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Southeastern Europe Export Control Seminar Szeged, Hungary 17-18 June 2003 Trends in Proliferation: Threat Assessment

Trends in Proliferation: Threat Assessment: 

Trends in Proliferation: Threat Assessment Terms A Global Problem The Threat Players and Processes Multinational Efforts Outlook

Terminology: 

Terminology Arms Trade: The legitimate buying and selling of weapons and dual-use items. $22-27 billion annually in conventional weapons over past three years. Proliferation: The spread of weapons and technologies that have negative consequences for regional and global security interests.

Types of Weapons Trade: 

Types of Weapons Trade State-to-state: Acquiring arms for national defense of police forces. Can involve intermediaries. Gray Market: Use of intermediaries to obscure ultimate buyer or seller. Black Market: Involves smuggling of stolen weapons, uses criminal networks, usually small scale.

Proliferation: A Global Problem: 

Proliferation: A Global Problem Countries of Concern Seeking self-sufficiency Aggressive denial and deception programs Non-State Actors Terrorists Criminal organizations

Countries of Concern: 

Countries of Concern Sanctioned countries International arms embargoes Countries under US sanctions Countries in Conflict Concern that influx of weapons could precipitate or extend hostilities Common transit countries

State Sponsors of Terrorism: 

State Sponsors of Terrorism Iran, Iraq, Syria, North Korea, Sudan, Libya, Cuba State sponsors of terrorism compose a very small share of the arms market -- less than 2% since 1995. Russia and China supplied more than 70% of the arms and equipment delivered to state sponsors of terrorism in the 1990s.

Proliferation:The Threat: 

Proliferation: The Threat

Priority Global Proliferation Concerns: 

Priority Global Proliferation Concerns Conventional Weapons Man Portable Air Defense Systems (MANPADS) Small arms and land mines Electronic warfare equipment (e.g., GPS jammers) Night vision equipment Spare parts for major systems

Priority Global Proliferation Concerns: 

Priority Global Proliferation Concerns Biological Weapons BW production does not require unusual items All production equipment is dual-use Much BW research and development is dual-use Cost is relatively low; easily produced Easy to conceal Can be weaponized in a variety of munitions Technology is expensive and readily available

Priority Global Proliferation Concerns: 

Priority Global Proliferation Concerns Chemical Weapons All production equipment is dual-use Precursors are dual-use but indicate final product Relatively inexpensive, but cost rises with increasingly corrosive resistant equipment

Priority Global Proliferation Concerns: 

Priority Global Proliferation Concerns Nuclear Smuggling Short-cut to nuclear weapons capability Material can be used to make radiological dispersement devices Smugglers take advantage of porous borders

Proliferation:The Players and Process: 

Proliferation: The Players and Process

The Essence of Proliferation: 

The Essence of Proliferation In its most basic sense, proliferation is Buyers and Sellers responding to market forces.

The Essence of Proliferation: 

The Essence of Proliferation Buyers seek weapons to meet military requirements, for political reasons, or economic considerations. What Buyers want: Complete weapon systems Production equipment, often dual-use Materials, often dual-use Technology Tangible Intangible, intellectual capital

The Essence of Proliferation: 

The Essence of Proliferation Sellers are driven almost exclusively by economics. Firms export because of insufficient domestic demand. Most countries cannot compete across-the-board in the global market---the US, Russia and UK control about 80% of the market---and face three options: Retreat from the market, go out of business Specialize into niche products Deal with “countries of concern”

The Essence of Proliferation: 

The Essence of Proliferation Buyers and Sellers value Risk Management. Political/Diplomatic Economic Military The greater the negative repercussions associated with a deal, the greater the effort to conceal the transaction from third parties.

Proliferation: End-to-End: 

Proliferation: End-to-End Development/Production Design, testing, evaluation, production Marketing Advertisements, brochures, arms shows Following the Deal Offers, negotiations, contract, payment Following the Transfer Delivery methods

Proliferation Players: 

Proliferation Players Buyers/end-user Sellers/producers Procurement intermediaries Brokers, front companies Financial intermediaries Banks, money launderers Carriers/shippers/freight forwarders

Typical Fronts for Dual-Use Procurement: 

Typical Fronts for Dual-Use Procurement Agrochemical companies Petrochemical companies Chemical companies Pharmaceutical companies Universities Research institutes

Clues to Procurement Fronts: 

Clues to Procurement Fronts Entity does not have clearly defined function or product Company does not appear in business directories Multiple entities use same address or phone numbers Entity refuses to allow seller to install or service equipment Entity acquires weapon-related items without prior history or explanation

The Procurement Process: 

The Procurement Process Seller Buyer Bank Bank 5) Documents 7) Documents 6) Documents 1) Letter of Credit Request/$ 3) L/C Confirmation/$ 2) L/C Issuance/$ 8) Buyer claims GOODS 4) Seller ships GOODS

The Financial Process: Gray Arms Market: 

The Financial Process: Gray Arms Market Supplier Broker Buyer Transporter Buyer Bank Broker Transporter Broker Bank Supplier Transporter Supplier Bank Buyer

Examples of International Non-Proliferation Efforts: 

Examples of International Non-Proliferation Efforts Australia Group: An informal consultative gathering of nations committed to ridding the world of chemical and biological weapons. Missile Technology Control Regime (MTCR): Member countries seek to limit the risk of proliferation of WMD by controlling transfers that could contribute to delivery systems.

Examples of International Non-Proliferation Efforts: 

Examples of International Non-Proliferation Efforts Nuclear Suppliers Group: A group of nuclear suppliers that seeks to contribute to the non-proliferation of nuclear weapons through guidelines for nuclear-related exports. Wassennaar Arrangement: Contributes to regional and international security and stability by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies.

Outlook: 

Outlook No sign that drivers behind proliferation--economic, political, and military--will abate in near future. Can increase costs/risks to proliferators Greater due diligence by companies Strengthen and enforce export controls, licensing requirements, and brokering laws Multilateral efforts

Questions?: 

Questions?