The Shadow World: Corruption in the Arms Trade


The manufacture of and trade in weapons is a business that counts its profits in billions of dollars and its costs in human lives.

The arms trade drives the gargantuan amount spent on ‘defence’ every year – $1.6 trillion in 2010 alone: $235 for every person on the planet.

It accounts for almost 40 per cent of corruption in world trade. The very small number of people who decide on multibillion dollar contracts, the huge sums of money at stake and the veil of secrecy behind which transactions take place (in the interests of ‘national security’) ensure that the industry is hard-wired for corruption.

The formal, large government-to-government deals and illicit or black market trade are inextricably intertwined and function on the basis of collusion among politicians, intelligence operatives, listed corporations, bankers, money launderers, go-betweens and common criminals.

This shadow world of money, corruption, deceit and death operates according to its own rules, largely unscrutinized, bringing enormous benefits to a chosen few and misery to millions. The trade corrodes our democracies, weakens already fragile states and often undermines the national security it purports to strengthen.

Greased palms

I experienced this first hand as an ANC Member of Parliament in South Africa’s nascent democracy. At the time that our then President, Thabo Mbeki, claimed we did not have the resources to provide life-saving medication to the over five million people living with HIV/AIDS, we spent $10 billion on weapons we didn’t need and barely use today. About $300 million in bribes were paid to senior politicians, officials, go-betweens and the ANC itself.

To cover up this corruption the ANC leadership undermined the very institutions of democracy they had fought so courageously to bring about. Parliament was turned into a rubber stamp. I was thrown off the committee I ran and eventually forced to leave Parliament, where the ANC majority voted down any meaningful enquiry into the arms deal. The two key anti-corruption bodies were closed down, investigators told who and what they could and could not investigate, and prosecuting authorities directed as to who to charge. If you were involved in the corruption and a political danger to President Mbeki, you were charged. If, however, you were knee deep in corruption but an ally of the President, you were not even investigated.

The British company BAESystems contributed $180 million of the bribes and received the biggest contract, even though the jet it sold had not made an initial shortlist and was two and a half times more expensive than the plane desired by the air force. The Defence Minister at the time, a major recipient of bribes, decided to exclude cost as a criterion on this, the single biggest contract democratic South Africa had ever signed. Only 11 of the 24 jets have ever been operational.

In the five and a half years after the deal was signed, 355,000 South Africans died avoidable deaths as a result of the government’s refusal to provide anti-retroviral drugs through the public health system. South Africa could have built close to two million houses with the money spent on the weapons or created 100,000 low-skill jobs a year for 10 years in a country with a formal unemployment rate of close to 30 per cent.

According to the country’s Deputy President Kgalema Motlanthe, corruption is now pervasive throughout the ruling party and at all levels of government. Its roots are to be found in the arms deal and its cover-up, the point at which the ANC lost its moral compass.

Accounting irregularities

The British Serious Fraud Office (SFO), after an extensive investigation into six cases of corrupt arms deals, first sought to prosecute BAE, but then settled with the company which was obliged to admit only to minor accounting irregularities and pay a fine of £500,000 (about $781,000). A few months later, in a settlement with the US government, BAE admitted that it had paid unauthorized commissions (what you and I understand as bribes) on these deals. The company was fined almost half a billion dollars, a miniscule percentage of what it had made on the deals, and allowed to continue its activities.

A few years earlier, under political pressure from Tony Blair, the SFO had closed down an investigation into BAE in relation to the world’s biggest ever arms deal. According to police, BAE paid over £6 billion ($9.37 billion) in bribes on the Al Yamamah deal with the autocratic state of Saudi Arabia. No-one has ever been charged with wrongdoing.

Governments protect their country’s arms companies from meaningful scrutiny and the legal implications of their behaviour because of the symbiotic relationships between them. There is regular movement of senior people between jobs in governments, intelligence agencies and arms companies. The companies are seen not only as key components of their country’s manufacturing sectors but also as crucial to national defence, foreign policy and intelligence gathering.

In the post 9/11 world, with its emphasis on national security, it has become increasingly difficult to criticize these assumptions. It is even ignored that for the cost of every job generated in the industry, between three and seven could be created in other sectors such as health, clean energy and education.

During these economically difficult times, in which millions are losing their jobs and the public sector is being stripped bare, the weapons business displays few signs of belt-tightening.

Lift the veil

The US, which spends almost as much as the rest of the world combined on defence, is pressing ahead with the production the F-35, a jet fighter which will cost its taxpayers at least $380 billion and which, in the words of a former Pentagon aerospace designer, is ‘a total piece of crap’.

But it is needed to ensure the continued prosperity of the domestic USweapons buying system in which Pentagon leaders approve these absurd projects because the vast majority of them want high-paying jobs with the weapons manufacturers when they leave government service. Politicians vote slavishly for them because they receive massive political campaign contributions from the companies and fear being labelled anti-jobs. Meanwhile, the companies themselves laugh all the way to the bank, often producing irrelevant or inadequate weapons years too late and for more than double the originally agreed cost.

The arms business, which fuels and perpetuates conflicts around the world, is less regulated and scrutinized than other ‘harmful’ industries such as tobacco and alcohol. In order to continue to operate, those who manufacture and trade in weapons must accept a far greater degree of regulation, transparency and accountability.

The time has come to lift the veil on this shadow world, to demand that our taxes are not used to develop another deadly weapon for the material benefit of a tiny self-serving élite, but are rather employed to enhance the lives of those who go hungry, who are without work or who suffer the deadly consequences of the trade in arms.

Andrew Feinstein is a former ANC Member of Parliament in South Africa. He is now an author, campaigner and co-founder of Corruption Watch. His latest book is The Shadow World: Inside the Global Arms Trade (2011, theshadowworld.com).  

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