"As of late 2011, El Hammam reportedly had possession of multiple European hostages," the designation added.

Belmokar responded to his effective "firing" by Droukdel by setting up a new commando unit called "We Sign with Blood." One of his close associates said he was setting up his own franchise of al Qaeda which would report directly to al Qaeda leader Ayman al Zawahiri. He vowed attacks against Western interests if the international community moved against jihadists in northern Mali.

Before the bloody conclusion of the siege at In Amenas, he recorded a tape demanding the release of two prominent Jihadists from U.S. prisons. It appeared to be a calculated bid to raise his profile and popularity amongst jihadists worldwide -- and a shot across the bows of Droukdel.

The operation was not without cost for Belmoktar. Several of his most experienced deputies were killed in the attack. Analysts tell CNN he either felt strong enough to risk losing them or the stakes were such that the operation was a necessity.

Teh hostage attack was launched across from Libya. Both Belmoktar and Abou Zeid made trips to Libya after the fall of Gadhafi and established a network of contacts there. If they have been killed, analysts say it will set back Al Qaeda's ambitions in Libya.

Lebovich told CNN that if both senior commanders have been killed it will likely set back efforts by jihadists to wage a campaign of guerrilla warfare against the French and their allies.

But recognizing the scale of the mission to restore Mali's territorial integrity, French officials have indicated that some troops would stay in the country at least until July. France had been hoping to withdraw the majority this month.

And it's clear that Islamists groups are far from raising the white flag in parts of northern Mali. Another faction - the Movement for Unity and Jihad in West Africa or MUJAO - remains active around Gao, where there have been several suicide bombings. The local government headquarters was seized by militants for several hours on February 21st, provoking a long gun battle with French and Malian troops. The fighting virtually destroyed the town's market.

MUJAO appears to have had close ties to Belmoktar.

And Tuareg Islamist leader Iyad ag Ghali -- leader of the group Ansar Dine -- also remains at large.

If Belmokar and Abo Zeid are gone, there may be one compensation for AQIM. Droukdel and his deputy al-Hammam may be able to wrestle back control of al Qaeda operations in the Sahara.

In a letter Droukdel wrote last year and which was found by the Associated Press in Timbuktu last month, AQIM's leader criticized his subordinates in northern Mali for trying to introduce Islamic law too quickly in the region and for imposing harsh punishments which he said jeopardized their whole project. "Your officials need to control themselves," he wrote.

"It is very probable, perhaps certain, that a military intervention will occur ... which in the end will either force us to retreat to our rear bases or will provoke the people against us," he wrote.

His prediction was accurate. Now he has to deal with the consequences of AQIM's over-reach in Mali.