Archive for November, 2011

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Recalling the post-Ottoman tax on non-Muslims

November 17, 2011

In November, 1942, the government of Turkey imposed the varlik vergisi, a tax on wealth, assets, and capital, that was applied mostly and at the highest rates against Turkish non-Muslims.  The rates were often higher than 100 percent of one’s total wealth.  The non-Muslims who could not afford to pay the tax where railroaded off to forced labor camps.

A recent article from Today’s Zaman noted that, “Within the scope of wealth tax payment requirements, 1,229 non-Muslims were sent to Aşkale via the Haydarpaşa railroad station in İstanbul to perform the jobs assigned to them.”  According to Wikipedia, 21 non-Muslims died at the labor camps.  The government collected over 320 million Turkish lira (approximately 270 million USD at the time) from Assyrians, Chaldeans, Greeks, Jews, and Armenians through the tax.

The varlik vergisi showed that the devshirme blood tax and the jizya against non-Muslims from the days of the Ottoman Empire could not be permanently purged from the “secularist” Turkish regime that replaced it.

Fortunately, Turkey rescinded the tax in 1944.

However, Turkey continues to impose the jizya against Greek Cypriots to this day, according to published reports.

Discriminatory taxes against non-Muslims in the post-caliphate Islamic world are much overlooked but not uncommon, whether it was the Turkish varlik vergisi, Malaysia’s bumiputra system, or government-endorsed jizya against Sikhs in Pakistan, Jews in Yemen, and Copts in Egypt.

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Islamic insurance risky except to sharia advisers

November 16, 2011

Wednesday word:  takaful

Sharia law bans conventional insurance policies because Muslims think insurance involves uncertainty, gambling, and interest charges.  The substitute that the sharia financiers have come up with to replace insurance is takaful.  Dar & Moghul define takaful this way:

Islamic cooperative insurance is not a contract of buying and selling, where a party offers and sells protection and the other party accepts and buys the service at a certain cost or price.  Rather, it is an arrangement, whereby a group of individuals each pay a fixed amount of money, and then compensation for losses of members of the group are paid out of the total sum.

This chart from a presentation by Islamic finance lecturer R.A. Sarjoon helps distinguish between conventional insurance and takaful in the eyes of Islamic financial experts:

Diagrams of conventional insurance & takaful

The problem with takaful is that it gives the sharia law advocates and advisers yet another opportunity to distort financial markets with awkward, inefficient models that enrich themselves while spreading sharia law concepts deeper into society and farther throughout the world.

Whenever an Islamic financial product is pitched by the men on the business side of Islamic financial firms, they have to go to their sharia advisory boards and ask the members to sign off on the proposals.  When the product is structured on the borderlines of Islamic law, it gives the sharia advisers outsized influence over the final business decision on the structure of the product.  The controversial products probably help deliver more fees to the sharia advisors as well, because their services are called upon more often to bless off on the structure.  The sharia advisers like innovation in financial products because it gives them the opportunity to meet more often to deliberate on the sharia compliance of the proposed products, they can claim more expenses, and it helps justify the payments the sharia advisors receive from the Islamic firms, etc.

Takaful is a potential bonanza for the sharia advisers.  They can offer their services not just to Islamic banks, but to insurance companies as well.

Read more background and news about takaful over at Shariah Finance Watch.

* Dar, Humayon A., and Moghul, Umar F., The Chancellor Guide to the Legal and Shari’a Aspects of Islamic Finance (Great Britain: Harriman House, 2010).

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Top sharia banker commits 58 criminal offenses

November 15, 2011

Majid Al Refai was no ordinary bank employee–he was the managing director and founding chief executive officer of the billion dollar Bahraini sharia financial institution known as Unicorn Investment Bank.  Prior to that, Mr. Al Refai was the deputy CEO of UBS’s Islamic finance entity, Noriba.

Sharia finance CEO

After auditors released their findings, Unicorn sought to distance itself from Al Refai’s deeds, claiming that “The alleged criminal offences relate mainly to transactions by Mr. Al Refai which were not approved by the Board of Directors.”  Mainly, but perhaps not exclusively…  Here’s Unicorn’s press release from earlier this fall:

Towards the end of 2010, Unicorn Investment Bank submitted a criminal complaint against its former CEO, Majid Al-Refai, to the General Prosecutor of the Kingdom of Bahrain. The General Prosecutor subsequently commissioned renowned global advisory firm Deloitte to conduct an independent investigation into the matter. The Deloitte report concluded that there were 58 alleged criminal offences committed by Majid Al Refai during his tenure at Unicorn, and the General Prosecutor has now referred the case to the Criminal Court of the Kingdom of Bahrain.

It is important to note that several reports issued in 2010 by the Central Bank of Bahrain, PriceWaterhouse Coopers and Ernst & Young arrived at similar conclusions to those detailed in the above-mentioned Deloitte report. The alleged criminal offences relate mainly to transactions by Mr. Al Refai which were not approved by the Board of Directors of Unicorn; personally appropriating and squandering Bank funds; shredding and destroying over 8000 Bank documents; and deliberately preventing the Bank’s partners, associates and other authorized entities from accessing Bank documents, thereby contravening the laws of the Kingdom of Bahrain and the rules and regulations of the Central Bank of Bahrain.

The Bank has also filed two civil cases against Majid Al-Refai and two other former employees of the Bank to retrieve funds that were misappropriated. Consequently, the Bahraini authorities have placed two travel bans on Majid Al Refai in Bahrain. Furthermore, the General Prosecutor has instructed all banks in Bahrain to freeze Majid Al Refai’s assets.

Unicorn confirms that the above-mentioned legal proceedings, which are ongoing since September 2010, are all within the jurisdiction of the Kingdom of Bahrain, and do not affect the ongoing operations of the Bank.

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Islamic countries doomed to economic misery

November 14, 2011

This graphic from the New York Times can be interpreted in several ways.  It depicts the degree to which people say religion plays an important part in their daily lives and per capita GDP by country.  Pres. Obama might look at this as evidence that poor people “cling” to religion, but judging by the high number of Islamic countries in the upper left-hand corner, one cannot escape the likelihood that as an economic system, Islam is unsustainable.

Productivity & faith by country

The early caliphate enriched itself through plunder of newly conquered lands.  But once the territorial expansion reached a standstill, so did the Islamic world’s economic growth.  The caliphate had exhausted the wealth of the people they conquered.  Their subjects faced excessive Islamic taxation, capital was limited by the sharia prohibition on interest, and zakat has served to keep the poor in a permanent state of welfare dependence.

Among predominantly Muslim nations, only Saudi Arabia with its vast oil wealth even came close to a mid-line to a per capita GDP of $25,000, but still falls short.  The U.S. and Italy show that it is possible to have highly religious people and highly economically productive people at the same time.

Meanwhile, we are still told by Iran and the supporters of sharia finance that Islamic law provides for a more ethical and sustainable economy.  Hooey!

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Hezbollah sells coffee mugs, CDs, resistance

November 13, 2011

As part of a radio special on Hezbollah last month, BBC reporter Owen Bennett-Jones did a man-on-the-street bit in Beirut. Introducing the segment, the reporter casually mentions that a local shop sells Hezbollah key chains, coffee mugs, and Hasan Nasrallah CDs, and that the traffic cops on the street are all on Hezbollah’s payroll.

Here’s a telling two-minute clip:


The reporter asked pedestrians which political party they support.  Everybody he spoke with answered Hezbollah.  Answers included:

  • “Yes, Hezbollah, the resistance, the one who lets you sleep at night.”
  • “Party of the resistance of course, Hezbollah… cuz they were the ones who lifted our heads up in the sky, they were the ones who protected us and made us proud.”
  • “I do support them, but I don’t like to make it public, I don’t like to make politics out of it.”
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Sharia goon blames corn futures for recession

November 11, 2011

Grain futures contracts were traded as early as the 1840s in the United States.  Were the commodities futures a monstrous invention of godless financial speculators that doomed America to nearly two centuries of economic ruin?  Far from it.  One source explains:

Before the North American futures market originated some 150 years ago, farmers would grow their crops and then bring them to market in the hope of selling their commodity of inventory. But without any indication of demand, supply often exceeded what was needed, and unpurchased crops were left to rot in the streets. Conversely, when a given commodity such as soybeans were out of season, the goods made from it became very expensive because the crop was no longer available, lack of supply.

In the mid-19th century, grain markets were established and a central marketplace was created for farmers to bring their commodities and sell them either for immediate delivery (spot trading) or for forward delivery. The latter contracts, forwards contracts, were the fore-runners to today’s futures contracts. In fact, this concept saved many farmers from the loss of crops and helped stabilize supply and prices in the off-season.

Commodities markets and their predictions of future supply and demand have, generally speaking, helped bring relative stability to food markets and avoid famine.  But what does Islamic law have to say about Western commodities markets that have helped stabilize food prices and avoid starvation?  Just watch this clip from known jihadist Taqi “Ugly” Usmani, one of the world’s foremost sharia finance scholars and Islamic jurists, denigrate the system during a speech in August:

Keep in mind, malnutrition plagues countries across the Islamic world today.  Few, if any, societies have ever made so much food available to the world at such an affordable price as has the United States of America.  Yet sharia law declares the financing behind this unique historical accomplishment to be a haram (filthy) sin.

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More Iran sanction wind whistling

November 10, 2011

The normally reticent director of OFAC, Adam Szubin, has written a blog post about Iran sanctions on the U.S. Treasury Department’s website.  The post accompanied Treasury’s designation of six front companies that own more vessels from Iran’s maritime fleet (IRISL), and Szubin dubiously claimed that “IRISL’s days may be numbered.”

Szubin also linked to a somewhat disorienting Treasury graphic to show the measures Iran has taken to conceal the true identity and ownership of its vessels:

Iran exploits Isle of Man & Panama

At any rate, the post highlights Treasury’s desire to demonstrate that the Obama administration’s sanctions on Iran are “tough” and “smart,” although critics have pointed out that sanctions against Iran have done little to deter Iranian nuclear advances.

During his opening statement at a Senate hearing last month, Banking Committee ranking minority member Sen. Shelby (R-AL) levied a scathing review of the sanctions strategy:

Despite 30 years of progressively more stringent economic sanctions, Iran remains one of the more serious threats to the national security of the U.S. and our allies. Iran continues to support authoritarian regimes, terrorist organizations and radical militias in Iraq and Afghanistan. For allies such as Israel… Iran’s threat to its very existence is real, continues unabated, and cannot be ignored.

More than one year has passed since Congress, the UN, and many of our allies levied the most recent round of sanctions against Iran in an attempt to derail Iran’s efforts to obtain nuclear weapons. Unfortunately, the heightened sanctions have not yet produced any significant change in Iran’s behavior regarding its nuclear program, international terror, or its record on human rights.

One problem is that the White House and the State Department have carefully managed to avoid labeling any major Russian, Chinese, or other US-trading partner’s companies as violators of US-mandated sanctions. China, Russia, and others are expanding trade with Iran, continuing to provide it with banking assistance and investing in its energy sector. Additionally, China and Russia have further undermined U.S. sanctions by supporting Iran’s military programs. For sanctions against Iran to be as effective as possible, the Administration needs to do a better job at securing the cooperation of the global community.

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Islamic law creates economic toilet bowl

November 9, 2011

Michael Schuman at Time magazine has written a good article openly supporting the theory that the Islamic world suffers economically because of Islamic law itself.  Normally, the mainstream media subject readers to arguments about the legacy of colonial “exploitation” or some other nonsense to explain Muslim poverty, so this honest acknowledgement of the obstacles to economic growth that Islam creates is quite refreshing.

Islam’s prohibition of riba (interest), while not specifically cited in the article, is certainly one of the major factors which retarded the development of modern financial systems in the Islamic world.

The economic condition of Islamic nations is quite depressing.  One recent article revealed that inequality is rampant across Islamic countries, and that 230 million people in Islamic countries suffer from hunger.  Amazingly, while millions of Muslims live in misery created largely by Islam, Iranians and Muslim allies of the Occupy Wall Street protestors have the nerve to criticize American capitalism and its effects on the world.

From Time’s Curious Capitalist blog on Oct. 18:

Is Islamic law to blame for the Middle East’s economic failures?

One of the great mysteries of economic history concerns how the Islamic world lost its mojo. A thousand years ago, the Middle East was richer and more influential in the global economy than Europe. According to data compiled by the late economist and statistical wizard Angus Maddison, the Middle East accounted for about 9.5% of global GDP in the year 1000 while Western Europe’s share was less than 9%. By 1700, however, the situation had totally reversed, with Western Europe commanding a hefty 22% of global GDP and the Middle East a pathetic 3%. The Arab world had controlled many of the lucrative trade routes between Asia and the West, but that role got usurped first by the Portuguese, then by the British and Dutch. What went wrong?

Economists and historians have struggled over that question for centuries. The answer is not just of academic interest. The revolutions that have swept through the Middle East, toppling dictators in Libya, Egypt and Tunisia, got a good part of their momentum from the widespread public frustration over the persistent lack of economic progress and opportunity omnipresent in the Middle East. Perhaps the biggest challenge facing the new governments that have emerged from the Arab Spring is providing the jobs and higher incomes all of those young people who participated in the rebellions desperately expect. If the new political leaders fail to deliver, the Arab Spring, which has brought such hope to the region, could deteriorate into a cycle of protest and political upheaval that will only set back its economic development.

There have been many theories of how the Middle East lost out economically to the West. But they have generally felt unsatisfactory. Read the rest of this entry ?

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How U.S. products were used in Iraq IEDs

November 8, 2011

U.S. officials announced the indictment of four men from Singapore and one man from Iran on Oct. 25 for conspiring by fraud to import 6,000 sensitive American-made radio frequency modules into Iran.  From there, Iranian citizen and resident Hossein Larijani trafficked the equipment to Iraq where it was used by insurgents who made at least 16 improvised explosive devices, but probably many more, from the components.

The full DOJ press release is actually a pretty good read and is posted after the jump, but here is the critical sequence and key points, keeping in mind that U.S. law prohibits the export of American goods to Iran:

  1. A Minnesota company makes radio frequency modules;
  2. A Singapore group bought thousands of modules, lying to Minnesota company saying that the final destination for the devices would be Singapore;
  3. Larijani instructed the Singapore group to ship the 6,000 modules to him by air;
  4. From Iran, the modules arrived in Iraq;
  5. At least 16 of the modules were recovered by U.S. forces being used for detonating systems in improvised explosive devices, the scourge of the Iraq war.
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Islamic Relief income up by 89% to £50 million

November 7, 2011

Islamic Relief Worldwide released its 2010 annual report in October showing an 89 percent increase in zakat donations for the organization’s efforts since 2006, excluding grants and institutional transfers.  IRW received  £50 million in private, voluntary donations in 2010 plus £14 million from other sources as one of the charts in their report illustrates:

Upswing in Muslim charity cash

Chart from IRW 2010 Annual Report, p. 53

Donations are up despite Islamic Relief Worldwide’s record of assistance to Hamas, cooperation with Union of Good (pro-Hamas) charities, its leadership ties to the Muslim Brotherhood, and alleged acceptance of $50,000 from an Osama bin Laden agent in 1999.

The findings, along with evidence of double-digit revenue growth for Islamic Relief USA, cast serious doubt on claims of an international chilling effect on Islamic giving and the alleged criminalization of humanitarian engagement by Western counter-terrorism laws.

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Sadaqa for Allah’s sake will become a mountain

November 6, 2011

Doing something in Islam “for the sake of Allah,” “in the path of Allah,” or “in the way of Allah” often connotes doing it for jihad.  Spending zakat (Islam’s wealth tax) or sadaqa (voluntary giving) for the sake of Allah implies funding jihad.  Even “mainstream” Islamic charities in the West avoid such language because of its disturbing undertone.

But that doesn’t seem to have impeded the boys at Salafi Audio from spreading their message for sadaqa for the sake of Allah.  This recording refers to Ramadan, which took place in August, but was uploaded to the web by an entity called “LearnToReadTheKuran” in October.  In this less than two minute clip, the speaker says that Allah will turn donated sadaqa, no matter how small its size, into the size of a mountain:


Under Islamic law, sadaqa is distributed to the same eight groups of people who receive zakat, one of which is the mujahideen.

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