How to Destroy a War Economy

Throughout history, war may have been hell, but for small groups of conflict profiteers it has also been very lucrative. Today’s deadliest conflicts in Africa — such as those in Sudan, South Sudan, Somalia, northern Nigeria, and the Democratic Republic of the Congo — are sustained by extraordinary opportunities for illicit self-enrichment that emerge in war economies, where there is a visible nexus between grand corruption and the instruments of mass atrocities. State armies and rebels use extreme violence to control natural resources, labor, and smuggling networks. Violence becomes self-financing from pillaging, natural resource looting, and the theft of state assets with connections that extend to New York, London, Dubai, and other global financial centers.

During the final year and a half of his presidency, President Barack Obama has a real opportunity to make a difference in helping to stop these wars — a cause he committed to during his recent trip to Africa. “If African governments and international partners step up with strong support, we can transform how we work together to promote security and peace in Africa,” Obama said in a July 28 speech in Ethiopia. He also threatened consequences for those who are unwilling to make peace. Speaking on Aug. 4 about a peace deal aimed at ending the South Sudan war, he warned that the United States would have to “recognize that those leaders are incapable of creating the peace that is required” and find a new way forward if the country’s warring leaders miss an Aug. 17 deadline. But if the war economies that keep them going are not addressed, peace processes and counterterrorism efforts like the ones he focused on in South Sudan and Somalia during his trip stand little chance of success.

To disrupt and dismantle these war economies, a transnational effort led by the United States is needed to trace, seize, and return the ill-gotten gains of the networks of perpetrators and facilitators who fund and profit from these conflicts. Ultimately, the incentives for financially benefiting from violence and mass atrocities need to be fundamentally altered through a comprehensive strategy of financial pressure that provides the necessary leverage to drive the parties to the fundamental compromises to give sustainable peace a chance. George Clooney and I have created a project, The Sentry, to help do just that. A collaborative effort between financial investigators, analysts from the impacted regions, field researchers, and policy advocates, The Sentry is focused on exposing and undermining the financial networks of perpetrators, facilitators, and enablers who benefit from war.

In these hijacked African states, leaders use networks of enablers and financiers for personal enrichment and as a means to stay in power. Arms dealers, ivory traffickers, gold and diamond smugglers, minerals dealers, and others collude with government officials and rebel warlords — as well as, at times, terrorist networks — to maximize profit for a narrow few. Technically savvy and skilled at exploiting legitimate systems of finance, trade, and transport — as well as money laundering, regulatory and sanctions evasion, disguised beneficial ownership, diversion of state resources and assets, security sector fraud, and offshoring assets — these networks have remained largely untouched by law enforcement, regulation, or international sanctions. The joint African Union/United Nations High Level Panel on Illicit Financial Flows from Africa, chaired by former South African President Thabo Mbeki, estimated that Africa loses $50 billion annually because of this kind of graft.

Instability and the absence or subversion of the rule of law allow the biggest guns to control and profit from illicit economic activity, which would in a normal state operate under a legal framework and in the formal economy. Deadly violence serves multiple interests, and the states of emergency that rulers disingenuously declare in response to war allow them to further consolidate power, repress civil society and opposition, and enhance control of the spectacularly profitable illicit economy.

Political power and access to wealth and opportunity are so interlinked in hijacked states that it is difficult to separate greed from grievance in assessing motivations for conflict. Root causes involve a deadly cocktail of economic opportunism combined with social cleavages. And as war economies evolve and conflicts become more protracted, armed groups can fragment, especially if states employ divide-and-conquer military strategies, as has been seen in Sudan, South Sudan, Somalia, Congo, and other deadly conflicts in Africa.

Some states can have multiple, competing kleptocratic networks — “government officials, private-sector actors, and organized criminals … represented in a single integrated network” of grand corruption, according to Sarah Chayes of Carnegie Endowment for International Peace — which can lead directly to civil war or to the carving out of violent local fiefdoms who control the resources of the area. Somalia, which has struggled against the militant Islamist group al-Shabab, has been the most acute example of this phenomenon: the state totally collapsed in 1991 and the country was without a formal, internationally recognized government for two decades afterward. But it is also evident in South Sudan, eastern Congo, and the Central African Republic, among others, where competing armed groups commit horrible atrocities and violently pursue the spoils of a perverted state. Natural resources, wildlife, land, forests, and drug cultivation are all the subject of violent contestation.

Given the profitability of conflict and mass atrocities, the United States and Europe must focus on making war more costly than peace. People who benefit from war economies abound in peace talks and often view themselves as losing out economically in a negotiated settlement. Therefore, peace efforts require an emphasis on conflict transformation, where war economies must be dismantled and the institutions of the hijacked state, often predatory going back to the colonial period, must be completely reformed to fulfill their intended purpose. This is even more difficult in countries where natural resources have provided huge corruption opportunities.

International policies must focus more overtly on changing the cost-benefit analysis from war to peace. This has been the case in a number of places, including the way the Kimberley Process removed blood diamonds from the global supply chain and helped contribute to the end of conflicts in Sierra Leone, Liberia, and Angola.

As long as conflict is profitable, it will remain harder to end. Peace will have a chance only when the critical pillars of the war economy are addressed, in particular by creating serious consequences for those financing and facilitating the armies, militias, insurgencies, and terrorist groups that are devastating this region. The economic supply chains fueling conflict and the commission of mass atrocities must as a matter of policy be disrupted and dismantled as a means of altering incentives towards peace.

Without impacting the greed-driven calculations at the negotiating table, the Obama administration’s post-trip support for peace processes like the one in South Sudan will have little success in ending Africa’s deadliest conflicts. Dismantling the financial networks that enable and benefit from atrocities and creating a cost for profiting from conflict will allow other essential tools — such as diplomacy, accountability measures, state-building assistance, and peacekeeping — a better chance of success. In the end, anyone involved in war crimes, from direct perpetrators in war zones to financial enablers in the boardrooms of Europe, Asia, and America, should be denied the proceeds from those crimes.

Photo credit: CHARLES LOMODONG/AFP/Getty Images

Corrections, August 10, 2015: Thabo Mbeki is a former president of South Africa and is the chairperson of the High Level Panel on Illicit Financial Flows from Africa. A previous version of this article introduced Mbeki as president. The panel is a joint effort between the African Union and the United Nations. A previous version of this article did not mention the United Nations’ role. The panel is known as the High Level Panel on Illicit Financial Flows from Africa. A previous version of this article referred to it as the Panel on Illicit Financial Flows from Africa.