All entries for March 2017

Viktor Bout: The Rise and Fall of the “Merchant of Death”

Viktor Bout: The Rise and Fall of the “Merchant of Death”

The gray arms market consists of untrustworthy deals between governments, rebel groups, or brokers, sometimes supported by legal contracts, but often blurring the line between legal and illegal. The United Nations, as well as many independent state commissions, has attempted to investigate this shadow world of illegal arms distribution, which includes the infamous Viktor Bout and the network of dictators in need of his munitions. These countries and international bodies have placed embargoes and gathered public support to shut down this dangerous operation, but they have rarely gathered enough support or traction for meaningful legislation to lend teeth to enforce such sanctions.

Viktor Bout, aka the “Merchant of Death”, epitomizes the underworld opportunities presented in the transition from Soviet socialist society to a post-Cold War free market illiberal democracy. With access to transit lines across the third world, Bout helped fuel the decade’s worst atrocities in Africa by supplying weapons to dictators that would murder anyone in their path. He is hardly the only weapons facilitator in the world; indeed, the United States itself is the leading global exporter of weapons. The US would do little to help the enforcement or flow of intelligence on Viktor Bout but instead unknowingly hired him as one of the numerous contractors to supply the war in Iraq and Afghanistan in the early part of the decade. An analysis of Viktor Bout’s operations and his eventual conviction can shed light on the gray arms market, and on possible steps to be taken to stem arms smuggling.

Background: Viktor Bout’s Convoluted Operations

Viktor Bout’s past is murky, to say the least. Most likely born in Tajikistan, Bout graduated from the Soviet Union’s Military Institute of Foreign Language and became fluent in six languages, which he used in the service of the Soviet Union military to interpret in Africa. He earned the rank of Lieutenant in the Soviet Military and there is strong evidence that he was a member of the GRU – Soviet Special Forces – which offered him a wide range of contacts which were likely instrumental in starting his international arms endeavors.

In the Russian post-Cold War economy, anything and everything was for sale. Much of the Soviet military stock fell into the hands of the senior officers in charge, who would sell poorly documented weaponry on the international market in order to cover patronage that was no longer forthcoming. Thousands of pilots and aircrews were out of work with the collapse of the Soviet military; they were easy targets for gray arms dealers who were easily able to replace their previous salaries. Under these conditions, an abundance of products and military grade employees, Bout’s additional education in economics enabled him to devise a business model that would maximize profits at every turn. Thus began his long-standing venture into the gray arms market.

Bout was able to purchase a small force of surplus Soviet Antonovs and Ilyushin planes that could sustain rough landings on demanding dirt runways in many of the African countries he delivered to. Bout paid so little for the planes in fact that he was able to recover his cost after only a few runs; aiding his bottom line, it also did not hurt that the aircraft were not insured and were registered in countries with the most laissez-faire regulations.

Viktor Bout’s planes never flew empty, a stream of Soviet-era craft continuously carrying arms into warring countries. Complicating the tracking of such material, his shell companies would often fly legitimate cargo such as food and appliances into these same markets, along with illegitimate non-military cargo such as diamonds out of them. Bout’s honed business mind manipulated these decoy shell corporations and his numerous bank accounts, as well as utilized the remoteness of the locations he operated in, to evade investigation and elude the law.

Viktor Bout’s small fleet acquired increasingly dangerous customers as his reputation grew, and began arming the Afghan Northern Alliance Resistance led by Ahmad Shah Massoud in 1992. The turbulence of Afghanistan’s militia politics resulted in the opposing Taliban taking one of Bout’s flight crews and arms shipments hostage in 1995, but the latter’s escape the following year led many investigators to believe that a deal had been struck between Bout and the Taliban.

Throughout the 1990s Bout also armed the inner circle of ruthless African dictators including Mobuto Sese Seko and Jean-Pierre Bemba in the Democratic Republic of the Congo, Jonas Savimbi’s UNITA force in Angola, Charles Taylor in Liberia, Bockarie in Sierre Leone, and Paul Kagame in Rwanda. Bout and Taylor were even friends beyond the supply of arms. Bout would at times use this friendship for everything from hunting with friends in the bush, evading arrest, and registering his planes in Liberia (among many other African nations). Bout played a shell game of operations between nations, often flying two planes with the same registrations, changing flight plans or not following the ones filed, and forging documents such as End-User Certificates (EUCs). With vast corruption and ample natural resources, the continent of Africa was a prime target for Bout’s weapons the trade.

In 1993, Bout moved his business, known as Transavia Travel Agency, to Sharjah, United Arab Emirates, where he partnered with Sultan Hamad Said Nassir al Suwaidi to gain access to the Sharjah airport. This new operation was a hub for Bout to facilitate his weapons smuggling to Africa, Afghanistan and the Bosnia. The Emirates staging area also offered protection from the prying eyes of investigators who were targeting the network of planes Bout ran through his shell corporations and sister companies. Viktor Bout and his brother Sergei, involved in many of his operations, made hundreds of millions of dollars from the transport and sale of weapons to embargoed nations in turmoil from Persian Gulf. In the end though, there was no denying this business had grown invaluable in the third world transit of arms. Despite being the target of investigations and having supposed assets frozen throughout the Clinton and Bush administrations, he was nevertheless hired as one of the thousands of subcontractors transporting military goods into Afghanistan and Iraq. Bout’s cargo fleets were so successful at delivering their payload that even after his companies were proven to be involved in illicit arms movement, it would be years before the American government would cease using his services.

Both the success of Bout’s network, and the intensity with which international organizations and individual agencies alike pursued him, changed the face of arms control and conflict resolution. His operations throughout Africa changed the way investigators looked into containing failing states, eventually learning that restricting the arms flow from actors such as Bout was essential to favorable outcomes. Yet for nearly two decades, in spite of his obvious ties with known war criminal and the tremendous energy focused on understanding his operation, Bout remained at large and in business.

Finally in 2008, Bout was arrested in Thailand at the culmination of a DEA sting investigation involving agents posing as FARC (Revolutionary Armed Forces of Columbia) militia members. It was not until 2010, after much deliberation by Thai Courts, that Bout was eventually extradited to the U.S. and charged with supplying and supporting a known terrorist organization.

A Closer Look at the Solution

This case study of the gray arms market should be carried one step further. As stated, gray arms trade borders on legality and, in many cases, crosses that line. Often this process of weapons purchases also results in smuggling, generally to a tertiary consumer who cannot acquire material directly from the dealer for any number of reasons.

Having worked for the Central Intelligence Agency (CIA) for 22 year (1971-1993) in Counterterrorism, Counterinsurgency, Arms Interdiction and Special Operations, I have managed and directed mobile arms interdiction teams throughout El Salvador to prevent the spread of contraband and arms smuggling in Central America. The latter, smuggling, is a major business in Central America, offering intermediaries an opportunity to both fuel the inflow of arms across the Western hemisphere and make a considerable amount of money doing so. Those in need of these intermediaries, who cannot buy weapons wholesale, include drug cartels, insurgents, and terrorists. Still, while it may help take some small measure of arms out of combatant control, interdicting a shipment is not particularly effective in identifying and disbanding a smuggling network—just as arresting a drug mule is not a very efficient way to dismantle a cartel. To do this, tandem intelligence and law enforcement operations are required in order to identify both the origins and destinations of a smuggled shipment, often by incorporating some form of electronic tagging or surveillance, and tracing the shipment throughout the criminal network. This was in fact done quite effectively in the early 1980s to reduce the flow of arms from Nicaragua to El Salvador through the Gulf of Fonseca.

Another more contemporary example of illegal arms smuggling is the ATF Fast and Furious “gunwalking” operation. Those arms were traveling through the Southwest United States to notorious drug cartels in Mexico. The operation’s legality was dubious, though it allegedly had the complicity of the U.S. Justice Department, making it a good example of the legal confusion involved in gray market trade. Still, while operating closer to the States and lacking certain clarity in the chain of command, the concept of Fast and Furious was nevertheless similar to my operations in Central America during the 1980s. There was also some level of success in Central America and in other related counterterrorist operations worldwide, which helps make a stronger case for the idea of Fast and Furious. However, a major problem with these operations is the high penalty both law enforcement and civilians face if the operation fails, as it may have in Fast and Furious.

Conclusion

The post-9/11 world of privatized military contracts is likely a looking glass at the future of the American Defense System. The military industrial complex, with a strong lobby and considerable political support, will not allow the defense budget to be cut substantially, and will continue to result in the trade of superfluous military equipment. And although for twenty years Viktor Bout epitomized the gray arms trade – forging EUC’s, flight plans, and flight manifests, befriending ruthless dictators, fueling conflicts across the African and Asian continents, and illegally transporting weapons – Viktor Bout and the likes of his network will inevitably disappear from prominence. However his legacy, for better or likely for worse, will remain, this time in the form of more ‘legitimate’ private companies providing weapons, training, medical, and security services for the U.S. troops operating in the region. What is perhaps most disturbing of all though, is that these private security firms, known to many simply as mercenaries, have not been held more responsible for their actions in exchange for their legitimate contracting. They are running lawless through warring areas, often held less accountable for their actions than Bout’s networks ever were. The face of arms dealing may have changed from former Soviet strongmen to businessmen in pinstripe suits, but the problems they cause manage to persist across time.

About the Authors

Leo Labaj is Director of the Infrastructure Protection Division at Security Management International, LLC (SMI). He is retired from the Central Intelligence Agency and has worked weapons interdiction cases throughout his distinguished career. He can be reached at llabaj@smiconsultancy.com. Daniel Levanti is a Research Associate at SMI and recently graduated from the University of Central Florida with a degree in “Political Science.” He can be reached at dlevanti@smiconsultancy.com.


Foreign Economic Collection and Industrial Espionage Cases Targeting Americans are more Prevalent than Ever

As today’s business environment has become globally interconnected, foreign intelligence activities have extended beyond traditional targets in the U.S. intelligence community and other national security structures. Hostile intelligence services, as well as “private collectors”, now target a wide variety of corporate executives, which has compounded the risk of foreign economic collection and industrial espionage like never before.

In previous decades the threat of physical or electronic surveillance from international intelligence services applied primarily to U.S. diplomats or those individuals responsible for transporting R&D materials. In today’s world, however, anyone can be a target of foreign collection activities. Of particular interest to foreign “collectors” are American business travelers.

Industrial Espionage Results in Massive Business Losses Every Year

According to the Office of the National Counterintelligence Executive (NCIX), over $300 billion worth of intellectual property is stolen from U.S. companies each year. In many of these cases, the information was extracted while an executive was traveling abroad for business. Furthermore, in most instances, the executive never realized that his or her sensitive materials had been compromised. As such, a recent annual report to Congress on foreign counterintelligence concerns stated, “the United States private sector is seen as an irresistible ‘soft target’ for foreign intelligence collectors.”

The most common methods to obtain sensitive information from travelers are through electronic surveillance and exploitation of laptops/PDAs/cell phones, the use of elicitation techniques by trained intelligence officers against unwitting business people, and surreptitious hotel room intrusions. Bribery, blackmail, sexual entrapment and extortion are also common methods, however those operations expose the espionage intent, thus removing the clandestine aspect of the theft.

According to recent FBI statistics, 23 foreign governments actively target the intellectual property of US corporations, while over 140 countries spend resources to acquire American technology. The top U.S. technologies targeted for theft include aeronautics, information systems, lasers and optics, sensors, marine systems, and electronics. Additionally, ONCIX warns that the rapid expansion of social networking software and virtual world technology offer new venues for making contacts and transferring information.

Economic Espionage vs. Industrial Espionage

Before proceeding further, it is important to note the differences between economic and industrial espionage, as both terms are often times mistakenly used interchangeably. The key difference between the two forms of collection methods is that economic espionage involves the assistance of a government intelligence service, while industrial espionage is purely a covert or clandestine collection performed by an industry competitor (that is not to imply, however, that former intelligence officers do not carry out these industrial espionage operations).

It should come as no surprise that countries such as China, Russia, France, Iran, Cuba, Israel, Japan, and India are commonly alleged to have involvement with the theft of valuable U.S. business secrets. Most of the time these countries deny any involvement with economic espionage activities, however on some occasions they are caught “red-­?handed” or simply boast about their successes. One of the most notable cases (or myths – depending upon who you ask), involved the admission from retired director of the French intelligence service (Direction Generale de la Secuirite Exterierure – DGSE) Pierre Marion. Marion, on more than one occasion confessed publicly to installing audio devices in the business class cabin of Air France flights to listen in on the conversations of American businesspersons.

To justify the action, Marion was quoted as saying:

“This espionage activity is an essential way for France to keep abreast of international commerce and technology. Of course, it was directed against the United States as well as others. You must remember that while we are allies in defense matters, we are also economic competitors in the world.”

Despite the French admission, the most immediate threat to American business travelers still remains from China. Businessmen and women traveling to Beijing, Shanghai, Hong Kong and even Taipei need to be especially vigilant, as the likelihood for eavesdropping, intrusion operations, and electronic interception is extremely high. Unlike many other countries, the Chinese recognize the need for all of its citizens to contribute to the foreign collection efforts – almost as a point of patriot duty.

China’s pursuit toward modern economic prosperity became evident when during the 1980s President Deng Xiaoping unveiled China’s 863 Program. The 863 Program was Xiaoping’s personally approved National High-­?Tech R&D initiative. Per a 2009 interview with China’s former Minister of Science, the objective of the 863 Program was as follows:

“…to boost the innovation capability in the high-­?tech sectors, particularly in strategic high-­?tech fields, in order to gain a foothold in the world arena; to strive to achieve breakthroughs in key technological fields that concern the national economic lifeline and national security; and to achieve leap-­?frog development innkey high-­?tech fields in which Chinas enjoys relative advantages or should take strategic positions…”

In other words, it is the decree of the Chinese government that the theft of foreign economic secrets is an acceptable, and necessary, responsibility of all Chinese citizens. This concept is particularly reinforced to those Chinese who may actively travel abroad and have access to foreign companies and organizations, universities, national laboratories, or tradeshows.

Industrial espionage is equally as prevalent, and problematic, as economic espionage. Although foreign government involvement is not present, the amount of financial damage that can be inflicted upon a company through the loss of a formula, blueprint, methodology, or proposal can cost upwards of hundreds of millions – if note billions -­? of dollars.

According to ASIS International, Fortune 1000 companies fall prey to industrial espionage attacks on average of 2.5 times per year. The cost alone to secure and investigate these attempted intrusions can range anywhere from the tens of thousands to millions of dollars. Therefore, it is safe to say the problem of both economic and industrial espionage is not going to disappear any time soon.

Conclusion

It should come as no surprise to anyone that a number of nations friendly to the United States continue to engage in economic espionage. Likewise, the on-­?going threat of industrial espionage from foreign private sector competitors is equally pervasive. With the billions of dollars that are stolen from American businesses each year, the only immediate solution to the problem is to implement effective countermeasures that reinforce strong operational security practices.

Unfortunately, many companies recognize the need for these practices only after their secrets have been stolen and millions of dollars in research and development funds have been lost. Corporations should protect themselves now before their company secrets are no longer secret!

About the Author

Luke Bencie is the President of Security Management International, LLC. He has traveled to over 120 countries for the U.S. Government, as well as the private sector,and frequently lectures on counterintelligence, foreign economic collection, and industrial espionage. His latest book, Among Enemies: Counter-­?Espionage for the Business Traveler, is now available everywhere.

Proprietary – Copyright SMI 2013


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