What Drives the Middlemen? Exploring Involvement in WMD-related Illicit Trade

Dr Daniel Salisbury is a Postdoctoral Fellow at the James Martin Center for Nonproliferation Studies in Monterey, California. He completed his PhD at the King’s College London Department of War Studies in 2016. This blogpost draws on research which will be published in the Nonproliferation Review later in the year.

As North Korea demonstrated by testing an ICBM this week, proliferating states are able to acquire WMD-related technology despite a complex landscape of UN and other technology-based sanctions and export controls. Procurement agents working on behalf of WMD programmes have used illicit procurement techniques –front companies, mislabeling goods and falsifying documentation— since the earliest days of efforts to prevent proliferation. Drawing on my recent research I argue that conceptual insights – particularly from criminology – can usefully be combined with the limited dataset to further understanding of illicit trade and means to counter it.

Existing research – rightly so – tends to focus on the most significant proliferation networks. These cases have suggested that there is much financial wealth to be gained from proliferation. The AQ Khan network, headed by Pakistani nuclear weapons scientist and manager of Pakistan’s uranium enrichment programme, is by far the most explored case. After relying on illicit procurement from the international market place to build Pakistan’s nuclear arsenal, from the late 1980s he used his network of contacts to supply Iran, North Korea and Libya. After the network was busted and Khan confessed in 2004, his personal wealth drawn from illicit transactions and other sources was said to have reached $400 million.

A more recent and ongoing case where an individual has reaped financial benefits involves Karl Lee, said to be a “principal supplier” of Iran’s missile programme. Robert Einhorn, an official in the Obama administration has noted “A.Q. Khan is in a class by himself …But if Khan occupies places 1, 2, 3 and 4, then Karl Lee is clearly No. 5…. He’s done a lot of damage”. Reports indicate that Lee made $10 million over just several years of supplying Iran’s programme. Despite multiple sanctions, the seizure of $7 million of his assets and a $5 million bounty placed on his head in 2014, Lee remains active in China.

These cases involving the “big fish”, although having had the most significant tangible impact on state’s WMD development, are far from typical. A number of other smaller cases where suppliers, middlemen, and to a lesser extent procurement agents, have been indicted or prosecuted, mostly by the US, can be found in the public domain. However, beyond these, many of those working to supply WMD programmes remain faceless. Drawing on the dataset provided by the few enforcement cases, and drawing on conceptual insights from other literatures – particularly criminology – can help to provide a fuller picture of what drives the middlemen.

Clearly those who become involved in illicit WMD-related trade seek to gain from their behaviour –financially or in another sense. Procurement agents not directly working for the government may still feel some kind of political, patriotic or ideological fulfilment. There are limits to both of these explanatory factors. Some individuals such as Alex Cheng – a supplier to the Iranian nuclear programme – have made relatively little from their exploits. While the total deal was worth $2million, as a colleague has pointed out, this included $450,000 profit which was split “between 13 co-conspirators over a five-year period”. Cheng likely took home a few thousand dollars a year from his illicit activities, and was sentenced to 9-years in prison for it. WMD-related procurement is usually no way near as lucrative as other illicit activities – arms trafficking or narcotics smuggling for example.

While nationality and a sense of patriotism may seem to drive the involvement of many Iranian nationals or dual-nationals in Iran’s illicit procurement, this is also not so clear cut. Iranians may become involved because of pre-existing business connections or lack or language barriers, rather than being driven by patriotism. Iranians convicted in Germany in 2013 for transferring valves to an Iran’s Arak reactor, for example, had differing allegiances to the Iranian regime. Rational-choice models of criminal behavior suggest that the perpetrators will weigh up the costs and benefits of involvement. While middlemen obviously consider benefits and costs, it is unlikely they do so in a structured and fully informed manner.

Since 2004 it has been mandatory for states to put in place export controls to prevent proliferation-related trade. This legislation – when implemented – has had a variety of effects: allowing governments to risk assess transactions, detecting illicit procurement, and compelling suppliers to establish compliance programs. However, it is questionable whether enforcement of the controls has a deterrent effect. Limitations to the cost-benefit model described above, as well as a lack of understanding of potential penalties undermine prospects for deterrence.

The criminology literature suggests that “certainty” of punishment is more important than “severity” in deterring crime. Severity of sentence has seen some buy-in from government officials in relation to export controls – often cited when sentences are announced. However, for political and legalistic reasons, “certainty” in prosecution and punishment is difficult, even in countries which have a stronger record of prosecuting export control violators. Some recent work suggests that even when middlemen perceive a risk of penalty, this risk can incentivize involvement in illicit trade because it can be monetized through higher commissions.

In sum, borrowing conceptual approaches from other disciplines can help to gain insights into illicit trade at the transactional level, and means to counter it. A conceptual grounding – such as that borrowed from criminology discussed above – can help to provide new insights, especially complementing the existing dataset, which is fairly limited and mostly drawn from enforcement cases. Further research in this area could enhance our understanding of what drives the middlemen, increase the effectiveness of export controls, and more broadly help to counter WMD-related illicit trade.

Image: Gas centrifuges for uranium enrichment recovered from the BBC China in Italy, en route to Libya, in 2003. They were later taken to the Y-12 complex in the USA where this picture was taken (with a Y-12 guard also in the picture), via wikimedia.

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