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States can play, too: constructing a typology of state participation in illicit flows

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Abstract

The prominent growth in “illicit globalization” has been broadly construed as an anti-state phenomenon, and criminological literature has largely reflected this focus on nonstate actors. However, states too have used and will continue to rely on illicit globalization for their own ends. A state or states may be driving demand, providing supply, or facilitating the transport of any given illicit flow (or perhaps all of the above simultaneously). This article establishes a motive-based typology of state participation in international illicit flows, illustrated with current and historical examples. By focusing on why states may engage in illicit flows, I argue that there are four broad archetypes of state participation: direct revenue generation, indirect revenue generation, procurement, and territorial control. While the risks can be significant, state participation can drastically improve an illicit transaction’s chance of succeeding. Furthermore, many states that are heavily involved in illicit flows have little to lose even if their involvement is uncovered. This typology provides differentiation meant to enhance the study of state participation in illicit flows.

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Notes

  1. Andreas refers to this phenomenon as “illicit globalization” [8].

  2. Andreas [9] and Mertha [42] are excellent examples of recent scholarship on this topic, among others.

  3. Green & Ward [28] and Hillyard & Tombs [32] are good examples.

  4. This is reasonable, since Williams’ primary focus has been on transnational criminal organizations (TCOs), and much of the focus in the immediate post-Cold War era was on the new importance of nonstate actors.

  5. Naim’s archetypal “mafia state” would fit under William’s category of collusion [46].

  6. North Korean diplomats have also been apprehended distributing Clonazipam and Fenethylline in the Arab world, suggesting that the DPRK was also producing these synthetic drugs in some quantity [55].

  7. State control of the drug industry is thought to have faded in the early 2000s, although meth production reportedly remains widespread [44].

  8. There are a range of estimates as to just how much revenue Pyongyang has generated from these activities. For instance, estimates of the DPRK’s income from drug sales in 2004 ranged from $200 million to $500 million, with drug sales to Japan alone estimated at $100 million annually. Similarly figures have been cited for currency counterfeiting and weapons sales. These figures, especially those on the upper end, should be treated with suspicion, given the tendency of many commentators to inflate the value of criminal activity. However, given that the DPRK’s entire economy was in the range of $1 billion at the turn of the millennium, even a fraction of these figures would represent a substantial source of income for Pyongyang [55].

  9. Hajdinjak stresses that these smuggling networks were more in the service of “the ruling regime” rather than the state itself, especially in light of the fact that the same networks were not used on behalf of the state after the war [30]. However, given that warfighting is widely considered one of the most basic functions of a state, I would argue that financing the war effort through cigarette smuggling remains an example of state participation in illicit flows.

  10. The shipping registry has reportedly provided as much as 25 % of Liberia’s annual state income. See Schoen [60].

  11. This is no longer true for Honduras or Panama. While both countries continue to be important transshipment points for Latin American cocaine headed for market in the US, significant portions of state security apparatus are being used to impede the drug trade with US support. Honduras in particular is noted for the “Americanization” of its drug policy [61]. Panama remains an important provider of amoral services such as money laundering and ship registration.

  12. See Bisschop [15] for a discussion of how pressures on port authorities in Europe may facilitate the transshipment of electronic waste.

  13. For example, all three ports have been used for state-run illicit nuclear technology networks. See Kelman [38]. Similarly, Iran has favored Dubai and ports in Malaysia for transshipment of nuclear technology. See [3, 4].

  14. Fuel subsidies from Beijing are responsible for 80 % of the revenue of the companies that operate the distant water fishing fleet. Some of the fleet owners are also state-controlled [29]. Beijing argues that the fishing is in accordance with agreements signed with West African countries, but eyewitness accounts suggest that these fleets are engaged in unlicensed fishing, fraudulent catch documentation, and the use of illegal equipment [29, 34].

  15. Indeed, Andreas reports that underground trade between Bulgaria and Yugoslavia had more than doubled by 1994 the losses that supposedly resulted from the war. Macedonia too became heavily economically dependent on illicit trade with Yugoslavia [7].

  16. Croatia, for instance, smuggled $308 million worth of conventional small arms in 1993–1995 alone, mostly from neighboring Eastern Bloc states and Argentina. The fledgling Bosnia-Herzegovina is estimated to have smuggled $500 to $800 million worth of small arms in 1994 and 1995 [30].

  17. See Kelman [37], for a detailed description of the use of illicit flows by the nuclear programs of Pakistan, Iraq and Libya.

  18. Thus far, DPRK has only tested weapons relying on plutonium from its Yongbyon reactor. However, the recent revelation of a complete uranium centrifuge facility signals that DPRK has been actively procuring dual-use items for fissile material production [2].

  19. See Huang [33] for classifications of piracy, half of which have state participants.

  20. Karp reports that black market small arms can be 3 to 10 times as expensive as licitly bought arms [35], and Naylor reports similar rates in discussing Iranian purchases in the 1980s and 1990s [47].

  21. For example, Pakistan used diplomatic pouch to ship prohibited uranium ultra-centrifuge parts and plans from Europe during the 1970s. Similarly, Iraq used diplomatic pouches to carry “shopping lists” for nuclear procurement during the 1980s [52, 71]. Iraq also used its national airline to ship large quantities of scientific journals on subjects related to nuclear weapons during the same period [71]. Diplomats abroad may also serve as useful conduits for distribution of illicit products. There are numerous documented instances of North Korea diplomats being used to traffick drugs and counterfeit currency, and to launder money [55].

  22. For example, People’s Steel Mill, a large scale industrial company affiliated with the Pakistani state, has been used as a front for the procurement of specialized machinery necessary for manufacturing uranium ultra-centrifuges [1]. In another example, the Iraqi Oil Ministry was used during the 1980s to assure sellers that orders for nuclear-sensitive dual-use technologies were for actually for the petroleum industry [52].

  23. Pakistan has made widespread use of procurement agents travelling on diplomatic visas on behalf of its state nuclear program [71].

  24. Indeed, this was Islamabad’s argument about A.Q. Khan and his aid to the Libyan nuclear program, though there is evidence that his actions were tolerated or even endorsed by Pakistani officials at the time. For a useful discussion of Pakistani state complicity in the Khan network’s later dealings, see Fitzpatrick [25]. Chestnut has warned that North Korean proliferation networks have a similar potential to go rogue [18]. In a more historical example, Chambliss notes that state-sponsored pirates did not always act in the interest of their sponsors [17]. Andreas points out that networks nurtured by the state in Yugoslavia spread into other illicit trades after sanctions ended [7].

  25. Discovery may make future flows difficult, but not impossible. For example, Pakistan’s nuclear procurement efforts were known to Western intelligence beginning in the 1970s, but procurement strategies evolved even as export controls tightened. See Kelman for a description of this evolution [33].

  26. Andreas has made this argument about illicit flows more broadly. See [8].

  27. The revenue from Bureau 39 was reportedly prioritized to pay for North Korea’s nuclear program and the acquisition of luxury items to reward loyalty in the military [55].

  28. This inherent difficulty has done little to deter scholars and policymakers from citing enormous figures regarding the size of illicit trade in general. See Thuomi [66] and Andreas & Greenhill [11] for useful critiques of this practice.

  29. For example, Karp notes that the total amount of global black market arms deals is directly correlated to the number of states that are currently under embargo [35]. Similarly, Andreas points out that the growth in the use of sanctions as a security tool in the post-Cold War era has increased the incidence of state-led smuggling networks [7].

  30. “Market criminalization” has largely been driven by dominant states of the developed world, especially the US. See Woodiwiss [76] and Woodiwiss & Hobbs [77].

  31. See Van Schendel, 2005 [68] and Nordstrom, 2007 [50] for rich description of these relationships.

  32. Andreas argues that developing states are merely following the standard advice of the International Monetary Fund when they seek to use their comparative advantage in illicit flows [6].

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    Jonathan H. C. Kelman

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Kelman, J.H.C. States can play, too: constructing a typology of state participation in illicit flows. Crime Law Soc Change 64, 37–55 (2015). https://doi.org/10.1007/s10611-015-9568-4

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