Controlling the Arms Bazaar

By Jo. L. Husbands

In July 2012, after years of preliminary effort, United Nations (UN) member nations gathered in New York to draft a treaty that would provide the foundation for regulating the international arms trade. Time ran out on the Arms Trade Treaty negotiations, but treaty proponents have promised to continue the effort.

The arms trade includes everything from handguns to ballistic missiles and a wide range of supporting equipment and technology. After an extended slump following the end of the Cold War, the trade is currently growing. The Congressional Research Service estimates that in 2011, worldwide arms agreements, which include sales and assistance, totaled more than $85 billion, almost twice the 2010 total. Small Arms Survey, a well-regarded nongovernmental organization based in Geneva, Switzerland, estimates the size of the legal trade in small arms as at least $8.5 billion a year. For obvious reasons, no one has a reliable estimate for the size of the illicit arms trade.

In The Shadow World: Inside the Global Arms Trade, Andrew Feinstein makes the case for bringing arms transfers under greater control. This is probably the most comprehensive investigative account of the global arms trade since Anthony Sampson’s The Arms Bazaar in the mid-1970s. Like The Arms Bazaar, it is filled with accounts of the world of arms brokers, shady deals, and covert assistance. Feinstein also addresses the economic pressures that drive arms procurement and exports in the regular defense budget and policy process. Above all, it is a story of corruption and its deadly consequences.

Feinstein writes about the impact of corruption in the arms trade from personal experience. As a legislator in South Africa’s early post-apartheid government, he found himself the ranking member of the African National Congress on the parliament’s Public Accounts Committee. In the course of his service he confronted evidence of corruption and mismanagement in multibillion-dollar arms deals—by a government initially pledged to cut military spending—and was eventually forced to give up his seat after he refused to stop pushing for an investigation of the allegations.

The Shadow World is first-rate advocacy research with extensive and well-documented evidence assembled in service of his indictment of the current state of the global arms trade. “The trade in weapons,” he writes, “is a parallel world of money, corruption, deceit, and death. It operates according to its own rules, largely unscrutinized, bringing enormous benefits to the chosen few, and suffering and immiseration to millions. The trade corrodes our democracies, weakens already fragile states and often undermines the very national security it purports to strengthen.” Readers will have to decide, however, whether Feinstein’s understandable anger at the ruinous consequences of the arms trade at times pushes him to argue his case in ways that may make it hard to persuade those not already inclined to share his views.

Several recurring storylines will give readers insights into facets of the global trade. Some illustrate the workings of the trade in major weapons systems, and some focus on the illicit trade, mostly in small arms and light weapons, and its devastating effects in conflicts around the world; both underscore the political role that arms transfers continue to play for suppliers and recipients.

One of the storylines concerns the Middle East and especially Saudi Arabia. In the wake of the 1973 Arab-Israeli war, the boycott by the Organization of the Petroleum Exporting Countries and subsequent price increases generated vast revenues for oil-producing states, giving them the wherewithal and the security incentives to expand their arsenals. For arms-producing states, the incentives to cement political relationships and “soak up petrodollars” with arms exports were equally strong. The United States, the United Kingdom, and other producers, including the Soviet Union/Russia, vied to sell huge quantities of weapons, particularly advanced aircraft and naval vessels. Israel and Egypt, at the center of continuing efforts to craft a lasting Middle East peace settlement, also receive huge quantities of weapons as security assistance. Even with the recent rise of China and India as major arms importers, a substantial portion of the world’s weapons exports in any given year will be destined for the Middle East.

At the center of Feinstein’s Middle East story is Saudi Arabia, with its apparently insatiable appetite for modern weaponry and pervasive culture of corruption that has tainted its relations with major arms producers. The Al Yamamah (Arabic for “The Dove”) deal between the United Kingdom and the Saudis captures the essence and the high politics of these transactions; personal interventions by Prime Minister Margaret Thatcher helped to seal the deal. Over 20 years, advanced fighters from BAE Systems, the prime contractor, went to the Saudis, and in return the UK government received guaranteed supplies of oil. Although all the details of the sale, the largest UK arms export deal ever, were never revealed, BAE made tens of billions of pounds.

Charges of bribery and multimillion-dollar slush funds dogged the deal from the beginning, and Feinstein provides many details drawn from investigative reporting. A UK government investigation of BAE practices was launched in 2004, but when Saudi Arabia objected, Prime Minister Blair ordered it shut down in 2006 in the name of maintaining good relations. Another major installment in the Al Yamamah deal was signed shortly afterward. The UK investigation ended, but in 2010 BAE was fined $400 million as the outcome of a U.S. Justice Department investigation of a U.S. bank charged with funneling BAE’s bribes to a Saudi prince.

One of the persistent problems facing efforts to tackle corruption is the belief that “this is how things work” in overseas arms deals. Until relatively recently, many countries permitted companies to deduct bribes from their taxes as part of the cost of doing business, a practice that the Organization for Economic and Co-operation and Development Convention on Combating Bribery, which took effect in 1999, and a number of new national laws and regulations have helped to curb. More general efforts against money laundering in the name of counterterrorism or counternarcotics have also made bribery more difficult.

How much things may have improved in the wake of these efforts is unclear. The 2011 Transparency International (TI) Bribe Payers Index, which ranks both countries and sectors by the likelihood of paying bribes to gain overseas business, ranks the arms, defense, and military sector 10th, a significant improvement from earlier surveys. Earlier TI research cited by Feinstein, however, concluded that the arms trade was “hard-wired for corruption” and accounted for 40% of all corruption in global trade.

The civilian toll

Another recurring theme in Feinstein’s work is the terrible price paid by the civilians caught in conflict fueled and sustained by the illicit trade in weapons. The book opens with an account of the horror that consumed Sierra Leone during the civil war of the late 1990s; the stories of slaughter and mutilation by the brutal Revolutionary United Front (RUF) fighters are difficult to read. Feinstein focuses particularly on Africa, where many of the world’s poorest nations are also those most afflicted with recurring conflicts that sap any hope for development. The genocide in Rwanda, the continuing conflicts in Zaire/DR Congo, and the civil wars in Angola and Liberia all share common features: the web of brokers and dealers who supply the arms and the weak or corrupt leaders who tolerate or often facilitate the trade. Here one encounters Viktor Bout, perhaps the best-known of the breed of arms brokers from the former Soviet Union, who turned the experience and contacts gained in the covert campaigns of the Cold War to profitable new ventures in post–Cold War conflicts. Another is Leonid Minin, the Ukrainian broker who supplied the RUF in Sierra Leone, with the active connivance of Liberian president Charles Taylor and the leaders of other nearby states. Both eventually fell afoul of the law, but their fates illustrate the differences in current national regulations. Minin spent two years in jail in Italy awaiting trial but was ultimately released because his crimes had taken place overseas. In contrast, U.S. law may assert extraterritorial jurisdiction. In early 2012, Bout, who was arrested in a sting operation in Thailand and extradited to the United States, was convicted and sentenced to 25 years in prison for conspiring to sell weapons to a U.S.-designated foreign terrorist group based in Colombia.

Rather than address other aspects of the global arms trade—the book contains little if any coverage of Russia or China, for example, although both countries are part of the global problem and essential to any solutions—Feinstein devotes a significant portion of the book to U.S. domestic defense procurement and the corrosive effects of the military-industrial complex on U.S. foreign policy. In doing so, he makes some provocative charges. The U.S. military is the most powerful fighting force in the world, he writes, but the system for setting its budgets and buying its weapons is “the most expensive and arguably the most systemically corrupt. … While corruption in export deals has declined since the toughening of legislation and enforcement, the importance of the domestic market, combined with elected representatives’ dual need to deliver jobs to their constituents and to raise money for biennial elections, has led to systemic legal bribery.”

At this point the book becomes less of an account of the arms trade and more of an examination of the roots of U.S. militarism in the interlocking interests of Congress, the Pentagon, and defense companies in bigger budgets and the wars that justify them. The problems in the procurement system are well recognized and the bulk of the evidence Feinstein cites is part of the mainstream policy debate. His argument that the U.S. system is irredeemably corrupt is certainly not universally accepted and will weaken his case for a good many readers. Whatever one thinks of these arguments, they have the effect of making an already huge problem seem so enormous that one despairs of solutions. And that is part of the dilemma that Feinstein faces at the end: What is to be done?

Feinstein, like almost anyone who cares about the damage caused by the arms trade, is faced with the problem of finding solutions that could actually make a difference. If one accepts, as he does, that “some form of arms industry is required in the dangerous and unpredictable world we inhabit,” and that “obviously, the manufacture of weapons and related materiel may contribute to our general security,” then one is immediately in the world of balancing interests and making tradeoffs.

Feinstein makes a powerful case that at present the balance is dangerously skewed, but he does not offer many remedies. An Arms Trade Treaty could offer an overall framework for more coherent national action. The international treaties banning landmines and cluster munitions have shown a willingness by some states to outlaw weapons whose harm to civilians both during and long after conflict outweighs any military utility, although the United States has so far refused to sign either agreement. There have been encouraging regional and national efforts to improve regulations for parts of the arms trade, and the UN deserves great credit for its willingness to tackle the problems posed by the illicit trade in small arms and light weapons.

But the global arms trade is so vast and complicated that one could exhaust oneself trying to control it. Limited efforts are almost inevitable, yet they are vulnerable to the charge that their constrained impact is not worth the effort when measured against the number of conflicts and the scope of damage that fall outside the controls. The Shadow World does not offer many answers, but Feinstein deserves great credit for documenting why the questions must be asked.