REPORT TO THE PRIME MINISTER’S STRATEGY UNIT

PROJECT ON COUNTRIES AT RISK OF INSTABILITY (CRI)

May 2004

Written by David Mepham, Associate Director, Institute for Public Policy Research

This report represents the views of the authors and not those of the UK Government This report represents the views of the authors and not those of the UK ii Gover nment Contents

Introduction 1

1. Arms Prol iferation in CRI 2 What is the relationship between arms proliferation and CRI? 2 What is the cost of arms proliferation in CRI? 4 What kinds of weapons are being used in African CRI? 7 Where are these weapons coming from? 9 Arms from G8 cou ntries 10 European Union 11 France 12 Germany 12 Russia 13 United Kingdom 14 United States 14 Eastern Europe and the CIS 15 China 16 Regional Sources 16 What are the factors facilitating the transfer of arms to African CRI? 19 Role o f the arms broker and trafficker 19 The transport of arms 19 Transfers of intellectual property 22 What are the factors facilitating the transfer of weapons within Africa? 23 Poor control of state -owned weapons 23 Lack of capacity and poor co -ord ination between customs and 24 law enforcement agencies Poor Disarmament, Demobilisation and Reintegration (DDR) 24 Programmes Weak legislation and lack of clarity over what is licit and illicit 24 What are the political economy constraints on the UK being more restrictive on 25 arms exports issues?

2. The International Private Sector and CRI 27 Does natural resource dependence fuel conflict and instability? 27 In what ways and to what extent can the behaviour of UK 29 companies destabi lise African CRI? What steps has the UK government taken to address these 33 destabilising activities and with what degree of success? The Wolfsberg Principles 33 The Ethical Trading Initiative (ETI) 34 The UN Global Compact 34 The OEC D Guidelines on Multinational Enterprises 35 Voluntary principles on security and human rights 36 Forest Law Reform and enforcement processes 36 The Extractive Industries Transparency Initiative (EITI) 37 The Kimber ly Process 38 Financial Action Task Force (FATF) 38 International agreements to tackle bribery and corruption 39 The arms proliferation/private sector nexus – how are these arms financed? 42 The Rule of Law - Do we need a clearer legal framework for companies 45 investing in or sourcing from CRI? UN Sanctions and Expert Panels 46 UK Company Law Reform and social reporting 47

This report represents the views of the authors and not those of the UK iii Gover nment 3. Policy Recommendations 49 Tackl ing Arms Proliferation 49 Strengthening EU arms exports controls 49 Strengthening the G8’s commitment to control arms 50 transfers and support NEPAD Tackling the supply o f weapons within regions of instability 52 Addressing the factors that facilitate arms transfers 53 Promoting good corporate practice by UK companies in African CRI 55 Promoting impact assessments and more systematic reporting 56 Promoting core labo ur standards 56 Tackling corruption 57 Strengthening international initiatives on corporate responsibility 57 Going after the money – tackling weaknesses in the 59 international financial system Strengthening capacity building and supporting good corpo rate 60 practice by UK companies Strengthening the legal framework for companies 61 Stronger research effort 62

References 63

Appendix 1: UK exports to Africa CRI 200 -2002 70 Appendix 2: List of Armed conflicts in African CRI 1989 -2002 73

Appendix 3: African CRI and types of weapons used by government and 76 non -state actors Appendix 4: Export licences granted by and arms exports from EU member 87 states to Africa, 2002 Appendix 5: Flags of convenience jurisdiction claims 89 Appe ndix 6: False Guinean end user certificate 90

Endnotes 91

Figures

Fig. 1 GDP per capita before and after civil war 5 Fig. 2 Natural resources and Conflict Risk in low -income countries 28 Fig. 3 Destabilising activities of UK companies in CR I… 31 Fig. 4 …and some UK Government/international policy responses 32

Tables

Table 1 The effects of small arms misuse on stability and human development in 5 CRI Table 2 Arms transfer agreements to Africa 11 Table 3 Value of export licences gr anted by selected EU member states to Sub - 11 Saharan Africa 2002

This report represents the views of the authors and not those of the UK iv Gover nment ACKNOWLEDGEMENTS

The author would like to thank Leni Wild and Adrian Fradd of the ippr for their invaluable help with this report. The author would also like to thank Annie Heaton.

The ippr would like to pay special thanks to Saferworld for their huge contribution to the arms section of this report. The following individuals at Saferworld were involved in drafting sections or collating material: Paul Eavis (Director), Andy McLean (De puty Director), Roy Isbister, Catherine Flew, Helen Hughes, Alice Hutchinson, Joseph Miller, Archana Patel, Charlotte Philips, Richard Traill and Angus Urquhart.

Saferworld is an independent non - governmental organisation that works with governments and civil society internationally to research, promote and implement new strategi es to increase human security and prevent armed violence. www.saferworld.org.uk

This report represents the views of the authors and not those of the UK v Gover nment This report represents the views of the authors and not those of the UK Government INTRODUCTION

This ippr report was commissioned in March 2004 by the Prime Min ister’s Strategy Unit as part of its work on countries at risk of instability (CRI). The ippr was asked to produce a short report focusing on three specific issues.

Firstly, arms proliferation in CRI. This included the link between the availability of arms and CRI, the costs of arms proliferation, the types of weapons being used in CRI, the source countries for these weapons, the factors that are facilitating their transfer to CRI, and the political economy constraints to the adoption of a more restr ictive UK arms export policy. These issues are the focus of Chapter 1 . Related material is also provided in the appendices.

Secondly, the role of the international private sector in CRI. In recent years, there has been a growing interest in the link betw een conflict and natural resource exploitation. The ippr was asked to build on this existing analysis in the context of CRI, and to look at ways in which UK/G8 law or policy may contribute to or not adequately constrain the destabilising behaviour of UK/G 8 companies in CRI. The ippr was asked to consider the limitations of existing policy, for example on issues like corruption. The ippr was also asked to consider the linkages between private sector activity and arms proliferation: for instance, the way i n which arms purchases are being financed by licit or illicit international private sector activity and other initiatives to prevent the abuse of the international financial system. These issues are brought together in Chapter 2 of this report.

Chapter 3 of the report consists of a detailed set of policy recommendations, measures that the UK Government could take forward with others in the context of its forthcoming presidencies of the EU and the G8.

As agreed with the Strategy Unit, the focus in this report is mainly, though not exclusively, on CRI in Africa. The report is largely structured around a series of questions. Wherever possible, the report has sought to provide quantifiable data (on the size of arms transfers or the scale of economic activ ity), although the nature of CRI means that this data is often very hard to come by, incomplete or simply unavailable.

This report represents the views of the authors and not those of the UK 1 Gover nment 1. ARMS PROLIFERATION IN CRI

What is the relationship between arms proliferation and CRI?

The ready availability of arms does not cause state weakness or failure per se. The ‘Failed States Taskforce’ of the Centre for International Development and Conflict Management found, for example, that there was no clear correlation between countries’ levels of military expenditure and state f ailure (CIDCM 2003). Nor can the role of arms in CRI be considered in isolation from the broader structural or contingent factors that contribute to state effectiveness or weakness. For example, there are far more firearms in Europe (84 million) than in s ub -Saharan Africa (30 million) but the number of deaths from arms -related violence is much higher in the latter than in the former (Graduate Institute of International Studies - GIIS 2003:80). The relative strength and stability of structures of governance in most parts of Europe, as compared to many parts of Africa, is a more likely explanation for this.

However, when states are already weak or failing – which may be a consequence of economic stagnation, corruption, authoritarian or unrepresentative lead ership, decaying national infrastructure – the ready availability of arms can reinforce and accelerate these existing negative trends. In this sense, arms proliferation can be a significant contributory cause or factor in explaining state weakness and fai lure in CRI.

Arms proliferation can also exacerbate and make more destructive existing conflicts or conflicts that result from state failure or collapse.

‘A state’s capacity to resist failure can decline rapidly when armed militias emerge or the officia l security forces break up into semi - autonomous bands… Under these circumstances, the transition from failing to failed state is usually irreversible’ (Klare 2003).

Struggles between states or the remnants of states and armed rebel groups have been a cent ral feature of almost every instance of civil conflict and state failure. This includes countries like Algeria, Bosnia, Burundi, Cambodia, Chechnya, Colombia, DRC, East Timor, Georgia, Haiti, Liberia, Rwanda, Sierra Leone, Somalia, Sri Lanka, Sudan and Taj ikistan.

‘In some of these cases, the armed groups involved have sought to carve out an ethnic homeland in the space of a multinational state (as in Abkhazia, Bosnia, Chechnya, Kurdistan and Sri Lanka); in others, the goal has been to seize control of the government and its tangible assets (Liberia), to impose a new system of government (Algeria, Colombia), to silence opposition to the ruling faction or elite (Haiti, Rwanda), or to control a particular region that is rich in “lootable” raw materials (the d iamond zones of Angola and Sierra Leone; the gold, diamond, copper and coltan zones of the DRC’ (Klare 2004).

This report represents the views of the authors and not those of the UK 2 Gover nment In all these cases, arms proliferation has exacerbated the scale and destructiveness of the ensuing conflict.

There are other respects, too, in which arms proliferation can increase the risks of state failure in CRI. Armed conflicts – even relatively low level conflicts - tend to produce population displacement, with people fleeing to the cities or to refugee camps, disrupting economic activit y and putting additional pressures on the central state to provide food and other essential supplies. The United Nations High Commission for Refugees is currently assisting more than 5 million internally displaced persons as a result of civil war (Collier et al 2003).

Military conflict between a central state and armed rebel groups can trigger internal arms races, with resources diverted from civilian to military production and consumption, further weakening state capacity.

‘The average developing cou ntry, defined as a country with less than US$3,000 per capita gross domestic product (GDP) in 1995, spends about 2.8 per cent of GDP on the military. During civil war, on average, this increases to 5 per cent’ (Ibid.).

State weakness – exacerbated by th e easy availability of arms - can lead to the wholesale privatisation of security. When people no longer feel that the central state is willing or able to protect them, they are likely to seek this protection from other sources such as local warlords, regi onal armed groups or private security organisations, leading to further polarisation and conflict and increasing the chances that CRI will fail or collapse.

In ‘post conflict’ situations, arms proliferation can hinder peace -making efforts and strategies for economic, political and social reconstruction. For example, in El Salvador and Guatemala the number of deaths caused by firearms increased significantly once the armed conflicts in these countries had ended, as banditry and violent crime spread. Large numbers of weapons left over in a country after a war can also fuel regional instability. For instance, arms left over from the conflict in Mozambique have fuelled the crime wave in South Africa over the last decade.

Arms proliferation can also cont ribute to instability in countries that are not involved in full -blown conflict. The easy availability of weapons makes it more likely that existing tensions and disputes become violent. The traditional practice of cattle rustling in Kenya, Uganda, Ethio pia and Sudan has become much more lethal following the influx of large quantities of weapons into these countries. This has led to conflict between ethnic groups. In Uganda, it has also fuelled conflict between the heavily armed Karamoja tribe and the go vernment i.

This report represents the views of the authors and not those of the UK 3 Gover nment What is the cost of arms proliferation in CRI?

It is clearly difficult to separate out the specific human and development costs attributable to arms proliferation and availability, from those that are the result of violent conflict more generally (to which arms proliferation is a contributory cause). The most serious attempt to do so is the Small Arms Survey, but this focuses on the impact of small arms and light weapons and not on heavier forms of military equipment ii .

It is estimated that small arms are implicated in more than 300,000 deaths each year, primarily in the world’s poorest countries (GIIS 2003). Larger scale weaponry and military equipment is also responsible for many human deaths and injuries each year, though global figur es for the numbers killed by this equipment are not available. These deaths and injuries are the most direct and obvious human cost of arms proliferation.

‘Of the two to three dozen violent conflicts that were ongoing each year between 1992 and 2002, mor e than 90 per cent were in the developing world. Two -thirds of the 15 ongoing internal conflicts of 2002 had already lasted eight or more years…Almost 50 per cent of the lowest - ranking countries on the United Nations 2002 Human Development Index (HDI) we re severely affected by armed conflict’ (GIIS 2003).

Conflict fuelled by arms has direct adverse economic impacts.

‘By the end of the typical civil war, incomes are around 15 per cent lower than they would otherwise have been…However, the end of a civ il war does not end the costs arising from it. Many of the economic costs, such as high military expenditure and capital flight, persist for years after the conflict. So too do heightened mortality and morbidity rates…Neighbouring economies also suffer lo wer growth rates’ (Collier et al 2003).

This report represents the views of the authors and not those of the UK 4 Gover nment Fig. 1 GDP per capita before and after civil war U.S. dollars

3,000

2,000 Before civil war After civil war

1,000

0 Peru El Salvador Nicaragua Angola Dem. Rep. Burundi Congo

Sambanis 2003, cited in (Collier et al 2003:14)

But weapons proliferation has a wider – often more indirect - impact on development and governance in CRI, particularly at the local level . These impacts are set out in the attached table.

Table 1 - The effects of small arms misuse on stability and human development in CRI

Impacts on Indicators development Direct Fatal and non - Lost productivity Effects fatal injuries Personal costs of treatment and rehabilitation Financial costs at household, community, municipal and national levels Psychological and psychosocial costs Indirect Armed crime Rates of reported crime (homicide) effects Community -derived indices of crime Insurance premiu ms Number and types of private security facilities Access and Incidence of attacks on health/education quality of social workers services Incidence of attacks and closure of health/education clinics Vaccination and immunisation coverage Life expectancy a nd child mortality School enrolment rates Economic activity Transport and shipping costs Destruction of physical infrastructure

This report represents the views of the authors and not those of the UK 5 Gover nment Price of local goods and local terms of trade Agricultural productivity and food security Investment, Trends in local and foreign direct investment savings and Internal sectoral investment patterns revenue co llection Trends in domestic revenue collection Levels of domestic consumption and savings Social capital Numbers of child soldiers recruited, in action Membership of arm ed gangs and organised crime Repeat armed criminality among minors Incidence of domestic violence involving firearms or the threat of weapons Respect for customary and traditional forms of authority Development Incidence of security threats interventions Costs of logistics and transportation Costs of security management Opportunity costs associated with insecure environments and/or damaged investments

(GIIS 2003)

While most of these impacts have not been formerly quantified, there are some exception s. For example, in respect of education, studies have shown how enrolments in primary, secondary, vocational and night schools in certain regions of Afghanistan, Colombia, Mozambique, Nicaragua, Sierra Leone, Sudan and Uganda declined during periods of in tense armed conflict (Luckham et al 2001). In other countries, not directly affected by armed conflict, students and school facilities have suffered as a result of the widespread availability of arms and the insecurity this creates. For example, a World Ba nk poverty assessment of Jamaica found that 30 per cent of girls surveyed said that they were afraid to go to school because of the threat of firearms -related crime. Even where children were able to attend school despite violence, there were persistent eff ects on the quality of education (GIIS 2003:141).

Arms misuse has serious adverse impacts on economic activity, deterring domestic and international investment. In the Great Lakes region of Africa, for example, armed violence has decreased commercial act ivity along the Congo river, a primary transport network (GIIS 2002:141). According to the World Bank, countries affected by widespread social violence, instability and armed conflict suffer disproportionately from negative growth and reduced inflows of fo reign direct investment. In a survey of 69 multinational companies conducted for the World Bank, insecurity and violence ranked as the greatest risk factor facing investors (World Bank 2001).

Conflict, exacerbated by arms misuse, can contribute to capita l flight. Prior to conflict the typical civil war country held 9 per cent of its private wealth abroad. By the end of the civil war this had risen to 20 per cent, and by the

This report represents the views of the authors and not those of the UK 6 Gover nment end of the first decade of post -conflict peace to 26 per cent (Collier et al 2003) .

There is a link, too, with refugee movements and human displacement. Nine of the top ten countries of origin of asylum seekers wishing to enter the EU, for the period 1990 -2000, were countries that had suffered from serious armed conflict during this period or immediately before. These were the Federal Republic of Yugoslavia, Turkey, Iraq, Afghanistan, Bosnia - Herzegovina, Sri Lanka, Iran, Somalia and the Democratic Republic of the Congo (Castles et al 2003).

The easy availability of arms in CRI can impact on levels of crime in the EU. For example, Albania, Serbia and Croatia have been identified as the prime sources of weapons entering the EU, fuelling the increasing levels of gun crime across many countries, including Africa UK iii .

What kinds of we apons are being used in African CRI?

Accurate information on the different types of weapon being used in African CRI is hard to come by. The main types of weapons are small arms and light weapons. This is probably because they are relatively cheap, dura ble, widely available (both internationally and within the region) and their size makes them easier to traffic. However, in some circumstances, heavier conventional weaponry also plays a significant role.

As a rule, governments have greater access to h eavier weaponry than non - state actors (NSAs), which tend to be limited to small arms and light weapons. A number of factors help determine access to different types of weaponry. Small arms and light weapons are ideal for guerrilla warfare and heavier weap onry more useful for conventional warfare. Access to resources is vital too. The actors with access to heavier weaponry are either states with a bigger revenue base or non -state actors in control of territory with rich natural resources that they can use to finance military equipment purchases (see chapter 2 on the arms proliferation/natural resource nexus). Heavy weaponry also requires maintenance and access to spare parts and again this tends to privilege governments.

Appendix 3 of this report draws on material produced by the International Institute for Strategic Studies (IISS) database to provide country breakdowns of the types of weapons being used by governments and rebel groups in African CRI. In this chapter, the report draws out two general trend s, using additional material from the Stockholm International Peace Research Institute (SIPRI), and illustrates how different types of weapons are being used in different contexts in African CRI.

Firstly, the IISS data indicates that governments have acc ess to a larger market of potential arms suppliers and that non -state actors are often reliant on transfers from other non -state actors from elsewhere in the region.

This report represents the views of the authors and not those of the UK 7 Gover nment Secondly, it appears that different weapons tend to be used at different stages of a conf lict. SIPRI argues that when violence breaks out in many intra -state conflicts, small arms and light weapons tend to be used initially by both sides. However, government forces can then move quickly to introduce heavier weapons. For example, in Côte d’Ivo ire in late 2002:

‘When the conflict began, the opposing forces were fighting mainly with small arms, but the government quickly imported a small number of attack helicopters. These were flown by mercenaries and put into action almost immediately upon arr ival. The conflict thus followed much the same pattern as earlier conflicts in Sierra Leone and Guinea. These conflicts also started as ‘small arms wars’, but soon saw the introduction of Mi -24/35 attack helicopters, sturdy aircraft armed with missiles and cannons’ (Wezeman 2003:3)

This pattern can be observed in conflicts elsewhere in the world. The Colombian Army makes intensive use of helicopters in its fight against rebels, and the Sri Lankan and Philippine governments have used combat aircraft, tanks and ships in fights against their own opposition groups (Ibid.).

Civil conflicts

In Sudan , the Government has used combat helicopters and aeroplanes to bomb rebel villages in Darfur and the Sudan People’s Liberation Movement (SPLM) in the south. Human Rights Watch has reported that the Sudanese Government has equipped the Janjaweed militia in Western Darfur with a range of small arms and light weapons, including Klashinkovs, G -3s, Belgique and Doshkas (anti -aircraft guns) (HRW 2004:22 -23) iv .

The vario us factions in Somalia use ‘low -cost assault rifles, pistols, hand grenades, rocket propelled grenades, mortars, heavy and medium machine guns and anti -aircraft cannons deployed in a ground -attack role’ (UN 2003a:15). v

In Burundi , rebel forces are equipp ed with large numbers of personal weapons, machine guns, rocket propelled grenades and mortars (Janes’ Sentinel Security Assessment 2003:44).

Lower intensity conflicts and armed crime

In lower intensity conflicts and for armed crime, the Kalashnikov rem ains a popular weapon in use in many African CRI. Similarly, the AK -47 has become the trade mark gun of the Karamoja region that borders Kenya and Uganda (Mkutu 2003:25). It is widely used in commercial cattle -raiding and for attacks on rival clans and nei ghbouring villages (Ibid:22). Handguns are often used for armed crime in urban areas. In Nairobi, for example, the US -manufactured Colt 45 pistol is the most commonly seized weapon by the Kenyan police.

This report represents the views of the authors and not those of the UK 8 Gover nment Human Rights Abuses

It is not just conventional weapons and small arms that are used to facilitate human rights abuses in African CRI but also a wide range of military, security and police equipment including tear gas, body armour and riot control equipment. A worsening human rights situation is often a clear indicator that countries are at risk of instability. It is particularly important, therefore, to ensure tight controls over transfers of this equipment.

Terrorism

The easy availability of arms and explosives in African CRI are also fuelling terr orism. The MANPAD attack on an Israeli aeroplane at Mombassa airport in 2003 illustrates the availability of these weapons in African CRI. It is suspected that this weapon was trafficked from Yemen, through Somalia to Kenya. Al Qaeda used explosives in the 2000 attack on the USS Cole off the coast of Yemen and the truck bomb attacks on the US embassies in Kenya and Tanzania in 1998.

Where are these weapons coming from?

Weapons flows to African CRI come from a variety of different sources – licit and illicit – and through a wide variety of different means.

‘During the Cold War state -to -state arms transfers to sub -Saharan Africa involved primarily heavy, high maintenance equipment – tanks, transport aircraft and jet fighters. The scale was colos sal. Much of it came from the US and Western Europe. In 1998 alone, at the end of the Cold War, they amounted to $4 billion. By 1995, they had dropped to $270 million. However, state -to -state flows were replaced by a major growth in commercial arms dea ling and illegal arms trafficking in low maintenance light weaponry, primarily items such as the AK -47 and rocket -propelled grenade launchers’ (DFID et al 2001).

The traditional pattern with Cold War transfers to allies and proxy conflicts changed in the 1990s, the former Warsaw Pact countries becoming the major source of weapons entering African CRI. As these countries reduced their arsenals, and in some cases upgraded stocks for NATO membership, large supplies of surplus military equipment became avai lable for sale to developing countries, including Africa. Economic hardship in Central and Eastern Europe, the lack of effective arms export legislation and poor law enforcement capacity also facilitated this trade.

However, successive reports of irrespo nsible arms transfers to African CRI from Central and Eastern Europe have led to increased pressure on these countries to strengthen controls. This has begun to happen in places like Poland and Bulgaria. There are indications that the main sources of we apons transfers to African CRI are now moving eastwards with Belarus, China, Moldova and Ukraine becoming large -scale suppliers. Of the G8 countries, Russia is the main supplier of arms to African CRI. However, the war on

This report represents the views of the authors and not those of the UK 9 Gover nment terror has introduced a new dyna mic, with the US increasingly providing military assistance to countries in North, West and Eastern Africa. Countries in the region also have a significant role as suppliers. There is some manufacturing capacity in these countries but each country is a su pplier in some way through diversion or transit.

Today, a typical arms transfer to an African CRI might involve weapons sourced from the former Soviet Union, organised by a western European broker and diverted through a neighbouring country in the region. A myriad of transportation, finance and insurance ties often link such transfers back to G8 countries.

Official and comprehensive data on these arms transfers is hard to come by or simply unavailable.

‘Data on countries in the region comes from expo rter declarations or, more typically, anecdotal information…The resulting picture appears to be a significant underestimate, failing to capture not only imports of newly manufactured equipment from suppliers outside the region but also the important trade in second -hand hardware between African governments and non -governmental actors, and cross border smuggling between private individuals’ (GIIS 2003:117).

Governments in recent years have increasingly begun to publish more information on their arms exports . This section draws on official sources, although close scrutiny of the data reveals a number of concerns about its reliability in some areas. However, government, media and UN reports do shed some light on arms transfers to the African continent and wit hin it.

This section looks at weapons transfers from outside Africa (from the G8, the EU, Eastern Europe and the CIS, China) and from within the African continent itself (through diversions, government supply to other governments and non - state actors, a nd local production).

Arms from G8 countries

Most of the G8 and EU states appear to have recognised the risk that the indiscriminate supply of arms to African CRI may have significant negative consequences. In general, export -licensing policies to the c ontinent have been tightened in recent years. Nevertheless, included among the G8 and EU are the world’s largest arms exporters, whose customers include the vast majority of CRI, and there are still cases where inappropriate transfers are being authorised . Based on figures produced by the US Congressional Research Service (CRS), the table below summarises (by value) recent conventional arms transfer agreements to Africa (not including small arms and light weapons).

This report represents the views of the authors and not those of the UK 10 Gover nment Table 2 - Arms transfer agreements to Africa vi (figures in US$ million) Supplier Agreements 1995 -98 1999 - 2002 Global Total 3,100 10,200 France 100 600 Germany 0 1,600 Italy 100 300 Russia 600 1,500 UK 200 700 US 89 109 All other European 700 3,800

(Grimmett 2003:Table s 1C -2C)

European Union

The CRS figures show that EU countries made 31 per cent of the region’s agreements, this at a time when the scale of arms transfer agreements to Africa rose from $3.1 billion for 1995 -1998 to $10.2 billion for 1999 -2002. However, t he CRS report notes that ‘ the notable rise in the level of arms agreements reflected, to an important degree, [South African procurement]’ German and UK companies were major beneficiaries of that procurement vii .

According to the most recent Consolidated EU Report, which covers the 2002 calendar year, the value of arms licences awarded for exports to Sub -Saharan states by the four EU G8 states were as set out in the table below.

Table 3 - Value of export licences granted by selected EU member states to Su b- Saharan Africa, 2002 Value ( €) France 189 million Germany 26 million Italy 1.6 million UK 24 million

(EU Council 2003)

UK figure is a partial figure only, as it fails to take into account the impact of Open Individual Export Licences, to which no value is attached.

Excluding South Africa, EU member states between them issued 132 licences for arms exports to Sub -Saharan Africa to a value of at least €14.5 million (some member states do not report on licence values). EU states delivered arms to 14 Sub -Saharan states in 2002, and agreed to deliver arms to 42.

This report represents the views of the authors and not those of the UK 11 Gover nment Appendix 4 lists the aggregate EU values of licences awarded and transfers made to Africa in 2002, broken down by recipient country, as contained in the Consolidated EU Report.

Aga in if South Africa is excluded, the value of licences issued during the year exceeded €10 million in five cases: Angola, Botswana, Central African Republic, Gabon and Nigeria. However, the value of actual deliveries to Africa was substantially lower than the value of the licences granted.

France

According to the French Annual Report 2001 (latest year available), over the last 10 years France has exported relatively small amounts of arms to African CRI (orders and deliveries below $1 million per country per annum). However there are examples within this timeframe of French arms being used in large - scale conflicts:

• Cote d’Ivoire - Since the attempted coup of September 2002, France has participated in the conflict alongside government troops, supplying hel icopter gunships to the government. These were used in attacks on rebels that resulted in the deaths of some 400 rebel fighters (IISS 2004; Global Witness 2003).

• Rwanda - Reports have suggested that to counter the advance of the Rwandan Patriotic Front in 1994, France rushed in 60 -mm, 81 -mm, 120 -mm mortars and 105 -mm light artillery guns to the Rwandan (pre - dominantly Hutu) army as well as four companies of 680 combat troops at a time. (Goose et al 1994).

Germany

The German annual report for 2001 (lat est year available) does not include high value transfers to CRI in Africa. However, some entries stand out as of potential concern:

• Tanzania – small arms to the approximate value of £76,000 viii

• Zimbabwe - licences worth £13,000 were granted for hunting an d sporting weapons and ammunition.

• Rwanda - licences for cross country vehicles worth £488,000.

• Yemen - licences granted in 2001 for the sale of £2 million worth of ammunition for rifles. Yemen is widely acknowledged as a diversionary risk, and has been identified in UN reports as a source of small arms into Somalia.

This report represents the views of the authors and not those of the UK 12 Gover nment Russia

Of the G8 countries, Russia’s export policy towards African CRI raises the biggest concerns. According to SIPRI in 2001, Russia was the largest single exporter of arms to the A frican continent (SIPRI 2002:376 -377). Details on specific Russian small arms exports are difficult to quantify given the proliferation in production of ‘traditional’ Russian weapons. Copies of the AK - 47 are now produced in at least 19 countries, including China, Finland, and Romania (Amnesty International 2003). Examples of Russian exports of concern include:

• Sub -Saharan Africa - between 1999 and 2002, Russia delivered 40 tanks and self -propelled guns, 160 artillery pieces, 130 armoured personnel carriers and armoured cars, 2 minor surface combatants, 20 supersonic combat aircraft, 60 helicopters and 40 surface -to -air missiles to the region (Grimmet 2003) .

• Zimbabwe - between 1999 and 2000 Russia exported 21,000 AK -47s to Zimbabwe (Amnesty International 20 04).

• Ethiopia - in 1998 -1999, at the height of the war with neighbouring Eritrea, Ethiopia was reported to have received from Russia four Mi -24 attack helicopters, eight Mi -17 military transport helicopters, eight Su -27 fighter - interceptors and 10 self -propelled artillery pieces from Russia (worth over $200 million) (Moscow Izvestiya 2001). In 2002, the Russian state arms company, Rosoboronexpot, also said that Addis Ababa intended to purchase six MI -35 combat helicopters, 100 Igla light anti -aircraft com plexes, 20 BTR -80 armoured personnel carriers, ammunition for infantry and artillery weapons at a total cost of $150 million (Putilov 2002).

• Sudan - in January 2002 the Russian and Sudanese governments signed an oil -for -arms deal worth $200 million. Und er this agreement, in return for oilfield development rights, Russia began aiding the Sudanese government in establishing factories to manufacture and sell Russian Tu - 72 tanks (Stratfor.com 2002). In May 2002 new orders were agreed worth between $200 -300 m illion under which Russian Mi -24 and Mi -17 helicopters and several MiG -29 aircraft would be supplied to the Sudanese government as part of a new military -technical cooperation agreement (Financial Times Global News Wire 2002). Russian supplied Government helicopters have been used in attacks on rebels and civilians in West Darfur.

• Angola - in 1998 the Russian Defence Minister visited Angola to initiate a new five -year rearmament programme (BBC News 2004). The agreement reached provided long -term Russian assistance in the modernisation and maintenance of Angola’s armed forces. It also created the opportunity for a future agreement whereby Angolan/Russian centres would be established to service Russian made weapons in other African states (Amnesty

This report represents the views of the authors and not those of the UK 13 Gover nment Internati onal 2003). Russia continued to export arms to Angola throughout 2000 and 2001. This was at a time when hundreds of thousands of Angolan civilians were killed or displaced in the war against UNITA. In 2000, attack helicopters were exported. In 2001, export s included Su -24 fighter - bombers, MI -23 fighters, T -72 tanks and grenade launchers (Ibid).

United Kingdom

The following UK licence decisions potentially give cause for concern.

• Angola, Cameroon, Cote D’Ivoire, Namibia, Nigeria and Senegal - an open l icence (which typically allows for repeated and unlimited deliveries) was issued in 2002 for components for a wide range of offensive naval equipment. This includes components for combat aircraft and helicopters and components for machine guns, mortars and artillery to these and other countries .

• Angola - in 2002, 22 Single Individual Export Licences (SIELs) to a value of £14 million and 10 Open Individual Export Licences (OIELs) for exports including armoured all wheel drive vehicles, components for mach ine guns, components for combat aircraft and components for combat helicopters.

• Nigeria - from 2000 to 2002, 78 SIELs to a value of £21.5 million and 24 OIELs were issued, including armoured all wheel drive vehicles, small arms ammunition, components for machine guns, components for combat aircraft and components for combat helicopters.

• Ghana - open licences were issued in 2000, 2001 and 2002 for export of components for combat aircraft and for combat helicopters.

• Kenya - licences were issued for sales o f small arms and ammunition during 2000, 2001 and 2002.

A more comprehensive summary of licences granted for UK arms exports to Sub -Saharan states is provided in Appendix 1.

United States

The latest US Annual Report (2002) raises concerns over the types of military equipment exported in direct commercial sales (DCS) and foreign military sales (FMS) to African CRI ix . These are countries where ‘serious abuses’ are taking place by government and security forces, according to the US State Department x.

• Kenya – received pistol, revolvers, ammunition and aircraft spare parts to the value of $28,342.

• Ghana – received 65 pistols and revolvers and bomb detonation equipment to the value of $103,027.

This report represents the views of the authors and not those of the UK 14 Gover nment • Nigeria – received missile launchers, aircraft and ship componen ts to the value of $4,489,050.

In addition, President Bush’s welcome to those countries ‘willing to co -operate against terrorism’ has led to an increase in arms exports and military aid and training to African CRI (Boucher 2001). For example:

• Kenya - in 2002, a supplementary Foreign Military Financing (FMF) package of as much as $15 million was granted to help ‘protect Kenya’s borders and coasts from terrorists’ xi (USAID 2003). In the 10 years prior to 11 September 2001, Kenya received only $1m in FMF.

• Dj ibouti - described in the Congressional Budget 2004 as ‘an African front -line state in the war on terrorism, standing shoulder to shoulder with the United States’ (USAID 2004). Djibouti received $1.5m FMF in 2002. This is the same amount it received in to tal over the 10 years prior to 11 September 2001.

Eastern Europe and the CIS

The countries of Eastern Europe and the CIS are large -scale suppliers of weapons to African CRI. These weapons are often being transferred by brokers and transported via ne ighbouring countries. For example:

• Romania - 20,000 AK -47s were shipped from Romania to Uganda from where they allegedly reached rebel forces in the DRC (Salopek 2001).

• Bulgaria - exported T -62 and T -55M battle tanks to Uganda, Angola and Ethiopia in 1 998 -1999 (Salopek 2001). UN investigators documented evidence of ‘large supplies of Bulgarian weapons, mainly small arms, to UNITA forces between 1996 and 1998’ (Salopek 2001; SEESAC 2004).

• Belarus - exported BMP -1 armed combat vehicles and Mi -24 attack helicopters to Cote d’Ivoire and artillery systems to Sudan in 2002 (Salopek 2001; UN Register of Conventional Arms 2002).

• Ukraine - identified by the UN as a source of arms supplied via intermediaries to embargoed rebels in Sierra Leone and to the embarg oed government of Liberia (HRW 2002b).

Since the late 1990s, many EU candidate countries such as Bulgaria and Poland have pledged to help combat the illicit arms trade and some progress has been made in strengthening export control legislation. However, t here are serious doubts as to how well these newly established laws and regulations are being enforced. Overall, it appears that suspect sales from the region are decreasing. Nevertheless, some states, such as Belarus and the Ukraine, have still to introdu ce stricter controls and remain key suppliers of arms to African CRI.

This report represents the views of the authors and not those of the UK 15 Gover nment Moldova is a particular concern because of the enormously insecure arsenal of arms in the TransDniestra region. This region has been described as ‘a haven for organised crime and a vi rtual arms dump, containing within its boundaries large quantities of mines, small arms and ammunition’ (Salopek 2001 xii ) The types of weapons available reportedly include 50,000 tons of ageing artillery shells, mines and rockets in fortified bunkers. The se paratist regime in Tiraspol supposedly has the capability to manufacture and export small arms, including assault rifles, machine guns and Grad multiple -rocket launchers (Salopek 2001; International Crisis Group 2003).

China

Examples of Chinese exports of concern to African CRI include:

• Cote d’Ivoire - in 2002, Moise Lida Kouassi, Minister for Defence and Civil Protection, visited China to purchase light weapons, ammunition, explosives and heavy weaponry (Salopek 2001).

• Sub -Saharan Africa – between 19 99 and 2002, China delivered 70 tanks and self -propelled guns, 13 minor surface combatants and 10 helicopters to the region (Ibid.).

Regional Sources

Weapons flows to African CRI are also coming from within the region, recycled from previous conflicts, supplied by other governments or rebel groups, or produced within the region/country itself. Some of these examples are set out below.

Diversion of transfers from original recipient

One source of arms to African CRI is the diversion or quick re -sale of arms imported by one African country and then ‘re -supplied’ to another. For example, arms from Iran diverted via Guinea to Liberian rebels. These mortar rounds were originally procured from Iran by the Guinean Ministry of Defence in June 2003 but were sw iftly transferred to Liberians United for Reconciliation and Democracy (LURD) rebels in Liberia and used in a subsequent attack on the Liberian capital in July 2003 (HRW 2003).

Government supply of arms to other governments and non -state actors

Another regional source of arms is from governments to other governments and rebel groups. Typically, these transfers are of existing government stocks, originally acquired externally or produced or refurbished domestically. On one definition of arms manufacturi ng capacity, there are 15 African countries with the capacity to produce arms and or ammunition (GIIS 2002). These are Algeria, Burkina Faso, Cameroon, Egypt, Ethiopia, Guinea, Kenya, Libya, Morocco, Nigeria, South Africa, Sudan, Tanzania, Uganda and Zimba bwe.

This report represents the views of the authors and not those of the UK 16 Gover nment Craft production

However, the figures above exclude illicit craft production of small arms. Craft production occurs in small private workshops or homes without any legal authorisation. It tends to be crude and small scale (e.g. single weapons or small batches). This takes place in many African countries and seems to be increasing as a source of proliferation within the region. Ghana is an example of a country where illicit craft production has become a crucial source of revenue for various local c ommunities and a significant source of arms to groups in other countries in the region (Ibid.).

‘Demand for Ghanaian guns stretches across West Africa. Locally manufactured guns are trafficked through illicit channels into Benin, Burkina Faso, Cote d’Ivo ire, Nigeria and Togo. Presently, it is impossible to determine whether the countries are the end -station for exports or serve only as transit points for re -exportation. The volume of trade between Ghana and Nigeria and the role of brokers in this commerce have concerned both governments enough to sign a Memorandum of Understanding in August 1999 to exchange information on illicit trafficking of small arms, including craft produced weapons ’ (GIIS 2003: 29)

Government supply to non state actors

To desta bilise foreign enemies, weaken foreign -based opponents and advance their economic interests, a number of African states have provided military support to foreign non -state actors. Examples include:

• The supply of arms by the Ugandan government to the Suda n People’s Liberation Army (IISS 2004).

• Transfers from the Sudanese government in Khartoum to the Ugandan rebel movement, the Lord’s Resistance Army (Refugee Law Project 2004:18).

• The supply of weapons by the Ethiopian government to Somali factions (BB C Worldwide Monitoring 2002).

• The Liberian government’s support to the RUF rebels in Sierra Leone (UN Panel on Sierra Leone 2000:para 193).

• Ugandan and Rwandan support to Congolese rebel groups, the MLC, RCD -Goma and RCD -ML (UN Panel on DRC 2001:para 143).

Government arming of domestic militia groups

In many cases, African governments supply arms to civilians to form an additional body of armed security personnel. This may be to meet particular security challenges or further the government’s securit y objectives in

This report represents the views of the authors and not those of the UK 17 Gover nment circumstances where there may be a reluctance to use official state security forces for this purpose. Concerns about this practice stem from the absence of control exerted over these groups once armed, their poor level of training, weak ove rsight and record keeping over the arms themselves, and the make - up of the groups that receive the arms. These groups often mirror ethnic/tribal divisions, and transferring arms to them may exacerbate ethnic/tribal tensions (Bishop Ochola, cited in Kacoke Madit E -newsletter 48 2004).

Failings in these areas create the problem of armed, frequently unaccountable, civilians. The potential for these militia members to then become involved in armed crime or conflict with rivals is very real. For example:

• In U ganda, the arming of militias, or what are known as Local Defence Units (LDUs), has been taking place for many years and has recently received renewed attention following the arming of several thousand LDU members as a counter measure to the upsurge and sp read of violence perpetrated by the rebel Lord’s Resistance Army, in the north and east of the country (Mkutu 2003; Kacoke Madit E -newsletter 48 2004; IRIN 2004)

Illicit trafficking of existing stocks by non state actors and civilians

Another source of a rms in African CRI is the transfer of arms and ammunition from one rebel group to another. This local level trade is sometimes referred to as the ant trade. However, in total it is responsible for the transfer of considerable amounts of arms. For example:

• Trafficking across the Uganda -Kenya border region involves a number of different actors. This includes small traders, businessmen, warlords and renegade security officials, as well as brokers (Mkutu 2003:24 -25). The motive for the sale of arms may be poli tical but is frequently economic and the trade is sometimes linked with the trafficking of other illicit items such as drugs and natural resources, like diamonds and timber.

• Somalia - The UN Panel Report into breaches of the UN arms embargo highlights a n umber of different supply routes for arms into the country (UN Panel on Somalia 2003:para 54). Arms and ammunition, normally in relatively small quantities, are trafficked in deals between brokers and local traders with arms sourced from neighbouring state s such as Ethiopia and Kenya, and most commonly from Yemen (GIIS 2003:188).

Ammunition

Given the vast quantities of arms already in circulation in Africa and their durability, the demand for arms is often less than the demand for ammunition. The product ion of ammunition is particularly significant therefore and an often overlooked problem. However, production is frequently shrouded in secrecy

This report represents the views of the authors and not those of the UK 18 Gover nment and there is little evidence of the manner in which transactions are conducted, to whom arms and ammunition produ ced in these factories are supplied and the level of marking and record keeping that occurs. The Ugandan Government has recently announced that the state -owned Nakasongola ammunition factory is now selling ammunition and refurbished arms commercially in Ea st Africa (New Vision 9/2003).

What are the factors facilitating the transfer of arms to African CRI?

The role of the arms broker and trafficker

Much of the weaponry available in African CRI was transferred there by arms brokers and traffickers. Many brokered arms deals are legal, particularly since brokers act within the letter of the law and are adept at exploiting jurisdictional loopholes. As the Chairman of one UN Panel stated, arms brokers are able to operate

‘through impressive networks in man y countries, often without respect for the law of the land. The people and companies involved in these kinds of activities are instrumental in facilitating war and armed conflict’ (UN Security Council 2003).

Some of the brokers and agents involved in arms trafficking in Africa CRI are G8 nationals or operate from G8 countries like the UK, France, Germany and Russia. For example, the Russian arms dealer Victor Bout is accused by the UN of having supplied contraband weapons to rebel movements in Angola, Sier ra Leone and to the regime of Charles Taylor in Liberia. UN reports also suggest that Bout and his networks have been active in Cameroon, Central African Republic, Democratic Republic of Congo, Equatorial Guinea, Kenya, Libya, Congo -Brazzaville, Rwanda, S outh Africa, Sudan, Swaziland and Uganda.

Arms brokers tend to focus predominantly on small arms and light weapons. However, they also trade in heavier weaponry. According to a report by the UN Panel of Experts on the Illegal Exploitation of Natural Res ources in the DRC, John Bredenkamp, a UK based businessman, is an active investor in a brokering company called Aviation Consultancy Services, in which capacity

‘he has offered to mediate sales of British Aerospace military equipment to the DRC. Mr Bred enkamp’s representatives claimed that his companies observed EU sanctions on Zimbabwe, but British Aerospace spare parts for ZDF (Zimbabwe Defence Forces) Hawk jets were supplied in 2002 in breach of those sanctions’ (UN Panel on DRC 2002:para 56)

The tr ansport of arms

The means by which arms are shipped from the source of supply to the final destination are multiple and complex. They involve numerous actors and

This report represents the views of the authors and not those of the UK 19 Gover nment several layers of fraud. They will often involve the manipulation of weaknesses and loophol es in the regulation of international transport, as well as loopholes in national jurisdiction.

Weapons can be transported by air, sea or across land. However, as the UN notes

‘air transportation is the preference of sanctions busters…in most cases, th e planes that were used had in one way or another been subject to document fraud, forgery of flight plans and other irregularities’ (UN Panel on Liberia 2001).

The following examples illustrate some of the wider factors that facilitate the transport of ar ms to African CRI, including the abuse of aircraft registration processes and the use of false end user certificates (EUCs).

The abuse of aircraft registration processes

In its investigation into the conflict in Liberia and the violation of the arms em bargo, the UN Panel found clear evidence of fraudulent aircraft registration in Liberia, as well as in the neighbouring Central African Republic. In the case of forged EUCs, many of these had Guinean armed forces as the declared end -users (Ibid:38). The Pa nel described illegally registered aircraft as an ‘endemic problem’ (Ibid:10). The most common method consists of changing the aircraft registration number. The very complexity of the processes of registration, leasing and chartering of aircraft creates am ple opportunities for fraudulent activity. An aircraft can be registered in one country, leased and chartered elsewhere, with the crews hired in another, while the plane is serviced in another and the main operating offices of the company owning the aircra ft are based in still another country.

“Flags of Convenience” – or open registries – are used for commercial and tax reasons xiii . Arms brokers and transportation agents are able to exploit “flags of convenience” because aircraft can be registered under a for eign flag. Since there are no stipulations as to whether aircraft should be based in the country where there are registered, in many cases, the country of registration may be completely unaware – or choose not to know - of the operations of aircraft that use its name (see Appendix 5). “Flags of convenience” are a good example of what Ronan Palan calls ‘the commercialisation of sovereignty’ (Palan 2003).

For many years, Liberia was a “flag of convenience” for the fringe air cargo industry due to its lax l icence and tax laws. UNSC resolution 1343 (2001) grounded all Liberian registered aircraft. However, following President Taylor’s departure, some of the air -cargo companies that are now re - registering were previously involved in sanctions busting.

The a ir transportation route also played a significant role in sanctions busting in Angola. It was described as ‘a lifeline for supplies to UNITA’ as well as the means by which diamonds could be smuggled through to the international

This report represents the views of the authors and not those of the UK 20 Gover nment markets, financing arms pur chases and international travel by UNITA officials (UN Panel on Angola 2000:para 163 -165).

False End User Certificates (EUCs)

False End User Certificates are another means by which arms brokers and traffickers arrange for arms to be transferred illicit ly to African CRI. An EUC is supposed to guarantee the final destination of weapons; however it can be easily forged or falsified. In the case of Liberia, forged EUCs identifying neighbouring countries such as Guinea and Cote d’Ivoire were frequently used. The UN Panel of Experts investigating sanctions busting in Liberia, revealed how a Guinean end -user certificate that the Guinean Government claimed was a fake had been circulating among individuals in Eastern Europe. The EUC attached in Appendix 6 names a UK company, Molyneaux Ltd, based in West Sussex, as the broker of arms for one particular shipment xiv .

EUCs can be issued by governments, corrupt officials or criminals complicit in the deal on behalf of the actual recipient, particularly in those countri es that act as transit or entry points for the weapons. For example, in the case of arms shipments to UNITA during the arms embargo, Zaire (now DRC) was the primary source for EUCs.

The lack of scrutiny of EUCs has enabled brokers to regularly use these a s a method for illegal shipments. A reoccurring problem is that many states supplying arms are providing EUCs to brokers and middlemen rather than the officials of the recipient state. The lack of a standardised approach to issuing and verifying EUCs also makes them easier to forge. A UN Panel Report cites the example of an EUC being issued in Burkina Faso, authorising a brokering company Engineering and Technical Company LTD , registered in Gibraltar, to obtain arms (UN Panel on Liberia 2002:24).

In some i nstances, governments inadvertently grant export licences on the basis of a fraudulent EUC. This usually happens because the exporting state has not properly examined the authenticity of these documents. But it can also allow the exporting state to conveni ently claim no knowledge of wrongdoing. Successive UN Expert Panels have recommended the establishment of an international mechanism for harmonising and verifying EUCs (UN Panel on Liberia 2003a:para 5).

Arms brokers and transportation agents have also become expert at falsifying other forms of documentation in order to avoid detection. Other common techniques of deception include filing multiple flight plans to aviation authorities in different countries, using another aircraft’s call sign, or falsely declaring the goods on the cargo as something relatively innocuous such as drilling equipment.

The role of aircraft insurance

Aircraft insurance is a pre -requisite for flight permission. This potentially provides another point of control. However, it se ems that companies and

This report represents the views of the authors and not those of the UK 21 Gover nment individuals who own or lease aircraft have little problem obtaining flight insurance. There is some evidence to suggest that Russian planes and insurance companies are frequently used in this regard as they are willing to grant cheap ‘no questions asked’ insurance on the understanding that there will be no payouts on insurance claims.

Complex corporate structures

The illicit transfer of arms to African CRI is also facilitated by the complexity of corporate structures, with different systems for aircraft registration and insurance, pilot insurance, and the insurance of the cargo, the operating agent and the aircraft owner. These can all be registered in different countries (UN Panel on Liberia 2003:17). This makes it incredibly diffi cult to discover the actual owners of some companies and who is responsible for specific arms deals. Many of the countries in which these companies are registered – often offshore havens like the British Virgin Islands - have strict privacy but weak laund ering laws. Arms brokers can easily set up and dissolve a company in secrecy. Companies can also be established in relative secrecy with ‘nominee’ directors who know little about the company they are directing.

One example, cited in the UN Panel Report o n Sierra Leone, involved a contract between a Gibraltar -based company representing the Ministry of Defence of Burkina Faso and the Ukrainian state -owned company Ukrspetsexport. An aircraft of the British company, Air Foyle, acting as an agent for the Ukrai nian carrier Antonov Design Bureau, shipped the cargo, under a contract with the Gibraltar -based company, Chartered Engineering and Technical Services. The weapons in questions were flown aboard a BAC - 111 owned by Leonid Minin an Israeli arms broker of Ukr ainian origin. The aircraft bore Cayman registration (a flag of convenience country) and was operated by a company named LIMAD, registered in Monaco – another off - shore haven (UN Panel on Sierra Leone 2000:para 203 -208).

Transfers of intellectual property

The globalisation of the defence industry has facilitated the transfer of arms to African CRI. Defence companies have undergone substantial restructuring and rationalisation, both within national borders and across t hem. Diminished demand following the end of the Cold War has led to a buyer’s market. This has paradoxically led to a proliferation of points of supply.

Under WTO rules, defence sales are exempt from the general prohibition on offsets, and buyers have been quick to insist that, as a condition of sale, defence production capacity be moved to the buying country. Exporting companies, particularly from the G8 and the EU, have set up joint -ventures with, or taken stakes in, local companies and established l icenced production facilities in many recipient states. In many cases, these arrangements are to the advantage of the licensing or ‘parent’ company, in that they may lower production costs and/or shift production into a jurisdiction with weaker regulatio n, including weaker export controls. These developments have complicated efforts at non -proliferation, with most states failing to institute

This report represents the views of the authors and not those of the UK 22 Gover nment effective control over the transfer of intellectual property that such arrangements involve.

Small arms have pr oved a particular concern. As a rule, G8 countries are not willing to transfer the most advanced technology. However, many small arms and light weapons technologies do not fall into this category and are therefore particularly prone to willing prolifera tion by manufacturers. Russia is now expressing its concern - for example within the context of the Wassenaar Arrangement - that the production of the AK -47 is now completely beyond its control. Versions of the AK -47 are being produced without Russian pe rmission in many countries in Eastern Europe and elsewhere.

Germany and the UK have both been implicated in the proliferation of Heckler & Koch small arms via licensed production facilities in Pakistan and Turkey (Channel 4, 9/12/1999). In April 2004, i t was announced by Malaysian Defence Minister, Najib Razak, that the Austrian company, Steyr Mannlicher, ‘will transfer fully the license to manufacture and export Steyr rifles and pistols in the global market to Malaysia’. The Minister added that the Ste yr equipment could be promoted in the Middle East and Africa and that ‘considering the size of the market, it could be a potential revenue earner for the country’ (AFP 12 April 2004). While it is not yet clear what conditions might be attached to the agree ment, the understanding of Mr Razak is clearly that Malaysia will be free to sell downstream as it sees fit.

What are the factors facilitating the transfer of weapons within Africa?

Poor control of state -owned weapons

Poor management and control of st ate stockpiles of arms are a major cause of weapons entering the illicit market in African CRI. Key issues here relate to the management of existing stocks, and policies towards the handling of surplus, obsolete and collected arms (for instance relating t o their storage and disposal) and record keeping procedures.

Thefts from government stockpiles

In conditions of poor security, criminals and rebel groups can simply steal arms from government stockpiles. According to the UN Panel Report on Angola, a si gnificant source of arms for UNITA was captured weapons from Angolan government forces (UN Panel on Angola 2000:para 18). The Ugandan rebel group, the Lord’s Resistance Army, has also acquired weapons through theft from government forces (Jane’s Sentinel S ecurity Assessment 2003:770).

Misuse of state -owned arms by state officials

Members of official state security forces are sometimes a source of arms and ammunition to the illicit market or directly use their weapons to commit criminal acts. In Uganda, t he army is identified as a source of arms to the This report represents the views of the authors and not those of the UK 23 Gover nment Karamojong pastoralist groups, while in the Mano River Region underpaid security officials are also reported to be selling arms and ammunition (Mkutu 2003:24,32; UN Panel on Liberia 2002a:para 61).

Lack of capacity and poor co -operation between customs and law enforcement agencies

The capacity of police and customs officials to enforce controls over arms transfers is seriously limited in many African CRI. Often the government is unable to provide the ne cessary resources to recruit, train and pay for adequate numbers of police, customs and security personnel. Corruption can easily take hold in this environment. For example, in Kenya there has been a history of endemic corruption among those institutions that manage border controls, as a result of which the Kenya Ports Authority Corporate Corruption Prevention Committee has recently been strengthened ( http://www.kenya - ports.com/corruption.htm , 5/5/20 04).

Given the vast and porous borders of many African CRI and the regional nature of the arms trade, cross -border co -operation between law enforcement agencies is vital. However, there is often a lack of trust between neighbouring security forces.

Dis armament, Demobilisation and Reintegration (DDR) Programmes

When armed conflicts end, surplus arms are often transferred to government forces or rebel groups in other countries in the region, rather than being destroyed. The failure of DDR programmes has been a major contributory cause therefore of the ready availability of arms across the African continent. In Angola one of the primary factors undermining the 1992 peace process and speeding the return to war was the failure to institute an effective DDR programme (UNIDIR 1996:84 -92). Similarly, the end of the Mozambique civil war and the absence of a comprehensive DDR programme in the country saw vast quantities of arms flood into the Southern African illicit arms market fuelling instability and crime in n eighbouring states (Ibid.).

Weak legislation and lack of clarity over what is licit and illicit

Many of the examples of arms transfers within and between African CRI that have been highlighted in this report could be characterised as illegal in some for m. However this is not always the case. The absence of effective and comprehensive legal controls means that activities that would generally be seen to be nefarious, and might readily be assumed to be illicit, may not in fact be covered by any existing leg al controls. The reality in the vast majority of African CRI is that there are numerous legal loopholes relating to the control of arms (Flew and Urquhart 2004; Cross et al 2003). For example, in the development of the Tanzania National Action Plan on arms management and disarmament, it was discovered that Tanzania had longstanding free - trade agreements with many Central African countries that specifically prohibited the inspection of cargo in transit. This facilitated the use of Tanzania as a transit poin t for weapons to the conflicts in the Great Lakes.

This report represents the views of the authors and not those of the UK 24 Gover nment The weakness of existing legal control regimes, the poor enforcement of these controls, and inadequate record keeping systems mean that it is often difficult to determine which weapons and transfers are licit and which are illicit.

What are the political economy constraints on the UK being more restrictive on arms export issues?

The economics of the arms trade

The traditional argument used against a more restrictive approach to arms exports is that it will lead to a loss of jobs in the exporting country and damage to its economy. But this ‘conventional wisdom’ has been very seriously challenged in recent years. Adair Turner, former Director General of the CBI, has been an outspoken critic, arguing tha t this approach is based on a mercantilist understanding of economics that has been broadly discredited in almost all other areas of economic activity (Turner 2001). The traditional argument has also been challenged in a major report published in November 2001: The Economics Costs and Benefits of UK Defence Exports (Chalmers et al 2001) . The report was authored by Neil Davies and Chris Wilkinson, senior Ministry of Defence (MoD) economists, as well as two independent academics, Malcolm Chalmers and Keith Ha rtley.

The report was published by the York University Centre for Defence Studies (and has been described subsequently as the York Report). An updated version of this report was published in Fiscal Studies, the journal of the Institute for Fiscal Studie s (Chalmers et al 2002).

The York Report estimated the economic effect of a 50 per cent reduction in arms exports. It concluded that a halving of defence exports from the average 1998/99 level would result in the loss of nearly 49,000 jobs in the defence sector, many of which would be at relatively high wages. However this would be offset by the creation over a five -year period of around 67,000 new jobs (at lower wages, on average) in non -defence employment, with most of these jobs created in the first tw o years (Ibid.).

The report illustrated the very limited scale of adjustment that might be required, ‘the estimated reduction in direct and indirect employment on defence exports would account for less than one fifth of one per cent of total UK employmen t in the baseline period’. This conclusion is further supported by examining trends in defence employment in the UK. The York report notes that employment supported by defence exports had already fallen by 100,000 from 1996 to 1999. According to the off icial UK Defence Statistics, average defence exports during 2000 and 2001 were almost 20 per cent lower than in 1998/99.

There has been no suggestion in mainstream economic debate in the UK that these reductions in employment and/or defence exports have had a significant macroeconomic impact. Neither does there appear to have been widespread

This report represents the views of the authors and not those of the UK 25 Gover nment concern over the particular jobs that have been lost, perhaps because those job losses have been relatively easily absorbed by the wider UK economy.

UK military exports to African CRI are a tiny proportion of UK total exports. Based on the 2002 UK Annual Report on Strategic Export Controls, the value of SIELs to African CRI was approximately 1.7 per cent of the value of all SIELs issued (HMSO 2002). Any economic adjustment that resulted from a more restrictive arms exports policy towards African CRI would be almost insignificant in the context of an economy the size of the UK’s. This would also be the case in other G8 countries, with the possible exception of Rus sia. For Russia and the states of the former Soviet Union there may be a more significant process of economic adjustment that would result from tighter arms export controls, not least given the weakness of many of these economies.

Strategic influence

Another apparent constraint on the adoption of a more restrictive approach to arms exports by the UK and other G8 countries is the belief that they give the supplying country real strategic influence over the countries to which they sell. The nature of t hat influence is rarely spelled out in detail, but it is generally assumed to involve wider economic and commercial benefits and some sway over the internal and regional politics of the state concerned.

But the UK experience suggests that this argument is very overstated and that in some cases arms transfers have produced a boomerang effect (policies that rebound negatively and unpredictably on those who prosecute them). For example, military equipment sold to Iraq in the 1980s was used against British troops in the 1991 Gulf War. UK arms to Saudi Arabia have made the UK more reluctant to criticise the Saudi regime for its human rights violations and have given the UK no obvious influence over Saudi policy. Moreover, in Afghanistan, some of the arms sup plied to the Mujahideen by the UK and the US in the 1980s ended up with the Taliban and Al Qaeda.

There is another dimension to the argument about strategic influence that relates particularly to UK arms brokers and traffickers. It is sometimes claimed that some of these arms brokers and traffickers provide useful information to the UK intelligence services about the operation of terrorist networks or other assorted threats to the UK. This may partly explain the deep reluctance of the UK Government to ex tend full extra -territorial controls over arms brokers and traffickers. However, in the absence of more information about the type of information supplied, it is impossible to judge its importance. By contrast, the humanitarian costs of weak controls ove r arms brokers are well established (Mepham and Eavis 2002).

This report represents the views of the authors and not those of the UK 26 Gover nment 2. THE INTERNATIONAL PRIVATE SECTOR AND CRI

Does natural resource dependence fuel conflict and instability?

Over recent years, the relationship between international private sector activity and state weakness, failure and conflict has become a major research theme, as well as a growing priority for governments and international institutions. The most forward thinking companies that invest in and source from CRI are also beginning to take the se issues more seriously. Traditionally, violent conflict and instability is seen as a risk factor for companies which has to be computed into financial risk ratings in relation to investment decisions. Increasingly, however, companies are being asked to c onsider the reverse dynamic – their impacts on stability, conflict and human rights, as well as the environment.

A particular focus of attention – for governments, researchers and business - has been the apparent connection between conflict and depende nce on natural resources. Intra -state conflicts in countries like Angola, Cambodia, Liberia, Sierra Leone and the DRC suggested that an important linkage existed. Commentators and politicians also seized on the theme, talking of ‘diamond wars’ and ‘resou rce conflicts’. Work by the World Bank, the International Peace Academy, FAFO and International Alert, amongst many others, has sought to assess, quantify and define the nature of this connection and to outline an appropriate policy response. NGO campaign s, for example those of Global Witness around “conflict diamonds”, the logging industry and the role of oil investment, have also served to push these issues into the public spotlight.

The World Bank’s research is striking and in some quarters controvers ial. It indicates that developing countries face substantially higher risks of violent conflict, instability and poor governance if they are highly dependent on primary commodities. The Bank’s findings suggest that the presence of abundant natural primary commodities, especially in low income countries, exacerbates the risks of instability and conflict and, if conflict does break out, tends to prolong it and makes it harder to resolve.

‘Close to 50 armed conflicts active in 2001 had a strong link to nat ural resource exploitation, in which either licit or illicit exploitation helped to trigger, intensify, or sustain a violent conflict. In other countries with low -intensity conflict or collapsed states, corrupt officials and their opponents, often involve d with organised crime and terrorist networks, siphoned off revenues from natural resources. In addition to sustaining conflict and undermining governance, resource exploitation has contributed to famines, the spread of diseases, population displacement, and serious environmental damage. Abundant natural resources, which should be a blessing for a low -income country, in most cases make poor people poorer’ (Bannon and Collier 2003).

This report represents the views of the authors and not those of the UK 27 Gover nment Fig. 2 - Natural resources and conflict risk in

30% 30 24% 25 20 17% Risk of Civil 15 War 11% 10 (percent) 6% 5 0 5 10 15 20 25 Primary commodity exports as a share of GDP

(Collier and Bannon 2003:3)

The World Bank’s work on this issue ha s often been characterised as explaining conflict by reference to “greed” rather than “grievance”. For example, Paul Collier, a key figure in the Bank’s thinking on this issue, has argued that there is no statistical link between objective grievances (for example, inequality) and the onset of conflict. As Collier puts it

‘ethnic tensions and ancient political feuds are not starting civil wars around the world…economic forces such as entrenched poverty and the trade in natural resources are the true culpr its.’ (cited in Ganeson and Vines, 2004: 302)

Collier and his team offer a rational actor account of conflict that focuses on the motives of rebel actors, arguing that greed or loot -seeking rather than justice -seeking are the key factor in the onset of vi olent rebellion. According to this thesis, war is pursued to capture resources more than resources are pursued to sustain war. In their latest papers, however, Collier’s team have offered a weaker formulation of the thesis, one that places more emphasis o n the opportunity for organised violence, regardless of motivation (Collier and Hoeffler 2001).

Despite the importance of the World Bank’s work, it has its critics. The International Peace Academy (IPA), for example, has provided an important critique of some aspects of the earlier work of the Bank on natural resources, conflict and instability.

This report represents the views of the authors and not those of the UK 28 Gover nment ‘While there is growing agreement that economic factors matter to conflict dynamics, there is little consensus as to how they matter, how much they matter, or in what ways. In part, this disagreement has stemmed from the loaded normative terms “greed” and “grievance”, the stark opposition in which they were presented, and a continued lack of clarity as to what variables these terms are meant to capture. While sta tistical methods are a useful way of identifying key variables across a class of cases, at best they generate broad correlations that illuminate only part of the picture’ (Ballantine and Sherman 2003).

The Bank’s work can also be criticised for giving to o much emphasis to the impact of resources on the behaviour of rebel groups and not enough attention to how government mismanagement of resources fuels conflict, human rights abuses, instability and poor governance.

There are three important conclusions to draw from these debates that are particularly relevant to this report. Firstly, we should focus on the behaviour of resource -rich governments (and how those resources are used or misused), as well as on rebel groups. Too often, government control of i mportant resources and the revenues that flow from them goes with endemic corruption, a culture of impunity, weak rule of law and inequitable distribution of public resources. Secondly, “the natural resource curse” is not destiny. Although poor countrie s that are heavily dependent on natural resources are at greater risk of conflict or state failure, this is not inevitable. Countries like Botswana, that have managed their natural resource wealth effectively, have been successful in avoiding conflict and in achieving considerable progress in development. Thirdly, while economic factors are relevant in many conflict situations, they are not the only relevant factor. Invariably they interact with socio -economic and political grievances, interethnic disputes and security dilemmas in triggering instability and state failure or the outbreak of warfare.

The important debate about the management of natural resources needs to be seen in this wider context, as only one component – albeit an important one - in th e avoidance of conflict and the promotion of more competent, accountable and peaceful states.

In what ways and to what extent can the behaviour of UK companies destabilise African CRI?

There are a number of ways in which the activities of UK companies a nd investors can impact negatively on the quality of governance or the prospects for stability and development in African CRI. These are set out in the chart below.

This report represents the views of the authors and not those of the UK 29 Gover nment

Fig. 3 - Destabilising activities of UK companies in CRI…

Leads to inequality, reduces the effectiveness of Corruption and public administration bribery of foreign Distorts public expenditure decisions, diverts officials urgently needed resources away from other sectors Undermines democratic accountability and the rule of law Financing of govts/opposition groups through Increased levels of arms purchasing revenue Sustains armed conflict/warring factions payments Undermines democratic financial accountability

Human rights Undermines personal security and international abuses by human rights norms private security Increases political and social unrest within the local guards employed population by UK companies Instability and weak May lead to resource tension and conflict governance Damages long -term economic sustainability Environmental Undermines efforts to ensure sustainable resource degradation management

UK/EU trade barriers can lock African CRI into dependenc e on primary commodities Likely to increase inequalities within and between Expl oitative different regions terms of trade Undermines observance of international labour standards

May exacerbate human rights abuses and armed conflict UK transfers of Reduces resources available for investment in arms and military health, education and other public services Thisequipment report represents the views of the authors and not those of the UK Gover nment 31 Fig. 4 - …A mapping of major UK/international policy responses

Voluntary measures promoted by companies Company CSR Strategies or industry associations Wolfsberg Principles on International Finance Ethical Trading Initiative

Voluntary initiatives Voluntary principles on security and human rights promoted by The OECD Guidelines on Multinational Enterprise governments or UN Global Compact international institutions

Public Private The Extractive Industries Transparency Initiative Partnerships

Kimberley Process Government based Financial Action Task Force regulation

Conditionality by Detailed conditions governing the use of aid governme nts or Threats to withdraw aid international financial institutions

Legally binding The OECD Convention on Combating Bribery of regulations at the Foreign Public Officials national and International Sanctions international level This report represents the views of the authors and not those of the UK Gover nment 32 What steps has the UK government taken to address these destabilising activities and with what degree of success?

The UK Government acknowledges that UK companies can act in ways that are damaging or destabilising for CRI in Africa and elsewhere, and it has supported a wide range of policy responses and initiatives to promote high corporate standards in these countries (some of these key initiatives are discussed below). These policy responses run along a spectrum: from purely voluntary initiatives to legally -binding regulations. They include:

• Voluntary measures promoted by companies and/or industry associations, for example companies’ corpo rate social responsibility (CSR) strategies, the Ethical Trading Initiative (ETI) and the Wolfsberg Principles on Finance.

• Voluntary initiatives promoted by governments or international institutions, in which public bodies see their role as a convenor or facilitator, for example the UN Global Compact, the OECD Guidelines on Multinational Enterprises, the Voluntary Principles on Security and Human Rights, Forest Law initiatives.

• Public/Private Partnerships (PPPs), in which governmental bodies play more act ive roles and have specific policy objectives with regard to companies, for example the Extractive Industries Transparency Initiative (EITI).

• Government -based regulation, with compliance measures that vary from voluntary to quasi -mandatory, often with mo nitoring mechanisms, for example the Kimberley Process, the Financial Action Taskforce (FATF), Arms Export Guidelines.

• Conditionality by governments or international financial institutions, for example detailed conditions governing the use of aid or threa ts to withdraw aid if certain policies are not adopted.

• Legally -binding regulations at the national and international level, for example UK law linked to the OECD Bribery Convention and sanctions authorised by the UN Security Council.

This typology of responses is based in part on work done by the Norwegian NGO FAFO (FAFO 2003)

The Wolfsberg Principles

In 2000, 11 international private banks , representing around one third of the world’s private banking funds and supported by Transparency International, drew up the Wolfsberg Principles. These principles were initiated in response

This report represents the views of the authors and not those of the UK 33 Gover nment to accusations of money laundering. They commit the banks to a common global standard for their private banking operations, including customer ‘due diligence’, identifying the source of funds, monitoring, and voluntary reporting of potentially illegitimate transactions to responsible authorities.

Banks are required to establish an ‘independent department responsible for the prevention of money laundering’. Assets can be blocked subject to local laws and regulations. Other banks have expressed an interest in committing to the principles, with reputational concerns p roviding a strong incentive for compliance.

The Ethical Trading Initiative (ETI)

The ETI is an alliance of mainly retail and consumer goods companies, trade unions and NGOs operating in the UK. Established in 1998, the ETI’s aim is to achieve improvem ents in working conditions in international supply chains through the application of an ETI Base Code grounded in ILO core labour standards. The combined annual turnover of the ETI amounts to over £100 billion and is expected to rise significantly as mor e large UK companies sign up to join. The ETI’s approach is one of change through dialogue: ETI members visit their suppliers, identify conditions that do not meet the ETI Code and then plan improvements in agreement with these suppliers. Many ETI compa nies are becoming progressively more accountable for their treatment of workers along their international supply chains.

However, the international supply chains of many other UK companies remain inconsistent with a strong commitment to human rights and core labour standards. An Oxfam report published in 2004, Trading Away Our Rights: Women working in global supply chains , based on detailed interviews with women workers in 12 developing countries, exposes the costs of industrialised companies’ demands fo r faster, more flexible and cheaper production. As the report notes,

‘The benefits of flexibility for companies at the top of global supply chains have come at the cost of precarious employment for those at the bottom. The pressures of retailers’ and br and companies’ own supply chain purchasing practices is undermining the very labour standards that they claim to support’ (Oxfam 2004).

The UN Global Compact

The most high profile new initiative of recent years is the UN Global Compact, established at t he instigation of the UN Secretary -General in 1999. The Compact brings together the private sector and non -governmental organisations (NGOs) with UN member states and UN agencies. It is based on nine core principles covering human rights, labour standard s and the environment. Companies that sign up to the Compact are required to ensure, first, that they support and respect human rights within their direct sphere of influence and, second, that they are not themselves complicit in human rights abuses commit ted by others.

This report represents the views of the authors and not those of the UK 34 Gover nment While the Compact has played a role in drawing attention to the responsibilities of the private sector in relation to human rights, labour standards and the environment, it is not yet having any real impact in influencing and changing corp orate policies on the ground. There are no conditions of membership or criteria that companies must meet before they are permitted to become a member of the Compact. And there is no system for dealing with complaints made against specific companies.

On 2 4 January 2004, at the World Economic Forum in Davos, the UN Secretary -General announced his intention to hold a Global Compact Summit in New York in June 2004. This Summit will be an important opportunity for considering how to strengthen the Global Compa ct.

The OECD Guidelines on Multinational Enterprises

The longest standing initiative for promoting high corporate standards is the OECD Guidelines on Multinational Enterprises. First adopted in 1976, the Guidelines set out a comprehensive list of guidel ines for good corporate behaviour, including on human rights and labour standards. The latest revision of the Guidelines began in November 1998 and concluded with the adoption of a revised text by the OECD Ministerial Meeting in June 2000. The review was triggered, to some extent, by growing NGO and trade union opposition to the ill -fated Multilateral Agreement on Investment (MAI), and the view that this would strengthen investor rights without any commensurate investor responsibilities.

Yet this review has not served to adequately strengthen the Guidelines and many of its mechanisms remain weak. For example, the OECD Guidelines contain a mechanism (reporting through national contact points, NCPs) with the intended purpose that signatory governments shoul d respond to concerns raised about specific companies. But this mechanism is weak and relatively ineffective.

In October 2002, the UN Expert Panel on the Illegal Exploitation of the Natural Resources of the Democratic Republic of Congo named over 50 OE CD companies as being in breach of the OECD guidelines in its report to the UN Security Council. This list included 4 UK companies and dossiers on them were forwarded to the NCP in the UK. However, the UK Government declared that the UN had supplied insuf ficient and inadequate material about the companies’ alleged malpractice, and that proper investigation into these claims was therefore not possible.

‘Although the OECD Guidelines have helped focus attention on what home governments can do – instead of l oading all the burden of measures onto host governments – there remains a disconnect between member states’ commitment to international conflict resolution and the commitment to enforcing the OECD Guidelines. This lack of commitment is reflected in the va rying performance of the NCPs, and

This report represents the views of the authors and not those of the UK 35 Gover nment the indifference shown by some governments towards companies that fail to respond to allegations of non -observance (FAFO 2003).

Voluntary principles on security and human rights

One of the most serious allegations tha t can be made against a company is its complicity in human rights abuses committed by security forces employed to protect its property. To address this issue, the UK and US Governments jointly launched the Voluntary Principles on Security and Human Rights in Zones of Conflict in 2000.

The Principles focused on the Extractive Industries and aimed to provide guidance for companies that invest in difficult policy environments. Since the principles were agreed, many of the companies involved in the initiative have sought to apply these principles in particular countries and have adopted human rights training programmes for their staff. Although only voluntary, their development demonstrates how acceptance of the universality of human rights and the responsibi lity of different stakeholders to co -operate in assuring these rights has widened and evolved.

Forest Law Reform and enforcement processes

The forestry industry is a major global sector: gross production accounted for $160 billion worldwide in 1998 and this was projected to rise to $299 billion by 2020 (Toyne 2004). The problems associated with forest law are particularly acute in some African CRI. Timber producing CRI often have high levels of foreign debt, poor governance, high levels of poverty and u nsustainable systems of forest management. These factors contribute to, and are reinforced by, the illegal trade in timber. At the same time the G8 countries (along with China) currently import two thirds of the timber that is traded globally each year. Significant responsibility for tackling illegal logging should rest therefore with those that profit by purchasing or trading in illegal timber, and not just with producing countries.

In recent years there have been a number of initiatives taken to comba t the illegal extraction and trade in timber, but these have had limited impact. There are some voluntary schemes that track the production and movement of timber but there is poor use and global coverage of them – in Western Europe, for example, certified wood products account for just 5 per cent of the market (Brack et al 2002:18).

The UK Government announced its public timber procurement policy in 2000, stating that the UK Government would actively seek to buy from sustainable and legal sources. But i n 2002 it was criticised by the House of Commons Environmental Audit Committee for its alleged lack of progress on the issue (Toyne 2004). It is also unclear to what extent companies are actually taking notice of the UK Timber Trade’s Federation Code of Co nduct (Ibid.).

This report represents the views of the authors and not those of the UK 36 Gover nment The Extractive Industries Transparency Initiative

Another important recent development is the Extractive Industries Transparency Initiative (EITI), launched in September 2002 and co -ordinated by DFID. It is now a multi -stakeholder partne rship of oil and mining companies, northern and developing country governments and NGOs. It was established partly as a response to an international NGO campaign ‘Publish What You Pay’ which called for greater transparency over the revenue payments made to host developing country governments by international oil, mining and gas companies. The campaign has demonstrated that a lack of transparency damages human rights and development and is a source of corruption, conflict and instability in many countries.

Revenues from oil, mining and gas are very important in about 60 developing and transition countries, including many CRI, but in many of these countries neither the host government nor the multinational companies investing there disclose information about payments made to governments for access to resources. The aim of the EITI is to increase transparency over payments and revenues in the extractives sector.

While the best companies are engaging with it, there is no guarantee that all companies will do s o, particularly in those areas, such as African CRI, where greater transparency is needed most. The first EITI pilot was set up in Nigeria in February 2004, with future pilots planned in Ghana, Georgia and East Timor. It is important that governments, comp anies and NGOs support these pilots and use them to demonstrate the benefits of transparency over revenue payments. It is also extremely important that the UK Government press for greater transparency in the financial affairs of state -owned oil and mining companies, as well as in countries’ general budget processes. It could reinforce this by providing technical assistance and strengthening the capacity of civil society to interpret and use this newly available data.

The International Financial Institutio ns have an important role in relation to EITI. The IMF, for example, is currently playing a constructive role in respect of Liberia and Angola in pressing for greater budgetary transparency. The World Bank is also beginning to take this issue more serious ly but needs to do more. The Bank is involved in direct investment in the extractive sector through the International Finance Corporation (IFC), a Bank subsidiary which partners with private investors. However, an internal evaluation of the Bank’s perfo rmance in January 2003 highlighted serious weaknesses in current policy. It stated that:

‘Due to the links between poverty and poor governance…increased Extractive Industry investment is likely to lead to bad development outcomes for many if not most of the Bank’s clients’ The report went on to call for ‘a fundamental reorientation of the Bank’s work…away from prioritising the attraction of new investment and towards capacity building and technical assistance focused on strengthening the government’s ca pacity to maximise the benefits and minimise the risks

This report represents the views of the authors and not those of the UK 37 Gover nment of existing extractive industry investment’ (World Bank Operations Evaluation Department 2003:para 5.1)

The Kimberley Process

The Kimberley Process Certification Scheme is a specific initiative desi gned to stop the flow of ‘conflict diamonds’ onto the world market. It was launched in January 2003 following widespread concern about the trade in diamonds in exacerbating conflict and large -scale human rights abuses in countries such as Angola and Sierra Leone. The certification process requires governments and the diamond industry to implement import/export control regimes in the rough diamond trade, to prevent them fuelling war and human rights abuse. There are now over 60 members of the scheme.

Howev er, trade in conflict diamonds still exists and there is considerable scope for strengthening the process. At present, the Kimberley Process is a system of self -regulation, which aims to track diamonds from the point of mining to the point of sale. To da te, little has been done by the diamond industry to monitor and assess how self -regulation is working in practice (Global Witness 2004).

In October 2003, the European Commission, South Africa and other governments adopted a voluntary peer review mechani sm. This represents a step towards better monitoring. However, the effectiveness of such a system will depend on all countries being reviewed thoroughly at least every four years. There are currently no sanctions for those members that are found to be i n violation of the scheme.

Financial Action Task Force (FATF)

Over the last decade, a key focus of law enforcement officials and of anti - terrorist agencies has been to prevent the use of the world’s financial systems by criminals and terrorists, and to d eprive such groups of funds.

Work in this area has been led by the Financial Action Task Force (FATF), a Paris based organisation closely linked to the OECD (which houses its Secretariat). The FATF was established by the G7 Summit held in 1989. The G7 He ads of State or Government and the President of the European Commission convened the Task Force from the G7 member States, the European Commission and eight other countries. Since then the FATF has expanded its membership from the original 16 to 31 governm ents and two regional organisations.

The FATF is an inter -governmental body whose purpose is the development and promotion of policies, at both the national and international level, to combat money laundering and terrorist financing. The FATF is committe d to promoting anti -money laundering initiatives around the world and to building a global anti -money laundering network. In April 1990, the FATF issued a report containing a set of 40 recommendations. The recommendations provide a complete set of counter -measures against money laundering, covering the

This report represents the views of the authors and not those of the UK 38 Gover nment criminal justice system and law enforcement, the financial system and its regulation, and international co -operation. Though not a binding international convention, many countries have made at least a politic al commitment to implementing it. These Recommendations have since been revised, in 1996 and again in 2003, to take into account changes in money laundering methods, techniques and trends, and they have been used to pressure countries into strengthening th eir financial systems.

‘Neither FATF nor any of the regional bodies that replicate FATF standards and conduct mutual assessments have yet focused on combating money laundering involving illicit commodities apart from narcotics. No attention has been give n to the laundering of the proceeds of coltan, oil and gas, tanzanite, timber or gemstones, except a few references to the use of diamonds and gold in connection with discussions of terrorist finance. Accordingly, FATF and other bodies have yet to develop typologies describing the mechanisms by which the funds from these commodities are handled’ (Winer and Roule: 185).

International agreements to tackle bribery and corruption

Corruption is fuelling conflict and human rights abuse around the world, dest abilising weak states and damaging the development prospects of many CRI. Corruption facilitates other forms of illicit activity, including money laundering, the drugs and arms trade, and the establishment of illegal and legal companies engaged in this tr ade. Corruption also facilitates the growth of transnational crime and international criminal networks.

Developed country companies, including from the UK, are often involved in corruption, paying bribes overseas to secure commercial deals. Some of these companies receive cover from export credit guarantee agencies. Without a stronger and more concerted effort by developed countries to clean up their act over bribery, there will be limited global progress in reducing the incidence of corruption.

The UK Government has stated publicly on various occasions that it is committed to taking an international lead on corruption. Over the last seven years, the UK Government has also signed up to various international agreements on corruption. The most important and relevant of these for combating international bribery are:

• The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which was ratified by the UK in November 1998 and came into effect in February 1999 .

• The Council of Europe Criminal Law Convention on Corruption, which came into force in July 2002 and was ratified by the UK in December 2003.

• The UN Convention against Corruption. The UK has yet to ratify this but has said that it hopes to be among the first 30 states to do so.

This report represents the views of the authors and not those of the UK 39 Gover nment The OECD Bribery Convention (1997) principally focused on criminalising the bribery of foreign public officials. However, the overall impact of the OECD Convention has been weakened by limited attempts to publicise the conventio n amongst business, by loopholes in the Convention itself and by deficiencies in the OECD’s monitoring process. Only 51 per cent of the 835 business experts interviewed by the NGO Transparency International in 2002 had heard of the OECD Convention. More over, only 35 per cent had put in place compliance programmes within their companies (Transparency International 2002). A separate OECD Study in 2003 found that only 43 of the top 100 non financial multinational companies presented anti -corruption materia l on their websites, compared with their propensity to make public statements on environmental issues (almost 90 per cent). Of these 43, only 26 mention bribery of public officials. And only 7 provided a formal report on their implementation of their ant i-corruption commitments.

The OECD Convention does not require states parties to criminalise the bribery of their own public officials, nor does it address the bribery of private officials. This is particularly important in the case of foreign political party officials who are not ‘public officials’ (Transparency International 2004:132). A bigger problem is that companies are not held responsible for the actions of agents or subsidiaries acting on their behalf. As a Control Risk Group Survey found in 1 997, 56 per cent of European companies and 70 per cent of US companies said that they occasionally used agents to make corrupt payments for them (cited in Hawley 2003).

There are weaknesses, too, with the Convention’s monitoring process. Phase 1 of th e monitoring process involved ensuring that each of the signatories had put in place the required national legislation. This process is carried out by Peer Review, involving representatives from 2 other OECD countries and from the OECD Secretariat. Phase 2 of the process, which is intended to survey the effectiveness of this legislation, has been slower than planned. Although the process was supposed to have finished by 2005, Phase 2 did not start until 2002. It is now due to be completed by October 2007. Eight countries have so far been peer -reviewed, with reports published on their compliance with the Convention. A further 4 countries have been reviewed, with reports pending.

However, there has been too little enforcement by national governments of their anti -bribery commitments. In the UK, not a single UK national has so far been prosecuted. Why is this: why are the UK and other governments apparently so slow in prosecuting companies for corruption? One of the key problems with tackling bribery is tha t it is notoriously complex and potentially expensive to prove, particularly when the alleged abuse takes place in CRI. The weakness of legal and governance structures in many CRI is a serious obstacle to obtaining the necessary evidence to bring a succes sful prosecution.

This report represents the views of the authors and not those of the UK 40 Gover nment But some of the explanation also lies with the UK, with the legislation passed by the UK to bring itself into compliance with the Convention and with the level of priority that it has given to the issue and, in particular, to bringing prosecutions.

The UK Government has further to go before it will have fully implemented its international commitments to tackle bribery. Phase 1 of the OECD review of the UK argued that there were serious shortcomings in UK legislation. As an interim m easure, the UK Government introduced an extra section into the Anti -Terrorism, Crime and Security Act, which came into force in February 2002. This meets the minimum OECD requirements as it explicitly covers offences committed by UK nationals or companies abroad. However, its bribery provisions were always meant to be a temporary measure pending enactment of comprehensive new legislation.

But attempts at bringing forward new anti -corruption legislation have experienced difficulties. In March 2003 the Hom e Office published a draft corruption bill for public consultation. A joint Parliamentary Committee reviewed the text and published a report in July arguing that the draft bill required substantial reworking. The main concern was that the definition of co rruption in the law was hard to understand and that this would limit its practical value. Unlike the Anti -Terrorism Act, the draft did not contain explicit reference to the offence of bribing foreign officials and it was uncertain whether activities of co mmercial agents would be covered (cited in Hawley 2003). In its response to the Joint Committee’s report in 2003, while accepting some of the Committee’s recommendations, the government rejected the Committee’s central recommendation for a clearer definiti on of corruption in the bill. It now appears unlikely that new corruption legislation will be brouht forward before the end of this Parliament.

The international reputation of the UK on tackling international corruption could be compromised by lack of p rogress in key areas. Later this year, the UK faces an evaluation by the OECD Working Group on Bribery (Phase 2) of how it is implementing the OECD Convention. It will also face a second round of evaluation by the Council of Europe’s Group of States agai nst Corruption (GRECO). The UK faces the possibility of censure in these evaluations unless firm steps are taken.

The most recent and comprehensive attempt to address corruption has been led by the United Nations. In December 2003 the UN Convention ag ainst Corruption was signed by 95 countries, including the UK. This must be ratified by at least 35 states before it can come into force. The UK is committed to ratifying it but is looking at whether this requires new legislation.

This report represents the views of the authors and not those of the UK 41 Gover nment The arms prolif eration/private sector nexus - how are these arms financed?

The discussion of the EITI, the Kimberley Process and the FATF have already touched on the linkages between arms proliferation and the private sector. The purchase of arms and military equipment is expensive. While many governments have established defence sectors and funding sources that support them, others are reliant on less formal (sometimes illicit) forms of income generation to support their arms purchases. Armed groups in opposition to a government also need to find a regular source of income to assemble, equip and maintain a fighting force. Before the end of the Cold War, many developing country governments and rebel groups received financial and military support from one of the superpo wers or from proxy regional powers. With the end of the Cold War, this aid has largely dried up. In some cases, such as Mozambique, El Salvador and Nicaragua, the withdrawal of external support helped encourage former combatant parties to enter peace agr eements. In others, however, it has merely encouraged combatant forces to seek out alternative forms of financing for their arms purchases and military campaigns.

In many African CRI today, conflict and the arms purchases that fuel them are closely li nked to the exploitation of natural resources and to various forms of extortion. Governments and rebel groups can raise funds through the direct sale or looting of resources, such as oil, diamonds, coltan and timber. The proceeds from international narcot ics production and trafficking are another major source of financing for illegal arms purchases. Governments and rebel groups can also raise funds through the misuse of official development assistance and the diversion of humanitarian aid, and through co rruption and the theft of diaspora remittances.

The ability of governments and rebel groups to transform captured assets into revenues and war material has been facilitated by a parallel increase in their access to poorly regulated global trade and inves tment markets.

‘In conditions of lax oversight, the global financial services industry launders the proceeds of arms smuggling, corruption, kidnapping and other illegal activities’ (Sherman 2002).

This suggests that a key part of the policy response to the problem of arms proliferation in CRI should target the financial flows generated by the trade in conflict commodities (that fund arms purchases), rather than just the commodities themselves.

‘To date, cross -border exploitation of illicit extraction represents an aspect of the illicit use of the global financial services sector that has received comparatively little attention. Existing financial transparency initiatives have not addressed the need to combat the flow of funds from abuses of natural r esources in cases of conflict’ (Winer and Roule 2003).

This report represents the views of the authors and not those of the UK 42 Gover nment Governments that exploit natural resources to finance conflict or for personal enrichment have been described by the World Bank as “predatory autocracies”. The government of Angola, largely dependent on oil during the latter years of its war with UNITA, is one example of an unaccountable, predatory state. The resources it extracted from natural resource exploitation helped finance the conflict with UNITA and to enrich the Angolan governing elite, at t he same time as the population became further impoverished.

‘In 1999, at a time of renewed armed offensives against UNITA, about 88 per cent of the government’s total revenue came from oil – more than $4 billion. In addition to the substantial revenues that went into the war effort, some $1.1 billion, nearly 20 per cent of the country’s GDP, simply disappeared from government coffers in the same year’ (Ganesan and Vines 2004).

In Liberia, the government of Charles Taylor, used natural resource exploit ation and other means to fund both illegal arms purchases and illegal supplies of arms to rebels in neighbouring Sierra Leone, who at the time were subject to a UN arms embargo.

‘Despite international arms embargoes, the Taylor government spent millions for his own wars and to supply the RUF, using revenue from government -controlled diamond and timber sales, and from monies diverted from Liberia’s lucrative maritime registry…The US -based Liberian International Shipping and Corporate Registry used off -budg et accounts to pay $925,000 for illegal arms and other prohibited items at the request of the government in 2000, a period when Liberia was still deeply involved in supporting the RUF and had also launched incursions into neighbouring Guinea. Liberia’s wea pons purchases from 1999 to 2003 were mainly financed by off -budget spending by the Liberian government’ (Ibid.)

Governments can also exploit the resources of neighbouring states to raise funds, including for military purchases. Examples of this include the way in which Angola, Namibia, Rwanda, Uganda and Zimbabwe have intervened in the conflict in the DRC. The UN Panel on the DRC (2001) found that the Rwandan military financed its involvement in the DRC through commercial exploitation of resources, sha reholding in businesses operating in the DRC, payments from the rebel group RCD -Goma, and taxation and protection payments from businesses operating in Rwandan -controlled areas in the DRC (Ibid:314). The Panel also found that Uganda had benefited from the DRC’s gold and diamonds. At the same time, Angola, Namibia and Zimbabwe were granted oil, diamond and forestry concessions in return for their support for the Kabila government.

The involvement of Charles Taylor’s forces in Sierra Leone’s conflict and in western Cote d’Ivoire from September 2002 to mid -2003 was also driven in part by a desire to obtain control of resources, with the resources again used for arms purchases, the enrichment of Taylor’s cohorts and for further conflict.

This report represents the views of the authors and not those of the UK 43 Gover nment Similarly, rebel gr oups can use their exploitation of natural resources to help fund arms purchases. Angola, the DRC, Liberia and Sierra Leone are four recent examples of this:

• Successive UN investigative panels monitoring UNITA’s sanctions -busting in Angola reported that UNITA earned approximately $300 million a year from illicit diamond sales between 1999 and 2002 (Ibid.)

• A range of armed groups in the Democratic Republic of the Congo – both foreign forces and domestic militias – have systematically looted the country fr om the beginning of the current conflict, in 1998, to the present; among the looted goods have been coffee, coltan, diamonds, gold and timber (UN Panel on DRC 2001).

• In the early 1990s in Liberia, Charles Taylor’s National Patriotic Front of Liberia was t hought to be earning some $75 million a year from taxing the sale of cannabis, diamonds, iron ore, rubber and timer (Ellis 1999).

• In Sierra Leone in the mid to late 1990s the Revolutionary United Front (RUF) sustained itself largely by the sale of diamond s, raising between $25 million and $125 million a year (UN Panel on Sierra Leone 2000).

Some rebel groups raise funds for arms purchases through the sale of future rights to war booty. In these cases, combatants sell exploitation rights to natural resour ces that they don’t control, but that they intend to control. If an aspiring rebel group has no money, but stands a chance of capturing valuable resources in combat, it can sell off the future right to exploit the resources it hopes to capture, either to a foreign firm or a neighbouring government. The rebels can then use this money to pay soldiers and buy arms and thus gain the capacity to capture the promised resource.

‘In the 1997 civil war in Congo -Brazzaville, the private militia of former President Denis Sassou -Nguesso was funded, in part, by the sale of future exploitation rights to the Congo’s extensive oil reserves. On the eve of the conflict, Sassou received substantial assistance from a European oil company. Some reports suggest that he receiv ed $150 million in cash; others state that the company helped him to purchase arms. These funds enabled him to defeat the incumbent president, Pascal Lissouba, following a four -month war that destroyed much of Brazzaville and cost 10,000 lives. These boot y future swaps – and similar trades in Angola, the Democratic Republic of the Congo, Liberia and Sierra Leone – in each case have helped to initiate a war or prolong one that appeared to be ending’ (Ross 2003).

Another source of funds for rebel groups is extortion and kidnapping. Under certain circumstances, rebel groups have earned large sums by extorting money from, and kidnapping the workers of, resource firms. This has been a particularly issue in Colombia. According to one study, between 1991 and 1999 Colombia’s rebel groups earned $1.5 billion from kidnap ransom (Pax Christi Netherlands, as cited in Bannon and Collier 2003:6).

This report represents the views of the authors and not those of the UK 44 Gover nment Just as markets have emerged in some developing countries to trade kidnap victims, markets have emerged in developed count ries to supply ransom insurance. Kidnap insurance, although understandable from a personal or business sense, has the perverse effect of reducing the incentive to protect workers from kidnapping and increasing the size of ransom payments.

The rule of la w - do we need a clearer legal framework for companies investing in or sourcing from CRI?

The discussion of some of these initiatives for promoting high corporate standards raises important questions about the application of international law to companies operating in African CRI and elsewhere. The UK Government is cautious on this issue, tending to argue that international human rights law applies to states and not to non -state actors.

This view pertains even when private companies and individuals clai m the benefit of human rights for themselves in national and international human rights tribunals. For example, The European Court of Human Rights in Autronic AG v Switzerland, Eur. Ct. H.R. Series A.178 (1990), affirmed the Swiss company Autronic's right to freedom of expression under the European Convention. The UK is also generally sceptical about extensions of extra - territorial jurisdiction.

But this approach is open to challenge and is being undermined by new national and international legal preced ents. For example, a clause in the UK Anti -Terrorism, Crime and Security Act (2001) has already opened up the possibility that UK companies and nationals, including company directors, could be prosecuted in the UK for corruption offences abroad, regardle ss of whether they involve public officials or the private sector. xv Similarly in France, legal action is being taken against a consortium of four companies, including French oil company Technip, and the US company Halliburton, for allegedly making up to £1 20 million worth of under -the -counter ‘commissions’ to public officials in Nigeria to smooth the path of a large gas contract. The legal action is linked to the OECD Convention on the Bribery of Foreign Public Officials, signed by 35 countries including t he UK.

Under existing UK law, a parent company is protected to a large extent against liability claims for human rights abuses involving its subsidiaries, including those overseas. What is known as the ‘corporate veil’ allows parent companies to argue i n law that they are mere shareholders in the enterprise and, therefore, not directly responsible for the activities of subsidiaries.

However, the extent of foreign direct liability has been altered by recent cases in the US and the UK courts, which have also seen extensions of extra - territorial jurisdiction. In the US, The Alien Tort Claims Act of 1789 is being used in a number of cases to sue multinational corporations for violations of international law in countries outside the US. The Act grants juri sdiction to US Federal Courts over ‘any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States’.

This report represents the views of the authors and not those of the UK 45 Gover nment There have been separate civil law developments in the UK, involving Rio Tinto in Namibia a nd Thor Chemicals and Cape plc in South Africa. Following a series of House of Lords judgements in these cases, transnational companies, headquartered in the UK, can now be held legally liable for human rights violations abroad where, for whatever reason, access to justice locally is restricted. xvi At an international level, the International Criminal Court applies human rights responsibilities to individuals and the Geneva Conventions to armed groups. The Geneva Convention on Asylum also applies to non -state actors.

The most serious attempt in recent years to establish a clearer legal framework for the human rights responsibilities of companies is the Norms on the Responsibilities of Transnational Corporations and other Business Enterprises with regard to H uman Rights (the Norms).

Faced with a proliferation of codes developed by NGOs and governments, the Norms are an attempt to rationalise the existing standards relating to the human rights responsibilities of companies. Their purpose is also to assist companies to implement human rights standards throughout their operations and to integrate human rights principles into their decision -making processes.

The Norms are based solely on existing international human rights law and labour standards, drawn, for example, from core ILO conventions, the UN Global Compact and the Guidelines for Multinational Enterprises. As a set of values based on existing international law they apply to all ‘transnational corporations and other businesses’, not only those who have signed up to the Global Compact or other initiatives. While some conflict -related activities are covered under the sub -Commission norms, they do not specifically target conflict -related behaviour of economic actors.

A number of companies have already w elcomed the publication of the Norms and expressed a willingness to use them. In December 2003, a group of seven multinational companies launched a three -year project, the Business Leaders Initiative on Human Rights (BLIHR). The companies involved in the initiative are ABB Ltd, Barclays plc, Hewlett Packard, MTV Networks Europe, National Grid Transco plc, Novartis, Novo Nordisk and the Body Shop International plc. The project’s aim is to test the Norms as a tool for businesses to use when faced with the co nceptual and practical difficulties of implementing human rights principles at the country level.

The Norms were discussed at the UN Commission on Human Rights in 2004. After lengthy discussion, the Commission asked the UN High Commissioner for Human Rig hts to examine the Norms and other initiatives and to submit a report to the 2005 meeting of the UN Human Rights Commission.

UN Sanctions and Expert Panels

UN Sanctions have legal force and are on the far end of the spectrum of policy responses to the p roblems of CRI. In extreme cases, UN -mandated economic and financial sanctions can be imposed on governments or non -

This report represents the views of the authors and not those of the UK 46 Gover nment state actors in an attempt to curb their nefarious activities. Sanctions have undergone an important change over the last decade.

‘Fro m comprehensive trade embargoes aimed at exerting economic pressure for political change, sanctions are now primarily targeted at decisionmakers – including political leaders and key regime supporters – and have specific instrumental objectives, such as po litical isolation or the interdiction of resources…Additionally, sanctions are now often directed at non -state actors – for example, to curtail the resource flows to rebel forces engaged in the illicit trade of natural resources for arms’ (FAFO 2003: 20).

In recent years, there has been a growing interest in improving the design, implementation and efficacy of targeted sanctions. A series of international processes – including the Interlaken Process, the Bonn/Berlin Process, and the Stockholm Process – h ave produced recommendations for targeted financial sanctions, arms embargoes and travel/aviation sanctions, plus capacity building for sanctions implementation and monitoring.

Independent ad hoc panels of experts, reporting to the Security Council or one of its sanctions committees, have been used to provide the UNSC with information on the economic dimensions of conflict in specific countries and to monitor sanctions busting. These Panels have been very useful in improving the international community’s understanding of the resource dimension to conflicts, in identifying beneficiaries of illicit practices and contributed to ‘naming and shaming’ of rogue economic actors.

UK Company Law Reform and social reporting

A particularly important opportunity to s trengthen the international obligations on UK companies is the forthcoming UK company law reform bill. The review of UK company law began in 1998 leading to the publication of a Government White Paper Modernising Company Law in 2002. A critical question f or the review was whether shareholders should retain their dominant place in the structure of corporate governance, or whether companies should be accountable to a wider group of stakeholders. The Review concluded that there should not be a significant bre ak with the notion of shareholder primacy. However, it also concluded that the law should be used to emphasise the dependence of commercial success for a company on its cultivating and maintaining positive relationships with employees, customers and suppl iers, and paying attention to the business’s broader social and environmental effects.

The Government claims to be making good progress on the main Companies Bill, which will implement the work of the Company Law Review. In a recent speech, CSR Minister, Stephen Timms, promised that a draft bill would be made available for consultation before its introduction to Parliament, and that this would happen shortly (Timms, 2004).

This report represents the views of the authors and not those of the UK 47 Gover nment When the Government does bring forward proposals, these should increase corporate transparency and accountability for any adverse social impacts, including on conflict and human rights in CRI. The proposals should address the mechanisms, often referred to as the ’corporate veil’, that companies use to shield themselves from liability f or their negative social and environmental impacts.

In advance of the main Companies Bill, the Government also proposes to make changes in respect of company reporting, through what are known as Operating and Financial Reviews (OFRs). These are supposed to provide shareholders and others with better and more relevant information on the performance of companies and their prospects for the future. While the Government is again promising to consult on these proposals, it appears heavily predisposed to defi ne the corporate reporting requirement in narrow terms.

At present, companies have the option to produce an OFR as part of their financial reporting and accounts, but comparatively few do so voluntarily. The Government’s declared intention is to require the largest companies to do so.

‘Controversially the current proposals distinguish between matters which must always be reported on, and those which must be reported on only when the directors consider them “material” to fulfilling the review’s objective : an understanding of the business and its prospects. Importantly, social and environmental issues come within the latter discretionary category with the inherent risk that this approach will lead to under -reporting in these areas’ (Joseph, 2003).

This would be a missed opportunity. Openness and disclosure are essential prerequisites for the success of voluntary initiatives to enhance the social impact, including the human rights impact, of international commercial operations. Without disclosure compani es cannot build the trust of their stakeholders. Greater disclosure can also help strengthen the socially responsible investment (SRI) community, helping them to engage better with companies on international human rights, conflict and corporate responsibil ity issues in CRI.

There is an important precedent for this: the amendment to the Pensions Act 1995 (which entered into force in 2000). This required pension fund trustees to reveal whether they had social, environmental and ethical policies. While ther e is still scope for considerable improvement, particularly on implementation, a survey of investment funds conducted in 2003 found that two -thirds of respondents now claimed to take account of social, ethical and environmental issues (Gribben and Olsen, 2 003).

This report represents the views of the authors and not those of the UK 48 Gover nment 3. POLICY RECOMMENDATIONS

TACKLING ARMS PROLIFERATION

This report has shown how arms transfers move through complex chains - often with linkages in Western Europe, Eastern Europe and the conflict region - and how a wide range of factors facilitat e the trade - including legal loopholes, weak capacity, corruption and lack of political will.

The UK Government has already taken a number of important steps to address this problem but a more comprehensive policy response is required.

Export control s - the EU Code of Conduct, the Export Control Act and the Transfer Control Initiative provide key frameworks to help strengthen controls on arms transfers.

Enforcement capacity - British officials have significant technical expertise on arms control is sues and can work with African CRI to help strengthen their capacity.

Development assistance - the UK is one of the largest bilateral donors with significant levels of support going to many African CRI. The UK could play a bigger role in supporting loc al initiatives to reduce arms availability.

Diplomatic influence - as a member of the UN Security Council, the EU and the G8, holding the Presidencies of the EU and the G8 in 2005 and having strong bilateral relations with many CRI, the UK has significant political weight to bring to bear.

At the moment the UK is not maximising this capacity as effectively as it could. Legal loopholes are facilitating the transfer of arms to CRI, some governments in Central and Eastern Europe have received limited practi cal help to strengthen their export control capacity, measures to reduce arms availability and combat armed violence are not yet integrated sufficiently into UK development programmes. The UK also seems to be missing some diplomatic opportunities to addre ss arms issues, not least with other G8 states like Russia.

Strengthening EU arms export controls

The UK Government should work with its EU partners to:

• Introduce ‘a presumption of denial’ of arms exports to African CRI. This presumption can of course be overridden if the Government can demonstrate that there is a legitimate defence requirement for the equipment in question and that it poses no problem for any of the export criteria. However, it shifts the onus of proof – making it incumbent on the Go vernment to demonstrate why this export is necessary given the concerns that it already has about stability in the country that wishes to import the arms.

This report represents the views of the authors and not those of the UK 49 Gover nment • Strengthen the EU Code of Conduct. The EU Code has been in place now for almost six years, yet it has not had the anticipated impact on member states’ export policies. Many of the criteria are ambiguous and provide too much scope for national discretion. This is likely to become a greater problem in an EU of 25 members. The UK should use the current review of the EU Code to promote a strengthening of the criteria and then take an initiative on this during the UK’s Presidency of the EU in 2005.

• Build the capacity of Central and Eastern European (CEE) states to implement effective arms export policies . This should include support for legislative reform, licence application assessment, public transparency and enforcement.

• Improve transparency and information exchange among exporting authorities. EU governments should share data relating to problemat ic transportation routes and end -users, as well as information on individuals and companies with a history of involvement in irresponsible arms transfers. Public national reporting should be mandatory, with information provided on licences granted or tran sfers to CRI. This should include meaningful descriptions of all goods or technology in question and details of both their end -user and the proposed end -use.

Strengthening the G8’s commitment to control arms transfers and support NEPAD

The G8 is an impo rtant forum to advance arms control initiatives because it brings together the world’s biggest arms exporting countries. It does not have a significant implementation capacity for arms initiatives but it has a valuable role in developing norms and buildin g political will to control arms transfers. It also has the important link to African countries now through the New Partnership for African Development (NEPAD).

The UK Government should work with its G8 partners to:

• Agree a declaration on international standards for arms exports. G8 states agreed in Kananaskis to ‘Developing and adopting common guidelines to prevent the illegal supply of arms to Africa’. The G8 should agree criteria or principles based on international law for assessing arms exports . This could be an important step in the UK’s Transfer Control Initiative towards securing an international agreement on controlling arms exports at the 2006 UN Small Arms Review Conference.

• Get an international agreement on arms brokering . Controlling a rms brokering is also part of the G8 Action Plan for Africa. The UK should aim to agree a declaration on common standards for controlling arms brokers during its presidency, as well as the need to secure an international legally -binding instrument at the 2 006 UN Small Arms Review Conference.

This report represents the views of the authors and not those of the UK 50 Gover nment • Increase pressure on Russia to control arms sales. Russia is a growing problem for arms proliferation to CRI. The G8 is an important opportunity for the UK and other partners to raise this as a serious diplomatic conc ern and make clear how Russian actions are contrary to the Kananaskis Declaration and undermine NEPAD.

• Tackle arms proliferation as part of assistance to NEPAD. Controlling arms trafficking is a key part of the NEPAD Peace and Security Agenda. The G8 is providing considerable financial and political support to NEPAD. Support for initiatives to control arms should be included within this. In addition to supporting technical and financial assistance, the G8 should ensure that DDR and weapons collection a re integrated into the doctrine of the new African Peace Support Capability.

• Encourage more effective controls on arms transfers from other suppliers. Significant quantities of arms being used in African CRI are originally sourced from countries outside of the G8 or EU, in particular some of the states of Eastern Europe and China. It is therefore crucial that the UK, operating with its partners, uses these influences with these states to tighten their arms export policies to CRI.

• Strengthen export cont rol systems. The UK should use the full range of instruments at its disposal (e.g. the Transfer Controls Initiative, NATO, EU Code outreach) to engage with other key arms exporters on the question of transfers to CRI. States should be encouraged to ‘alig n themselves to the principles of the EU Code’ (among those who have already done so are Romania and Belarus). Assistance should be provided to these countries. This should cover the full range of export control issues, from updating legislation, through export licence assessment to effective end - use control. In addition, a process should be developed whereby states are progressively engaged in the information -exchange mechanisms of the EU Code, dependent on overall progress in implementing more effectiv e export controls.

• Build customs and law -enforcement capacity . In several states of Eastern Europe, border controls are very poor and arms shipments are taking place even when not authorised by government. Improving the functioning of customs and law en forcement agencies is therefore central to preventing unlicensed transfers. It would have the additional benefit of helping control other smuggling activities (e.g. of drugs and people). The UK should help boost this capacity by supporting training progra mmes, providing equipment, sharing information and encouraging cross -border and regional co -operation.

• Improve stockpile management. Despite increasing attention being paid to the issue of surplus stocks in recent years, the control of surplus arms is st ill a cause of real concern, especially in Eastern European states with large leftover supplies from the Cold War. xvii Support should be provided to help ensure accurate data and better management of surplus stocks. In

This report represents the views of the authors and not those of the UK 51 Gover nment addition, a culture of automatically des troying any surplus weapons should be encouraged. The UK should lead by example in this regard.

• Provide financial and industrial support to reduce reliance on arms exports. Alongside diplomatic pressure, the UK and other European governments should prov ide technical and financial support, so that economies traditionally dependent on military production and arms exports can diversify their economies. This is particularly true of Central and Eastern Europe and the states of the former Soviet Union.

• Suppor t UN small arms processes. The UK should continue to support the UN small arms process and the Programme of Action on SALW. Within the context of the UN Open -ended Working Group to Negotiate an International Instrument to Enable States to Identify and Tra ce, in a Timely and Reliable Manner, illicit SALW , the UK should work with its partners in pursuit of a legally -binding agreement.

Tackling the supply of weapons within regions of instability

Supporting initiatives to tackle the supply of weapons within regions of instability has to be a central part of any effort to reduce arms availability in African CRI. The UK has taken a lead in this area through the small arms strategy of the Global Conflict Prevention Pool that has funded a number of important sub -regional and national initiatives.

The UK Government should work with others to:

• Strengthen customs and law enforcement capacity in African CRI. The porous borders of many African countries facilitate the illicit trafficking of arms. Strengthening the capacity of customs and law enforcement agencies is vital to address this problem. The UK Government could help achieve this through supporting training programmes, providing equipment, encouraging cross -border cooperation and by seconding staff to help bu ild the capacity of national institutions. For example, in Mozambique the Crown Agents have played an important role in improving customs controls in Maputo port.

• Support the development and implementation of National Action Plans. The UK has supported n ational assessments of the small arms problem, leading to the development of National Action Plans in Kenya, Namibia, Tanzania and Uganda. These plans cover a wide range of issues from strengthening legislation, to police training and development programm es to reduce the demand for weapons. These should be developed in other African CRI.

• Support the development and implementation of regional agreements. The regional nature of the small arms problem makes regional coordination essential. Agreements on s mall arms control are in place in the Horn of Africa and the Great Lakes region, as well as West and Southern Africa. However implementation has been patchy. This is

This report represents the views of the authors and not those of the UK 52 Gover nment partly a result of weaknesses within the SADC and ECOWAS secretariats. Some progress has been made to implement the Nairobi Declaration on small arms in the Horn of Africa and Great Lakes region as a result of UK support for the Nairobi Secretariat.

• Renew the Global Conflict Prevention Pool (GCPP) small arms fund and integrate small arms i nto development programmes. The GCPP small arms fund has helped to tackle arms proliferation in CRI. However, its existence beyond March 2005 has yet to be confirmed by the Treasury. Renewing its funding is vital. Given the close linkages between arms availability, CRI and under -development, it is also important that initiatives to enhance security and reduce the proliferation of small arms are integrated into development budgets and programmes. This will require prioritisation within DFID regional progr ammes and integration into DFID country strategy papers in African CRI.

• Apply diplomatic pressure to states of concern. A significant part of the problem of arms availability in African CRI is caused by other countries in the region with which the UK and its partners have significant diplomatic and development relationships. Yet opportunities to put diplomatic pressure on these countries often seem to be missed. For example, the role of Rwanda and Uganda in DRC is well known, yet it is not clear what di plomatic pressure is put on these countries to cease their role in arms proliferation. The UK is now re -establishing its relationship with Libya because of its WMD disarmament, but ceasing the supply of conventional and small weapons to CRI does not appea r to be a condition of renewing diplomatic and trade ties.

Addressing the factors that facilitate arms transfers.

The UK Government should:

• Introduce full extra -territorial controls over arms brokering. The Government has recently introduced controls o ver arms brokers but only in limited circumstances. The new regulations mean that brokering conventional weapons to destinations not subject to a UN embargo will require a licence only where part of the deal takes place in the UK. As a result, UK dealers can continue to transfer weapons to CRI that violate human rights or threaten regional stability (but where no embargo is in place) simply by going across the Channel to conduct their arms brokering deal. This loophole should be closed as a matter of urgen cy.

• Set up a registration scheme for arms brokers and transportation agents. To operate legally, arms brokers and transportation agents should be required to register. Brokering companies and transportation agents that fail to register but continue to op erate should be prosecuted. The UK should press other countries to do the same. Governments should establish (and exchange information on) white lists and black lists of arms brokers. They should also establish black and white lists of reputable air compan ies and air operators to ensure that suspect planes and operators

This report represents the views of the authors and not those of the UK 53 Gover nment are not being supported by governments in other circumstances, for example by being contracted to carry other cargo such as relief supplies to CRI.

• Establish international standards for th e administration of shipping or aircraft registers. Effective control over the transportation of arms is compromised by the existence of registers that allow those vessels or aircraft on their books to run their operations without adequate supervision. All shipping and aircraft registers, whether or not they function as ‘flags of convenience’, should be required to maintain certain standards. Failure to do so should result in their being ‘black -listed’, with the effect that this registration would not be re cognised by the international maritime or aviation authorities.

• Improve the capacity to track aircraft. A key component of controlling arms flows into African CRI is to keep track of the aircraft with the capacity to ferry those arms. Therefore, working w ith others, and building on the efforts of the US Safer Skies for Africa initiative, the UK should assist states that lack adequate air traffic control (ATC) infrastructure, through the provision of technical and financial support. In addition, the UK shou ld explore the feasibility of placing transponders (which able unique identification by ATC systems) in all commercial aircraft registered to carry cargo.

• Support greater international co -operation to prevent the abuse of aircraft registration. Government s should develop new mechanisms for monitoring air traffic that may be carrying illicit goods such as arms. This might include creating a centralised “flight -plan registration” system to help identify misuse, for example multiple flight plans. The UK shou ld also support the creation of an international aircraft inspection agency, empowered to carry out random inspections of aircraft to check airworthiness and to compare the actual cargo against the manifest

• Support tighter rules over aircraft insurance. To deter individuals and companies from trafficking arms, Governments should ensure that legal entities registered to carry arms and military equipment insure their planes/ships with approved insurers. In order to avoid the incidence of bogus insurance pol icies, whereby a policy is issued with no prospect of payout so as to meet administration obligations, insurers should be obliged to lodge bonds with internationally respected financial institutions, so as to guarantee that any insurance claims can be met.

• Promote the establishment of an international customs and border - control support agency . Physical inspection of cargo is an essential plank in any comprehensive strategy to control arms trafficking, yet border and customs control is weak in several expo rting states of Eastern Europe and in many CRI of Africa. The UK should promote this in its relations with these countries. For example, given the status of Tripoli as a major refueling point for arms shipments on route to Sub -Saharan Africa, one of the conditions of welcoming Libya back into the international community

This report represents the views of the authors and not those of the UK 54 Gover nment should be extensive co -operation on inspection of transiting aircraft. The scale of the problem will require a co -ordinated international response. An international agency should be esta blished to provide a comprehensive range of support, including for example the training of personnel and the provision of information technology. In more extreme circumstances, and in co -operation with the national authorities, the proposed agency should take over the running of national agencies pending the building of adequate local capacity. The agency should also be empowered to carry out random inspections.

• Promote end use controls and end -use certificates (EUCs). To help prevent the widespread abus e of EUCs in arms trafficking, governments should develop an international standardised EUC system that allows for appropriate scrutiny and verification measures to ensure the validity of the undertakings made by exporting and importing countries. xviii

• Tighte n controls over licensed production of arms overseas. Governments should better regulate licensed production oversees (LPO) and the transfer of intellectual property. Companies should be required to apply for a licence to establish a licensed production facility offshore, and production from the facility and subsequent export should require the permission of the original licensing authority.

PROMOTING GOOD CORPORATE PRACTICE BY UK COMPANIES IN AFRICAN CRI

This report has shown how some of the activities of UK and other international companies can destabilise African CRI. It has looked at the policy measures adopted by the UK and others to prevent or minimise these negative impacts and to promote good corporate practice.

In many respects the UK Gover nment and UK companies regard themselves as world leaders on corporate social responsibility (CSR). These CSR initiatives have brought benefits, but they also have their limitations.

More effective regulation - economic globalisation and the growth and reach of the international corporate sector are calling into question the voluntarist CSR model. Many of the most difficult issues surrounding the international corporate sector occur in CRI. It is in these circumstances – where local governments may be unable or unwilling properly to regulate the international private sector - that the case for cross -border corporate accountability is at its strongest. However, many of the existing national and international initiatives for promoting high corporate stan dards lack effective regulation and enforcement.

Go after the money – tighten international financial controls – while commodity certification schemes have potential benefits, they are also complex to administer. There may be advantages in focusing more on the financial revenues that flow from resource exploitation rather than the commodities themselves.

This report represents the views of the authors and not those of the UK 55 Gover nment Clarify the legal responsibilities of companies - The extent to which UK and other international companies are subject to international human rights la w is a highly contentious subject. The UK Government has tended to take a conservative position, arguing that international human rights law applies to states but not to non -state actors like companies. This view has been seriously challenged, however, by a series of recent legal judgements. There could be real advantages to companies from establishing a clearer legal framework for their operations. In the UK, the company law reform bill creates a real opportunity to strengthen the human rights and social obligations of UK companies that invest internationally or source from overseas.

At the moment, the UK Government’s influence over the behaviour of UK companies investing in or sourcing from African CRI is less than it could be. Having established a repu tation for prudent economic management, the Government could be more self -confident about making the case for a changed relationship with the UK’s international business sector, one in which corporate rights are matched by a stronger set of corporate respo nsibilities.

Promoting impact assessments and more systematic reporting

The UK Government should:

• Support the introduction of conflict risk and impact assessments for companies that invest in CRI . International Alert and the Canadian NGO the Internatio nal Institute for Sustainable Development have been developing a methodology for Conflict Risk and Impact Assessment (CRIA). The focus of this research is on identifying gaps in existing corporate assessment tools from a conflict -sensitive perspective, an d developing a tool for companies to use when investing in difficult environments. The UK Government should strongly support this work.

• Integrate impact assessments into its development assistance strategies and UK policy on export credit guarantees, to help ensure that the UK is not further destabilising CRI through its development, trade and investment policies.

• Introduce a mandatory requirement on UK companies to report on their international social and environmental impacts via Operating and Financi al Reviews (OFRs), as part of the UK Company Law Review . The Government’s current proposals would not do this – a serious missed opportunity for strengthening corporate accountability.

Promoting core labour standards

The UK Government should:

• Press all UK companies to make respect for core labour standards an integral part of their international supply chain business strategies . Companies should address systematically how their sourcing and

This report represents the views of the authors and not those of the UK 56 Gover nment purchasing practices impact negatively on the way that produce rs hire and treat workers overseas and on issues of conflict and instability.

• Continue to provide strong support for the Ethical Trading Initiative. Other UK companies should be encouraged to join it, particularly those from outside the retail or consume r goods sector.

Tackling corruption

The UK Government should:

• Allocate additional resources to investigate cases of corruption and bribery by UK companies and nationals overseas and to bring successful prosecutions. Despite the UK’s ratification of th e OECD Anti - Bribery Convention in 1998, not a single UK national has so far been prosecuted. The UK should ensure that there is a core of specialised staff within the law enforcement agencies, and establish a specific unit to investigate and prosecute corr uption and other serious forms of economic crime.

• Deny ECGD cover, and other forms of government support, for a specified period, to companies found to have engaged in corrupt practices abroad.

• Ratify the UN Convention against Corruption as soon as pos sible and introduce, at the earliest opportunity, a new and comprehensive Corruption Bill. This should make it unlawful to make corrupt payments to a third party while deliberately ignoring or consciously disregarding the fact that such payments may be use d to give undue advantage to a foreign public official. The Bill should also make UK companies liable for illegal corruption acts carried out by controlled foreign subsidiaries.

• Undertake a concerted information campaign to promote appropriate and effecti ve anti -corruption programmes and responsible use of agents and intermediaries among UK business.

Strengthening international initiatives on corporate responsibility

The UK Government should:

• Promote criteria for membership and a system of independent monitoring of company compliance with the principles of the UN Global Compact . A complaints system, either through a small executive committee or through an appointed ombudsman, should be put forward for consideration at the UN Summit in June 2004.

• Strong ly support the OECD Guidelines on Multinational Enterprises and strengthen the UK National Contact Point (NCP) system . The NCP should be located in a separate agency, its resources increased substantially and it should be empowered to investigate allegatio ns

This report represents the views of the authors and not those of the UK 57 Gover nment whether or not a formal complaint has been made, with any findings published in the UK’s Annual Human Rights Report. The UK should convene a meeting of other OECD states, to review which elements of the OECD Guidelines need to be updated to address the role of companies wishing to do business in CRI and promote the necessary amendments to the Guidelines.

• Continue actively to support the Voluntary Principles on Security and Human Rights and encourage other countries and companies to engage with the Initi ative. While the Initiative has focused on the Extractive Industries, the UK Government should support and encourage its adoption by other industry sectors.

• Support the Extractive Industries Transparency Initiative (EITI), and work for greater involvement by other developed countries with the EITI process . Increased support should be provided to governments committed to making their budgetary processes more transparent, as well as for civil society in these countries to interpret and use the newly availa ble data. The UK Government should also support the introduction of an industry -wide mandatory requirement on companies to disclose net revenues to all national governments. One way of doing this would be through a change in the Listing Rules on Stock Exc hanges, with revenue transparency a condition for companies to be listed. UK Listing Authority Rules are implemented by the Financial Services Authority (FSA). They dictate the formal requirements of a company issuing securities on the UK Stock Exchange. The FSA is currently conducting a review of the listing rules. It is anticipated that this will be finalised and implemented by summer 2005. Revenue transparency has also been included recently in the new European Transparency Operations Directive. Thi s sets minimum standards for companies listed on stock exchanges in the EU. The UK should use the FSA review and recent European developments to press the case for greater transparency over revenue payments.

• The UK should continue to press the World Bank and the IMF to practically integrate EITI principles into their operations. This issue has already grown in importance for the IMF. It is also becoming a more important concern for the World Bank, with several reports by the Bank’s own consultative bodie s calling on it to embrace revenue transparency. The Extractive Industries Review (EIR), a two -year multi -stakeholder consultation by the Bank that completed its final report at the end of 2003, stated that, ‘The World Bank Group should vigorously pursue transparency at country and company level in all the resource -rich countries it works with’ (Extractive Industries Review 2003:47).

• Support the development of an international template for the acceptable governance of natural resource revenues. Such a template should require foreign companies and state -owned companies in the extractive industries to report payments so as to allow appropriate scrutiny. The introduction of a standardised template, and its adoption by governments interested in attracting reputable companies, would provide a

This report represents the views of the authors and not those of the UK 58 Gover nment much higher degree of reputational cover and can help to address political risk. At present, the insurance entities that provide cover for political risks, such as the World Bank’s Multilateral Investment Guarantee Agen cy (MIGA), have to assess each situation on an ad hoc basis. Adherence by companies to a good governance template would help MIGA and other insurers in making decisions about the provision of cover.

• Support a strengthening of the Kimberley Process on con flict diamonds . Companies should be encouraged to develop effective management systems that address purchasing/diamond procurement, sales, staff training and internal audit and control procedures. The UK Government should also support the establishment o f a regular independent monitoring mechanism to encourage compliance by member countries. The approach adopted for the diamond industry will not necessarily work well for other sectors, in part because of the dominance of a single actor (De Beers) in the rough diamond trade. Rather than establishing a whole new set of commodity specific certification schemes or even a generic commodity control system, it may make more sense to tackle the financial flows that result from commodity exploitation.

Going after the money – tackling weaknesses in the international financial system

The UK Government should:

• Support the creation of a global corporate “white list” of reputable financial institutions. This could reinforce national regulatory efforts by rewarding p rivate financial institutions that meet high standards of transparency for the funds that they process. Adherence to agreed standards, such as the Wolfsberg Principles on financial transparency, would become a competitive advantage, while non -adherence wou ld carry financial losses. The “White List” model may be applicable to other sectors, for example the insurance sector, and could provide incentives to discourage the provision of insurance to companies involved in sanctions - busting shipments of arms and o ther commodities. The UN, the IFIs and donor countries should explore the introduction of a “white list” for institutions whose financial services they use.

• Support targeted financial sanctions against governments or rebel groups that are violating human rights or promoting serious instability or conflict. UN Resolution 1373 requires member states to enact legislation facilitating the freezing of assets and the blocking of financial transactions of international terrorist organisations. Comparable finan cial sanctions should be adopted to target actors complicit in conflict.

• Establish a UN Sanctions Enforcement Committee. Despite the efforts of UN expert panels, UN embargoes are routinely flouted. To date, no one has been taken to court for sanctions b usting. The proposed sanctions committee, as well as establishing ad hoc investigative panels, should also create embargo monitoring bodies. Governments should be

This report represents the views of the authors and not those of the UK 59 Gover nment encouraged to respond positively to expert panel reports, providing investigative assistance where requested and pursuing through legal channels those identified in the reports as in breach of the law. In addition, secondary sanctions should be imposed on those states identified as repeatedly supplying arms in contravention of UN sanctions. It should go without saying that these should be “smart sanctions”, designed to target offending parties and to minimise any adverse impacts on ordinary people in those countries.

• Support an international agreement to criminalise in the home country the sal e of ‘booty futures’. This could be similar to the OECD Convention on Bribery. At present, claims on future resources are fueling conflict and instability in many CRI.

• Affirm that UK public money will not be used to pay ransom to rebel groups in situatio ns of kidnapping. The Government should also press internationally for extortion payments not to be treated as a tax -deductible business expense.

• Support an expansion in the remit of the Financial Action Taskforce to consider the trade in illicit natural resources . To date, FATF has not focused on combating money laundering linked to natural resource exploitation. It should be directed and resourced to do so, with procedures by which FATF members could implement appropriate regulatory and enforcement ac tions.

Strengthening capacity building and supporting good corporate practice by UK companies

The UK Government should

• Use its development resources to help build up more effective governance structures and regulatory capacity in CRI. A particular foc us should be on strengthening customs departments, finance ministries and the rule of law.

• Use development resources to promote economic diversification in CRI. Low -income countries heavily dependent on natural resources are at high risk of conflict. C ountries with a more diverse base of exports are better protected from the adverse effects of commodity price fluctuations. Diversifying out of dependence on primary commodities also requires developed countries to reduce their trade barriers on processed ‘higher value’ goods from CRI.

• Publicise and promote UK companies that demonstrate best practice on human rights and conflict issues and engage constructively with the UN Global Compact, the OECD Guidelines and the UN Norms.

This report represents the views of the authors and not those of the UK 60 Gover nment • Ensure that UK Government -su pported trade missions overseas address human rights and conflict issues in the prospective trading country.

Strengthening the legal framework for companies

The UK Government should

• Support the UN Norms on Business as a means for establishing a cleare r legal framework of accountability for companies on human rights . The Norms will be subject to extensive consultation and discussion over the next year, co -ordinated by the UN High Commissioner for Human Rights. The UK Government should contribute constru ctively to this debate.

• Explore the possibility of a new international legal framework – possibly based on the UN Norms – to cover the sale of natural resources used in conflict or linked to serious corruption . Such a framework would need to establish c ommon tracking and disclosure mechanisms for the extraction and sale of certain commodities. An intergovernmental mechanism might be needed to oversee the implementation of such a framework and to bring together work done by the IFIs, development agencies and others.

• Bring forward Company Law Reform proposals that increase corporate transparency and accountability for any adverse social impacts, including on human rights and conflict internationally. These proposals should address the mechanisms, often re ferred to as the “corporate veil”, that companies use to shield themselves from liability for their negative social and environmental impacts, including on human rights and conflict overseas.

• Offer clear guidance to UK companies on how to formulate Host Government Agreements in a way that is consistent with international human rights law . These agreements, concluded privately and without transparency between business and governments, are often for large -scale, long -term infrastructure projects, sometimes affecting a large population and geographic area. They routinely contain clauses that discourage compliance with the international human rights obligations of host states. They can also distort the democratic process by dictating the shape of domestic law s without accountability to the public and by demanding a regulatory climate favourable to foreign direct investment without regard to the rights of local populations.

• Prosecute for sanction busting. It is extremely rare for individuals to prosecute for sanctions busting. Governments need to strengthen their capacity for bringing effective prosecutions in these cases.

• Support the work of the International Criminal Court in prosecuting economic actors. The Chief Prosecutor of the ICC has indicated a

This report represents the views of the authors and not those of the UK 61 Gover nment willingness to investigate allegations of complicity by companies in crimes against humanity and war crimes. Such cases could help to clarify the normative basis for private sector activity in conflict zones or CRI.

Stronger research effort

The UK Govern ment should

• Support increased research into issues around arms proliferation, the role of the international private sector and CRI. While this report has managed to pull together a considerable amount of information from a wide range of different sources , accurate data on CRI is hard to come by and, in some cases, simply unavailable. Good quality policy -making depends on the quality of the data and analysis.

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This report represents the views of the authors and not those of the UK 69 Gover nment Appendix 1: UK Exports To African CRI 2000 – 2002 SIEL = Standard Individual Export License OIEL = Open Individual Export License

Country No. of SIELs Total v alue of SIELs No. of OIELs Equipment of particular concern Algeria 39 £17.5m 27 Components for: combat + military utility helicopters, transport aircraft Angola 67 £23.0m 13 Military cargo, utility + armoured all wheel drive vehicles, body armour Compon ents for: combat aircraft, combat helicopters, frigates, heavy + general purpose machine guns, torpedoes, naval mines, anti -ship missiles, corvettes, surface -to -air missile -launching equipment, weapons -control systems, small calibre artillery, mortars Bur kina Faso - - 1 - Burundi 0 <£250,000 0 -

Chad 0 - 4 - Congo 1 <£250,000 6 - Brazzaville Congo (DRC) 2 <£500,000 6 Military cargo vehicle Cote d’Ivoire 2 <£500,000 21 Body armour Components for: heavy + general purpose machine guns, small calibre ar tillery, combat aircraft, combat helicopters, mortars Djibouti 0 - 2 - Eritrea 13 < £2.0m 3 Body armour, military cargo vehicles Ethiopia 32 <£750,000 2 - Gabon 4 £4.5m 28 Components for: combat helicopter Ghana 21 < £2.0m 44 Sporting gun ammunition, smoke hand grenades, military helmets, body armour Components for: combat aircraft, combat helicopters, multi -role non - combat aircraft Guinea 0 - 6 - Guinea Bissau 0 - 1 -

This report represents the views of the authors and not those of the UK Gover nment 70 Kenya 103 £5.0m 65 Shotguns (13), semi -automatic pistol (1), sporting rifles (9) , small arms ammunition, body armour, stun grenades Components for: assault rifles , general purpose machine guns Libya 20 <£3.0m 5 Armoured all wheel drive vehicles Malawi 12 <£750,000 8 Goods coated or treated for signature suppression for military use , shotguns (2), sporting gun ammunition, sporting rifles (1), mortar training equipment; small + large calibre artillery training equipment Components for: military utility vehicles Mali 0 - 2 - Mauritania 0 - 4 Armoured all wheel drive vehicles Mozam bique 7 <£1.0m 4 Devices for initiating explosives Niger 0 - 4 Components for: military transport aircraft, military aero -engines Nigeria 78 £21.5m 24 Body armour, armoured all wheel drive vehicles, small arms ammunition, small arms training equipment sp orting rifles (12) Components for: combat aircraft, combat helicopters, large + small calibre artillery, heavy + general purpose machine guns, weapons control systems , frigate, torpedoes, naval mines, naval electronic warfare equipment, anti -ship missiles, surface -to -air missiles, mortars, corvettes, depth charges. Sierra Leone 13 <£8.5m 2 Armoured personnel carriers, body armour, general -purpose machine guns (15), small arms ammunition, devices for initiating explosives Somalia 6 <£500,000 2 Military car go, utility + engineer vehicles, body armour, devices for initiating explosives Sudan 11 <£750,000 2 Military cargo vehicles Swaziland 1 <£250,000 1 - Tanzania 47 <£20.0m 14 Shot guns (4), rifles (3), ground based radars, small arms ammunition, militar y cargo vehicles Components for: combat helicopter Uganda 12 <£750,000 2 Armoured all wheel drive vehicles, machine pistols (1) Zambia 16 <£5.5m 14 Sub machine guns (+400), semi -automatic pistols (+400), shotguns,

This report represents the views of the authors and not those of the UK Gover nment 71 rifles, military helmets, body armour, a ir weapons, small arms ammunition Components for: combat aircraft, combat helicopters

This report represents the views of the authors and not those of the UK Gover nment 72 Appendix 2 - List of Armed Conflicts in African CRI, 1989 -2001 , Table generated from List of Armed Conflicts in the World, 1989 -2001, States in Armed Conflict 2001 ,U psalla University, p.36. Location Incompatibility Opposition Organization Years with minor, intermediate armed conflict or war 1989 -2001 89 90 91 92 93 94 95 96 97 98 99 00 01

Algeria Government Islamic groups including FIS, GIA Angola Government UNITA Burundi Government CNDD -FDD Cameroon - Territory Cameroon -Nigeria Nigeria Central African Government Military Faction Republic Chad Government FARF, MDJT Congo Government FDP and Angola Democratic Government RCD, MLC Republic of Congo Djibouti Government FRUD Eritrea -Ethiopia Territory Eritrea -Ethiopia Ethiopia Territory EPLF, ONLF, OLF Guinea Government RFDG Guinea Bissau Government Military Faction Liberia Government LURD Mali Territory MPA, FIAA Mauritania - Territory Mauritani -Senegal Senegal Mozambique Government Renamo Niger Territory FLAA, CRA,UFRA,FDR,FARS Rwanda Government FPR, Opposition alliance Sierra Leone Government RUF, AFRC, Kamajors Somalia Government SNM, SPF,SSDF,USC Sudan Territory SPLM, NDA Uganda Government LRA

No conflict Years with minor armed conflict Years with intermediate armed conflict or war

This report represents the views of the authors and not those of the UK Gover nment 73 Note: An armed conflict is defined by the Uppsala Conflict Project as a contested incompatibility that concerns gover nment or territory or both where the use of armed force between two parties results in at least 25 battle related deaths. Of these two parties, at least one is the government of a state. Minor Armed Conflict: At least 25 battle related deaths per year and fewer than 1,000 battle related deaths during the course of the conflict. Intermediate Armed Conflict: at least 25 battle related deaths per year and an accumulated total of at least 1,000 deaths, but fewer than 1,000 in any given year. War: At least 1,0 00 battle related deaths per year.

This report represents the views of the authors and not those of the UK Gover nment 74 Abbreviations for Appendix 2 SNM (Somali National Movement) SPF (Somali Patriotic Movement) AFRC (Armed Forces Revolutionary Council) SPLM (Sudan People’s Liberation Movement) ANC (African National Congress) SSDF (Somali Salvation Democr atic Front) AZAPO (Azanian People’s Organization) UFRA (Union of Forces of the Armed Resistance) CNDD -FDD (National Council for the Defence of Democracy -Forces for UNITA (National Union for the Total Independence of Angola) the Defe nce of Democracy) USC (United Somali Congress) CRA (Coordination of the Armed Resistance) EPLF (Eritrean People’s Liberation Front) FARF (Armed Forces of the Federal Republic) FARS (Revolutionary Armed Forces of the Sahara) FDP (Democratic and Patriotic Forces) FDR (Democratic F ront for Renewal) FIAA (Islamic Arab Front of Azawad) FLAA (Air and Azawad Liberation Front) FIS (Islamic Salvation Front) FPR (Rwandan Patriotic Front) FRUD (Front for the Restoration of Unity and Democracy) GIA (Armed Islamic Group) LRA (Lord’s Res istance Movement) LURD (Liberians United for Reconciliation and Development) MDJT (Movement for Democracy and Justice in Chad) MFDC (Movement of the Democratic Forces of the Casamance) MLC (Congolese Liberation Movement) MPA (Azawad People’s Movement) NDA (National Democratic Alliance) ONLF (Ogaden National Liberation Front) OLF (Oromo Liberation Front) PAC (Pan Africanist Congress) POLISARIO (Popular Front for the Liberation of Sanguia el Hamra and Rio de Oro) RCD (Congolese Democratic Rally) RE NAMO (Mozambican National Resistance) RFDG (Rally of Democratic Forces of Guinea) RUF (Revolutionary United Front)

This report represents the views of the authors and not those of the UK Gover nment 75 Appendix 3 - African CRI and types of weapons used by government and non -state actors

All information dra wn from the International Institute of Strategic Studies: Armed Conflict Database (IISS 2004)

Table of Abbreviations

Categories Of Armed Conflict

There are three types of armed conflicts:

International armed border and territorial conflict: Involvin g governments in armed conflict over sovereignty and territory

Internal armed conflicts: Taking place between government forces and organised groups, which control sufficient territory to sustain concerted military operations. These conflicts can sometim es spill across international borders without being considered international conflicts between state parties.

Terrorism: Attacks involving one or more factions in significant armed opposition to a state. The intensity in violence in such attacks varies. Violence directly attributable to organised crime is not included.

Political Status

Examines whether the combatants are currently in conflict or in negotiations.

Active: Covers current conflicts which may vary from low -intensity (or intermittent) enco unters to high -intensity (or constant combat).

Ceasefire: Agreed by recognised leaders of disputants, but does not stand as a resolution to the conflict. Does not suggest that all conflict has stopped.

Peace Accord: Formal resolution of conflict ratifi ed by recognised leaders of disputants. In some cases, conflict may still persist. Examines whether the combatants are currently in conflict or in negotiations. The current status is displayed in a fact box.

Dormant: Applies to terrorist conflicts. Inact ive for the past 12 months.

Weapons

Small arms (SA): Revolvers and self -loading pistols; rifles and carbines; submachine -guns; assault rifles; light machine -guns.

Bladed Weapons (Bl wpn): Knives, bow and arrows, machetes.

Light weapons (lt wpn): Heavy machine -guns; hand -held under -barrel and mounted grenade launchers; portable anti -aircraft guns; portable anti -tank guns; recoilless rifles; portable launchers of anti -tank missiles and rocket systems; portable launchers of anti -aircraft missile systems; mortars of calibre of less than 100mm.

Artillery (arty): All types including heavy mortars, rocket launchers 100mm and above.

Armoured Fighting Vehicles (AFV): APC (with armament), armoured cars, light tanks, main battle tanks.

Armed Helicopters (AH): All types capable of delivering weapons. This report represents the views of the authors and not those of the UK 76 Gover nment Combat Aircraft (Cac): All types capable of delivering weapons.

Submarine (SS): Nuclear powered submarines, diesel powered submarines and midget submarines.

Principal Surface Combatant (PSC): Aircraft carrier s, cruisers, destroyers and frigates

Patrol and Coastal Combatant (PCC): All types of patrol craft, including corvettes

Coast Guard (CG): All vessels and aviation assets belonging to the Coast Guard

Improvised Explosive Devices (IED): Explosives, car bombs and suicide bombers.

Mines (M): Anti -personnel and anti -tank mines.

Weapons of Mass Destruction: ( WMD N) Nuclear, (WMD B) Biological, (WMD C) Chemical

This report represents the views of the authors and not those of the UK 77 Gover nment Types of weapons used by non -state Algeria parties and some identified sources of supply

Non State Parties: GIA, GSPC Equipped with a variety of small arms State Parties: Algeria (Gov. of) weapons but sti ll rely heavily upon bladed Type: Internal Armed Co nflict weapons, especially knives and machetes. Political Status: Active They possess mortars, Rocket Propelled Fatalities: 88,500 since 1992 Grenade (RPG) rocket launchers and Refugees: n.k. machine guns that have been taken from IDPs: >100,000 the army. The weapons themselves and the money needed to buy them have gen erally come from the Islamic Types of weapons used by government fundamentalist support base; either and some identified sources of supply sympathisers in Europe and especially in France, or from traditional sponsor The Algerian Air Force possesses the countries such as the Sudan and Iran. Unmanned Aerial Vehicle (UAV) Seeker , Mig -23 Flogg ers or Su -24s, ground -attack Table comparing types of weapons helicopters, such as the Mi -24 Hind or the held by State and non -State actors Mi -8 Hip . The Algerian Army maintains a significant force Armoured Personnel Types of Carriers and AIFVs comprising of BRDM -2 1992 - 2004 Weapons Recce vehicles, BMP -1/2s and a number of BTR -50. Artillery -wise, th ere is a varied WMD N force of towed and self -propelled pieces. WMD B The former include D -30s, D -74s, M -30s WMD C and M -1931/37 (all 122mm), a small number of M -46 (130mm) and some 20 M ML20s (152mm). Mortars range through IED M-37s (80mm), M -1943s (120mm) and M - CG 1943s (160mm). G round troops are PCC equipped with basic Assault Rifle (AR), either the AK/74 or the South African PSC R4/R5.They have also been equipped with SS some British -made Pilkington Optronics Cac Kite night -vision sights. This illustrates that aside from traditional sources of military AH hardware, such as the former Soviet arty Union, Algeria now obtains military AFV equipment from a number of sources, including Britain. Between 1996 and 1997 Blwpn Italian companies exported pistols, rifles lt wpn and ammunition worth 13 billion lire SA (approximately US $6m). Algeria received State Non -State large supplies of weapons between 1998 and 2000 shipments originated from the Ukraine, Belorussia or the Russian Federation. Comprising 27 T -72 Main Battle Tanks (MBTs) and 32 BMP -2 Armoured Infantry Fighting Vehicles (AIFVs). Fourte en Mi -24 Hind ground - attack helicopters and 36 Mig -29 Fulcrums , along with three Su -24 Fencer ground -attack bombers.

This report represents the views of the authors and not those of the UK 78 Gover nment comparatively light 23mm Anti -Aircraft Gun (AAGs) and 40mm Rocket Launchers (RLs), as well as heavier 60mm, 75mm, 76mm, 82mm and 88m mortars, 120mm medium -range field howitzers, and D -30 Angola and G6 155mm Self -Propelled Howitzers (SWHs). Its tanks are usually ex -Soviet T - 34, T -55s and T -62s, and it has a few Non State Parties: UNITA miscellaneous APCs. UNITA’s main rifles State Parties: Angola (Gov. of) are the American 12.7mm machine -gun Type: Internal Armed Conflict and the Russian -manufactured AKM. Political Status: Peace Accord Small arms, such as Chinese 12.7 Fatalities: >30,000 since 1992 machine guns, 20mm guns, RPK Refugees: 374,000 submachine guns, Heckler & Koch IDPs: >2,800,000 Gewehr 3 (G -3) and AK -47s. Its heavier infantry arms include M -72 grenade launchers, RPG -7s and other rocket Types of weapons used by government launchers. Former President Mobutu Sese and some identified sources of supply Seko of Zaire, Zambia, Congo -Brazzaville, Togo and Burkina Faso, have at various The Angolan Air Force uses Su -22 Fitter , times been identified as UNITA’s suppliers Su -24 Fence r and Su -25 Frogfoot , MiG - of arms and material. The UNITA weapons 21 Fishbed /23 Flogger combat aircrafts, as usually originated in China or in Eastern well as Mi -17 Hip H and Mi -24 Hind attack European countries and Russia, though helicopters. For transport purposes, it has South Africa and Zaire wer e also main C-130 Hercules planes, Antonovs and Mi - sources. The Stingers were obtained from 8 Hip helicopters. The government uses a the CIA when it supported UNITA against series of Soviet and R ussian tanks (T -54s, the communist government in the late 55s, 62s and 72s) and Armoured 1980s. Personnel Carriers (APCs), BMP -1s and BMP -2s. There are more than 70 types of Table comparing types of weapons mines in Angola, originating from at least held by State and non -State actors 20 different countries, but mainly the Types of former Soviet Union, Eastern European 1992 -2002 countr ies, Cuba and China. Portugal, the Weapons Czech Republic, Bulgaria, Slovakia, WMD N Russia and North Korea have sold the WMD B government Russian and ex -Soviet tanks and APCs. Russia has been the dominant WMD C contributor in airpower, while also offering M maintenance, repair and u pgrading IED services. The US has also provided a number of C -130s. Artillery comes from a CG group of countries, with Russia and the PCC Czech Republic the frequently sited PSC examples. Ukraine, Belarus, Poland, Spain, France, Brazil, South Africa and SS China have also s old weapons to the Cac Angolan government AH

Types of weapons used by non -state arty parties and some identified sources of AFV supply Blwpn lt wpn UNITA had an arsenal of portable Surface - to -Air Missiles (SAMs), Russian SA -7 SA Grail , SA -14 Gremlin and SA -16 Gimlet State Non -State missiles. Also Amer ican missiles, notably FIM -92A Stingers and FIM -43 Redeyes . Guns, mortars and artillery include

This report represents the views of the authors and not those of the UK 79 Gover nment Table comparing types of weapons Burundi held by State and non -State actors

Types of 1993 - 2004 Non State Parties: CNDD -FDD, FNL Weapons State Parties: Burundi (Gov. of) WMD N Type: Internal Armed Conflict Political Status: Active WMD B Fatalities: >213,500 since 1993 WMD C Refugees: 527,000 M IDPs: >400,000 IED CG Types of weapons used by government PCC and some identified sources of supply PSC SS The government forces retain the use of Mi -8 Hip helicopters and transport adapted Cac DC -3 Dakota transport ai rcraft. In terms of AH artillery, the army is equipped with arty Russian D-30 2A18M 122mm towed howitzers and BM -21 Grad ( Hail ) 122mm AFV Multiple Rocket Launchers (MRLs), 88mm Blwpn and 120mm mortars. The government lt wpn forces employ a collection of South African and FSU -supp lied Armoured Fighting SA Vehicles (AFVs). Tanzania, Rwanda or the State Non -State DRC are the main transit routes, while the main suppliers are the FSU and China. Before 1996, the US, France and other Western European countries all supplied arms to the Burundian government.

Types of weapons used by non -state parties and some identified sources of supply

Rebels have acquired similar small arms and heavy artillery, probably either stolen from government stocks or captured in the Democratic Republic of Congo (DRC). The rebel s use both SA -7 Grail and SA -16 Gimlet Man Portable Air Defence Systems (MANPADS). There has also been widespread use of grenades and splinter weapons. Muslim elements within the rebel forces have acquired rifles and Rocket Propelled Grenades (RPGs) from Sudanese rebels. Training for these weapons has also been supplied by the SPLA.

This report represents the views of the authors and not those of the UK 80 Gover nment government is alleged to have provided arms and money to the rebels. The conflict in the neighbour ing Democratic Republic Congo -Brazzaville of the Congo (DRC) may also have yielded some weapons, particularly explosives and grenades. Non State Parties: Cocoye, Ninja Militia State Parties: Congo Gov, Cobra Militia Table comparing types of weapons Type: Internal Armed Conflict held by State and non -State actors Po litical Status: Peace Accord Fatalities: >20,000 since 1997 Types of 1997 -2004 Refugees: 20,000 Weapons IDPs: >150,000 WMD N WMD B Types of weapons used by government WMD C and some identified sources M IED The Congolese Air Force employs Mi -24 CG fighters in an offensive capacity. SA -318s, SA -316s and SA -365s are used for PCC transportation. Mi -8s are multi -role aircraft, PSC having been adapted to carry the 7.62mm SS N AAT F1 general -purpose machine -gun. Cac Fixed -wing transport aircraft, such as G - 222s and An -26s, are used to move heavy AH equipment. The military’s main b attle tank arty (MBT) is the T -54/55. The BRDM 1 is used AFV for reconnaissance purposes. BTR Blwpn 50/60/152 variants are used for troop lt wpn transport and fire support. Support artillery is extensive, ranging from 76mm (M -1942) SA and 100mm (M -1944) to 130mm (M -46) State Non -State and 152mm ( D-20). BM -21s and 82mm, 81mm and 120mm mortars provide support for infantry units. Government infantry is armed with 7.5mm MAS 49/56 and M24/29 light machine -guns. In addition, it may carry 7.62mm NATO FN - FAL and CETME 58, AK47/AKM, RPD and RPK assault rif les. Close support weapons include 57mm M18s and RPG -7 grenade launchers. Sources of government weapons are varied, but certainly include China, Italy, the former Soviet Union and Ukraine, and, during the 1980s and 1990s, France. The latter supplied the SA series of helicopters. Italy supplied one G -222 and the Russian Federation some 20 T -54/55 MBTs.

Types of weapons used by non -state parties and some identified sources

Information on Ninja weaponry is scant. It is known that it has received small arms from government stocks; it is more than likely, therefore, that it has the same or similar rifles and light machine -guns to those mentioned above. The Angolan

This report represents the views of the authors and not those of the UK 81 Gover nment Table comparing types of weapons Cote D’Ivoire held by State and non -State ac tors

Types of 1999 -2004 Non State Parties: MPCI, MJP, MPIGO Weapons State Parties: Cote d’Ivoire (Gov. of) WMD N Type: Internal Armed Conflict Poli tical Status: Active WMD B Fatalities: >1,600 since 1999 WMD C Refugees: n.k. M IDPs: <1,000,000 IED CG Types of weapons used by government PCC and some identified sources of supply PSC

Alongside the small arms of the infantry SS and light weapons, such as 81mm and Cac 120mm mortars, the army also used AH armoured personnel carriers (M -3) and arty converted helicopters (SA -318 and SA - 319). Although the air force contained a AFV number of ground attack aircraft ( Alpha Blwpn Jets ) there was no confirmation that these lt wpn aircraft were used. The government forces purchased weapons from various SA suppliers, including South Africa, the State Non -State United States, the UK and France.

Types of weapons used by non -state parties and some identified sources of supply

Much of the insurgent activity relied on mobility, usually through th e use of jeeps and unarmed personnel carriers. The armaments used were largely light weapons – automatic rifles, such as the AK47, small -calibre mortars and portable rocket launchers. The sources of rebel arms vary for each group. The MPCI was originally a military battalion and was therefore able to use official military equipment. The western rebel groups, however, relied on illegal arms smuggling from Liberia and Sierra Leone.

This report represents the views of the authors and not those of the UK 82 Gover nment towed artillery pieces. However, far more DRC widespread is the use of 75mm and 105mm light artillery pieces. Equally, Uganda has 122mm and 76mm pieces Non State Parties: Interham we, MLC, and Rwanda 105mm and 152mm artillery RCD, Mayi Mayi pieces. Mortars are in widespread use State Parties: DRC, Angola, Burundi, amongst all parties in the conflict. The Namibia, Rwanda, Sudan, Uganda, most prolific being 82mm and 120mm Zimbabwe weapons of Soviet origin. The government Type: International Armed Conflict recently purchased mortars from Poland. Political Status: Ceasefire Fatalities: >204,000 since 1996 Grenades and splinter weapons are Refugees: 514,000 particularly sought after. MANPADS are IDPs: >4,000,000 used by both sides, specifically the SA -14 Gr emlin, SA -7 Grail, and SA -16 Gimlet. AK -47s, RPK 7.62mm (LMG) and PK Weapons used by the parties and some series 7.62mm (GPMG) seem to be the identified sources of supply weapons of choice for most participants. All sides in the conflict use arms supplied The government’s air assets are chiefly by primarily FSU, but also from Poland, used to maintain communication, they and other Eastern Bloc cou ntries, South maintain SU -25K+BM Frogfoot ground Africa, Pakistan, China, North Korea, attack aircraft (which they acquired from France and USA. Georgia in 2000) and Mi -24 Hind helicopter gun ships. I n support of the Table comparing types of weapons government Zimbabwe maintains PRC F - held by State and non -State actors 7s, Mi -35s Hind E helicopters, BN -2 Types of Islanders and the An -12 Cub. Angola 1996 -2004 chiefly uses its Mi -17 Fresco's and Mi - Weapons 24s.Namibia use Harbin Yunshuji Y12 s WMD N for transport and reconnaissance as well WMD B as Cessna O2 -A Skymasters. Recently the WMD C offensive capacity has been increased thanks to the acquisition of K -8 M Karakorum's from China. As for armour, IED the government forces have T -55/54s, CG PRC T -59s and T -34s. They also maintain antiquated Panhard M3s and M113s. PCC Zimbabwe has PRC T -59s and T -69s, PSC Type -63s and UR -416s. Angola utilises SS Russian T -55s and BTR 60/80/152s, and, for reconnaissance, BRDM -2s. Namibia Cac maintains T -54/55s and BTR -60s. AH arty The opposition rebel forces have no air assets of their own; however, their AFV regiona l allies do. Uganda utilises Mi -24s, Blwpn Bell 412, MiG -21Fishbeds and MiG -17s. ltwpn Rwanda has in its air wing MiG -21s and SA An -2s. The MLC in the north and the RCD (Goma) have access to BTR -40s and 152s State Non -State from Uganda and Rwanda respectively. Uganda and Rwanda both mai ntain ageing FSU equipment, mainly T -55s, BTR -60s and BRDM -2s. 14.5mm and 7.62mm machine guns/cannon are jury - rigged and mounted on jeeps and lorries. All sides, including the rebels, have access to artillery. The government and its allies deploy 152mm, 12 2mm and 88mm

This report represents the views of the authors and not those of the UK 83 Gover nment money and provided shelter and training to Ethiopia OLF personnel.

Table comparing types of weapons Non State Parties: ONLF, OLF held by State and non -State actors State Parties: Ethiopia (Gov. of) Type: Terrorism Types of 1994 - 2004 Political Status: Active Weapons Fatalities: 3,000 since 1994 WMD N Refugees: ??? IDPs: n.k. WMD B WMD C M Types o f weapons used by the IED government and some identified CG sources of supply PCC Aircrafts used include Cessna 401, De PSC Havilland DHC -6 Otter aircraft. Russian SS Mi -6 Hook , the Mi -24/35 Hind , the French Aérospatiale SA -316 Alouette III and the Cac Mi -8 Hip helicopters. Th ere have been AH reports of T -34/85 tanks providing fire arty support to government incursions into rebel held districts. In more widespread AFV use are armoured personnel carriers Blwpn (APC). The army employs BRDM -1/2 lt wpn amphibious vehicles for reconnaissance SA and BTR -60 for transport and close -fire support. The army operates 105mm M101 State Non -State and 75mm M116 P howitzers in a close - support role. The mortars used are 60mm M19; 81mm M29; 82mm M43 and 120mm M43. The standard Ethiopian assault rifle is the 7.62mm Type -56 Chinese sub - varian t of the AK -47/74. Other rifles used include the Italian 7.62mm Beretta BM 59, the US made M14 and in some cases the aged Lee -Enfield .303 carbine. In general the machine guns used are of former Soviet Union origin, the 7.62mm RPK series being the most pro lific. Nearly all army equipment has been purchased in the 1980s from the USSR, which supported the then communist regime.

Types of weapons used by non -state parties and some identified sources of supply

To counter the threat from the air, the rebels are known to use SA -7 Grail man - portable anti -air missiles (MANPADS). There have also been reports of rebel soldiers capturing 14.5mm ZPU -1 anti - aircraft guns. The OLF receives funding from several sources, the majority of which cannot be confirmed. However, in the past the Libyan, Kenyan and Eritrean governments have all supplied arms,

This report represents the views of the authors and not those of the UK 84 Gover nment Table comparing types of weapons Namibia held by State and non -State actors

Type s of 1998 -2004 Non State Parties: Caprivi Liberation Weapons Army WMD N State Parties: Namibia (Gov. of) Ty pe: Terrorism WMD B Political Status: Active WMD C Fatalities: <100 since 1998 IED Refugees: 2,500 IDPs: n.k. CG PCC PSC Weapons used by the government and SS some identified sources of supply Cac The Namibian Defence Force (NDF) is far AH superior in terms of troop numbers and arty armaments. Since 1999, about one - AFV quarter of the NDF’s total force has been based in the Caprivi Strip, increasing Blwpn regional security by, for instance, providing lt wpn armed escorts along the trans -Caprivi SA highway. Much of Namibia’s sophisticated State Non -State weaponry, such as recently a cquired attack helicopters (Mi -8s and Mi -24s), main battle tanks (T -34s and T -55s) and anti -tank guns (57mm and 76mm calibre) remains useless against tiny bands of CLA insurgents. Nonetheless, the NDF is able to utilise other armaments, such as Casspir and Wolf armoured personnel carriers, BRD -2 reconnaissance vehicles and small arms. There have been no reports of light weapons or towed artillery being used in the conflict, although they are part of Namibia’s arsenal. The US has supplied Namibia with the ma jority of its arms; other important deals have been signed with Canada, China, Libya and Russia.

Weapons used by non -state parties and some identified sources of supply

CLA weaponry consisted entirely of small arms: AK -47 assault rifles appear to be the weapon of choice, with G -3 rifles and shotguns also used. Given the small number of arms required, it is likely that they are procured through personal deals with UNITA rebels.

This report represents the views of the authors and not those of the UK 85 Gover nment Nigeria Table comparing types of weapons held by State and non -State actors

Non State Parties: APC Types of 1999 -2004 Azeri, Tiv Militia, OPC Weapons State Parties: Nigeria (Gov. of) WMD N Type: Internal Armed Conflict Political Status: Active WMD B Fatalities: <7,000 since 1999 WMD C Refugees: 15,000 M IDPs: >750,000 IED CG Types of weapons used by government PCC and some identified sources of supply PSC

When deployed, the army and police are SS privy to an advanced arsenal utilising an Cac array of rifles and small arms, common AH examples being 9mm pistols and arty submachine guns, 5.56mm assault rifles and light machine guns. Helicopters are AFV used, but only for surveillance and Blwpn transport. Fol lowing the lifting of military lt wpn sanctions on 1999, the US provided the Nigerian army with training and hardware, SA although most of this is to be used in State Non -State peacekeeping operations. The UK and the US have also cooperated with Nigeria in modernising its police fo rce so that it can counter all types of violent crime.

Types of weapons used by non -state parties and some identified sources of supply

Limited access to conventional military equipment means ethnic groups exploit more primitive armaments, including bows and arrows, machetes and spears. Although firearms are also used, these are usually old or locally made. A significant increase in the fatality rate comes with the use of submachine guns or pump -action or automatic guns. Given the legacy of past and prese nt conflict in West Africa, there is a regular flow of weapons that, sometimes, find their way to ethnic militants in Nigeria. The porous Idiroko border between Benin and Nigeria is particularly susceptible to arms smuggling. Some weapons are also stolen f rom the army or police.

This report represents the views of the authors and not those of the UK 86 Gover nment Appendix 4: Export licences granted by and arms exports from EU member states to Africa, 2002

Country No of Licenses Value of Licenses Value of Exports (€) (€) Algeria 46 46651144 14993411 Libya 5 332068 0 Morrocco 127 1039318600 7560341 Tunisia 92 15972525 216373 Total N.Africa 270 1102274337 22770125

No of Licenses Value of Licenses Value of Exports Country (€) (€) Angola 37 23907604 1561200 Benin 5 16717 47700 Botswana 65 24412833 628511 Burkina Faso 2 91782 0 Cameroon 31 1977085 0 Cape Verde 100 Central African Republic 544 93281427 11336700 Chad 9 229126 185273 Congo (Republic of) 5 426157 0 Congo ( Democratic Rep ublic of) 10 26986 0 Djibouti 5 599361 0 Equatorial Guinea 6 1590000 0 Eritrea 14 2495830 60000 Ethiopia 19 5403963 0 Gabon 35 22065671 890 Ghana 38 1835997 2579125 Guinea 500 Guinea -Bissau 100 Ivory Coast 20 1010860 0 Kenya 65 2729930 107800 0 Lesotho 200 Madagascar 200 Malawi 14 359874 0 Mali 300 Mauritania 8 4289 15227 Mauritius 25 2514906 47700 Mozambique 5 31954 0 Namibia 49 633668 0 Niger 300

This report represents the views of the authors and not those of the UK 87 Gover nment Nigeria 50 13951588 380900 Senegal 11 313322 0 Seychelles 200 Sierra Leone 3 34583 0 Somalia 4 24298 0 South Africa 480 235233754 48085914 Sudan 6 5637 0 Swaziland 100 Tanzania 76 224164 27000 Togo 7 296441 0 Uganda 3 69324 0 Zambia 26 253968 104472 Zimbabwe 3 168020 0 Sub -Saharan Africa Total 1700 436221119 66138612

This report represents the views of the authors and not those of the UK 88 Gover nment Appendix 5 -

Flags of Convenience Jurisdictions

Antigua and Barbuda Jamaica Bahamas Lebanon Barbados Liberia Belize Luxembourg Bermuda (UK) Malta Bolivia Marshall Islands (USA) Burma Mauritius Cambodia Mongolia Cayman Islands Netherlands Antilles Comoros Panama Cyprus Sao Tome and Principe Equatorial Guinea St Vincent German International Ship Register (GIS) Sri Lanka Gibraltar (UK) Tonga Honduras Van uatu

(International Transport Workers Federation 2004) According to the International Transport Workers Federation, ‘where beneficial ownership and control of a vessel is found to lie elsewhere than in the country of the flag the vessel is flying, t he vessel is considered as sailing under a flag of convenience`.

This report represents the views of the authors and not those of the UK 89 Gover nment Appendix 6 – False Guinean end -user certificate

This report represents the views of the authors and not those of the UK 90 Gover nment Endnotes i For an indepth discussion of the impact of small arms on pastoral conflict please refer to Saferworld’s Report by Mkutu (2003) ii DFID has recently launched a res earch project to examine the links between arms availability, armed violence and poverty. Findings are not yet available but this will be an important source of information on this issue iii Although figures fluctuate, it is estimated that gun crime in the UK has doubled over the past ten years and increased by 35% in 2002 (The Guardian, 10 January 2002). The UK National Criminal Investigation Service (NCIS) threat assessment 2002 states that there appears to have been an increase in firearms traced to Centr al and Eastern European countries, although the scale of these imports is not clear. However, anecdotal evidence suggests the situation is worsening. The Metropolitan Police Authority (MPA) Gun Crime Scrutiny report (2004) notes that Turkish groups control ling drug distribution in North London have access to and increasingly choose illegally trafficked firearms sourced in the Balkans. iv The SPLM has ‘used small numbers of artillery and tanks in direct assaults on government strongholds’ (Wezeman 2004: 39) T he most likely suppliers to the SPLM are neighbouring countries like Uganda. v In 2002, the UN adopted resolution 1425 prohibiting the financing of arms acquisition and deliveries and the direct or indirect supply to Somalia of “technical advice, financia l and other assistance, and training related to military activities.” (UN Panel on Somalia 2003:15). Despite the declaration of a ceasefire in October 2003 and the continuing reconciliation process, Somalia is subject to ongoing violations of the arms emba rgo established by UNSC Resolution 733 in 1992. A report presented by the Panel of Experts shows a continuous influx of small quantities of weapons and ammunition that feed the local open arms markets and faction leaders' warehouses in Somalia. vi “All othe r European” includes, for example, other EU member states, accession states, Balkan states and states of the Former Soviet Union excluding Russia. China was also identified as a major supplier, with deliveries of $400 million during 1995 -1998 and of $100 million during 1999 -2002, and transfer agreements worth $500 million during 1995 -1998 and $800 million during 1999 -2002. vii Note that non -US figures from the CRS are rounded to the nearest $100 million, so zero readings do not necessarily indicate an absenc e of deliveries. viii The figures from the German annual report, which appear in Deutschmarks, have been converted to British pounds using a 31 December 2001 exchange rate. ix Foreign Military Sales: New and used weapons, spare parts, and related services purc hased directly from the US government by foreign governments, Direct Commercial Sales: Transfers negotiated between the manufacturing company and the foreign buyer, and approved by the Department of State through the issuance of an export license. x Please refer to Country Reports on Human Rights Practices in Kenya, Ghana and Nigeria, US Department of State 2003 xi Foreign Military Financing (FMF) refers to congressionally appropriated grants given to foreign governments to finance the purchase of American -made weapons, services and training. Many of the countries connected to the war on terrorism are included within FMF. xii See also (International Crisis Group 2003:1)‘Moldova: No Quick Fix, International Crisis Group’, ICG Europe Report No. 147, 12 August; (L angton 2003) ‘Security Threats Facing an Enlarge EU’, presentation at a seminar on ‘EU -Belarus co -operation to increase security in a wider Europe’, held in Warsaw, Poland, 24 –25 November 2003 (see Moldova section of SEESAC 2004). xiii This also creates airp orts of convenience (UN Panel on Liberia 2001:63) xiv One case uncovered by the UN experts describes how machine guns for Uganda that should have been dispatched back to Slovakia entered Liberia via an Egyptian arms brokers using a forged EUC for Guinea (UN Panel on Liberia 2001:.39) xv Anti -Terrorism, Crime and Security Act (2001), Part 12, Bribery and Corruption, Cl 109 xvi Connelly -v- RTZ Corporation Plc [1996] 2 WLR 251 xvii T he US and Norway, for example, have provided considerable support for the destructio n of surplus weapons by Romanian and Bulgaria.

This report represents the views of the authors and not those of the UK 91 Gover nment xviii More information on the modalities that should be included can be provided. EUCs should be supplied by the exporting state and should use unique serial numbers on certificates; and, originals should be retur ned to the exporting government and verified.

This report represents the views of the authors and not those of the UK 92 Gover nment