DID Osama bin Laden bankroll the slaughter of children in Beslan? President Putin argues that the tactics used by the terrorists are those of al-Qaeda, therefore that the funding must come from it too. He desperately wants Beslan to be portrayed as the Russian 9/11 — a new front in the international war on terrorism — because the alternative is too ugly to consider. But the Chechen chahids are the cheapest suicide bombers available on the terror market. Their cost is only the explosive they carry plus transportation.

The truth is that Beslan is the beginning of the final chapter in the destabilisation of the Caucasus, which is dangerously close to turning into a full-blown multi-ethnic conflict. This would be a Hobbesian war bankrolled not by al-Qaeda, but by the Caucasus’s prosperous terror economy.

The seeds of this booming economy were sown by the generosity of some of the sponsors of the Mujahidin in Afghanistan during the anti-Soviet jihad. In the early 1990s the Northern Alliance — then funded by the Russians — blocked the advance of the Taleban. To weaken the coalition of warlords from the North, al-Qaeda and its Muslim sponsors decided to force the Russians to fight on a new front by fostering a conflict in the Caucasus: the fight for independence in Chechnya provided the golden opportunity.

The Chechen Islamist guerrilla groups were then weak and poorly funded; bin Laden and his network of sponsors strengthened them militarily and financially. In 1994, some Islamist elements in Pakistan’s intelligence agency, ISI, began nurturing Shamil Basayev, a young Chechen fighter. Trained and indoctrinated in the Amir Muawia camp, near Khost in Afghanistan, Basayev returned to Chechnya to form the first army of Chechen jihad.

Veterans of the anti-Soviet jihad soon arrived in Chechnya, among them the Jordanian-born Khattab (a pseudonym), whom Basayev had met and befriended in Pakistan. Khattab was close to bin Laden and his network of financiers and administered the money. In 1995, a Saudi charity funded his journey to Chechnya, together with several training camps, while bin Laden contributed $25million towards the jihad in Chechnya.

The Chechen Islamist guerrillas, following the blueprint of the anti-Soviet jihad, were encouraged to become self-sufficient by linking up with the local criminal economy. Basayev, and later Khattab, established business links with criminal organisations in Russia as well as Albanian organised crime and the Kosovo Liberation Army. These alliances proved fruitful in generating profits from the drug trade and the smuggling of contraband, especially arms.

A buoyant war economy began to take shape and soon Chechnya became an important hub in the region for various rackets — counterfeiting dollars, money laundering and kidnapping. Khattab, in particular, showed remarkable business acumen when dealing in the murky world of crime and terror. In 1998, he negotiated with Granger Telecom, a British company installing mobile communications systems in Chechnya, a ransom of $4 million for three British engineers and a New Zealander kidnapped by his group. When bin Laden demanded their deaths, Khattab requested a higher price. Bin Laden counter-offered £4 million. The four were the first Western hostages to be beheaded by an Islamist terror organisation.

Before the second Chechen war in 1999, Islamist armed groups tapped into the prosperous industry of oil theft and smuggling. One of the most important Russian pipelines carrying oil and gas from the Caspian region passes through Chechnya. Tankerloads of petrol began crossing the Caucasus, heading wherever there was demand.

From Chechnya, the joint venture between crime and terror spread into neighbouring countries, helped by porous borders and political infighting. The Pankisi gorge which links Chechnya, Georgia and the Kadori gorge, a valley situated between Georgia and the irredentist region of Abkhazia, has a thriving smuggling industry. As in Afghanistan, smuggling of arms, drugs and oil not only funded the insurgency, it spread Islamist insurgency, reigniting old and starting new conflicts.

Beslan is not Russia’s 9/11, but a reminder that since the early 1990s the economics of Chechen terror has seeped into the entire region. The Caucasus is on fire. Al-Qaeda merely supplied the match.

Loretta Napoleoni is the author of Terror Inc: Tracing The Money Behind Global Terrorism

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