Adama Diarra / Reuters file

Militiaman from the Ansar Dine Islamic group, who said they come from Niger and Mauritania, ride on a vehicle at Kidal in northeastern Mali in this June 16 file photograph.

TIMBUKTU, Mali -- A military helicopter arced through the dusty yellow haze and dropped onto the sand a few kilometers from Timbuktu on April 24, settling inside a ring of Islamists armed with AK-47s and anti-aircraft guns.

A general from neighboring Burkina Faso and a Swiss government aid worker emerged and joined an Islamist leader sheltering in a tent; they exchanged pleasantries over roasted goat and cans of fruit juice. About an hour later, after the Swiss official and Islamist leader had spent five minutes alone in the helicopter, a pickup truck arrived carrying Beatrice Stockly, a Swiss missionary who had been kidnapped nine days earlier.

"I don't know what they talked about, but soon after the Islamist left the helicopter, the hostage arrived," said a witness who was on the helicopter that whisked Stockly, who arrived wearing a veil, to freedom.

"The first thing that she did was remove the veil and eat a bar of Swiss chocolate."

Such exchanges -- usually secret -- lie at the heart of a multimillion dollar kidnap and ransom industry in West Africa's dry north. Governments, including the Swiss, deny paying ransoms, but deals are done, according to U.S. officials and Swiss government reports. Alongside networks smuggling everything from cigarettes to guns, people and drugs, they form a lucrative criminal economy that has helped drive this year's implosion in Mali, a state that has lost control of an area in its north bigger than France.

Flush with cash, al-Qaida-linked gunmen -- dubbed "gangster-jihadists" by French parliamentarians -- are now key players in a web of Islamists and criminal networks recruiting hundreds of locals, including children, and a trickle of foreign fighters. Among the shifting alliances, al-Qaida's North Africa wing, known as AQIM, has forged links with Malian Tuareg Islamists, and MUJWA, a group that splintered off from AQIM but still operates loosely with it. 

Islamic rule
The Islamists, who advocate a political ideology based on Islam, are trying to impose a strict form of Shariah law. At least three suspected criminals have been stoned to death or executed by firing squad in Mali while several others have had hands and feet amputated.

Almahamoud, a man from Ansongo who was accused -- wrongly, he says -- of stealing cattle, suffered an amputation in August. "They cut off my hand to make an example of me," he said. "They will continue mutilating people to impose their authority. I don't know how I will live with just one hand."

Traditional, moderate Islamic customs have been crushed. Music is banned, women cover themselves with veils and residents are flogged for smoking cigarettes or drinking alcohol. Ancient religious shrines central to the Sufi Islam practiced by many Malians have been smashed because they are deemed illegal by the hardliners.

The Islamists say they have been helped by the criminal economy -- including payments from the West.

"It is the Western countries that are financing terrorism and jihad through their ransom payments," said Oumar Ould Hamaha, who said he spoke on behalf of MUJWA. Referring to the various Islamist groups, he added: "We are separate but we all have the same aim, to fight for Islam."

For the region and the West, the challenge is to wrest back control of a vast desert area that, for now, is a safe haven for extremists and criminals. The stakes are high. With large airplane runways in Gao, Timbuktu, Kidal and Tessalit under Islamist control, Mali's north threatens to become a free-for-all for traffickers and terrorists.

"Their common interest is the lack of a state," said a former senior Malian intelligence official when asked to explain the relationships between AQIM, which has moved from peripheral to powerful force in the region, and other Islamist groups and criminal networks. "Fundamentally that is what links these people."

Ransom millions
The Sahara's modern-day ransom industry has its roots in February 2003, when a group of 32 European tourists were snatched in Algeria by the Salafist Group of Preaching and Combat, known as the GSPC. Some of the hostages were rescued by Algerian security forces, but the rest were freed after $5 million was paid by at least one European government, according to Stephen Ellis, an expert on organized crime and professor at the African Studies Centre in Leiden, the Netherlands, who has followed the Islamist group over the past decade.

"It set a precedent," said Ellis. The GSPC later declared allegiance to al-Qaida, changed its name to AQIM and turned its southern wing into a money-making operation. "They were back in business with that first round of payments," Ellis said.

In the years that followed, more than 20 other Westerners were kidnapped across the Sahel-Sahara band. Leaked cables from 2008 and 2009 from the U.S. Embassy in Mali's capital, Bamako, record sources telling diplomats that AQIM had offered to pay as much as $100,000 for captured Westerners, so long as they were not American, in the hope of extracting even higher ransoms. The gangster-jihadists knew Washington did not pay ransoms -- but that other countries did.

Western and regional security officials say kidnapping subsequently earned AQIM tens of millions of dollars, although no figures have ever been confirmed. Switzerland has come closest to indicating the sums involved, though still officially denying it has paid any ransoms.

A Swiss government report in 2010 confirmed the country had spent 5.5 million Swiss francs ($5.9 million) the previous year to free two hostages held in Mali. A separate parliamentary statement revealed that about 2 million francs went on paying Swiss staff involved in the operation. A spokesman for the department of external affairs declined to say where the rest of the money had gone.
"There is no hostage that has been released without a ransom. You have to be realistic," a senior West African official who has direct knowledge of hostage negotiations told Reuters. "The West has financed AQIM by paying ransoms for hostages."

The money has allowed the group to buy food, fuel, weapons and favor among local populations in remote zones of Mali's north. Fees have risen, too -- AQIM is currently demanding 90 million euros ($117 million) for the release of four French workers seized from a uranium mine in Niger in late 2010.

In Mali's north, residents have little doubt they are seeing the results of ransom payments. In August, rank-and-file members of MUJWA in the town of Gao were given large wads of cash soon after an Italian and two Spanish hostages were freed, according to two residents, both of whom had friends or contacts within the organization. One resident said the minimum payment was about $300.

Joe Penney / Reuters file

Children studying the Koran are seen at Al Firdauss Islamic school in the Malian capital of Bamako on Sept. 22.

Djibril Yalga, who repairs mobile and satellite telephones on a dusty street corner in Gao, said business was booming under Islamist rule and fighters with cash were ready to spend it to keep locals happy.

"Lots of people -- mostly gunmen -- come to charge their phones," he said, as Islamists perched nearby on pick-up trucks mounted with machineguns. "They pay well and seldom try and bargain. They let me keep the change."

Following the money
When a coup in March removed President Amadou Toumani Toure, it revealed a deep rot in a country once seen as a model of democracy for the region. Bamako had tried to run Mali's north through alliances with a local elite involved in criminality -- rather than by tackling long-standing issues -- and that accelerated the collapse as a power vacuum persisted.

AQIM's Sahara wing, led by two Algerians, Mokhtar Belmokhtar and Abou Zeid, has extended its influence partly through loose alliances. Its partners include Ansar Dine, a group of Tuareg-led rebels seeking to impose Shariah, and the Arab-dominated MUJWA, say both local and Western officials.

Money from criminal enterprises has enabled the Islamists to outgun rival rebel groups. "(The Islamists) can afford to pay people but we cannot," said Mohamed Attaher, a senior official with MNLA, a rebel group that kicked off an uprising in January but in June was pushed out of areas it had controlled by MUJWA.

The United Nations has evidence that Islamists enlisting children in Mali's north are paying their families a one-off fee of about $600 for each new young fighter, plus monthly payments of about $400, according to Ivan Simonovic, the U.N.'s assistant secretary-general for Human Rights.

Reuters journalists travelling in Islamist-held zones saw a handful of children in the ranks of the armed groups, some working as drivers while others, clad in khaki boubous (flowing robes) and black headbands, showed off how quickly they could take apart and reassemble their AK-47s. U.S.-based Human Rights Watch estimates hundreds of children, some as young as 12, have been recruited into the Islamists' ranks.

"There are young fighters -- our doors are open to everyone," said Ould Hamaha, the MUJWA spokesman. "If they are very young we will be able to train them. It is not a problem."

The drug connection
As well as ransoms, drug money is funding the rebels and terrorists. The Sahara has become a transit point not just for hashish but also for some of the Latin American cocaine and Afghan heroin destined for Europe. For those who know the desert, such as Mohamed, a young Arab-Tuareg from Timbuktu, the trade has been a bonanza.

Having ferried subsidized fuel from Algeria to sell at a profit in Mali's north, he was approached to switch to a more lucrative alternative: becoming a driver on cocaine runs.

Mohamed said loads of cocaine would be dropped in the desert and he would collect $3,000 per trip to ferry drugs to a given location. After several successful deliveries, he sometimes even got to keep the car.

Joe Penney / Reuters file

Cocaine seized by Guinea-Bissau's judicial police in the capital Bissau on March 21 is displayed for journalists.

"With this money I was able to organize three wedding ceremonies -- how could I have done this with the other job?" he said, speaking to Reuters in Timbuktu. "As for the security -- if you smuggle fuel and are arrested you face a fine and lose your product. With drugs, as we say in the trade, ‘Someone else takes care of that.'"

Mohamed, who had shifted between smugglers and rebel groups, was referring to the common suspicions of complicity between some traffickers and civilian and military authorities in the north.

Similar accounts were repeated by others in the north, where new buildings, expensive cars and other ostentation hint at the money being made from drugs. In Gao, the biggest town in Mali's north, multistory Mediterranean-style villas surrounded by high, whitewashed walls and ornate gates have popped up amid the grinding poverty.

Ben Essayouti, secretary general of Timbuktu's branch of the Malian Human Rights League and a teacher, said: "People came in from the desert with suitcases full of cash. Sometimes the bank opened on holidays just for them."

Links between drug smugglers and Islamists, and the way in which funds are generated for AQIM, are more nuanced than in the ransom business. Hilary Renner, a spokeswoman for the U.S. Department of State, said of AQIM's role in the drugs trade: "They do not control the means of production but they do provide 'protection' and permissions for traffickers moving product through areas they control."

Traffickers arrested in Mauritania last year told authorities there that a convoy of hashish would have to pay $50,000 to pass through AQIM-controlled territory, according to a Western law enforcement official in the region.

But few people in Gao or Timbuktu now differentiate between criminals and jihadists. Essayouti said he had witnessed how the two cooperate. "When AQIM came into Timbuktu, we saw that they were together. The drug traffickers and AQIM look after each other."
Bamako-based diplomats and local residents in Gao say ties between traffickers and Islamists are even stronger in that town; they cited names of businessmen and local politicians allegedly connected to the drugs trade and now seen as cooperating with MUJWA. Ould Hamaha, who said he spoke for MUJWA, said the group had no links with drug traffickers.

The West’s dilemma
Reflecting frustrations with the ransoms that help finance terrorist groups, David Cohen, U.S. undersecretary for terrorism and financial intelligence, toured Europe in October to try and forge a common position on dealing with kidnappings. For many observers, however, the damage has already been done.

Regional and Western nations scrambling to resolve Mali's crisis are caught between mounting a hurried, and potentially ill-prepared, military operation, and the danger of giving the Islamists and their allies time to dig in.

As diplomats prepare a U.N. resolution to back military intervention, there is also talk of negotiations. The task is complicated by the array of allied players - Islamists, traffickers and some opportunistic youth - who, for now, see no advantage in bowing to Mali government control.

"It makes it more difficult as it is not clear how you have to approach them," said Pierre Lapaque, head of the U.N. Office on Drugs and Crime for West Africa.

To persuade groups to distance themselves from terrorism and organized crime, unsavory bargains may have to be made.
"In the short term, if the Malian government wants to win back the north, it will have to strike deals with some of these groups," said Wolfram Lacher, a researcher at the German Institute for International and Security Affairs. "The difficult question is how you stop ... their positions being strengthened."

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