By Robert Baer
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The Shadow World by Andrew Feinstein
How the multibillion-dollar global arms market is built on graft
Writing about the arms business isn’t easy. Weapons merchants, large and small, legal or illegal, hide their business behind numbered accounts, shell companies based in tax-haven islands, and middlemen who’ve learned to keep quiet. The arms dealers operate in distant places like Kiev or Sofia, beyond the rule of law and scrutiny. They live in Monte Carlo or Liechtenstein, where journalists aren’t welcome. They give interviews only after they’ve been caught red-handed, and even then will just maintain their innocence.
With The Shadow World: Inside the Global Arms Trade, Andrew Feinstein peers into this murky realm and sheds light on one of the world’s biggest and least regulated markets. Much of his insight stems from his experience in South Africa’s parliament. In 1999 he witnessed firsthand, as the ranking member of the African National Congress on the parliament’s Committee on Public Accounts, how the British arms company BAE Systems and the Swedish conglomerate Saab beat out their less expensive Italian competition in the sale of jet fighters to South Africa. The venal South African leadership ignored its own technical committee and bought the BAE-Saab aircraft—which South Africa ultimately found too expensive to maintain. Feinstein left parliament and started writing, with no shortage of acid in his pen.
Feinstein does not let up on the merchants of death, regularly reminding us that arms-related corruption is a global cancer, affecting everyone from America’s defense giants to Africa’s poorest countries. If Transparency International’s estimate that the arms trade accounts for 40 percent of world corruption is correct, Feinstein could hardly have found a more worthy target. He is also right that the West has turned a blind eye to the situation. There is simply too much political money tied to defense contracts to force politicians to demand accountability. Feinstein repeatedly asserts that we know enough about how these deals work to stop them. It’s only because of an absence of will—or a consent of silence—that we don’t.
Feinstein says the unregulated arms market is fundamentally immoral. Arms dealers such as the recently convicted Russian smuggler Viktor Bout, he says, have earned a special place in hell by fueling Africa’s conflicts and facilitating the slaughter of innocents. Such castigation is deserved—and uncontroversial. Where I most see eye to eye with Feinstein is the issue of Saudi Arabia’s egregiously corrupt arms deals. I’ve written on corruption in Saudi Arabia myself and have yet to hear of any credible effort to clean up arms purchases there.
Saudi royals are wealthy people. But the sizable government allowances they receive don’t begin to cover their lavish lifestyles, which include yachts, Kensington mansions, and private jets. So the royals have been forced to seek supplemental income. And the serious money comes from arms deals, where they collect substantial, unreported commissions.
Feinstein pays special attention to Al Yamamah, the infamous arms-for-oil deal signed by Britain and Saudi Arabia in 1985. BAE, the prime contractor, would net more than $50 billion in revenue from the deal over the next 20 years. On the face of it, the exchange made perfect sense: Saudi Arabia was too small a country to produce its own weapons, and Britain needed more oil than it was pumping out of the North Sea. The abuses, as Feinstein reveals, arose from the vast slush funds packaged into Al Yamamah. The funds were paid out at the discretion of BAE and certain Saudi princes. According to British and American investigators, the money ended up in the pockets of the princes and middlemen. Prince Bandar bin Sultan bin Abdul-Aziz al Saud, the former Saudi ambassador to Washington, reportedly got a $17 million dollar house and an Airbus A340 out of the deal.
The Saudis soon realized that the BAE fighters they had received were nearly useless. They had faulty radar. They were grounded by sand. In the mid-’90s, then-Crown Prince Abdullah pushed hard to cancel Al Yamamah. Yet not only was Al Yamamah not canceled, there was a 2007 follow-up deal called Al Salam, which covered the sale of 72 Eurofighter Typhoon jets to Riyadh. As with Al Yamamah, BAE acted as prime contractor. The irony, Feinstein points out, is that Saudi Arabia doesn’t need the Typhoons. Designed for Cold War dogfights over Europe, the jets would be of little use if Saudi Arabia were to fight Iran, which would likely resort to rocket attacks, or to counter an insurgency spilling over its borders from Yemen.
After the Gulf War in 1991, U.S. advisers assessed Saudi military performance against the Iraqis. They were astonished to learn that, although the Saudis had purchased a fleet of M60 tanks, they bought almost no oil filters, which must be constantly changed in desert warfare. The tanks might as well have stayed in garrison. What had happened was clear: There were commissions to be made in the purchase of the tanks—but none from filters. The consequences of such corruption are far-reaching and sobering. Saudi Arabia remains one of the world’s largest reserve tanks for crude oil. That means that the only things standing between us and a $250 barrel of oil—or whatever crude might go for if there’s a war in the Gulf—are tanks without filters and planes that don’t fly.
Saudi Arabia isn’t the only regime in which corruption undermines the military. As Libyan opposition forces captured Tripoli this year, it was discovered that 20,000 Russian-made surface-to-air missiles had disappeared, looted from Libyan military stocks during the fighting. Aside from the immediate question about where these missiles went, why didn’t the Libyans fire them at the NATO jets? One explanation I’ve heard from a former CIA colleague is that the Libyan military let the batteries go bad in the desert heat. Another is that Libyan troops didn’t know how to use them. In either case, Muammar Qaddafi was in possession of weaponry that protected neither his regime nor his country from attack. It’s reasonable to assume that the Libyan SA-7 missiles came attached with enormous commissions for the dealmakers.
I wish Feinstein had spent more time talking to policymakers about why they ignored corrupt arms deals and less time researching a laundry list of deals, many of which are well known. When I was in the CIA, I encountered hundreds of crooked arms deals, mostly originating in Russia and Eastern Europe. The CIA simply didn’t have the resources to pursue them. Feinstein tries to make the case that the West is in a position to put an end to this merry-go-round and prosecute companies such as BAE that pay enormous commissions by selling expensive arms to countries that don’t need them. But his optimism fails to consider how intractable and widespread arms-related corruption is. If someone as powerful as King Abdullah can’t put a stop to corruption in his own country, how can the West?