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Merchants of death: in a booming business, small-arms brokers make a killing.

Late one balmy evening in August 2000, Italian police, acting on an anonymous tip, burst through the door of room 341 at the Hotel Europa outside Milan. Inside they found Leonid Minin, a notorious Ukrainian arms dealer, partying with prostitutes--accounts differ as to whether there were two or four--more than 50 grams of cocaine, packets of heroin, $150,000 cash and half-a-million dollars in diamonds. But what really interested law enforcement officials were the nearly 1,500 documents they found detailing Minin's business in drugs, oil and lumber. And guns. Lots of guns.

Among the documents were details of a just-concluded deal involving Minin, a former Russian Air Force officer Valery Cherny, and several ruling political leaders from the Ivory Coast and Liberia. The sale was typical of today's illicit arms transfers.

According to the papers, in June 2000 Minin facilitated a shipment of arms at the behest of General Robert Guei, then the leader of the Ivory Coast. Some of the weapons were meant to stay in Guei's country, but the bulk of the shipment was to be passed on to Liberia--then, as now, under an international arms embargo. Guei had signed an end-user certificate, a customs document "legitimizing" the transnational shipments of goods. The following week, the cache of papers showed, Minin had arranged for the million-dollar purchase from Cherny of Kalashnikov rifles, rocket-propelled grenades, night-vision goggles and other equipment, as well as five million rounds of ammunition. The money was deposited into two accounts controlled by Aviatrend, a company owned by Cherny.

As part of the deal, Cherny also supplied the plane that in July flew from Moscow to Kiev, where 113 tons of weapons--only a part of the total package--were loaded and ferried to the Ivory Coast. While records showed that Guei kept some of the weapons, the remainder was transported to Liberia by a smaller aircraft, leased through another set of middlemen. Minin's arrest halted the transfer of the remaining weapons.

Arms, like the rest of the economy, became a global enterprise in the 1990s. The collapse of the Soviet Union, the rise of new producers, and the drive toward the privatization of security forces and trainers have led to a new generation of suppliers and brokers acting in countries where political troubles may be simmering. According to various estimates, state-sponsored small-arms trade represents 13 percent of all arms sales and constitutes anywhere from between $3 billion and $6 billion annually.

Whatever the amount is, the number of arms trading on the gray and black markets is growing. Since the end of the Cold War, the number of companies producing small arms and light weapons has exploded. In Western Europe, the number of production firms rose from 88 to more than 135, while in Eastern Europe the number of production companies quintupled to more than 60. Today, there are nearly 100 firms in the United States, compared with just 42 in the 1980s. New sales of weapons in the legitimate market have steered ever larger numbers to the secondary markets, simultaneously pushing prices down. Even weapons on the black market can be less expensive than those purchased legitimately--sometimes for as little as $15, a bag of maize or a chicken.

In addition to the lives lost, resources expended on arms and the destruction caused by the conflicts' violence can lead to the decimation of already fragile economies. Over the past two decades, studies conservatively estimate that conflicts have cost $37 billion to developing economies.

The international community is only now recognizing the broker's crucial function in international arms trafficking as needing serious examination and cooperation to help disrupt their activities. In July 2001, the United Nations convened a panel focusing on the black market trade in small arms and light weapons. The panel recommended that countries identify groups and individuals engaged in the illegal trade of weapons, establish "national coordination agencies" to provide research and monitoring, and regulate the activities of brokers.

But already critics of the policies that are being developed say they are inadequate. "I think [the small-arms pandemic] is misunderstood," said Kathi Austin, director of the Arms and Conflict Program at the Fund for Peace. Referring to the high-profile case of a notorious ex-KGB officer, she continued: "You would think, for example, that Victor Bout single-handedly is arming Africa--he's not. The structure of these organizations is more like a conglomerate with multiple contractors and subcontractors involved. Bout serves well as a poster boy, but more attention needs to be paid to the entrepreneurs involved."

The primary source of these weapons is governments. Fueling proxy wars throughout the 1970s and 1980s, the U.S. and Soviet Union provided arms to Central America, Africa and Southeast Asia. The end of that standoff left former pawn countries broke but well armed, such that cash-strapped governments have legally flooded world markets with assault rifles, mines, rocket propelled grenades and ammunition, helping to trigger or prolong civil conflicts. Then, too, there are corrupt public officials, military officers and former intelligence officials who have been able to take advantage of the uncertainty to access gray and black markets, often disregarding their own government's attempts to destroy weapons. "This opens two possibilities for a general" one Belgian arms dealer told a European interviewer. "Either he throws all his stocks into the sea, or he sells them on the `parallel market.'"

The second option can be disturbingly easy--and lucrative. In one common scenario, a military officer with access can falsify documents so that even in a government-to-government shipment the number and type of arms can be understated. Then, as the shipment is en route, some may be diverted to a third country, using another set of false documents to allow entry.

Even the U.S., the world's largest supplier of arms, is subject to leaks. The U.S. sells equipment through several programs, including foreign military sales (government-to-government sales), foreign military assistance (financial credits toward the purchase of weapons) and direct commercial sales. While there are strict controls on where the weapons go, gaps in monitoring exist. According to a U.S. General Accounting Office report issued in 2000, monitoring measures vary widely in different countries depending on the resources available, how various commands interpret the rules, and how they prioritize personnel duties. "The Department of Defense has not effectively implemented the requirement that its field personnel observe and report on foreign governments' use of U.S. defense articles and services transferred through the Foreign Military Sales program," the GAO concluded. "Officials also told us that they want field personnel to spend their time on their primary duty, which is to work with foreign governments on planning the acquisition of defense equipment," the report stated, suggesting that in some countries, Defense Department officials were more concerned with sales than with security.

Arms, sold legitimately or on the black market, go where the conflicts are. In recent years, Eastern European states have sold to African countries or to the former Yugoslavia. In a 2001 letter to European Union officials, Human Rights Watch cited cases in which Bulgaria had sold arms to Angola, Ethiopia and Uganda. Other shipments from the Czech Republic to Yemen were questioned based on previous diversions of arms to countries that were under embargos. Specifically HRW cited a case involving Czech weapons stopped in Bulgaria because of suspicions that they would be sent instead to Eritrea.

In Asia, much of the inter-country trade has been targeted toward Indonesia, where religious and separatist insurgencies across the vast archipelago create demand. In 2001 Thai police arrested two military officers for attempting to smuggle weapons to rebels in Aceh, including detonators, fuses for landmines, hand grenades, and ammunition for M-16 rifles and submachine guns. That the weapons had been stolen from a military depot went unnoticed until an anonymous tip alerted police to the smuggling operation. Meanwhile, members of the Indonesian security forces stand credibly accused of funneling weapons, particularly to Christian and Muslim militants in the Malukus. Weapons and cash meant to support Indonesian rebels also come from al-Qaeda-linked terrorists in the Philippines and the mid-East.

Once in the field, durability and reliability have allowed millions of weapons to stay in circulation for years. If civilian democratic rule comes to a region or if a conflict burns itself out, governments merely sell the surplus weapons to combatants in other conflict states. In some cases this is done by legitimate means; in others, clandestinely. Occasionally, governments lose control of their weapons altogether. As the Balkan war moved south into Albania in 1998, for example, rebels and civilians stole an estimated 80 percent of the national arsenal--at least 750,000 weapons--from various military storage facilities. Many found their way to Macedonia and Kosovo.

Once procurement sources have been established, it typically falls to the brokers to arrange transportation. This is the trickiest part. Arranging shipments of arms requires finding a transport agent who can secure cargo holding areas airport slots, obtain flight authorizations, lease an aircraft, and hire ground and flight crews. In most cases, several of these agents must be found because of tortuous flight routes requiring several stops for refueling or changing planes. Similar methods are used for transporting weapons on cargo ships.

In some ways, however, finding transportation has become easier. For starters, the number of companies providing such services has proliferated. And as borders dissolve and trade of all kinds increases, security measures are stretched more thinly. Several airports identified by groups as major transshipment points include Entebbe Airport in Uganda, Monrovia Airport in Liberia and N'Dijili in the Democratic Republic of Congo. Other airports in more developed countries have also been used, including Ostend in Belgium and Sharjah in the United Arab Emirates. Several airports in the Miami area are believed to be hubs for transshipments to Latin America.

Some brokers also facilitate financing the sales of weapons, which can be relatively straightforward payments through banks or complicated transactions involving front companies. Banks can take passive or active roles in helping to finance illicit arms trades. Passive activities entail simply allowing a buyer to draw down on an established account and transferring the funds at the seller's request. But banks will also take a more active role, acting as a fiduciary, setting up letters of credit, and providing payments based upon agreed milestones.

Financing doesn't always mean dollars. In Minin's case, payment appeared to be a mixture of cash, diamonds and timber contracts for a company he owned with operations in Liberia. In other cases, it can be oil. Following the outbreak of civil war in Congo-Brazzaville in 1997, Jack Sigolet, a financier with the French firm Elf Aquitaine, availed himself to President Pascal Lissouba. While Sigolet did not broker the arms deal, he set up the financing that allowed Lissouba to buy the weapons. In exchange for $50 million, Lissouba was prepared to offer 10,000 barrels of oil a day, followed by an increase to 15,000 barrels per day after several months. The $50 million, meanwhile, paid the military and bought weapons from several different sources.

Policing the arms-dealing business has proven difficult. While the U.S. Arms Export Control Act (AECA) holds that brokers who operate overseas and maintain a U.S. citizenship or conduct business through an American-registered company are subject to U.S. laws, government attorneys are reluctant to bring cases because of high evidentiary standards. Similarly, prosecutors must prove that defendants had knowledge that they were violating export control laws. "We've been aware of shipments that never touched U.S. soil [where brokers would still be subject to U.S. laws], but it's difficult to get U.S. attorneys or district attorneys to bring the cases," said one Customs officer. "They take a long time to build." Then, too, laws regarding the import, export, and transfer of weapons are rife with loopholes. In many countries, the description of air freight can be as general as "machine tools," or "construction equipment."

To stamp out the illegal transport of weapons, arms control proponents propose shining a light on the legitimate weapons trade. Areas where arms are being purchased in large numbers in a state-to state transfer likely also support an illegal market for weapons. Following the legitimate trade may make it easier to identify illegal transfers, such as shipment diversions. But heightening transparency is easier said than done. Of some 95 countries that have weapons production capacities, only about two dozen provide detailed transfer reports on a regular basis. Russia and China, two of the world's largest exporters, do not.

Recent initiatives at the international level to improve reporting of arms transfers are proving to be only half-measures. The Organization for Security and Cooperation in Europe (OSCE), for example, has established principles for tightening and harmonizing rules on exports and has called for greater cooperation and information sharing. Among other measures, the OSCE called for the international registration and licensing of brokers. But there is neither an all-inclusive definition of brokering, nor a discussion of transport agents or financiers.

The UN, meanwhile, has proven equally ineffective. In its Conference on the Illicit Trade in Small Arms and Light Weapons in All Its Aspects, the international body only briefly discussed the subject of transparency. For the most part, the UN did what it does best: It issued a hand-wringing report and earnestly suggested that regional groups "develop, where appropriate and on a voluntary basis, measures to enhance transparency with a view to combating the illicit trade in small arms and light weapons in all its aspects."

"The [UN] General Assembly has delivered nothing on top of the program they discussed," says Loretta Bondi, advocacy director at the Fund for Peace, an NGO that has lobbied for an international brokering convention.

Meanwhile, the European Union is examining extraterritorial jurisdiction proposals that would permit foreign nationals to be tried for crimes committed against a country. While the EU historically has been opposed to countries using such powers due to sovereignty issues, there are elements of such powers in recent treaties, including one dealing with crimes of pedophilia and the recent treaty to ban landmines. Such powers could go a long way toward slowing illegal brokering activities. "It would be priceless," Bondi says. But the philosophical and political obstacles are daunting.

Whatever the outcome of these well-intentioned, if inept, bodies, most experts agree that the U.S. will need to take the lead on pushing for an international solution to close loopholes and hold brokers accountable. Curiously, despite its war on terror, it has not. "We're disappointed that the U.S. has not taken the lead, despite pleas from Customs officials and other law enforcement. There seems to be a convention allergy" Bondi says, referring to the American refusal to sign separate conventions banning the use of land mines and child soldiers in conflicts. Americans "want to go it alone" she adds, "and perhaps in the face of common sense, [they] don't pursue agreements."

In the meantime, Leonid Minin remains in an Italian jail awaiting trial, one of a growing number of brokers who used his expertise and contacts to create or exacerbate conflicts worldwide. But the real trial will be for the international community to reconcile its political and legal differences to achieve peace.

Mr. Kruger is a writer in Washington, D.C.
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Author:Kruger, John A.
Publication:The International Economy
Date:Jun 22, 2002
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