Balkanalysis.com

Balkanalysis.com Editor’s Note: recent tales of tattooed and muscle-bound Western oil workers laboring in coastal oil fields, while expressionless men in dark suits and sunglasses stand watch for trespassers, only piques existing interest in Albania’s revitalized energy sector and goings-on there. In the following Balkanalysis.com special report – which discusses the major players involved, legal issues and technical data  –  readers get an inside view into an important emerging trend with regional implications for economy and possibly political life.

By Vlad Popovici and Chris Deliso

With additional contribution from Ioannis Michaletos in Athens and Stavros Markos in Tirana

The last few years has seen considerable foreign investment in Albania’s oil sector, a trend that is increasing and that involves not only onshore, but also offshore and refinery investment. Much of what is happening in this lucrative industry remains opaque, however, and issues such as privatization practices have been politicized.

The fossil fuels industry has a long history in Albania, where bitumen was mined in Roman times. Modern oil extraction started in the 1930s and, despite that Albania never became a global oil producer, reached production levels by the 1970s that made the country one of the main Balkan oil producers for a time.

However, plagued by inefficient management and obsolete technologies, Albania’s oil production declined and was on the brink of extinction in the post-independence 1990s transition period. However, in the last seven or eight years, the Albanian oil sector has been revived by foreign oil and gas companies looking to invest. While the major deals are involving onshore oil, other foreign investors have recently entered the game for offshore finds, though decisions are being delayed as the players consider proposed EU regulations which would have an impact on offshore drilling.

Albania is thus now looking at the prospect of becoming once again self-sufficient over the next 3-5 years, by eliminating the need for oil imports. And it could even find a new vocation as a small regional oil exporter, though this is not yet a done deal. Further, international watchdogs and investors are on the lookout for any signs of corruption or problematic dealings with governmental authorities, something that in the Balkans is a chronic issue.

From Boom to Bust

During Roman times, the region near Vlore in southern Albania was the center of significant bitumen extraction activity. Modern oil exploration and extraction started during World War I and, in 1928-1929, significant oil fields were discovered. These were the Kuçova field and part of what is now known as the Patos-Marinza field; today this is one of the largest onshore oilfields in Europe.

Mussolini was tempted by Albania’s oil resources and the refinery in Cerrik, near Elbasan in the south, was built during the Italian occupation in WWII. After the war, the Soviet Union also became interested in Albania’s oil resources, and developed a dominant role in the country’s oil sector.

Following the severance of diplomatic and commercial ties with the Soviet Union by dictator Enver Hoxha, China took the lead in the country’s oil sector and supported Albanian efforts- achieving a peak production of almost 43,000 barrels per day (bpd) or 2.2 million tonnes per year. This production level was enough to cover domestic consumption needs, and freed up some crude volumes for export.

However, in 1978 Albania broke off diplomatic relations with China too, and local oil production entered into a seemingly terminal decline. In the 1980s, the petroleum and bitumen sector was still employing 10% of the Albanian workforce, but its share of the national industrial production declined from 8.1% in 1980 to 5% in 1985, and even less than that at the end of the decade.

Oil sector growth was restricted by factors like obsolete technology that reduced oil field production yields, a lack of exploration to replace produced reserves, a lack of investment in extraction equipment and a very limited and aging transportation and refining infrastructure.

By 1990, oil production was down to 23,500 bpd (or 1.2 million tonnes/year).The breaking down of the Communist regime and its ‘central-planning’ economic system at the beginning of the 1990s worsened the oil sector’s problems. It was being run on autopilot by the national oil company (known as the DPNG until 1992 and Albpetrol after that), and oil production from the existing and aging low-recovery yield wells reached less than 9,500 bpd (or 475,000 tonnes/year) in 1994 [PDF]. No bottom was in sight and the entire Albanian oil sector seemed on the brink of extinction.

Factors: Known Reserves, Unknown Reserves, and the Difference for Investment

So far, Albania has not seen any investment from the oil majors. Rather, the players involved are small companies, some appearing to have been set up specifically for operations there.

To some extent, this is how the oil and gas industry works. Oil and gas supermajors, such as ExxonMobile, Royal Dutch Shell and BP tend to be on the lookout for those smaller companies that have already found oil and gas reserves, to renew their own oil and gas reserves.

For their own exploration activities, the supermajors usually focus on established production regions, where, even if they drill a new well, discovery chances are higher than in an unknown region where proven reserves are limited or non-existent. Thus regions like West Africa, the North Sea and the Gulf of Mexico take precedent over newcomers like Albania, Greenland, Suriname/French Guyana and the Falklands.

These unexplored new regions thus become niche markets for small players. Since the risks are huge, they have to focus their efforts, and usually on only one region. In fact, many small players disappear because they drill three or four wells, that turn out to be dry. Of course, if they hit pay dirt, the result is different.

The strategy of many of these companies, not unlike that of internet start-ups, is actually thus to find oil and gas and then be acquired by a major. This is the next step once a new production region is opened; the oil majors and supermajors will arrive in a second wave. In a recent example from the Balkans, in Romania’s Black Sea, Sterling Resources and other “small fish” spent almost two decades doing the groundwork, and now ExxonMobil is currently drilling offshore, with Petrom (OMV).

In the case of Albania, it is not yet clear whether the majors will arrive, which is not necessarily a bad thing, so long as those who participate abide by the law and pay their dues to the state.

Auspicious Developments: the Petroleum Law and PSC Definitions

On the legislative side, however, things have started to change for the better. They process actually began in the mid-1990s; in 1993, a Petroleum Law was adopted and amended in 1994 (and yet again in 2008) to create a legal framework for the exploration and extraction of hydrocarbons in Albania.

According to the Petroleum Law, the Albanian state, which owns all the oil and gas reserves in the country and is represented by the National Agency of Natural Resources (AKBN) can enter into Production Sharing Contracts (PSC) with state or private companies. These PSCs give exclusive rights to the state’s partner to explore and produce oil and gas in a defined perimeter for 25 years (five additional years can be added to the PSC if the partnership is successful).

According to the law, the first five years (or up to seven, in specific cases) of the PSC can be dedicated only to exploration, and minimum exploration and production investment requirements can be included in a PSC. After the operating partner deducts its exploration and production costs from the oil revenue, the remaining revenue is split between the partner and the Albanian state. The law states that the revenue split should be separately negotiated for each PSC and the state’s part can be paid either as a monetary royalty or in crude oil. The operating partner also pays corporate income tax, but does not pay any custom duties for the equipment imported for exploration and production.

Several licensing rounds were held for both onshore and offshore perimeters during the 1990s and many companies, from small independents to oil and gas majors got involved and performed a lot of preliminary survey work. An Albanian study from 1995 concluded that the approaches that had the largest potential of increasing the oil and gas production in Albania were existing field rehabilitation, enhanced oil recovery and more onshore and offshore exploration. Although the stage was set from the legislative point of view and many companies have shown initial interest, Albania was still waiting for a first mover to start production in the country beside the state-owned Albpetrol.

Bankers Petroleum: Leading the Onshore Revival

After this legal framework had been set to enable foreign corporations to explore, the breakout came in 2004. In that year, Bankers Petroleum, a small Canadian independent oil and gas company, signed a PSC with AKBN for the Patos-Marinza and Kuçova fields in central Albania. These fields are close to the Adriatic coast and to the city of Fier.

Bankers moved quickly to start production in Albania. This was mainly done by taking over existing production, shutting down wells and rehabilitating them to re-start or increase production. The company’s commitment here was rewarded by the rapid and large-scale increase of its Albanian average oil production, from around 600 bpd in 2004 to more than 13,000 bpd (equaling 665,000 tonnes/year) in 2011.

The company invested more than $450 million between 2007 and 2011 for the Patos-Marinza production development alone; in addition, it started re-developing the Kuçova field in 2011, while also improving the processing, storage and transportation infrastructure. This includes new treatment facilities, a new pipeline from Fier to Vlora and other necessary infrastructure.

Impressive Results and Ambitious Expansion Plans for Bankers

The most impressive result to date of the company’s foray into Albania is probably the exploration campaign that exponentially increased the Patos-Marinza reserve size. Here, the original oil in place increased from 2 billion barrels (bbl) in 2006 to 7.5 billion barrels in 2010, turning the field into one of the biggest, if not the biggest onshore oil fields in Europe. The proven reserves, along with the probable (those most likely to be extracted) ones have also increased, from 100 million bbl in 2006 to 227 million bbl by the end of 2010.

For 2012, the company announced in December 2011 [PDF] a capital investment budget of $215 million, expected to be fully financed with funds generated from the existing production. In March 2011, Bankers took over Albpetrol’s remaining interest in the Patos-Marinza field and plans to increase production here by 30%  in 2012, to an average of around 17,000 bpd. It will also start a ramp-up in production at the Kuçova field through enhanced oil recovery; here, it has set a production target of 2,250 bpd for 2015. Bankers Petroleum also plans to continue exploration in these fields, as well as in the Block F, a 750 square km block contiguous to the Patos-Marinza field, and a prospective site for natural gas and oil.

The long-term development strategy of Bankers Petroleum follows the conclusions of the above-mentioned Albanian report: reactivation of existing wells, enhanced oil recovery (through waterflood and modern thermal techniques) and increasing reserves through modern exploration techniques (especially horizontal well drilling).

Another Foreign Producer: Stream Oil and Gas

Bankers Petroleum is not, however, the only new producer in Albania. Stream Oil and Gas, another small Canadian oil and gas company, has signed a PSC with AKBN for three other aging producing fields: Cakran-Mollaj, Gorisht-Kocul and Ballsh-Hekal. These lie south of the Patos-Marinza field, near the city of Ballsh. The PSC also cover the small producing Delvina gas field. The company has increased its production during 2011 from under 2,000 bpd to 4,000 bpd, and plans to reach an average of about 15,000 bpd (more than 765,000 tonnes/year) in 2015.

Albanian oil production has more than doubled since 2004 and – thanks to Bankers Petroleum, Stream Oil and Gas and Albpetrol as main producers – had returned to the 1990 levels of 21-22,000 bpd (1-1.2 million tonnes/year) by the end of 2011. And this seems to be just the beginning. Domestic oil production already covers an increasing share of total Albanian consumption- estimated at around 30-35,000 bpd (1.5-1.8 million tonnes/year).

Despite Legislation Uncertainties, San Leon Energy, Beach Energy and Emanuelle Adriatic Look into Offshore Development

The companies investing in Albania thus far have been focused mostly onshore, but there are signs that offshore developers are on their way- as with the former, they tend to be small entities. The already high-risk gamble of energy research in Europe is complicated further there by proposed EU regulations on offshore oil and gas exploration and production. These regulations and the rationale behind them have been proposed but not yet approved, and are discussed in more detail in the Ballkanalysis.com e-book, 2011 Balkan Year in Review.

If the regulation is approved, it would mean a stricter offshore regime and increased compliance costs for companies. All of the players are currently in wait-and-see mode. This is another factor that drives up the risk for investors and that therefore might account for the lack of development in Albania’s offshore oil resources thus far.

However, two foreign companies have now gotten into the act. The first, Dublin-based San Leon Energy PLC, made news recently by announcing that it has identified “several large oil and gas prospects” on its 4,208 sq km offshore license near Durres. It has isolated “several large structural oil and gas prospects and is revealing large stratigraphic potential,” Oil and Gas Journal reported on January 17, 2012.

“The possibility of using seismic amplitudes to greatly reduce exploratory risk further demonstrates the high potential of offshore Albania,” the report added, noting that San Leon “is interviewing potential partners and plans to drill the first of two exploratory wells in late 2012 or 2013.” Unlike the onshore investors, San Leon has a larger portfolio, working in seven countries including the US and the Netherlands.

According to company data, the license it received from the Albanian government in February 2011 gives it a 75% share. The remaining 25% interest is held by another company, Beach Energy Limited of Australia. The latter “has agreed to pay 50% of the costs, rather than their 25% working interest requirement, for the upcoming 3D seismic programme,” states San Leon’s website. This is to be “in exchange for an option which, if exercised, will allow [Beach Energy] to hold a 50% working interest in the licence going forward.”

The second offshore player in Albania today, Cyprus-registered Emanuelle Adriatic Energy Ltd is actually a subsidiary of a large and diversified Israeli holding company, Israel Land Development Company. It was awarded the PSC for offshore blocks in 5,070 square kilometers of Albanian waters, an area that has not seen much activity yet. The companies that have offshore blocks will wait to assess the impact of the EU’s new proposed offshore oil and gas EU regulations for their costs and operations.

The agreement with the Israeli company was signed on January 15, 2012 and, according to Globe’s, “will state that Emanuelle Adriatic Energy’s rights to operate in the offshore blocks, and to carry out the work plan that will be agreed for seven years, and will include milestones that the company will have to meet after three and a half years, and after a further two and a half years.”

The capital investment by the Israeli company for this project reportedly amounts to $730 million. The company’s stock rose slightly after the deal was announced, and there have been rumors that Turkey is unhappy about it and the spreading of Israeli interests here. Thus it is not impossible that we will see further conflict over the contract on an internal political level.

It will be interesting to see whether Albanian offshore activity can catch up in the future with onshore activity. The main difference, however, is that investors know there is oil onshore, and any new entrant can thus start either by enhancing production at existing Albpetrol wells, or by rehabilitating closed wells. This makes onshore Albania a more mature production region, whereas offshore Albania has never experienced oil or gas extraction. Thus at present the offshore sector is in the much earlier discovery stage, which anywhere in the world is characterized by high risk and high stakes.

Refinery and Technical Issues

ARMO, the former state-owned refining company, was privatized in 2008 (the Albanian state still owns 15% of the company). ARMO has a refinery in Ballsh (1 million tonnes/year capacity) and another in Fier (0.5 million tonnes/year capacity).

In 2011, ARMO signed agreements with both Bankers Petroleum and Stream Oil and Gas for crude oil supply. Although the third Albanian refinery in Cerrik near Elbasan has been shut down for at least 10 years, the government in 2011 announced that it intends to privatize it as well. However, this dilapidated refinery was built during World War II, and investors do not seem keen to invest in refining capacities in Europe.

Technically speaking, Albanian oil is heavy, requiring more processing than light oil, and it is therefore being sold at a discount compared to lighter oils in Europe; its pricing is based on the Brent oil price, and the 2011 price levels were 60-75% of the Brent price [PDF]. However, Albanian crude can be refined, and in addition to the Albanian refineries, this is being done by Spanish, Italian and Greek refineries along the Mediterranean coast. Albanian heavy oil is currently being exported by small tankers to these countries.

The government’s goal of refurbishing ARMO’s capacity was indicated again on January 31, 2012. Switzerland-based Foster Wheeler AG, a global engineering and construction contractor and power equipment supplier, announced then that it has been awarded a contract for a feasibility study, according to Business Wire.

A subsidiary of its Global Engineering and Construction Group will undertake the study for the modernization of ARMO’s Ballst and Fier refineries. The study is being done in line with ARMO’s goal of restoring production “to the original design capacity and produce transportation fuels in line with current European Union regulations. The press release announced that the study is expected to be completed by mid-2012.

New Outside Interest: Outlooks for Future Investment

The success of Bankers Petroleum and Stream Oil and Gas in reviving Albania’s moribund oil sector have attracted other small and medium-sized oil and gas companies that hope to become producers in the country in the near future.

The most probable near-term new producer is Petromanas Energy. Petromanas holds three PSCs with the Albanian government. Under the terms of the PSCs, Petromanas has a 100% working interest in six onshore blocks (Blocks A, B, D, plus E 2 and 3) that comprise more than 5,600 square km across Albania’s Berati thrust belt, and that also include the 2001 Shpiragu-1 light oil discovery in Block 2.

An independent study from 2009 estimated the undiscovered reserves of these blocks at 3 billion bbl of oil, and 84 billion cubic meters of gas (Albania’s current gas production is marginal, and is being used for power generation). Petromanas is now finalizing discussions with potential joint ventures partners before launching the development of its concessions in Albania. A drilling rig has already been leased for work in the country during 2012.

An Albanian Broadcasting Company report of September 28, 2011 mentioned the deal. In a bilateral meeting, Besjan Pesha, Executive Director of the National Agency of Natural Resources, praised Petromanas, and noted that its work could “revolutionize” the industry in Albania. The company’s representative, Malfor Nuri in turn praised Pesha and the Agency for their cooperation.

A Controversial Privatization: The Case of Albpetrol

The 100% privatization of Albpetrol, approved on December 16, 2011 by parliament, could further increase Albanian oil production, if successfully finalized with a strategic partner that has the resources and know-how for oilfield rehabilitation, enhanced oil recovery and exploration of new areas.

In 2010, Albpetrol’s assets were valued by a company executive at almost $500 million. This figure included not only production assets, but also pipelines, storage tanks, buildings, and so on. However, a recent media report put the annual oil production of Albpetrol at 135,000 tonnes/year (about 2,600 bpd).

This privatization by the Berisha government was criticized by the opposition. The government noted that payment for Albpetrol would be made in cash. While it raised some eyebrows it is not that unusual (clearly, any government in the world would prefer to get cash rather than future investment promises). This news added to the controversy over the privatization in local media, though.

Further, concerns linger concerning the company’s real value. While Albpetrol was valued by its manager in 2010 at $500 million, as mentioned above, we believe it unlikely that an investor would pay more than half of that amount for the company. It will be interesting to follow the unfolding of the proposed privatization during 2012 and see which investor(s) might be interested.

Sky Petroleum’s PSC Cancellation

It has not all been smooth sailing for foreign investors in Albania’s oil sector, however. In June 2010 a small Texas-based outfit, Sky Petroleum, became the fourth foreign oil and gas company to sign a PSC with the Albanian government. However, Sky’s PSC was unilaterally cancelled by AKBN in November 2011. The company believes that the PSC should be reinstated, and in December 2011 it thus proceeded with arbitration against the Albanian Ministry of Economy, Trade and Energy and AKBN. Sky Petroleum is seeking monetary damages of $1 billion from the Albanian government if the PSC is not reinstated. Yet since the blocks lost by the Texans are onshore, where the EU has no involvement, the Albanian government can do whatever it pleases.

By any standard, this was a significant PSC cancellation. The license affected covered 17% of Albania’s total area. It would have given the Texas company exclusive rights to three exploration blocks totaling approximately 5,000 square km: blocks 4 and 5 in the south at the Greek border and the Dumre block close to the Patos-Marinza field. Previous work on the blocks had identified 10 prospects or exploration leads covering approximately 435 sq km, believed to contain up to 900 million barrels of oil equivalent of recoverable hydrocarbons.

Although AKBN stated that Sky Petroleum did not comply with some of the PSC requirements and missed a deadline for presenting a bank loan guarantee, the company believes it is in compliance, and that the deadline was missed because of the multiple top management changes at AKBN during 2010-11, which made it impossible for the company to obtain a meeting with AKBN in order to present the required bank documents. Some industry analysts have speculated that political preferences, outside competition, or even corruption could be the cause of the PSC unilateral cancellation.

Seeking to get further clarification on the matter, Balkanalysis.com contacted Sky Petroleum. In an e-mail response, Corporate VP Michael D. Noonan stated that “unfortunately due to the sensitive and confidential nature of the arbitration process we are unable to comment about the current situation in Albania.”

However, Mr Noonan did note that Sky Petroleum has “prepared and filed several United States of America – Securities and Exchange Commission (‘SEC’) filings on SEC Form–8K regarding this and other matters.” For further information on current news releases, SEC filings, analyst reports, and other corporate materials he refers the public to data on the Sky Petroleum website.

In the end, whatever may be lurking behind the case, Sky Petroleum’s experience shows that frictions can still occur between authorities and foreign investors in Albania, notwithstanding the relatively stable oil industry legal framework.

Public Perception and Criticism of Government and Investors- Justified or Not?

Aspects of the oil rush, including research, investors and the way that successive governments have handled both, have for years been discussed and debated in Albania. Criticisms have been made sometimes according to political motives, as well as on technical and scientific grounds in some cases.

An example of the latter was Albanian geologist Dr Telo Velaj’s recent interview for Gazeta Telegaf on January 5, 2012. He stated that past governments did not hold foreign exploration processes to a high enough scientific level, leading to incorrect estimations that in turn led investors to pull out, thinking that the country was not profitable. He added that the Albanian state bore “a great deal of responsibility… by not exercising proper control.”

From the scientific point of view, Velaj compared the Albanian Adriatic geology to that of Italy, where relatively large hydrocarbon deposits have been found. For this reason, Velaj suggested Italy’s ENI as an experienced prospective partner with the right knowledge for the Albanian situation.

Such views show that parts of the Albanian public is not satisfied with the way the country’s resources are managed and that the government could better communicate the details and rationale of PSCs signed with foreign investors, as well as their long-term energy sector strategy. The tax and royalty structure should be explained to the public and the benefits for the Albanian Treasury should be better quantified.

However, public suspicions over perceived disparities in profit splits (one is given in the Gazeta Telegraf interview) are often not warranted, or are based on misunderstandings. Companies – foreign or local – that have PSCs signed with the Albanian government pay a 10% royalty from their total revenues to AKBN. In cases where they took over previously producing wells from Albpetrol, those companies pay an additional pre-existing production royalty to Albpetrol.

In the case of Bankers Petroleum, according to the January 2012 investor presentation (.PDF) on the company’s website, the total royalty expected to be paid in 2012 is close to 17%, and will be between 14.8% and 16.2% for every year from 2013 to 2016. Beside the royalty, all oil and gas companies pay a 50% tax on their profits. It has to be understood that Albania is competing with numerous other countries, many of them with a much more developed oil and gas sector, in attracting capital to explore and produce its hydrocarbon resources.

Therefore, the tradeoff is between a prohibitive government take (royalty plus tax in this case) that will discourage any oil and gas company from investing in Albania (thus leaving it with terminally declining production), and a government take that allows foreign and local companies to make money by investing in the Albanian oil and gas sector, thus increasing local production and tax revenues.

Finally, the predominant presence of small oil and gas companies is normal in the early stages of the development of a new production region, and should not be a major concern if their activity is properly monitored by the government, and if their agreements with the government (PSCs) are transparent and well managed.

One reason for public criticism and fears, here as elsewhere in the Balkans, might have to do with mentality- a conviction that business agreements are done behind closed doors, and rife with hidden clauses. Although this might be well the case in some cases, from what can be seen in Albania’s case, corruption might occur rather as consulting fees paid to get a PSC or so. Once it is in place, the PSCs seem to be very transparent in practice.

In addition, public concerns about small investors having little oil and gas experience are also often misplaced. The fact that a company is brand new, and only seems to invest in Albania (for example), does not necessarily mean anything bad. Canada, Australia, the US and other countries have provided many examples of serial mining and energy entrepreneurs who, after having created a company and selling it for billions to a major mining or oil company, create another one focused on a specific emerging producer, with the same goal.

Thus, the people behind the companies are very important. Albania (and all Balkan countries) should not discourage small and medium-sized companies from investing- indeed, it is also much easier to negotiate a favorable agreement with a smaller company than with one of the supermajors.

A Short Delay Likely for Aspiring New Producers

At this moment, Balkanalysis.com does not foresee any other significant oil or gas producer in Albania before 2015. Although several offshore blocks have been awarded, as has been discussed, no significant exploration activity has taken place yet.

In October 2011, the European Union proposed a new Regulation for offshore oil and gas exploration and production activities. Initial feedback from the offshore operators indicates that the proposed regulation would create additional compliance costs. The regulation would apply to Albania as well, as a Contracting Party of the Energy Community. These additional costs, as well as the absence of any offshore oil and gas infrastructure and industry experience in Albania, will probably block any significant oil and gas offshore activities for the next several years.

Adding Up the Numbers: Oil Production and Future Scenarios

Overall, a positive assessment can be reached even from a conservative estimate, excluding any other potential players still to be named. In a likely scenario, increased oil production from Bankers Petroleum, Stream Oil and Gas, plus initial production from Petromanas and constant production from Albpetrol (or, the company that will buy Albpetrol), sees Albanian oil production reaching around 45-50,000 bpd in 2015 (2.3-2.5 million tonnes/year).

This figure amounts to more production than at anytime since 1974- when Albania reached peak production, allowing the country to cover all its domestic consumption and export the balance (5-10,000 bpd or 255-510,000 tonnes/year).

By comparison, no other country in the Balkans currently has any relevant oil production other than Romania and Turkey. According to EIA, Romania still produces around 90,000 bpd (4.6 million tonnes/year), but its production has fallen into steep decline, while Turkey still produces only around 45,000 bpd (2.3 million tonnes/year).

Therefore, becoming an oil exporter – even a small one – will give Albania some political leverage in the Balkans as well, further to some other energy transit projects that would involve Albania, especially the natural gas pipelines such as the Trans-Adriatic Pipeline or South Stream.

During 2011, oil production alone probably added $400-450 million to the Albanian economy, representing almost 4% of the country’s GDP. If the Brent oil prices stay around 90 USD/barrel for the next 3-5 years, this increased oil production in Albania will contribute about $1 billion – or between 7 and 8% of GDP – to the country’s economy by 2015.

If the domestic oil refining activities and all the construction activities linked to the oil sector (such as new pipelines, expanded export terminals and roads) are factored in, the cumulative contribution to the GDP can be pegged even higher. Increasing oil production in Albania might impact the country’s standing, the regional power structure, economic development and possibly the success or failure of proposed energy projects elsewhere.

Oil export from Albania to Italy could reduce the need for the long-promised AMBO pipeline. Greece might become more interested in having a small but stable supply of oil from Albania, now that the Burgas-Alexandroupoli oil pipeline is defunct and the country has to divert its oil import sources away from Iran for the foreseeable future, due to the international embargo against that country.

The alternative for Greece would be to turn to other plans, such as increased domestic exploration, which unfortunately requires money not available now, or else, participation in Cyprus/Israel offshore endeavors (which has tense political implications with Turkey). The prospect of having its northwestern neighbor become dominant in energy affairs does not sit well with Athens. At the same time, as stated above, the Turkish State Oil Company (TPAO) is reportedly unhappy about the Israeli offshore investment, and could try to make a case for itself behind the scenes.

Conclusions: Beneficial Development Possible, if Reforms Continue

A clean and smooth development of the hydrocarbon extraction and processing sector in Albania presents both a challenge and a huge opportunity for the country. The oil and gas regulatory framework must remain stable and free from any political interference- though the latter in particular is always challenging, given traditional Balkan power and patronage structures.

A successful privatization of Albpetrol – if this is indeed launched and finalized – will be an important test for the authorities. The government’s strong and continuous commitment to the development of the oil and gas sector is critical, as is transparency.

In 2009, Albania became a member of the Extractive Industries Transparency Initiative (EITI), a global initiative that works towards increasing the transparency and accountability of the extractive industries, including oil and gas. EITI’s reports from 2009 and 2011 show that the Albanian oil and gas industry relations with the government are generally considered to be open and transparent.

Howevcr, the possibility of fuzzy financial reporting is also suggested, specifically in the case of the cooperation of foreign investors and the government during today’s oil industry revival. Reported oil production royalties are provided in the first report on Albania (.PDF) published by EITI, in 2009. This report was crafted soon after the country became a member of EITI.

One of the things that the report looks at is whether the royalties and other amounts declared by oil and gas companies as having been paid to Albpetrol or the Albanian government in fact match the amounts reported by the Albanian government. The numbers given in the report (referring to the year 2009) reveal that a generous $600,000 was missing from the government’s reporting. In the oil industry, this is not a huge amount and could be a reporting error. On the other hand, one cannot exclude the possibility of corruption in the involved government agencies. It will be interesting to follow the future EITI country reports to see if such discrepancies persist.

Appendix: Companies, Entities and Notable Figures

The following information is based on, and refers to, official data and the official websites of some of the entities mentioned in the current article. The references are provided in order of their appearance in the text. This information accurately represents the data listed on the websites in question at the time of this article’s publication; please note that this will not be updated to take note of any changes that may occur in future.

National Agency of Natural Resources (AKBN)

Based in/location: Albania

Executive Director: Besjan Pesha

Activities: Governmental oversight of the renewable energy, hydrocarbons, mining and hydroenergy sectors

Ministry of Economy, Trade and Energy

Based in/location: Albania

Minister: Nasip Naço

Activities: Governmental ministry overseeing the economic sphere, including energy sector

Bankers Petroleum

Based in/location: Canada

Other Major Projects: None

Board of Directors: Robert Cross (Chairman); Abdel F. Badwi; Ian McMurtrie;

Gen Wesley Clark (ret.); John Zaozirny; Eric Brown; Phillip R. Knoll; Jonathan Harris

Albpetrol

Based in/location: Albania

Activities: State oil company

General Manager: Ferdinand Murati (as of August 2011)

Stream Oil and Gas

Based in/location: Canada

Other Major Projects: None

Board of Directors: Sotiris Kapotas (Chairman); Marlowe Allison; Ian Barron; Leslie Goodman; James Hodgson; George Mortakis-Martakis

San Leon Energy PLC

Based in/location: Ireland

Other Major Projects: Oil and Gas activities in the USA, Poland, Ireland, Italy, Morocco and Holland

Board of Directors: Oisín Fanning (Chairman); Philip Thompson; Paul Sullivan;  John Buggenhagen; Raymond King; Jeremy Boak; (Thomas) Daniel Martin Jr

Beach Energy Limited

Based in/location: Australia

Other Major Projects: Drilling and Production in Australia, Egypt and the US

Board of Directors: Robert Michael Kennedy (Chairman); Reginald George Nelson; Franco Giacomo Moretti; Glenn Stuart Davis; Neville Foster Alley; Belinda Robinson

Israel Land Development Energy (ILDC)

Based in/location: Israel

Other Major Projects: Holding Company for Real Estate, Media, Outdoor Advertising, Hotels and Utilities and Energy

Controlling Shareholders/Board of Directors: Jackob Nimrodi (Honorary President); Ofer Nimrodi (CEO); Shlomo Maoz (Chairman of the Board); Eliyahu Cohen; Ron Weissberg; David Schwartz; Smadar Nimrodi-Rinot; Ravit Nimrodi; Menashe Arnon; Chen Lavon

Note: ILDC Controls Emanuelle Adriatic Energy Ltd (incorporated in Cyprus). This subsidiary runs ILDC’s Albania operations, and in fact all of its energy projects.

Albanian Refining & Marketing of Oil (ARMO)

Based in/location: Albania

Activities: National Refining Company (Privatized)

Director: Rezart Taci

Petromanas Energy

Based in/location: Canada

Other Major Projects: None

Board of Directors: Verne Johnson (Chairman); Heinz Juergen Klaus Scholz; Jeffrey Scott; Gerard Protti; H. Werner Ladwein; Peter-Mark Vogel; Gordon Keep; Glenn McNamara (Director and CEO)

Sky Petroleum

Based in/location: Texas, USA

Other Major Projects: Mubarek Field (UAE offshore)

Board of Directors: Karim Jobanputra (Chairman): Robert P. Curt: Michael D. Noonan; Oliver J. Whittle

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A Special Report by Balkanalysis.com Director Chris Deliso in Skopje

Buried deep within a comprehensive history of the CIA’s technical wizardry from the Cold War through to today’s war on terrorism are some intriguing, but overlooked disclosures: previously unknown details regarding a sensitive CIA clandestine operation against Islamic terrorists in the Balkans.

Although the country’s name is not specified in the book, an analysis of available data within the larger historical context indicates beyond doubt that the operation occurred in Tirana, Albania in October 1998, in a joint effort with a CIA station in Western Europe, and probably the one in Rome.

The story becomes even more pertinent today considering the ongoing upheaval in Egypt against the longtime government of President Mubarak, and mass escapes of Islamists imprisoned by him. The prominent CIA role in some of those detainments could conceivably provide a motivating factor for future terrorism against American interests. In any case, the implosion of the Mubarak regime means that decades of sensitive intelligence cooperation could be undone, should the country’s security services be infiltrated by hostile parties.

During the 1990s, Albania became a safe-haven for members of Egyptian Islamic Jihad and al-Qaeda. Their members – some of them fugitives wanted by the Mubarak regime – were drawn to Albania for its proximity to Europe, weak institutions, and the existing presence of a large Islamic charity network which could provide them with “legitimate cover.” Albania thus represented a place of perceived escape; however, the CIA also came to have concerns that American interests in the country were about to be targeted as well- hence the need for an urgent operation.

This CIA Balkan operation is recounted in a fascinating and highly-recommended recent book, Spycraft: The Secret History of the CIA’s Spytechs, from Communism to Al Qaeda (Plume, 2009). It details for the first time how the obscure but effective Office of Technical Services evolved, becoming a vital part of the US intelligence apparatus, with its ever-expanding array of unorthodox spy gear, technology and reconnaissance teams. For the authors, former OTS director Robert Wallace and noted intelligence historian H. Keith Melton, it took several years and much administrative wrangling in order to get permission from the agency to publish this insider’s account of what went on behind the scenes.

While the vast majority of Spycraft is devoted to other matters, the anecdotes concerning Albania make fascinating supplementary reading for those interested in the Balkans, counter-terrorism and understanding the covert tactics of terrorist organizations. The following analysis discusses the revelations that come from the book in both historical context and in terms of the value that can be derived, for pure intelligence understanding, from the episode. Finally, a chronology of key events happening before and after the CIA operation is provided.

Setting the Stage: Key Context for the Operation

The CIA anti-terrorism operation chronicled in Spycraft was just one among many others conducted in Albania since 1995, when several foreign terrorist suspects were arrested and secretly rendered out of the country. These actions had ultimately been necessitated by the reckless and opportunistic policy of the Albanian government in the early 1990s, when then-President Sali Berisha allowed foreign Islamic radicals to establish a foothold in the country, under the tacit support of the then-intelligence chief Bashkim Gazidede. (Following the March 1997 riots and the toppling of Berisha’s government, Gazidede fled to Syria and then Turkey; he returned to Albania several years later and died of natural causes in 2008).

The first round of joint operations occurred in 1995, however, when the Berisha administration was still in power. At the time, the CIA cooperation with a special branch of the SHIK that had been set up to deal with Islamic terrorists infiltrated into the country. A SHIK officer involved at the time, Astrit Nasufi, would years later tell the Chicago Tribune that the unit was essentially run by a US intelligence officer they knew simply as “Mike.”

Among several important developments was the detainment and (temporary) recruitment of Hassan Mustafa Osama Nasr, an Egyptian living in Tirana. Commonly known as Abu Omar, this man would in 2003 be kidnapped off a street in Milan by a CIA team- an audacious abduction caused an outcry among the Italian public, legal threats and, possibly, ruined a surveillance operation that was being conducted by the Italians.

Before apparently leaving Albania and discontinuing his cooperation with the SHIK, Abu Omar provided a few precious bits of intelligence. These included information on Egyptian Islamic Jihad figures in Tirana, and terrorist branches in the UK, Germany, and Italy; in the latter, most significant was Milan’s Islamic Cultural Institute, at the time a base for mujahedin operations in Bosnia. (Soon after these revelations, Italian police raided the premises).

The second major round of CIA-SHIK operations occurred in 1998, a year after the country had descended into anarchy following the collapse of crooked pyramid schemes. The Berisha government was toppled and the rival Socialists took power in July 1997. At the same time, tensions between ethnic Albanians and the government in neighboring Yugoslavia were being felt, as a new militant group – the “Kosovo Liberation Army” – stepped up its operations. The Albanian diaspora in America and elsewhere intensified lobbying efforts, eventually winning the support of diplomatic figures such as Madeleine Albright, then Secretary of State, and diplomat Richard Holbrooke.

However, the intelligence community was more skeptical. For example, an October 1998 report from the Office of the DCI Interagency Balkan Task Force noted that “…US mass media propaganda vociferously attacked Milosevic and Serbs… [is] so blatant that it evoked letters to the editor from uninvolved readers for the obviously slanted coverage”.

For the CIA, politics was secondary to the business of providing security. In June and July 1998, several months before the operation documented in Spycraft, two raids on foreign extremists were conducted with the help of the SHIK and Albanian police. According to a subsequent Washington Post investigation of August 12, 1998, these raids netted “…a bag of faked documents and official Albanian government stamps needed to get past customs and police checkpoints [and] certify legal documents” at the home of a foreign “religious scholar,” Maged Mostafa. For the CIA, a prime security danger in Albania had always involved forgery and misappropriation of official identity documents, and these developments only reinforced this understanding.

The Post article noted that several suspects arrested in June and July 1998 were employed by Islamic charities associated under an umbrella network, bankrolled by the Kuwait Joint Relief Committee. Funded by private Kuwaiti citizens and interests through a Kuwaiti bank, the KJRC managed several charities including the Islamic Revival Foundation, which ostensibly aided “poor Muslim families and orphans in Albania.”

Headquartered in Tirana, it had established a strong presence in 1994. Since that year it had been led by Muhamed Hasan, one of the men arrested in the July 1998 operations. In late 1998, then-intelligence chief Fatos Klosi would attest for media that Osama bin Laden himself had visited Albania to organize his charity network in 1994.

Following the arrests, Muhammed Abdul-Kereem, director of the IRF’s orphan assistance program, stated for the media that “we are not taking advantage of the humanitarian assistance to make some other things.” After Hasan was detained, he was replaced at the IRF by Sudanese national Ibrahim Meki, who had “directed the [charity’s] educational institute for several years.” This institute was described in the August report as comprising four buildings “…surrounded by a high wall topped with barbed wire, [with] a sign on its guardhouse stating that only five cars are allowed to pass the gate, including four listed as holding Kuwaiti diplomatic license plates.”

In 2008, Meki (in his same job capacity) would be expelled from Albania, along with Egyptian national Abdulaziz Muhamed, director of a charity called Goodness of Kuwait, and Mamun Awad, director of the Islamic Vakf Society. Taken together, this would seem clear proof that together with bin Laden, Kuwaiti groups during the 1990s and at least until 2008 have directly sponsored extremist activities in Albania.

Further, for the Post report in August 1998, the institute’s general secretary, Sulejman Kurani, attested that its teaching staff hailed from Sudan, Syria, Kuwait and Saudi Arabia, adding that $80,000 had been donated by the charity to help “refugees” in the northern town of Tropoje- “a town that also is a key locus of arms stockpiling and smuggling by members of the Kosovo Liberation Army, the guerrilla group fighting to win Kosovo’s independence from Serbia, Yugoslavia’s dominant republic,” according to the newspaper. This mountainous region was (and is) the stronghold of Sali Berisha, then leader of the opposition Democratic Party.

However, when in July “euphoric” SHIK agents told the local press that the CIA had been involved in the terrorist round-up, al-Qaeda and its supporters were enraged. Several of the men had been rendered to Egypt, where they were reportedly tortured by the authorities. On August 5, a statement co-signed by al-Qaeda promised retaliation for the Albania raids. Two days later, terrorists attacked US embassies in Kenya and Tanzania, killing 224 people and injuring over 5,000.

On August 20, President Clinton launched symbolic missile strikes in Afghanistan and Sudan. However, while those attacks had occurred in Africa and been masterminded from Azerbaijan, the Egyptian Islamic Jihad’s perceived desire to attack American and other embassies returned the CIA’s attention to Albania, where after the attacks embassy staff had been relocated to a compound outside Tirana.

Soon thereafter, another SHIK operation resulted in the detention of one man believed to be planning an attack on the embassy; however, another one escaped. This is when the present story begins.

Planning the Operation: Ingenuity, Assessment and a Bit of Luck

Planning for a detailed operation to find and apprehend the second plotter began in the days immediately after the bombings, when a high-level CIA team visited Tirana to liaise with the SHIK. Despite the significant results achieved in previous operations, the CIA knew that the entire terrorist network established in Albania had not yet been uprooted, and that the operative at large could pose a future threat. However, to make sure nothing went wrong, and to limit further damaging exposure, they would have to come up with a foolproof plan that would disguise Agency involvement.

The exciting account given in Spycraft (pages 343-347) regarding how the CIA team planned its October 1998 Albania operation combines a little bit of everything: deception and stratagems, technical artistry, the use of covert devices, game-planning for various scenarios and so on. Almost ironically, in planning and the unexpected result, it is bookended by the use of two very different concealment devices.

Crucially, the narrative is enlivened with the first-hand testimony of the former OTS officer who led the technical preparations, Brian Mint. The testimony he provided to the authors indicates a combination of factors. First was a situational assessment, and analysis of the psychology and motivations of the at-large suspect, believed to be “a primary al-Qaeda forger who specialized in altered travel documents.” The OTS technical team became involved when wiretapped communications indicated contacts between the suspect and known terrorist cells “in Western Europe.”

The individual (who had apparently gone underground after the capture of his comrade) was married to a local woman, who claimed no knowledge of his whereabouts when asked by police. For the CIA, this man was a valuable target, as his capture “…could produce a wealth of intelligence through the identification of the alias identities of other al-Qaeda operatives along with exemplars of their passports, driver’s licenses, and other travel documents.” Indeed, as the authors recount, “finding the other terrorist became an obsession for the handful of case officers and techs.”

Since the Tirana terrorist underground, and the charities that sustained it had been so severely damaged by police actions since 1995, the CIA officers knew that accessing cash would be a problem for the fugitive. The intercepted communications revealed that al-Qaeda was using “a female cutout” (that is, a courier or go-between). This woman was identified and, in order to find the suspect, the CIA team needed to find a way to follow her in order to locate him.

The idea of combining technology with concealment via public mail was a risky but potentially brilliant method of gaining access to the fugitive without arousing suspicion. “According to Spycraft, “…the concept involved implanting a tracking device as well as an audio transmitter in a package sent to the cutout who could reasonably be expected to deliver it to the target.”

Brian Mint, overseeing the mission, was more skeptical that it could work than was the (unnamed) case officer, who enthused, “we know [the suspect] needs money… he’s gotten funds from Western Europe before and he’s looking for more. You put money in some package with tracking and audio devices and we can get him.”

Despite the inherent challenges, the case officer’s idea prevailed, and a team of technical experts was hastily assembled. While the CIA had long experience in creating myriad unique secret devices over the years, this one required a particularly ingenious design, in that it had to be a “double concealment” object. That is, the device sent through the mail would have to appear innocent enough to pass through the mail, and have not one but two secret cavities- one for the money that they hoped the terrorist would find, and the other for the electronic tracking equipment that they hoped he wouldn’t.

Acquiring and Modifying the Device

The next step, according to the book account, came when a technical officer “was dispatched to look for suitable concealment hosts.” The CIA team believed that “European tourist trinkets” would offer the best option, “since an inexpensive ‘gift’ would not be alerting to customs officials or others handling the item during transit.” Further, the intended recipient “would likely assume the gift was more than it appeared based on its point of origin.”

Thus, although it is not stated in the book, it seems clear that this phase of the operation involved dispatching the technical officer to the Western European city from where the item would need to be mailed- and to find something appropriately touristy to match that place.

The account given in Spycraft does not indicate how much time elapsed between the brain-storming sessions that planned the operation and this subsequent field research. It should not have required more than a few days however. The point of origin where the object was acquired can be deduced both by the 1995 revelations of Abu Omar, about the existence of affiliated terrorist cells in Italy, Germany and the UK, and by the description given of it in Spycraft: a wooden wall plaque with a metallic plate, engraved in outline with the image of an Italian cathedral and words reading ‘Saint Susanna.’ Considering that the ancient Church of Santa Susanna is one of the most famous in Rome, it is highly likely that this plaque was acquired and mailed from that city to Tirana.

However, before this souvenir could be sent, it had to be modified by the techs. After carefully removing the metal faceplate, they carved out a cavity in the center of the plaque “large enough to hold small-denomination bills worth several thousand dollars.” A special note scrawled in Arabic was added, telling the intended recipient “brother we are with you. Hopefully this will get you by until we’re able to contact you again.” Refastening the plaque with a strong adhesive, that could nevertheless be removed with some twisting, the techs then carved out the final touch- “a second compartment at the edge of the plaque large enough for electronics and batteries for two weeks of continuous transmissions.”

Sending and Receiving the Device

This two weeks of battery life was an issue of paramount importance; sent through the regular mail, the package could take as much as a week to arrive in Albania (that is, if it did not first arouse suspicion of postal workers or customs officials on either end, or simply get lost). The team would have to hope for the best- and, that the package would be almost immediately brought to the suspect’s location, otherwise the batteries could die and all their effort be for naught.

The note in Arabic had been necessary, in order to avoid arousing suspicion from the receiving party. But the team also sought to enhance the perception of legitimacy by mailing the device in a package “with labeling to give it the appearance of originating with the European terrorist cell, reads Spycraft. Since terrorist cells quite sensibly do not advertise themselves as such, it seems likely that the authors are hinting that the “labeling” referred to here pointed to an Islamic charity or other front company which would not arouse outside suspicion, but which would be known to the recipient for what it was.

This would mean that the CIA had not only identified the terrorist entity in question (again, probably based in Rome), but that they had either acquired some of its stationery or had been able to acquire an example of it to work from in order to create a reasonable forgery.

And, of course, in order for the whole mission to work at all, the team would have had to assume that the recipient in Albania would be unaware that the apparently sending organization had been compromised to such an extent. (Note that the book does not mention who personally delivered the package to the post office, or if that was an area of concern during the planning stage).

After the package had been sent, the OTS team got to work in Tirana, preparing its specially-equipped vehicles with audio tracking and surveillance equipment devices. All they could do was wait for the pieces of the plan to fall into place; as team leader Mint recalled, “all we knew was the address of the person we thought was the cutout… if that assumption was wrong, the operation ended. Further, we didn’t know if we would be able to keep our van with the audio receiver within the transmitting distance of the bug. We did what we could and hoped for the best.”

The CIA team enjoyed good luck. The package made it safely through the mails, and arrived at the address of the woman who was correctly identified as being the al-Qaeda courier. After being observed opening the package, she “read the Arabic-language note, and fifteen-minutes later, with the package tucked under her arm, began walking across town.”

The Operation Unfolds

At this point, the dual-concealment device tracking operation took on cinematic dimensions. The suspicious courier, not tipped off to anything untowards but still wary, was observed undertaking a “basic surveillance detection run,” states Spycraft. Making various stops, backtracking on certain streets, “she boarded a bus that took her into one part of town, changed buses, and headed to a different section.” However, the surveillance team – said to have been “unobtrusively” following behind – kept track of the courier with the package and “was eventually led to a neighborhood known for a militant Islamic presence.”

There, the woman disappeared into a two-story home behind a walled compound. A short while later, she came out again- this time without the package. What the authors describe as “local security” – most likely, Albanian police units – established a 360-degree perimeter “while the techs set up a listening post in a nearby house within range of the transmitter.”

This last detail is especially interested, though not explained further in Spycraft. Since an American covert surveillance team laden down with sensitive electronics cannot just walk into a private home in a foreign country (not to mention, at the exact moment it becomes operationally necessary to do so), it seems that the Albanian intelligence service must have previously selected a technical safe house in this “rough neighborhood.” It also means that they had somehow kept it from being discovered by local radicals. And thus the structure would likely have also possessed a back entrance or some similarly low-key area for the team to get in without incurring visibility and suspicion.

At the same time that the technical staff began picking up chatter from “several people” opening and discussing the package, an assault team of local police was assembled. The surveillance team then picked up scratching sounds from the plaque’s metal facing being removed; “the techs and case officers wanted to cheer as the concealment passed its first test. The target has recognized that the souvenir was more than it appeared and found the cavity concealing the money.” The team kept listening throughout the afternoon and into evening. And then something went wrong.

The Police Assault- and a Final Concealment Revealed

Stating that “the terrorist’s voice suddenly became agitated and his wife sounded emotional,” Spycraft explains that the technical officers surmised the suspect had detected surveillance on the perimeter while planning to leave the house. However this reason is not definitively claimed. There is also no mention of what happened with the “several” people – assumedly, more than two – initially described). “Then the techs heard the distinctive sound of a weapon being cleared and a round chambered.”

With this stark warning in mind, the Albanian special police prepared for an after-dark assault. After dark, and with the house gone absolutely silent, they stormed the building, concentrating on the second-floor apartment where they believed the suspect to be hiding.

However, a quarter-hour search revealed nothing, and the OTS time was stymied. “Either he managed to slip through the security around the house or he was still in there, hiding somewhere,” recalled team leader Brian Mint, who authorized a continued search. Yet after another hour, the police had found nothing, and the suspect’s wife claimed no knowledge of his whereabouts.

Believing that the operation had come to an end, the CIA officers entered the building to at least retrieve their concealment device, which “they found opened underneath the bed of the second-floor apartment.” It is not stated whether the suspect had discovered the second concealment cavity with the tracking device- if so, this would have clearly been the reason for his agitation a few hours previously, in which case the Albanian perimeter security officers would not have been the reason for the second change in the suspect’s demeanor and decision to arm himself.

Yet just as the OTS team was preparing to leave, “pistol shots and burst from automatic weapons fire came from the kitchen, followed by loud noises.” Apparently, the assault commander had returned to the apartment kitchen for a final look: “either curiosity or policeman’s instinct prompted him to move a small washing machine from against the wall. As he struggled with the surprisingly heavy appliance, a cavity between the back of the machine and the wall was exposed.”

The action then reached its final crescendo: “at that moment the armed terrorist, who had been hiding inside the washing machine, fired a single shot that hit the commander in the chest. Another nearby officer returned fire, recounts the book. “The terrorist rolled out of the machine and continued to shoot until he was killed with a burst of automatic fire from the assault team.”

The final strange irony of the account given in Spycraft concerns that the unfortunate terrorist had himself long been aware of the existence and use of concealment devices- the authors add:

“Closer inspection revealed that the working elements of the washing machine had been removed to create a hiding place just large enough for one person. Access to the concealment was obtained by removing the loosely attached tin backing and crawling through to the cavity.”

The operation was thus concluded, and was considered a success. Unlike during the disastrously publicized operations of a few months earlier, reads Spycraft, “press reports the following day made no mention of the Agency’s operational or technical role in the action, though the assault team along with the wounded commander, received deserved accolades. The OTS techs were satisfied to have played an unpublicized role in removing another terrorist from the seemingly endless war.”

The Concealment Operation: Final Assessments and Thoughts

There are several lessons that can be drawn from an assessment of this operation, relevant for both historians and intelligence practitioners. A study of both what actually did happen – and what could have happened differently – is instructive in our understanding of both disciplines.

For historians, the major conclusion that can be drawn from the account given in Spycraft is that Islamic radical networks present in Albania in the late 1990’s were highly organized, employed professional means of evading surveillance, and were well-armed. Their heightened levels of suspicion – justified after years of being hunted by police – were nevertheless not completely foolproof.

Another important point is that the Albanian police and intelligence services were enthusiastic and cooperative with the CIA in attempting to rid their country of the terrorist scourge. That they were capable of assisting with the operation, maintain secrecy, follow the courier, and execute the operation was quite an achievement, considering that the SHIK had been essentially reconstructed and retrained for barely over a year, at the time. It is also quite remarkable considering the considerable distraction presented by preparations for an imminent NATO intervention in Kosovo, and the concomitant preparations for Islamic charities to bring hundreds of new people into the country from all 1998 onwards.

For intelligence practitioners, every facet of the operation – from conception to conclusion – is relevant. First, the operational leader had to be convinced of the feasibility of sending a concealment device through the mail and it appears that it was only the enthusiasm of the case officer that won him over. Had it failed along the way, it was not likely to have been attempted again, at least not in the same theater of operations. The CIA would then have had to conceive of another way of accessing the individual- something that could have grown more difficult as further time passed.

And, had the tracking equipment been detected by the courier or suspect, not only would a covert foreign intelligence role have been assumed, but also the Islamist organization on the sending side would have been made aware of the deception- something that would certainly have caused communications with the Albanian cell to cease.

It might also be noted that the sheer physicality of the concealment device marks it as an essentially 20^th-century tactic, meaning it might not even be considered today when there are many new and different means of communication and access to funds than existed at that time.

While the operation was generally successful, the fact that the suspect had been killed instead of taken alive was unfortunate. After all, one of the key goals stated in Spycraft was that the suspect could, if taken alive, “produce a wealth of intelligence through the identification of the alias identities of other al-Qaeda operatives along with exemplars of their passports, driver’s licenses, and other travel documents.” Since he was killed in the police raid, however, these secrets died with him- though certainly the police would have recovered some documents or other data of importance.

The only lingering mystery left from the account given in Spycraft lies with the use of the word “several” to describe the number of individuals heard conversing within the house by the technical officers, once the concealment device arrived. Since this adjective implies the presence of more than two individuals, it is a bit odd that the rest of the account mentions only “the terrorist” and “his wife.” It is not possible that the crucial third party could have been the female courier, since she had left before the team heard conversations.

We are then left with an enigma: either the adjective “several” was mistaken, or other individuals were present in the house and had either somehow escaped before the police raid, remained in hiding during it, or been killed as well and just not mentioned. None of these are likely. For the third to be the case would have to mean that other individuals killed were either unexpected “collateral damage” that could provoke embarrassment if revealed, or such high-value targets that they could not be revealed even in passing. This mystery remains unresolved in the book’s account.

Appendix: Chronology of Events

The following events provide a timeline within which context can be established for the specific operation analyzed above, while also illustrating in general the intriguing convergence – and sometimes divergence – of global security events and US foreign policy of the time.

January-March 1997: The collapse of massive pyramid schemes leads to widespread anarchy in Albania, leaving over 2,000 dead and toppling the government of Sali Berisha.

April 1 1997: Caretaker Prime Minister Bashkim Fino announces the immediate suspension of the SHIK (Shërbimi Informativ Kombëtar/National Intelligence Service); its director, Islamist-supporting Bashkim Gazidede and his deputy, Bujar Rama, both resign.

May 30 1997: Arben Karkini is named new director of the SHIK.

July 1997: Fatos Klosi replaces Karkini as head of SHIK, following Socialist Party victory in July 1997 parliamentary elections forces Berisha government into opposition. Numerous personnel associated with the old regime are removed.

September 22 1997: A former director of the SHIK, Shkëlqim Agolli is found stabbed to death in his Athens home. Albanian media reports that the assassination was done by a Vlorë-based group, Komiteti Shpëtimit (Commission of Salvation), created after the riots.

October 1997: CIA sends a team to Tirana to begin a three-month training course for reforming the SHIK.

February 23 1998: Osama bin Laden issues his first fatwa, ordering Muslims to kill Jews and Christians throughout the world; the order sparks concern among the CIA.

February-March 1998: Albanian SHIK intercepts “chatter” between terrorist groups both within and without the country, including conversations with Egyptian Islamic Jihad members and its leader al-Zawahari.

Spring 1998: SHIK Director Fatos Klosi is called to CIA headquarters in Langley, Virginia for a briefing on future course of action.

June 25 1998: Egypt issues international arrest warrant for Tirana-based fugitive Shawki Salami Attiya.

Late June 1998: CIA-supported SHIK operation captures Tirana-based extremists Attiya, Ahmed Ibrahim Nagar, Mohammad Hassan Tita (Muhamed Hasan) and Mohamed Ahmed Salama Mabrouk, believed to have been sponsored by Osama bin Laden; however, another suspect is killed and two others escape. CIA recovers significant quantities of internal documents and computer equipment.

July 1998: Following the successful operation, “euphoric” SHIK agents unfortunately leak details of CIA involvement to the media, infuriating al Qaeda and its supporters

July 1998: Two weeks after the raid, another CIA-supported SHIK operation nets two more suspected terrorists.

August 5 1998: al-Qaeda publishes a statement vowing a response to the American-led Albania operation “in a language they will understand.” Statement is signed by bin Laden umbrella group International Islamic Front for Jihad.

August 7 1998: al-Qaeda terrorists attack US Embassies in Kenya and Tanzania, killing 224 people and injuring over 5,000.

August 12 1998: The Washington Post reports that senior US intelligence officials have in the previous few days visited Tirana to discuss the operations, unfortunate media leak and East African embassy bombings with SHIK officials.

August 20 1998: While vacationing in Martha’s Vineyard, Mass., President Clinton announces success in that day’s ‘Operation Infinite Reach.’ This bombing of an al-Qaeda training camp in Afghanistan, and a Sudanese pharmaceutical plant is a largely symbolic act that fuels more hatred of America among jihad supporters worldwide.

October 1998: CIA-organized raid executed by Albanian strike force raids EIJ safe house, leaving one suspect dead (operation recounted in Spycraft)

November 29 1998: US embassy non-essential employees in Tirana, removed due to fears of another attack similar to the East Africa embassy bombings, were still being kept from returning to the job, a sign that the whole al-Qaeda network had not been uprooted.

March 22 1999: NATO intervention in neighboring Kosovo begins.

April-June 1999: Thousands of new personnel, and millions of dollars in cash and supplies, enter Albania under the control of Saudi, Kuwaiti, Pakistani and other foreign Islamic charity groups. Liaise with existing charities some of whom have been direct targets of CIA investigations in the past.

June 9 1999: NATO bombing ceases as peace agreement reached, leading Yugoslav forces to withdraw from Kosovo.

June-July 1999: From Tirana, Saudi and Kuwaiti Joint Commissions for Relief in Kosovo fund massive efforts to assist refugees returning to Kosovo. Subsidiary cooperators include groups that will be linked with al-Qaeda later.

July 1999: Following NATO’s victorious Kosovo campaign, a celebratory visit to Tirana by US Defense Secretary William Cohen is cancelled over fears of Islamic terrorists.

November 1999 The SHIK is given a new name, State Intelligence Service (Sherbimi Informativ Shteteror, or SHISH)

August 7 2002: SHISH Director Fatos Klosi, the man who cooperated most closely with CIA, is removed from his position by President Alfred Moisiu; the move, reportedly ordered by the man who had originally nominated Klosi in 1997, Socialist Prime Minister Fatos Nano, is described in media as being politically motivated.

……………………….

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By Enza Roberta Petrillo*

The European Union emerged from the Yugoslav wars of the 1990s as a force that seemed capable of guaranteeing stability and peace in a part of the European continent perceived as a fracture-zone, an area of Europe known for its clashes.

Since 1991, Albania has radically changed, undergoing a complex transition period and a controversial process of institution-building. In contrast with countries like Serbia, Montenegro or Croatia, in Albania the power structures inherited from the Communist period were destroyed or swept away during the 1990s, especially during the explosion of violent conflict in 1997. These old and disintegrated structures were replaced during a long period of transition characterized by lawlessness, with a growing gap between the southern part of the country and the northern, and what the historian Ian Jeffries describes as a kind of €š”gangster land anarchy.”

Ever since the end of Communism, Albania has looked to the west. Hopeful and optimistic, the country has dreamed for almost twenty years of EU accession. At the beginning of this year, however, came the cold shower: Brussels denied the submission of EU candidature before the parliamentary elections scheduled for June 28.

Why are these elections so important for the young republic? Many analysts perceive them as a sort of watershed moment between the past and the future. These two dimensions might actually be two side of the same coin. Since 1991, the country has experienced five parliamentary electoral rounds; in 1991, 1996, 1997, 2001 and 2005. Albania’s first-ever free parliamentary election witnessed a 97 per cent turn-out in the first round on 31 March. This electoral round was strongly contested because the opposition parties were disadvantaged by their recent formation and by the lack of political experience. The ruling Party of Labour of Albania (PLA) won 56 per cent of the votes cast in the first round, mainly thanks to its continuing hold on the Southern Tosk part of the country, and on the political behavior of the agriculture population, many of whom feared that the Democratic Party (DP) would help the big private landowners regain possession of most of the country’s agricultural land.

The new People’s assembly first met on 10 April. On 29 April, the parliament passed an interim constitutional law to modify the 1976 Constitution: Albania became “The Republic of Albania” in place of “The People€šÃ„ô Socialist Republic of Albania”, and the leading role of the PLA was abolished. Although this party was of leftist persuasion, the government program presented by the premier, Fatos Nano envisaged an extensive privatization and a rapid shift to a market economy. These measures were violently contested with strikes and protest movements that caused the resignation of Nano as Prime Minister, followed by the Interim “Government of National Stability” headed by Vilson Ahmeti, until March 1992.

Macro-economic measures, price liberalization, privatization of large state enterprises and the collapse of the agricultural system exemplify the larger context surrounding the Presidential Elections of March 1992. The response to this electoral round represents one of the focal element of the recent history of the country.

The election of the ex-Communist and DP leader Sali Berisha started off the post-communist new deal of the Albania. Since 1992 Berisha has been one the most controversial political representatives in Albanian political life. His political profile coincides with the recent history of his country. From Communism to radical anti-Communism, from the age of 16 Berisha has tried all political approaches, from nationalistic authoritarianism to liberalism.

At the beginning of his mandate, Berisha was charged with being authoritarian and, in November 1994, called a referendum on a new constitution which, if approved, would have granted powers to himself as president, including the right to nominate the prime minister, dismiss ministers at the suggestion of the premier, as well as to dismiss or arrest the chairman and the members of the constitutional court and the supreme court with the approval of Parliament. The referendum failed, however, and several ministers were replaced.

The hard-line view of Berisha was demonstrated by the “Law on Communist genocide,” passed in September 1995 with the aim of prohibiting to anyone who had been a member of the old PLA central committee or the Communist Parliament from participating in national or local elections and holding jobs in the media or judiciary.

The first victim of this law was Fatos Nano, the leader of the Socialist Party.

Several analysts and international organizations monitored the Parliamentary elections of May 1996. Opposition parties accused the DP of practicing intimidation and electoral manipulation. These elements were confirmed by the Organization for Security and Cooperation in Europe (OSCE), which spoke out against the presence of armed individuals and unidentified persons inside polling stations who had an intimidating effect on voters and polling commission officials. The Democratic Party won the electoral round, however, despite the protests of the opposition and the OSCE. Behind this second waltz, several analysts saw the personal triumph of Sali Berisha.

In the first period of his mandate, Sali Berisha received strong support from Western countries, especially the USA. In 1993, Albania signed an accord on military cooperation with the USA and introduced the International Monetary Fund’s economic reforms. Foreign trade liberalization, flotation of the Lek, price liberalization and a wild expansion of the private sector contributed to creating the peculiar socio-political context of the pyramid schemes crisis and resulting popular insurgency of 1997.

The international press paid great attention to these fraudulent investment schemes, which paid out artificially high returns to early investors, using money paid in by subsequent investors. In this way, during the 1990s many Albanian companies became wholesome pyramid schemes, with no real assets. Unlike in many other countries, these schemes had direct political implications. Two-thirds of the Albanian population had invested in the pyramid schemes, through companies which were engaged in criminal activities.

At the beginning of 1997, about one-third of all Albanian family lost their savings as a result of the pyramid schemes€šÃ„ô collapse. Violent protests, strikes, and spontaneous movements upset Tirana and Vlore. Troops authorized by the Parliament guarded roads and government buildings. Berisha chose to respond with an iron hand, and the opposition answered with the Forum of Democracy, an alliance created to persuade the government to set up a technical executive and then hold elections.

The increasing of political tension caused in Albania a radical change of the political and social discourse. Violence became prominent. Larger anti-government protests shattered Vlore. Berisha accused the opposition of fomenting the anarchy and the insurgency, ordering the arrests of opposition politicians and declaring a state of emergency. This phase marked the acme of Berisha’s regime and his point of no return, in the eyes of the international community. The European Union and Italy played the fundamental role in persuading the Albanian premier to accept a government of national reconciliation representing all political parties.

The fundamental year to remember for understanding the political transition of modern Albania is 1997. In March of that year, Bashkim Fino, leader of the Socialist Party, replaced Berisha as interim Prime Minister. The inflows of Albanian refugees to Italy made clear the multi-dimensionality of the crisis and the necessity of new elections. Under the monitoring of OSCE observers and the international peacekeeping force, the elections were carried out fairly successfully. Voters voted without intimidation, but OSCE observers also pointed out problems with the vote-counting process. The DP, with only 25 per cent of the votes and twenty-four seats, lost the elections yielding the government leadership to Fatos Nano.

From 1997 to 2005, the centre-left coalition had various government leaderships. The resignation of Nano as prime minister caused by his coalition’s division was followed by the centre-left coalition government headed by Pandeli Majko, until the parliamentary elections of June and July 2001. In those the Socialist Party won, obtaining 73 of 140 seats, and the second socialist government headed by Ilir Meta started. However, his was a short-term mandate: after a six-month dispute with Fatos Nano, Meta resigned. The national reform period came to a halt and a near total dependence on international and EU aid began.

Why, then, did the centre-left coalition implode? The primary cause of that alliance’s collapse was internal divisions. From 2002 to the parliamentary elections of 2005, Nano and Majko €šÃ„ì who returned to the premiership in February 2002 €šÃ„ì had personified the factional conflict within the Socialist Party of Albania. This barren political debate gave the dimension of a cultural and political gap between the parliamentary politics and the Albanian society. Political feuding between Nano, Meta and Berisha impeded Albania’s progress in social, political and economic reforms, stopping the country’s progress in negotiations with the EU.

After the first EU openings in March 2004, the European Commission accused Albania’s leaders of stopping the political reforms, also accusing opposition leader Sali Berisha of paralyzing parliament’s activities. The EU also criticized the country’s incapability to elaborate a strategy against organized crime and political and economic corruption.

Economic crisis, institutional transition, international relations and institutional reforms were the main themes of the parliamentary elections of July and August 2005. Thanks to an election campaign based on the promise to fight poverty, stimulate business and lower taxes, Berisha won the elections, becoming premier of the centre-right government. In 2005 thus began Berisha’s “New Deal,” a different political phase grounded on a collective dream: entrance into the EU.

This objective has represented an element of cohesion by which the entire country has agreed to move forward, especially regarding the reduction of illegal migratory flows to Italy and Greece. The European dream was fomented also by the EU decision of 2006 to sign off on a Stabilization and Association Agreement between Albania and EU. The condition to obtain the Accord were clear: functioning rule of law, protection of minority rights, harmonization of Albanian rule with EU legislation, a functioning market economy and the increasing of cooperation with the other Western Balkans countries.

Two years after these EU conditions were presented, what has happened to Albania? For his part, Sali Berisha seems to have chosen the 1990s revival theme, raising the rhetoric against the opposition, rather than addressing European Reformism. During the election campaign, he has accused the opposition of being tied to the Communist past.

On December 22, the parliament passed a controversial “lustration” law, which is expected to allow for the dismissal from public office of a wide range of officials who participated in “political processes” while serving in higher-level government positions under the communist regime, including judges, prosecutors and law enforcement officers. The vague wording of the law gives the government free discretion in determining what “political processes” means, thereby allowing it considerable freedom in determining if an official should be dismissed from duty.

International observers, including the OSCE and COE, stridently criticized the law and expressed concern that the law would allow the government to assert undue political control over the judiciary, undermine due process, and circumvent constitutional protections provided to judges, members of parliament, and prosecutors. Furthermore, the law states that persons subject to the law cannot participate in its judicial examination. This places the court in direct conflict with the executive, as several members of the court were reported to fall within the scope of the law.

The European Union does not seem to appreciate this sort of political performance. Also, shadows enshroud these recent governmental acts. At the beginning of 2009, the US State Department declared in its 2008 Human Rights Report that €š”there were problems in some areas. During 2008 the government attempted to assert greater control over independent institutions such as the judiciary, the Office of the Prosecutor General, and the media. The government interfered in the ongoing investigation into the March 15 Gerdec arms depot explosion. Security forces abused prisoners and detainees and prison and pretrial detention conditions remained poor. Police corruption and impunity continued, as did discrimination against women, children, and minorities. While some progress was made toward combating human trafficking, it remained a problem.”

More than being on the road to implementation, EU standards seem to be further and further away. The Albanian Helsinki Committee and the Albanian Human Rights Group reported that police sometimes use excessive force or inhuman treatment. As reporting in the Human Right Report, police have frequently mistreated suspects at the time of arrest or initial detention. Roma, Balkan Egyptians, and homosexuals were particularly vulnerable to police abuse. The overall performance of law enforcement remained weak. Unprofessional behavior and corruption remained major impediments to the development of an effective civilian police force.

At the same time, the Ministry of Interior has started a new recruiting system with standardized procedures. In combination with the new system of police ranks, authorities expect this to improve the overall performance of the police. However, low salaries and widespread corruption throughout society made police corruption difficult to combat. However, the law provides criminal penalties for official corruption and, despite several arrests of high-level local and central government officials, corruption remained a major obstacle to meaningful reform and a serious problem.

*Enza Roberta Petrillo is an Italian research consultant on Balkan and East European Affairs, with a focus on institutional transition and social and human rights affairs. She has worked as a policy analyst for several research centers and international organizations and has collaborated as a freelance journalist with a number of newspapers, reviews and web-sites. She holds a master’s degree in Political Science and a PhD in Developmental Geography from the University L’Orientale of Naples.

(Balkanalysis.com Research Service) – New information from regional intelligence sources, as well as open-source channels, indicates that cross-border militant activities on at least four fronts are among the new developments to watch in the aftermath of Kosovo’s independence declaration on February 17.

While world attention has focused mainly on the political and legalistic dimensions of the Kosovo Albanian government’s declared independence on February 17, other concurrent developments indicate that the main actors are taking steps to change the facts on the ground in the short term, or produce a long-term deterrent by hastily securing a presence across a widening geographical terrain.

In south Serbia’s Presevo Valley, home of a substantial Albanian population, the Serbian government has been boosting the presence of its security forces. According to Skopje daily Vecer, the Serbian army is completing Tsepotine Base, also known as the “Serbian Bondsteel’ (a reference to the US Camp Bondsteel not far across the border in Kosovo). Its strategic high position allows commanding views of Kosovo to the east and Macedonia, 5km to the south. Although planned for five years, various issues and disagreements between the ministries of defense and internal affairs slowed it down, reports Vecer. However, with the independence of Kosovo, completing the 35-hectare base has become a priority. The construction of such a large base in this strategic triangle indicates Serbia’s concern to keep the presently quiet Presevo Valley from blowing up as it did in 2000. Also, for Russia, reportedly interested in some sort of a military presence with the help of the Serbs, the location is again ideal. Vecer reports that Serbia currently has 16 smaller bases along the 92km-long administrative border with Kosovo.

New information from Kosovo itself also suggests present Russian cooperation, with the presence of small numbers of alleged Russian military trainers, in civilian garb, in the northern Kosovo towns of Leposavic and Mitrovica. Balkanalysis.com reported in late 2006 about the arrival here of Serbian special forces in civilian clothes, as a precaution in case of Albanian attacks. In 2006, it should be remembered, KFOR repopulated a disused base in the north of Kosovo, primarily to prevent Serbian troops from coming to the aid of their ethnic kin in case of any large-scale violence.

Two days after the Albanian’s independence declaration, Serb reservists and other agitators stormed and destroyed the nearby border post, gaining brief but important access into Kosovo before it was recovered by NATO troops. On February 27, Reuters reported that the Serb National Council in North Mitrovica had called for Russia “to return its KFOR contingent [in order to] to stabilize the situation in areas where Serbs are in the majority,” in the words of Council leader Milan Ivanovic. Although Russia had a small troop detachment in Kosovo from 1999-2003, it was deliberately not given its own sector equal to those of the other Great Powers, nor positioning in northern Kosovo. Now, it appears, Moscow will have in one way or another positioning in both northern Kosovo and the Presevo Valley.

Along with the attack on the UN border post in northern Kosovo on February 19, Serbian reservists have also made their presence felt on an eastern Kosovo border checkpoint. On February 25, rioting ensued at the Mutivode checkpoint, where 250 ex-serviceman from Medveda, KurˆšÃ–¬°umlija and Lebane clashed with Albanian KPS officers at the administrative boundary with Kosovo. The two sides hurled stones at one another, until the KPS used tear gas to dispel the Serbs. Strong winds, however, soon cleared the air for more conflict. “Tires were also set on fire, and the wind spread the blaze to both sides of the line,” reported B-92. “During the entire showdown between the demonstrators and the KPS, cordons of KFOR, on one, and Serbian MUP on the other side of the line, looked on without intervening.”

Serbs have begun other forms of symbolic protest within Kosovo. Serbian police employed within the KPS are threatening to trade in their uniforms for those of Serbia as soon as possible; on February 28, in line with Belgrade’s wide-ranging policies designed to reduce the ability of the self-declared state to function, Serbian KPS officers announced a general strike. The strike will create an interim period in which the officers can make a coordinated action. Even if the struggling UN mission, essentially ineffective north of the River Ibar, dismisses their rejection or tries to take stronger action, the departure of the token Serb presence would signal the end of any hopes for multi-ethnic law enforcement in Kosovo.

On February 27, KFOR sources indicated that British and Austro-German reserve battalions were being put on a heightened state of readiness and that the military mission was increasing its presence in the north. Some Albanians apparently intended to make preparations of their own. On February 21, the leader of the Albanian minority population of North Mitrovica, Adem Mripa, was arrested by KPS police. According to B-92, three Tromblon RPGs and several pieces of ammunition for sniper guns weapons were discovered in his house, in the ethnically mixed quarter of Bosniak Mahala. At the same time, “a bomb was found near a house owned by [Serbian resident] Jovan Ilic, which KFOR subsequently destroyed.” Serbs in the isolated enclaves of central and southern Kosovo are far more vulnerable. An eight-year-old girl was stoned in Ljiplan on February 23, Tanjug reported, while playing in her yard. Such attacks were a regular occurrence, the girl’s father told reporters.

The announced independence of Kosovo has taken on wider dimensions, however. Approximately 12 days ago, Balkanalysis.com has learned, Macedonia’s intelligence services became aware of the re-opening of training camps/rear bases in the Kukes area of northern Albania. These bases, located near the clan stronghold of Albanian Prime Minister Sali Berisha, were where American and British military instructors trained Kosovo Liberation Army soldiers in safety for the 1998-99 campaign across the border in Kosovo. Reporters from Germany’s Spiegel in Kosovo, citing an Albanian paramilitary volunteer in the shadowy Albanian National Army, claim that the organization “takes orders from its head office in Tirana, Albania.” The ANA has recently stated its priority of monitoring the north of Kosovo and, if necessary, using force to prevent it from rejoining Serbia.

An expected complement to any Albanian irregular activity within Kosovo itself was likely to have been the paramilitary group destroyed in Macedonia’s “Operation Storm’ in November 2007. In the remote village of Brodec in the Sar Planina mountains above Tetovo, special police arrested or killed escaped criminals from Kosovo’s Dubrava Prison, and captured a sophisticated arsenal, sufficient for 650 men- for the moment at least neutralizing a major security threat before the anticipated secession decree in Kosovo to the north.

However, despite that coup, the Macedonian intelligence source stated that “very recently, we have received information that some small Albanian armed bands, 10-20 individuals or so in each, have re-entered Macedonian territory from Kosovo, in the Tetovo and Lipkovo regions- we are working on locating these groups before they can [become a threat]…  however, the border is very easy to be crossed in those places, and they can easily escape from one side to the other when necessary.”

By Christopher Deliso

With additional reporting from Albania by Stavros Markos

Tirana is swarming with American and British intelligence officers and Secret Service personnel ahead of American President George W. Bush’s June 10 visit to Albania. While such attention is standard procedure before any such trip anywhere in the world, specific local conditions are being factored in to the equation. According to published Albanian media sources and off-the-record testimony from Western intelligence officials, the US security detail, with support from the ever-faithful British MI6, is particularly keen to neutralize small Islamic fundamentalist organizations operating in the country. But a mysterious explosion near the US embassy on May 16 and two munitions seizures on May 30 have still not been attributed to any group.

In 1999, after the Kosovo intervention, Secretary of Defense William Cohen and President Clinton were both forced to cancel visits to Albania because of threats from a mostly Egyptian, but Saudi and bin Laden supported, terrorist cell that had entrenched itself in Albania during the early 1990′s. As will be seen, there remains great confusion regarding the circumstances of these cancellations and the foggy fate of one of Albania’s leading terrorist supporters during the 1990′s, Abdul Latif Saleh.

The Wider Context: A Complex Range of Turbulent Issues

On his trip, President Bush will also visit the Czech Republic, Poland, Italy and Bulgaria. The main event underpinning the trip, the June 6-8 Group of Eight (G8) summit in Germany, promises to be a tense affair dominated by the final status of Kosovo. Two days later in Tirana, Bush will meet with Albanian President Alfred Moisiu and Prime Minister Sali Berisha. It is likely that the outcome of the G8 Summit, and whatever agreements can be reached behind the scenes there, will color the president’s public comments in Tirana- regardless of whatever packaged soundbytes his speechwriters have already prepared.

The president is visiting Europe at a particularly sensitive time. A proposed but highly unpopular missile shield in the Czech Republic s already bringing out protesters. While there will probably not be protests in “pro-American” Albania, the independence of Kosovo, and the showdown with Russia and Serbia that the West has forced with this policy adventure, looms large- as do concerns over lurking Islamist elements.

Further, the president will hold meetings with the prime ministers of the three new candidate countries for NATO membership (Croatia, Albania and the Republic of Macedonia), something that has led Greek media to conjecture that the latter will receive an invitation to join NATO under its constitutional name- anathema for the Greeks, for whom the “Macedonian name issue” is returning as a hot political topic in advance of election season. In Albania itself, there have been several attacks by nationalists against Byzantine churches and Greek Orthodox Christians in the south.

A final issue is the legacy of America’s controversial detention center at Guantanamo Bay, Cuba, which lives on in Albania- the only country so far which has taken in prisoners discharged from the military facility. Most cannot return to their home countries, for fear of being tortured or killed. This was the case with the five Chinese Uighurs taken in by the Albanian government.

However, a recent BBC profile of ex-Guantanamo prisoners in Albania presents the daily reality of these de facto refugees in a highly unflattering light. A May 18 visit from the British media group to “the ramshackle refugee centre on the outskirts of Tirana” where eight Guantanamo “graduates” live mentioned the case of an Algerian who “cannot leave the country to be re-united with his familyˆšÂ¢Â¬Ã„¦ [nor] can they join him to live in Albania.” While the man, Abu Mohammed, is a trained doctor, not knowing the Albanian language he has little chance to find such work in the country. While Albania has presented its acceptance of the ex-prisoners as a gesture of help and support to its American patron, the mens’ lawyers and reports such as the BBC’s indicate that the country is being used more as a dumping ground for the unwanted “human trash” of the so-called “war on terror.’

Security Preparations

Along with the invasion of Iraq, Guantanamo is one of the main issues to have angered Albania’s Islamist groups. Since some of these groups have shadowy foreign sponsors, the Americans are obviously taking no chances with security. On May 16, an explosion in a Tirana cafˆšÃ‰Â¬Â© located very close to the US Embassy injured one waitress. According to the Associated Press, “police are investigating who was responsible and what sort of device was used.”

Most recently, on May 30, “a plastic bag containing a few grams of explosives was found at 2 p.m. [in] a courtyard at the economics faculty of Tirana University, about 100 meters [from] the U.S. Embassy,” reported the IHT, adding that “half an hour later, a package containing 30 grams (1 ounce) of explosives was found at Mother Teresa Square, near the office of President Alfred Moisiu.”

While it cannot be proven, it is not beyond the realm of possibility that these were deliberate plants by the authorities made in order to scare citizens into accepting the draconian security measures that will be in place for Bush’s visit. Indeed, Tirana residents are likely to feel more than a little restricted. According to BIRN, the Albanian capital will be turned into “a high-security zone.” This apparently means “a complete shut down of traffic in the capital and rooftop snipers on every major building along the route of the Bush motorcadeˆšÂ¢Â¬Ã„¦ most residents of apartment blocks close to places Bush is expected to visit will be prohibited from appearing on their balconies.” For the record, the preparations are being made under direction of the US Secret Service by a working group headed by Deputy Premier Gazmend Oketa.

Most recently, the Albanian parliament passed an extraordinary law that allowed a select team of US troops to accompany Bush on his visit. The act, passed by the Albanian parliament’s Law and National Security Commission, applies only to Bush’s visit.

While the high level of security is usual practice for a presidential visit it, as well as the grenade explosion and explosives seizures, are at the same time somewhat at odds with the country’s reputation as a bastion of pro-Americanism.

Indeed, the extravagant security operation is being conducted with the awareness that Islamic extremists operating in Albania and neighboring Kosovo could pose a threat, despite numerous efforts to contain them. The borders with Kosovo, Macedonia and Montenegro remain porous and easily exploitable.

According to several security sources, Albania itself hosts a small fundamentalist Wahhabi community, funded by Saudi Arabia and other Gulf states. It is this factor that, according to a former MI6 officer, led the British spy agency to double its presence in Albania in mid-2006. The former officer adds that with the election of French President Sarkozy, a ‘strong Europe’ conservative, we can expect the French DGSE to take a more robust role in the region as well, in coordination with the British.

Islamic Inroads

Further, the Albanian newspaper Shqip recently claimed that a “Wahhabi sect” active within the Islamic Community in Albania poses a threat as a potential supporter of terrorism in the future. As elsewhere in the Balkans, the report notes, Muslims in poor rural areas are taking monthly “salaries” in order to dress and behave in the Wahhabi fundamentalist way.

However, the Islamic community allegedly does not have the authority to control extremists inside their society, “often claiming that this problem is an obligation of the Penal Code of the Albanian Constitution.” In January 2002, a senior Islamic Community offficial, Salih Tivari, was murdered by extremists after pledging to cut down foreign influence and funding within the Islamic Community.

A number of foreign Islamic charities, such as the “mainstream” Islamic Relief, still work in Albania under humanitarian pretexts. In neighboring Kosovo, Islamic relief has tried to become an economic, social and religious force in rural areas forgotten by the West such as Skenderaj (indeed, the charity itself describes “isolated mountain villages” as its speciality in Albania). The organization has field offices in interesting locations: Shkodra, a largely Catholic city in northern Albania; and Pogradec, a not especially religious town but one strategically located on Lake Ohrid near the Macedonian border. Macedonian security officials have noted that attempted penetration of foreign Islamist charities via Albania was carried out, unsuccessfully, in the past.

While the Lake Ohrid area is not regarded as a significant area for Islamic extremism, it has not stopped international sponsors from reinforcing the faith. In the small village of Lin on the northwest corner of the lake, for example, the United Arab Emirates built an impressive mosque — the Fakhira Harib el Khili Xhamija — in 2001.

In Shkodra, as elsewhere in Albania, religious fault lines are being exploited by both conservative Christian and Muslim groups. Tensions have risen with perceived provocations between Catholics and Muslims, as was the case when a cross was put up in Shkodra, and then mysteriously vandalized in January 2006. And, when civic leaders wanted to honor national hero Mother Teresa with a statue, three Muslim groups — the Association of Islamic Intellectuals, the Albanian Muslim Forum and the Association of Islamic Charities — publicly protested.

The former, a relatively new group which allegedly supports interfaith relations, declared that a statue of one of the world’s most renowned humanitarian figures would be a “provocation” to Muslims.

In November 2005, Muslim groups were further enraged when Albanian President Alfred Moisiu, speaking at the Oxford Union in England, declared that only a “shallow” sort of Islam exists in Albania, a country with allegedly much stronger and more durable Christian roots. The MFA and other Islamic groups condemned the president for “insulting Islam.”

Other issues, such as the building of churches and the previous debate over whether Albania should accept the discharged Guantanamo prisoners, have also provided great opportunity for rhetorical displays from such pressure groups, which are becoming increasingly vocal and active. As the rhetorical battle heats up, and the imminent independence of Kosovo dissolves the urgency of strictly nationalist mentalities, the animosities between Catholics, Muslims and occasionally Orthodox will only increase.

Final Puzzling Discrepancies

The Albanian intelligence service, the SHISH, operates under the direct orders of the Americans and, when deemed appropriate, the British. This was not always entirely the case. In fact, ironically, the reason why Islamic extremists entered the country in the first place was due to the former head of the spy agency, Bashkim Gazidede, a devout Islamist. During the early 1990′s, the SHISH was therefore both arresting foreign extremists under CIA orders and enabling others. When terrorist leaders such as Osama bin Laden himself visited Albania, it was under the pretext of subsidizing the desperately poor post-Communist country. Sali Berisha, then president, was happy to accept the help, even making Albania Europe’s only member of the Organization of the Islamic Conference- without gaining parliamentary approval.

According to Albanian security expert Damian Gjiknuri, Gazidede, a former chairman of the Islamic Intellectuals Association of Albania was in the early 1990′s “working around the clock receiving official delegations from the Arab world, hence deviating from the official duties and even compromising national security.” In 1997, after the corrupt pyramid schemes collapsed and brought total anarchy to the country, the Berisha government was toppled and Gazidede fled, in July 1997. Reportedly, he went to the Middle East and was later protected and employed by Turkey’s MIT intelligence service.

What happened subsequently is opaque. It was reported that the former spychief returned to Albania in December 2005, following Sali Berisha’s re-election, on a Turkish Airlines flight. However, a European security official claims that this “sighting” was of a body double, and that Gazidede really returned via ship, from Turkish-held North Cyprus. Neither account can be confirmed. Since May 2006, German and Albanian news reports have claimed that Gazidede was given a state job overseeing property issues, but is now in Rome for medical treatment. In any case, it seems that Gazidede is no longer in a position to cause mischief.

A more perplexing disappearance has been that of Abdul Latif Saleh, once a major player on Tirana’s Islamic fundamentalist scene. This Jordanian radical employed by the Saudi government was also the business manager in Albania for Yassin al-Qadi, a Saudi tycoon was designated a terrorist sponsor by the US Treasury in October 2001. Although his American assets were frozen by the Bush administration, al Qadi’s web of business connections means he has not been touched abroad, and indeed his close connections with Turkish Prime Minister Erdogan resulted in his exoneration in that country last year.

In the 1990′s, al-Qadi was one of the leading Arab investors in Albania. His 15-story business centers (they would be seized by the Albanian government in 2002) were known, ironically, as Tirana’s “Twin Towers.” Al-Qadi, the founder and chief investor in the terrorist fundraising charity, Muwafaq (“Blessed Relief’), was alleged by the US government to have laundered $10 million for bin Laden through his business interests and charities. Investigators would also claim that Abdul Latif Saleh, the 45-year-old general manager of al-Qadi’s construction company, sugar importing firm and medical center, had been given $600,000 by Osama bin Laden for terrorist cells in Albania.

In September 2005, a US Treasury announcement reiterated its claims about the Jordanian. “Saleh has multiple ties to al Qaida, ranging from the Al Haramain Foundation to Yasin Qadi to Usama bin Laden,” said Stuart Levey, the Treasury’s Under Secretary for Terrorism and Financial Intelligence (TFI). “This designation identifies him as a terrorist facilitator and ensures that he will no longer be able to operate unencumbered.”

What this actually meant remains unclear. If Saleh would not be allowed to operate”unencumbered,” would he still be allowed to operate at all, and if so, why? At the same time that US forces in Afghanistan were rounding up random dark-skinned individuals and sending them to Cuba, it was allowing well known terrorist supporters in Europe, such as Saleh, to vanish into thin air.

For example, on November 12, 1999, “following a tip-off from US security services,” Saleh was detained by the Albanian SHISH and was then mysteriously flown by the US “to an unknown country.” A Tirana newspaper claimed that the arrest was related to President Clinton’s upcoming visit to Kosovo. Nevertheless, Saleh was apparently released undamaged, since he was able to make it back to Albania to be expelled again in 2002. According to the US Treasury, Saleh’s last known address was in the United Arab Emirates. Various reports have since placed him everywhere from Yemen to Afghanistan to supporting Muslim extremists in Kosovo.

Why the US would allow a known terrorist supporter to ride off into the sunset, even as it was detaining hundreds of people whose connections to terrorism were tenuous to non-existent, is likely to remain an enigma; however, Saleh’s affiliation with Yassin al Qadi, a powerful mogul with substantial investments around the world and former clients such as the US military itself, may well have played a part in the hands-off approach. A source with close ties to the US intelligence establishment would not confirm the scenario, but conceded that “this possibility cannot be denied.”

On April 30, 2007 the UN Security Council issued a press release updating its information on Saleh. It did not present any new information regarding his whereabouts, but it did note that he had been given an Albanian passport on two occasions (March 8, 1993 and December 1, 1995). This seems to have come shortly after a Tirana newspaper published this information.

The press release also replaced the name of one of Saleh’s alleged terrorist affiliations — the Salafist Group for Call and Combat — with the renamed version of the same Algerian Wahhabi extremist group, The Organization of Al QaˆšÃ‰Â¬Ã˜da in the Islamic Maghreb. On April 11, 2007, the group claimed responsibility for an Algiers bombing that killed 24 and wounded 222. North African terrorist groups have been fingered almost unanimously by Western intelligence experts as the most dangerous new development for possible terrorist attacks in France or Spain.

Interestingly enough, the press release also replaced under its “other information” section the word “na” (not applicable) with “expelled from Albania in 1999″- thus ignoring the Albanian government’s subsequent expulsion of Saleh in 2002. This omission only casts further doubts on why the shadowy terrorist sponsor was allowed to escape Albania, at a time when the Clinton-pioneered “extraordinary renditions” policy was in full swing in that country.

By Ioannis Michaletos and Stavros Markos*

The government in Tirana has, over the past few months, imposed new domestic security policies in order to curb an increase in criminal networks and their activities. At the same time, international bodies, namely the EU and NATO — entities which Albania wishes to join in the future — are worried about the country’s widespread corruption, and are pressuring Albania to reconstruct its judicial system so as to combat crime of all sorts.

The Albanian Parliament has thus enacted a series of remedial bills, which some analysts predict will lead to an infringement of democratic processes in the country. However, international aid to the security sphere in Albania has as a main target the curtailing of organized crime and terrorism, and not the imposition of a totalitarian state structure that would seek to emulate the Hoxha regime that dominated Albania during the Cold War years.

Of specific concern is the law for surveillance and electronic correspondence. This law was passed in 2005, due to pressure that Albania encountered from foreign agencies such as the CIA, MI6 and EUROPOL, which were reportedly concerned by the continued interrelation between organized crime and Islamic extremist within the state.

The attorney general of Albania, Theodori Solakou, has voiced his opinion by stating that any conducting of electronic surveillance will adhere to standards of basic human rights protection. However, this has not reassured the public, which fears massive eavesdropping by the government, a phenomenon long experienced in many other countries in the region and the wider world.

Here it is interesting to note that one of the major telecom operators in the country is AMC, an affiliate of the Greek state-controlled mobile provider, Cosmote. A possible scenario involving the Greek company and Albanian surveillance would of course be accusations made by Albanian politicians against Greece, claiming that this ownership would mean Greece would be the one controlling and benefiting from electronic surveillance of Albanians. The bilateral relations between the two states might be greatly hurt if such an incident involving AMC were to occur and become public, regardless of the actual law that provides this opportunity to the state. A similar incident in Greece with the company Vodafone — albeit in a different context — revealed the crucial role of mobile providers in modern-day eavesdropping.

On a related front, in summer 2006 the Albanian Parliament voted for an extreme resolution that called for the banning of speedboats operating from all Albanian Adriatic ports, a bill known as “the Berisha moratorium” after its most eager supporter, Prime Minister Sali Berisha.

This sweeping law prohibits the use of speedboats by any Albanian citizen, as such vessels had been used for almost two decades very extensively in contraband activities between Albania and Southern Italy, particularly narcotics and human trafficking. However, along with the actual criminal culprits, quite a few law-abiding Albanians were forced into unemployment because they lost vital sources of income that depended on tourism or fishing interests.

The real reason for the ban, however, was the visa/illegal immigration into Europe issue and the relations between Albania and the EU. A small detail usually left out from media coverage of the ban is that foreign-owned vessels are exempted from it, and also, as the BIRN Network comments, a lull in speedboat trafficking has occurred anyway, because the smugglers have returned to traditional means of transport such as bus and trucks.

Another notable development relating to state security is the creation of a port security and anti-terrorist force for the port of Durres. It has been initiated after an American report revealed that this particular Albanian city has one of the least safe ports in the world. The Albanian government promptly created a strong 78-man force to remedy this deficiency. It is likely that since amongst their duties is the protection of oil deposits and installations, the whole move is related to the proposed AMBO pipeline stretching from Burgas to Vlore and the prospect of Albania becoming a country of energy importance to Western Europe. Hence there is a clear need foe enhanced anti-terrorism forces and a modern security apparatus in the country.

Perhaps the real reason that Albania is implementing such harsh measures, measures that clearly impact on the everyday life of its citizens, is because of the enormous power of the organized crime groups entrenched in social and political life. During the Yugoslav wars of the 1990′s, successive Albanian administrations profited from the oil smuggling that supported the embargo-afflicted republics of the then-Yugoslavia.

Another key factor was state and criminal involvement in the arming of Kosovo’s “liberation’ army, the UCK; the various –and often illegal- international interests that coalesced throughout the Balkans in the 1990′s ensured the dramatic expansion of organized crime.

Lastly, the presence of extremist Islamic elements from the early 1990′s on alerted the West to other potential perils. Bin Laden himself reportedly had visited Albania during the mid-1990′s, and Islamic groups directed by state security chief Bashkim Gazidede, during the first Berisha regime, operated under the pretext of charity funds and international relief organizations. Foremost among these was the al Qaeda-linked Egyptian Islamic Jihad, reportedly rolled up in CIA-directed actions in 1998. However, the arrest of other extremists and asset freezes of entities in Tirana owned by Saudi mogul Yassin al-Qadi, whose assets in the US were also frozen, after 9/11 pointed to a persistence of Islamic activity. At present, the foreign-funded Islamists have become quieter and more clever, operating through think-tanks and choosing to proceed through “converting’ mainstream Albanian Muslims to Saudi Wahhabism, particularly in poor rural areas.

The larger Albanian public is more concerned, however, by the potential for state excess in terms of surveillance. The Albanian secret service has reportedly requested that the government enact a law by which all mobile phone subscribers would have a unique code, so as to be recognized instantly in case the state deems it necessary. Also, all telephone calls would be stored in a database for a period of three years, minimum.

Furthermore, Albania has recently received hi-tech electronic surveillance equipment from London, equipment that will assist in the enforcement of the nation-wide electronic monitor program.

Interestingly, there are some 1,000 people working under direction of the Albanian attorney general in this sensitive “Surveillance department,” an extraordinarily large number for one of the smallest and poorest countries in Europe. The real fear of the Albanian citizens is, therefore, the perceived ability of the state to conduct a mass program of surveillance under the pretext of the “war against crime,” so as to subdue its political opponents and in general curtail democratic rights.

Recent historical experience has proved that the aforementioned confirm a clear and present danger. In 1993, similar equipment — from the USA — was used to illegally survey leaders of the Greek minority in Albania. During that period the Albanian courts condemned 5 leading members of the Greek organization “Omonoia” for charges relating to actions against the state. The decision forced Greece to intervene by vetoing economic assistance from the EU towards Albania, and in general complicated the bilateral relations between Athens and Tirana. According to German sources, Albania received surveillance equipment due to its vital role in expediting the Kosovo war, with direct assistance from Western intelligence agencies.

Today, the small Greek community in Albania remains fearful that its prominent members (politicians, journalists, NGO members, lawyers etc) could yet again become subjects of state “attention.’ According to Albanian media sources, the Albanian secret service is currently monitoring members of the Greek community because of their statements on the “North Epirus issue.” The border provinces between the two countries are referred to separately as “Epiros” by Greeks and “Chameria” by Albanians; both states claim historic and cultural contiguity upon the cross-border terrain.

The demands of the Greek minority members in Albania which are today causing concern with the Albanian authorities include having more say in the communal affairs and seeking ties with their brethren in Greece. According to statistics and unofficial estimations, some 2-10 percent of the Albanian population has Greek ancestry and the overall controversy around “North Epirus” is interrelated with the overall democratic process in the post-communist Albania.

A relatively recent strain in relations between both states occurred on November 1, 2005, when Greek President Karolos Papoulias left in haste from an official visit to Albania, when an event staged by Cham Albanians took place in the area where the Greek and Albanian President were about to meet. The Cham protests for repatriation of their former properties in Greece has never been accepted by the Greek government, since the former left Greece in 1944-45 because of reprisals from Greeks, due to the Albanians’ collaboration with the Axis forces under Hitler. Nevertheless this is an issue that is simmering and a prediction is that as long as Albanian nationalism is energizing the country, there could be major setbacks in the relations between the two states specifically because of that issue. Maps of “Greater Albania” and similar aims, surely add up to a diplomatic climate that is uncertain and needs to get the exact opposite signals, so that both countries can fully cooperate and enjoy better relations.

Furthermore, Attorney General Theodhori Sollaku stated during an institutional meeting that he had been obliged to deny numerous requests by the secret service and the police for mass surveillance. He also added that the total number of surveillance demands can be compared to that of the USA, which has a population 100 times greater than Albania’s. That fact alone, according to the attorney general, reveals a situation not suitable for a democratic state, as well as a clear violation of human rights protection in the country.

This issue could be linked with the conflict between the government of Berisha and Mr. Sollaku, in which both parties have become locked in a series of accusations and counter-accusations of corruption over the past year. In fact, the government tried unsuccessfully to dismiss the attorney general on corruption charges, with no effect however, due to serious opposition from other political figures, including the president of the Albanian Republic.

Such developments indicate that Albania today is in danger of enacting a process that will drift its way toward Europe and not vice-versa. Instead of crime fighting, the new laws could become a perfect fit for those seeking to exert a totalitarian approach to the modern political environment. Political parties, minorities, NGO and labor syndicates could be all become subject to surveillance from the central government. Albania is a country that until 1991 had one of the most isolated and totalitarian regimes in the world. The way forward that includes EU membership would not be served by a mentality of the old days, wrapped in a hi-tech package of electronic and signal intelligence. This new episode in Albanian affairs will certainly prove to be another difficult passage from democratic-political adolescence to maturity, with all the pains and struggles that this passage entails.

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*Prolific Balkanalysis.com contributor Ioannis Michaletos is an analyst covering economics, politics and security issues in Greece and the Balkan region with the Research Institute for European and American Studies (RIEAS) in Athens.

Markos Stavros, born in 1965 in Vlore, Albania, is an award-winning investigative journalist in Tirana. He has worked with BBC Radio, Albanian Television TVS, France Television TF1, TF2, TV5, Italian Television RAI and more, specializing in Balkan organized crime.