By Katrina Manson Tuesday, July 17, 2012 The corrupt political elite at Somalia’s helm could “fuel continued instability and conflict, potentially reviving the fortunes of an embattled al-Shabaab”, according to the report by the UN Monitoring Group on Somalia and Eritrea, which is researched by experts who recommend individuals for sanctions to the UN Security Council. The report, a copy of which has been obtained by the Financial Times, says more than 70 per cent of all government income goes missing. In one example, it cited the disappearance of $1.5m in passport fees in the 18 months to the end of 2011, equivalent to 60 per cent of fees taken. Authorities even gave a diplomatic passport to a top pirate, it says.

“When you’re stealing $8 out of every $10 and a quarter of what’s remaining goes to the three top offices, that’s not corruption, it’s cannibalism,” Matt Bryden, co-ordinator, told the FT, adding al-Shabaab benefits in “fringe ways”, through for example the sharing of ammunition.

Al-Shabaab has suffered significant losses in the past year that could push it “to the point of rupture”, says the report, citing military defeats, loss of territory, revenues and rifts in its leadership.

But the report warns that although it has lost access to several revenue-generating ports, markets and border posts, sanctions-busting trade partners have kept the militants well funded, and warns the group is “actively strengthening” its ties with other foreign extremist groups, citing both Kenya and Tanzania, as well as arms imports from Yemen.

The report notes neither UAE nor Saudi Arabia have applied new sanctions that forbid the purchase of charcoal from Somalia, al-Shabaab’s single most important source of revenue. Imports are in fact “steadily growing” and may have earned al-Shabaab $25m last year, up from $15m the year before.

Somali leaders, including the prime minister and president, refute the allegations leaked in draft versions of the report.

Somalia’s transitional federal institutions, which were set up by donors eight years ago in an effort to develop political stability in a country at war for the past 20 years, are due to hand over to more representative forms of government on August 20. Many observers fear the handover may be thwarted. “The same leaders are likely to re-emerge; the transition is likely to be a non-transition, more of the same for the foreseeable future,” says a diplomatic observer.