Hezbollah’s Venezuelan money machine

On 3 January this year, the US carried out a spectacular operation in Venezuela. The sitting president, Nicolás Maduro, and his wife, Cilia Flores, were seized by the elite Delta Force, the US military’s specialised counter-terrorism unit. The mission was to bring the presidential couple to justice for narcoterrorism – trafficking cocaine in partnership with groups the US designates as terrorist organisations, among them Colombia’s FARC guerrillas and the Venezuelan gang Tren de Aragua. Hezbollah is not named in the charges. Yet the Islamist militant group, supported by Iran, has for decades had a significant presence in South America, mostly concentrated in Venezuela under the Maduro regime.

Hezbollah’s presence is woven into the political fabric of Venezuela. It has been crucial to Hezbollah’s ability to survive under international pressure, to finance its operations outside the Middle East, and to act as Iran’s long arm in the Western Hemisphere.

Decades of institutional collapse have left Venezuela with a legacy of economic failure, leading to hyperinflation and acute shortages, which, combined with violence and political repression, have led to more than seven million Venezuelans fleeing the country. This, and an openly ideological state apparatus, makes for near-optimal operating conditions for an organisation such as Hezbollah. Under the guise of political alliances, revolutionary rhetoric and state sovereignty it has been able to put in place significant financial and logistical structures. Regime insiders have helped provide identification papers, travel documents and logistical support, while criminal networks have provided cash, illegal trade routes and money laundering on an industrial scale.

According to the US authorities, Hezbollah’s criminal activities generate an estimated $300 million a year – roughly a third or more of its total budget, which is thought to be between $700 million and $1 billion. The remaining funding comes mainly from Iran, which is the organisation’s single most important source of financial support.

Drug trafficking linked to Latin America seems to be Hezbollah’s primary source of illegal income, with cocaine smuggling from Colombia in particular being a key element. Venezuela’s primary significance for Hezbollah and the Islamic Revolutionary Guard Corps (IRGC) is strategic and logistical: it offers state immunity, document facilitation, access to the gold trade and a platform for circumventing international sanctions. The result is that Venezuela has evolved into a strategic node in Hezbollah’s global infrastructure. The relationship stretches back decades. Nor is it confined to Venezuela.

On 17 March 1992, the Israeli embassy in Buenos Aires was blown up in one of the deadliest terrorist attacks ever committed in Argentina. A suicide car bomb destroyed the embassy and nearby buildings. The blast killed 29 and wounded more than 200, mainly civilians.

The attack marked a strategic breakthrough in international terrorism in Latin America. Argentina’s Supreme Court later ruled that Hezbollah was behind the attack, aided by Iran in the shape of the IRGC and the Ministry of Intelligence and Security (MOIS). The operational command was linked to Imad Mughniyeh, a senior figure in Hezbollah.

I assisted the court’s investigators as an expert on Hezbollah’s structure and operating procedures, and its operational links to the IRGC and MOIS. According to the intelligence services I spoke to at the time, Hezbollah’s presence in Latin America was nothing new. It had been known – and monitored – for years. The embassy attack was a sign of the terrorists’ need for secure rear bases, a need realised and institutionalised in Venezuela.

In 2003, as part of my work on Hezbollah activity in the region, I visited Argentina to speak at a counter-terrorism conference organised by the government. It was held in Puerto Iguazú, in Argentina’s far north-east, more than 1,000km from Buenos Aires and just a few minutes from the border with Paraguay. It is where Argentina, Brazil and Paraguay meet in the Triple Frontier: a tri-border area that has featured in counter-terrorism investigations with increasing frequency since the mid-1990s.

On the other side of the river is Ciudad del Este, a city with a reputation for lawlessness – a confusion of markets, smuggling routes and cash, where the government’s grip is tenuous. Ever since the CIA began monitoring the area in the 1990s together with the Argentine authorities, the name has cropped up constantly in intelligence reports.

With a population of 320,000, Ciudad del Este generates an estimated 60 per cent of Paraguay’s GDP and is one of the largest free-trade zones in the world, on a par with Hong Kong and Miami. Counterfeit electronics are sold openly on a massive scale. Every day, tens of millions of dollars in cash change hands in the city’s shopping district – money that vanishes quickly across rivers and borders.

Ciudad del Este’s entrepreneurs, logisticians, currency dealers, transporters and protection rackets are interlinked in complex money-laundering operations. This is a criminal service economy, where resources can be generated and moved with minimal operational risk.

According to intelligence sources, these illicit financial flows have been a lifeline for local organised crime, and, crucially, for Lebanese Hezbollah and in some cases Palestinian Hamas, too. It is how Hezbollah-linked networks can raise cash on the black market and from illicit trade, launder money through trade and currency exchange offices and transfer funds to Lebanon.

Paraguay, Brazil and Argentina remain vital for the kinds of networks that generate income from trade, smuggling and money laundering, often linked to diaspora communities and illegal economies in the Triple Frontier region. Meanwhile, after Chávez came to power in 1999, Venezuela emerged as the financial safe haven and logistical base of choice, thanks to the political ties between the highest levels of the regime and Hezbollah, in combination with the country’s broken financial system. In Venezuela, as in neighbouring Colombia and parts of Central America, individuals with links to Hezbollah are known associates of drug cartels and smuggling networks capable of generating substantial revenue.

Hezbollah’s relationship with Venezuela progressed as the country – first under Chávez and later under Nicolás Maduro, who succeeded him in 2013 – was increasingly integrated into Iran’s global strategy. Venezuela’s socialist government even entered into strategic relations with Iran and Hezbollah, driven by their ideological alignment and virulently anti-American and anti-Israeli stance.

In this, Hezbollah was a key financial and logistical extension of Iranian influence. Venezuela gradually became a regional hub for networks linked to Iran and Hezbollah, where government resources – including visas, travel documents and logistical support – were used to facilitate the freedom of movement and operations of individuals affiliated with terrorist networks.

Hezbollah’s links with the Venezuelan state date back to the early years of Chávez’s presidency. According to a former senior official at the US Treasury Department who testified before a US Senate committee, Chávez opened up Venezuela to Hezbollah as early as 2002-03. It was alleged the terrorist group set up training camps and support operations on Margarita Island in the Caribbean, with the regime’s knowledge and approval.

Margarita Island has a significant Arab diaspora – some 13,000 residents of Middle Eastern origin, including Lebanese Shia Muslims. According to intelligence sources, this helped foster a social, economic and logistical climate open for exploitation in the creation and expansion of networks. Margarita Island’s status as a free-trade zone, its strategic location off the coast of Venezuela and weak state control all make it ideal for criminals and extremists. According to Marshall Billingslea, a former Assistant Secretary for Terrorist Financing at the US Treasury Department, the island served as a logistical and financial node in Hezbollah’s global network, being used for money laundering, the smuggling of alcohol, electronics and gold, and forging documents.

At an early stage the US authorities warned that the Venezuelan authorities were complicit in systematic document forgery. According to Matthew Levitt, a political scientist specialising in international terrorism, thousands of fake national identity documents were issued to individuals from the Middle East so they could obtain Venezuelan passports and travel with fewer restrictions and far less scrutiny.

Around 2007 there was the first documented political contact between Venezuela and Hezbollah, when Venezuela’s then foreign minister Nicolás Maduro met representatives of the terrorist group in Damascus. It was around the time the Caracas-Damascus-Tehran air route was launched, which according to intelligence reports was later used for logistical purposes. Hezbollah operatives were provided with Venezuelan passports, while Conviasa, Venezuela’s government-owned airline, gave them logistical support. Flights operated on the route by Iran Air and Mahan Air were used to transport Iranian intelligence and security personnel, including staff linked to the IRGC and MOIS as well as Hezbollah. Reports suggest that both weapons and drugs were included in the air cargo.

In 2008, the US Drug Enforcement Administration (DEA) launched Project Cassandra to disrupt Hezbollah’s finances by targeting drug trafficking and money laundering. The investigation revealed Margarita Island to be a ‘back node’ – a logistical and financial hub where criminal proceeds could be systematically converted into operationally accessible resources, often with the acquiescence of the Venezuelan authorities. The DEA concluded that Hezbollah was involved in large-scale cocaine trafficking from South America to Europe and the Middle East; had complex money-laundering schemes that relied on the illicit car trade, cash processing and informal financial networks; and had integrated its criminal proceeds into its political and military structure.

Following the death of Chávez in 2013, as the Maduro regime consolidated power and, from 2017, came under increasingly severe international sanctions, Venezuela became more important as a financial safe haven for networks linked to Iran and Hezbollah, as well as a node for alternative payment channels, such as gold smuggling, cash processing and cryptocurrency markets.

At the same time, Hezbollah’s transnational criminal network operated a wide portfolio of businesses in Latin America – textiles, beef, charcoal, electronics, tourism, property and construction – which it used to launder illegal proceeds and inject them into the legal economy.

In Venezuela, Hezbollah’s support network has a family clan structure. A report by the Atlantic Council, a US think tank, noted that the Rada, Saleh and Nassereddin clans are part of a ‘much larger global illicit network of fixers, financiers, and facilitators for Hezbollah’, operating out of Venezuela under the protection of the Maduro regime. These networks are key to the systems that support both the Venezuelan regime and Hezbollah’s global operations.

While the Nassereddin clan is directly integrated into the structures of the Venezuelan regime, the Rada and Saleh clans ostensibly operate outside government, but control key elements in the illicit flow of drugs, weapons, contraband, smuggled goods and laundered money between Venezuela, Lebanon and Syria. They provide the specialised services that bridge any disconnect between Hezbollah, the regime-controlled shadow economy and certain sectors in Venezuela’s legal economy.

This continued relatively undisturbed until 2019, when the US Treasury Department imposed sanctions on Venezuela’s state-owned oil and gas company PDVSA, the regime’s main source of hard currency. The aim was to exert pressure just weeks after Maduro was sworn in for a second term following an election condemned by the US and other countries as fraudulent. At the same time, the EU tightened its sanctions regime, consisting of arms embargoes, asset freezes and travel bans. This further isolated Venezuela and increased the incentive to find ways around sanctions.

In response to the pressure, the networks in the region linked to Iran and Hezbollah underwent an evident professionalisation; rather than improvise ad hoc solutions, they now use scalable, financial sector-like structures with illicit financial flows that are hard to track. The main methods are trade-based money laundering (over-invoicing, under-invoicing and phantom shipping); layering using intermediaries and front companies for deniability; and hybrid value transfer systems that combine cash, informal transfers and (risk profile permitting) digital assets.

US measures against the regime, which culminated in the arrest of Nicolás Maduro and Cilia Flores in Caracas in January, have evidently had a knock-on effect on Hezbollah. Once a welcoming safe haven, Venezuela has become more uncertain, more expensive to operate in and more difficult to control. For Hezbollah, whose presence there has always been financial and logistical rather than operational, it is less of an abrupt change than a gradual reduction in its scope for manoeuvre. The result is not a less active network, but a more fragmented, decentralised network that is far harder to trace.

International sanctions and increased US pressure have largely targeted the structures needed for sanctions circumvention, money laundering and illicit financial flows. When Venezuela’s institutions, oil revenues and grey market are subject to stricter oversight, it erodes the country’s advantage as a stable ‘special economic zone’ for networks linked to Iran and Hezbollah. The networks are forced as a result to be more dependent on intermediaries and alternative nodes in the region. Nicaragua and Bolivia became Tehran’s ‘secondary nodes’ in the region, according to US experts who testified before Congress.

US action has had a pronounced effect on Latin America and Europe: intelligence cooperation has been prioritised, the severity of sanctions has jumped and the cost of protecting Hezbollah’s facilitators has risen significantly. Hezbollah continues to operate, but with less scope for action.

In the end, US measures will not see Hezbollah abandon Venezuela or Latin America. However, the terrorist organisation’s operations are now more vulnerable to disruption and more complex and expensive to carry out. Venezuela is no longer the relatively secure rear base it once was. For the wider world, far from reducing the risks, this means a more challenging threat landscape. The more Hezbollah depends on intermediaries, the harder it is to track.

This article was originally published in our sister publication, Axess Magasin. Translated by Charlotte Merton.