International Perspectives on Proliferation and Illicit Trafficking Networks and the Benefits of Strategic Trade Management

Transcription

1 International Perspectives on Proliferation and Illicit Trafficking Networks and the Benefits of Strategic Trade Management Justin V. Hastings Department of Government and International Relations University of Sydney 24 June 2015 Yangon, Myanmar Funded by MacArthur Foundation grant

2 What are illicit trafficking networks? Outline How are illicit trafficking networks related to strategic trade management? What can examining illicit trafficking networks tell us about how they operate and their weaknesses? What are the implications for Myanmar?

3 What are illicit trafficking networks? The people and firms that actually move goods subject to trade controls Nuclear materials; Nuclear components; Dual use goods Source countries Individuals Firms Broker countries Individuals Firms Buyer country Individuals Firms

4 Different types of proliferation networks State Non-state State source Non-state source State broker, if any Non-state broker State buyer Non-state buyer Example: France-Israel cooperation Example: Radioactive source trafficking networks 4

5 Different types of proliferation networks Hybrid Hybrid Hybrid Non-state source State source Non-state source State broker Non-state broker Non-state broker State buyer State buyer State buyer Example: AQ Khan s Pakistan network Example: North Korea-Syria network Example: AQ Khan s Libya network 5

6 Proliferation networks and strategic trade management Trade route Type of good Transport method Broker firm(s) Strategic trade management Ostensible source country/firm Transshipment country Ostensible buyer country/firm

7 Proliferation networks and strategic trade management Expedited trade Rigorous export and trade controls International trafficking networks take advantage of the inherent tradeoffs in strategic trade management Lax controls can - Decreased international confidence in country s trade institutions - Attract trafficking networks Onerous trade controls can - Lead to excessive compliance costs - Disincentivize legitimate companies from trading with country 7

8 Effect of state prerogatives Use of embassies, diplomats, presumption of non-interference, state-owned transport assets, state-owned trading companies No state prerogatives Non-state brokers Commercial routes Global transshipment hubs Commercial shipping methods Logistical centralization High embeddedness in local social networks State prerogatives State brokers Direct routes Avoidance of hubs State-owned shipping methods Logistical diffusion Low embeddedness in local social networks 8

9 AQ Khan s official Pakistan supply network Switzerland Netherlands Belgium/ France Canada United Kingdom United Kingdom Pakistan Canada West Germany West Germany Dubai Shipping routes Commercial purchasing agents Diplomatic purchasing agents

10 AQ Khan s Libya supply network Italy Switzerland Turkey South Korea United Kingdom Dubai Pakistan Japan Liechtenstein Spain Libya Malaysia South Africa Australia Singapore

11 AQ Khan s social network 11

12 Iran Technology Transfer Network: Group Location 12

13 Iran Technology Transfer Network: Nationality of individuals 13

14 North Korea networks: Group Location 14

15 North Korea networks: Nationality of individuals 15

16 Iran Acquisitions Network: Nuclear Suppliers Group Membership (Blue = NSG member, Red = Non-NSG member, Green = Iran) 16

17 (Blue = Non-NSG; Red = North Korea; Green = NSG) North Korea network: Group Location NSG membership status 17

18 Iranian proliferation network logistical routes 18

19 North Korean acquisition process Dandong case study (2013) North Korean buyer Bank accounts - NK bank branches in China - Trusted partners in China - NK shell company accts in SEA, China North Korean broker North Korean customs Chinese trading company Chinese customs Partner Chinese trading company Suppliers 19

20 Non-state: Multinational group and globalization level in transit country 20

21 Non-state: Congruence in transit country and globalization level 21

22 Non-state: Nuclear materials possession by globalization level and multinational status 22

23 Non-state: Congruence and origin country s 2014 Nuclear Security Index score 23

24 State logistical networks: Preliminary policy implications Context of the network A country s suitability as a logistical broker node appears to be related to embeddedness in social and commercial networks - Examples: UAE, Japan Proliferating countries do not avoid supplier countries that are NSG members Beyond the insertion of a third-country (or fourth-country) transit point into the shipment path, export controls per se do not appear to significantly change the commercial methods used in a shipment. - Network structures and ties are rooted in extra-territorial landscapes and relationships that transcend formal national regulatory systems. 24

25 Characteristics of the network State logistical networks: Preliminary policy implications Non-market relationships between suppliers and coordinators, and between coordinators and buyers, are important to proliferation. - They provide greater security, but less flexibility for proliferators. - It is not clear that a nuclear black market is a useful way to think about how nuclear and dual-use components are bought and sold. Given increasing returns, it may be difficult for a proliferator to replace a broker node that can be used in multiple broker roles, such as transit point or knowledge conduit, and as a location for technology acquisitions and social brokers. 25

26 Characteristics of the network State logistical networks: Preliminary policy implications Traits of state proliferators acquisitions and transportation broker hubs - Physically close enough to the buyer country that the country s state resources can monopolize transport on the final leg of the trip if necessary - Fairly high levels of globalization and trade openness - Social, economic, and political conditions that allow the buyer country to seek an optimal tradeoff between security and control Create a special focus on transportation broker countries that are not in the Nuclear Suppliers Group Focus intelligence resources on: - Creating distrust and difficulty in coordinating between nodes with non-market relationships - Multipurpose broker nodes - Broker nodes that are different nationalities from the country of concern 26

27 Internationalization of the network State logistical networks: Preliminary policy implications State proliferators may prefer to use their own nationals and diaspora members to conduct business and joint research. The extent to which buyer countries use co-nationals as brokers outside the buyer country may depend on the country s level of international isolation. - Greater international isolation may mean greater integration into the global economy, as the buyer countries make greater use of foreign brokers. - The buyer country may use co-national brokers closer to home that have access to international suppliers and non-market relationships with the home country. Brokers that are a different nationality from the buyer appear to be more flexible in their use of transit nodes and market relationships. - Forcing a buyer country to rely on non-market relationships and co-national brokers may lead to greater security for them, but also less flexibility. - Foreign brokers are easier to separate from the core network, but do less damage to the proliferation effort when they are separated. 27

28 Non-state: Initial findings Internationalization of the group - Transit countries that are more globally connected are more likely to host groups that do not have a foothold in their country, as well as groups that have footholds in multiple countries. - More globally connected origin countries are associated with groups with a foothold in the transit country. - Higher nuclear security in the origin country is associated with a lower probability of the group having a foothold in the transit country. Trafficking in nuclear materials - Multinational groups, groups with footholds in transit countries are better able to transport nuclear materials through those countries. - The countries through which they transport these nuclear materials tend to be less globalized than the countries that see radioactive source trafficking. 28

29 Implications for Myanmar Attempting to interdict export controlled goods at the border is not enough - Officials need an understanding of the social, logistical networks stretching into Myanmar through firms and brokers - The ties between Myanmar and origin and recipient firms need to be examined - Analysis requires understanding not only type of good, but also supplier, recipient, transport method, and broker relationships Increased integration into the global economy is likely to make Myanmar more attractive to: - Multinational and foreign organized crime groups engaged in radioactive source and nuclear material smuggling - Firms engaged in transshipping nuclear components and dual-used goods - Buyer and supplier countries using state prerogatives in Myanmar for brokering nuclear trade deals 29

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