Meet the new death dealers

As the Internet transforms the weapons trade, Beijing is becoming a massive player -- and we should be scared

Published November 12, 2011 2:00PM (EST)


This article was adapted from the new book, "The Shadow World," from Farrar, Straus and Giroux.

In our twenty-first-century world the lethal combination of technological advances, terrorism, global crime, state-sponsored violence and socio-economic inequality has raised instability and insecurity to alarming levels. At the same time, the engine that has driven this escalation, the global arms trade, grows ever more sophisticated, complex and toxic in its effects.

It might therefore be thought essential that the world’s democratic  nations should address this trade collectively and urgently. If it must  exist, then surely it should be coherently regulated, legitimately financed,  effectively policed and transparent in its workings, and meet people’s need for safety and security?

Instead the trade in weapons 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.

Global military expenditure is estimated to have totalled $1.6tn in 2010, $235 for every person on the planet. This is an increase of 53 per cent since 2000 and accounts for 2.6 percent of global gross domestic product. Today, the United States spends almost a trillion dollars a year on national security with a defense budget of over $703bn. The trade in conventional arms, both big and small, is worth about $60bn a year.

The US, Russia, the UK, France, Germany, Sweden, Holland, Italy,  Israel and China are regularly identified as the largest producers and traders of weapons and matériel.

Almost always shrouded in secrecy, arms deals are often concluded  between governments who then turn to manufacturers, many of which are now privately owned, to fulfil them. In some instances, governments enter into contracts directly with commercial suppliers. And companies  do business with each other or third parties, some of whom are not even legal entities. These include non-state actors – from armed militias to insurgent groups and informal clusters of ‘terrorists’ – and pariah states.

The nature of the arms trade has been changing. Just as the end of the Cold War brought transformation, so too has the ease of buying weapons and ammunition online, which has started to reduce the role of middle-men and undercut regulation further. "The advice and interaction with clients has gone because [they] buy direct from the factory now using the Internet," claims Joe der Hovsepian -- an arms dealer who has been active in Yemen, amongst other places, for years -- nostalgically. And, since 9/11, financial and other checks have become so much more stringent. As der Hovsepian again laments: "Business was much easier at the beginning. People would arrive with $5m in cash. Now you have to fill in hundreds  of forms to deposit or withdraw more than $15,000!" This has made government- to-government contracts even more important as the life- blood of the business. So even the smaller operators have to be linked to the big government players, leading to the formal and shadow trades becoming more enmeshed than ever, as we’ve observed in Iraq and Afghanistan. Crucially, adds der Hovsepian, "you have to be close to the Americans, otherwise you can’t deliver to your client. And also the Israelis, who will supply anyone who pays money."

China is the emerging force in the arms business and an alarming threat to the already under-regulated trade, given its insouciance towards the abuse of human rights. It is estimated that the country is the second-largest spender on defense and the seventh-largest exporter of weapons and materiel. In addition to being the largest supplier to Africa as part of its broader diplomatic strategy in the continent over the past decade or so, China’s major customers include Pakistan, Egypt, Bangladesh and India. South America is becoming a target market for Chinese sales as well. The Burmese military junta was a large customer during the 1990s, but now favors Russian, Ukrainian and Indian suppliers. China has been a long-time seller to Iran, Sudan and Zimbabwe. In addition, in the year leading up to the Sri Lankan army’s massacre of tens of thousands of Tamil guerrillas and civilians between January and May 2009 – during which war crimes and crimes against humanity were most likely committed, according to the UN – China "supplied a billion dollars worth of aid, including fighter jets."

For much of the twentieth century China was unable to match the technical standard of weapons produced in the USSR and the West. Where quality was lacking, however, quantity made up for it. Billions of dollars were poured into the defence industry, creating a sprawling complex of over 2,000 firms and 3 million employees by 1993. The industry has been comprehensively restructured since the late 1990s and, while problems remain, huge strides have been made in technological capacity.

In 2011, in a blaze of publicity, China unveiled its new J-20 stealth jet, a major flexing of muscle considering that the US is the only country that currently has stealth jets in service. Experts remain divided on whether the rapid advances necessary to produce the jet could feasibly have emerged from China’s defence industry. Sceptics suggest that the technology was developed from the remains of a US stealth fighter that crashed over Serbia in 1999.

NORINCO is China’s best-known defence company, while "private" companies such as Huawei are heavily involved in producing and selling dual-use technologies. China sells at "friendship prices" to make up for the still inferior quality of some of its equipment. What is certain is that China’s role in the trade will continue to grow at a frightening rate, as it becomes a more and more formidable economic and political force. It is unclear whether its growing status as an emerging superpower will have a positive impact on its ethics or attitude to human rights.

Despite the emergence of Dubai as an important terminus for arms deal-making, and the Emirates more broadly for transportation, Beirut remains an important fulcrum, especially for the Arab arms business. India and Brazil meanwhile are the two most attractive emerging markets for sales.

Latin America was overwhelmed by arms deal corruption during the 1970s heyday of military dictatorships. It is cleaner now, but corruption continues. Chinese arms have been turning up in Peru, Bolivia and Colombia. It is estimated that Bolivia is in the process of spending $100m on weapons from Russia. Brazil, whose own domestic industry is growing, has increased its defense spending as it has modernized and grown economically. Chile still has a law, a legacy of the Pinochet era, that dedicates 10 per cent of all copper revenues to defense spending. Mexico buys to battle the drug cartels, sourcing its equipment from the US and Central America, much like the warlords. Colombia has the fifth-largest helicopter fleet in the world, used against the FARC and to keep an eye on its rival, Venezuela. It receives vast amounts of equipment from the US as part of the War on Drugs. FARC itself receives weapons from China and various sources in the shadow world. Hugo Chavez fears attacks from unfriendly states in his immediate neighborhood and to the north and has consequently been a big spender on helicopters, tanks and missiles, mainly from Russia. It is claimed that a Kalashnikov factory is due to open in Venezuela in late 2011.

India and Pakistan are awash in armaments, including nuclear weapons. The Pakistanis have historically been supplied by the Chinese, the French and the Americans. Since 9/11, Pakistan has been the third-largest recipient of US military assistance: the three years after September 11 saw a 50,000 per cent increase in comparison with the three previous years.

Historically this military support has been accompanied by constant blowback, as matériel finds its way to the regions around the frontier with Afghanistan, which are populated by militants who have close links to Pakistan’s intelligence services. Tensions have increased considerably between the Americans and the Pakistanis in the aftermath of the assassination of Osama bin Laden at the compound he had been living in close to an army base on the outskirts of the Pakistan capital. Arms deals in the country continue to be shrouded in allegations of massive corruption.

India’s new-found wealth has seen a significant increase in its recent defence purchases, with military expenditure reaching $36.6bn in 2009, excluding nuclear development. Its arms purchasing has, at times, made it the largest weapons buyer among developing nations. In addition to spending $25bn on arms between 2007 and 2011, India is currently arranging to buy $42bn of weaponry. This has certainly focused the minds of all the big Western manufacturers, as well as Russia, which has historically been India’s largest supplier. The US has been gaining ground in recent years. It appears, though, that Russia, the US and Sweden have been sidelined in favor of the European Eurofighter consortium or the French in pursuit of an $11bn contract for jet fighters. However, the endemic corruption so evident in the ill-fated Bofors deal (when several powerful Indian government figures were accused of receiving kickbacks from the Bofors arms company) has not disappeared, despite haphazard attempts to debar companies caught paying bribes. A source told me of a senior Indian Army General involved in procurement who would not allow a weapons salesman past his door without a box of Johnnie Walker Blue Label whisky. "What is Blue Label?" inquired the source. "Way beyond your means, my boy," came the reply.

The global desire for weapons and matériel shows little sign of abating, despite the economic difficulties of the past few years in most developed countries. Given the industry’s unavoidable existence, a number of committed NGOs have attempted to ensure that this business which counts its profits in millions and its losses in lives is compelled to play by rules acceptable to the broader society, limiting the harm that it does. In recent years, led by Amnesty International, Saferworld, IANSA and Oxfam, among others, their efforts have largely focused on the achievement of a multilateral code of conduct. Due to these efforts, in 2009 the UN committed to pursue an international Arms Trade Treaty (ATT) with the goal of it being negotiated and signed in 2012. The treaty, if it is ultimately signed, will undoubtedly be an important step forward. It will refocus attention on the arms trade, a focus which has been largely missing in the national security tumult following 9/11. And it will provide an added tool for citizens to hold their governments to account.

But sadly, just like the EU Code of Conduct, which excludes consideration of government-to-government deals and is only casually implemented, the ATT is likely to fall far short of what is required to curb this network of greed and death. It will have no impact on the systemic "legal bribery" that is the US arms business. It is of course unlikely that Zimbabwe, North Korea, Iran or Burma will sign any such treaty, but China, Russia, Pakistan, and possibly even India, Israel and Brazil might also refuse to sign up to anything that places real curbs on their arms-trading activity. The US has indicated in early negotiations that it wants a treaty that China and Russia will ratify. This raises the question of whether a weak, even meaningless, treaty might be more damaging than no treaty at all. In the end it might simply provide the current unacceptable activities of the global arms trade with a veneer of respectability. To be most effective, the ATT would need to include strong, enforceable anti-corruption mechanisms; to prevent the export of arms where they may increase conflict, or have a negative effect on human rights and/or socio-economic development; to exercise greater control over the transportation of weapons; to either ban offsets or open them to far more scrutiny; as well as to impose far greater transparency on governments and companies, including the compulsion to reveal publicly how much and for what agents, brokers, dealers and middlemen are paid. And it would need to establish a coordinated international monitoring and enforcement body to police it.

Where there is a genuine need to keep aspects of an arms deal secret, this information should be made available for scrutiny by a group of senior judges, who are given the power to determine the validity of the need for secrecy. In addition, if the industry is to be allowed to conceal aspects of its activities, then in return it should accept certain prohibitions in the interests of making it less corrupt and damaging. Because of the close links between governments and arms companies and dealers, and the sensitive nature of the product being sold, funding of political parties or payments to politicians by arms companies or those linked to them should be made illegal.

Arms companies that continually flout laws and regulations should be debarred from tendering for government contracts until they have reformed their practices to the satisfaction of independent monitors. And both international and domestic criminal law should be used to prosecute arms companies and their representatives for selling weapons that are ultimately used for perpetrating crimes, not just where the arms vendors intend the ultimate crimes, but also when they are aware of a substantial likelihood that their commerce will contribute to this type of violence.

While 2010 saw the opening of negotiations on the ATT, it also marked a high point in revelations of arms trade corruption. The reality is that there will be no change in the way in which the arms trade operates unless the biggest producer and consumer of weapons, the USA, is willing to change. Is it feasible for a President in modern-day America to lessen the unaccountability, the deception and the iron-like grip on power and influence that the political, military and economic interests of the military-industrial-Congressional complex exercise? Or are we destined to continue living in a world dominated by the interests of this largely unelected and deeply flawed iron triangle?

During the course of the twentieth century, the trade in arms made viable and fuelled conflicts that cost the lives of 231 million people. The first decade of the twenty-first century has, if anything, been more violent.

A basic commitment to universal human rights, equality and justice, to the belief that it is better to save a life by feeding a hungry stomach than to take a life by producing another deadly weapon, demands that this trade, one of the most destructive and corrupting in human history, cannot be allowed to continue in its largely unregulated, unscrutinized current form.

Excerpted from "Shadow World: Inside the Global Arms Trade," by Andrew Feinstein, published in November 2011 by Farrar, Straus and Giroux LLC. Copyright © 2011 by Andrew Feinstein. All rights reserved.

By Andrew Feinstein

Andrew Feinstein is the author of "After the Party," a political memoir. He is currently an Open Society Institute Fellow and the founding codirector of Corruption Watch in London.

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