “provided some accounting advice here and there. I’m a gun for hire. I helped him advance his cargo business.”31

  As Bout’s businesses boomed, he generated millions of dollars that moved through the accounts of various front companies and partners. The UAE’s lax banking standards were already an ongoing concern among some of the Gulf nation’s largest banks, whose senior officers worried that the unbridled freedom of emirates’ financial structure was leaving them open to fraud and damaged reputations. A 1999 internal audit by the Sharjah branch of HSBC Holdings PLC, a major bank, found that hundreds of Russians had opened 1,186 bank accounts in that branch office—and that the rapid turnover in the accounts indicated “money laundering on a massive scale.”32

  Among the Russian accounts—later shut down by auditors—were several belonging to the “Semenchenko Group,” named for Andrei Semenchenko, who was listed on paper as the sole proprietor of San Air General Trading, a Bout-network firm later targeted by the U.S. Treasury Department. The “group” included San Air General Trading and several individuals who ran the company accounts. The report found that “a number of unusual transactions (including large cash transactions and transfers to a local money exchange) have taken place over the [San Air] account over the past year.”33

  In one case the auditors found that an individual in the Semenchenko Group named Maridiboy Kakharov, an Uzbek national “believed to be closely connected to San Air,” had a declared income of $817 a month. Yet he had a turnover of $1.53 million through his account from December 1998 to February 1999, prompting the bank to note that such transactions are “clearly not commens
urate with this level of salary.” The report noted that Kakharov’s account had received a transfer of $648,017 from the “Uzbekistan Ministry of Defense” during the period in question. An internal HSBC June 11, 2000, memorandum said that an internal bank compliance officer “has acknowledged that the bank is guilty of money laundering in the case of the Semenchenko Group at Sharjah branch.” But the compliance officer concluded that in the absence of any UAE law making money laundering illegal in the emirates, “the bank is under no legal compulsion to inform the central bank of the UAE.”34

  By 1995, Bout’s Sharjah airport operation had become the nerve center of an expanding Third World operation and his financial situation was improving dramatically. Already regularly flying weapons shipments into Afghanistan, Bout’s Sharjah-based Transavia flagship was also active in Africa.

  With many of his planes already settled in Sharjah, Bout moved in March 1995 to add a European hub at Ostend, a seaport on the Belgian coast. He set up an office in Ostend for another tentacle of his Transavia operation, using the name of the NV Trans Aviation Network Group, also known as the TAN Group.

  The tiny Ostend airport, less than a mile from the North Sea, was ideal. It was one of the few airfields in Western Europe that still allowed the large Antonovs and Ilyushins to land on its runways. The deafening engine noise from the Russian-made aircraft had already led many other European airport officials to ban them from their fields.