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

International Economy, The, Summer, 2002 by John A. Kruger

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.'"