License to deal: how Uncle Sam helps weapons merchants arm the world

License to deal: how Uncle Sam helps weapons merchants arm the world – includes related article

Deborah Lutterback

The boxes are labeled “above-ground swimming pool” or “airconditioning equipment” and have innocuous sounding destinations like a ministry of eduction or a children’s hospital in some other part of the world. What these boxes contain, however, are the arms that end up in munitions depots from Baghdad to Bosnia.

Just as America’s streets are bristling with weaponry, so is the global market-place. From the American-bought hand-gun that killed a Mexican presidential candidate this year to the American-made night vision equipment used by Iraqi forces during the Persian Gulf War, weapons of every variety are moving undetected across U.S. borders.

Here in the United States, violence-weary Americans have begun standing up to the once all-powerful gun lobbies. Although the Clinton administration has made gun control a centerpiece of its crime control package, it is actively promoting weapons exports as an economic panacea, experts say.

In fact, the same administration that highlights domestic arms control is rapidly deregulating the international arms market. As Congress reconsiders the Export Administration Act, which expired in June, the Clinton administration has offered proposals to make it easier to sell so-called dual-use items, ranging from machine tools to computers. These goods were restricted in the past because they can be used to make weapons of mass destruction. The White House, however, is now asserting that many of these high-tech electronic devices and chemicals are already widely available on the world market and that export restrictions merely handicap U.S. manufacturers.

Inside the administration, Commerce Secretary Ron Brown, whose agency helps regulate the arms industry, has pushed to loosen restrictions of dual-use exports. While some argue that Brown’s role as both industry advocate and regulator represents a conflict of interest, Brown says his policy “strikes the critical balance between nonproliferation concerns and economic interests.”

Critics of America’s arms export policy point to three problems. On the simplest level, our borders are minimally patrolled, making weapons smuggling an easy and lucrative pursuit. On the regulatory side, the licensing process designed to monitor arms exports is filled with loopholes that allow illegal arms dealers to circumvent the law. And against this backdrop of permeable borders and laissez faire licensing stands a foreign policy that puts U.S. economic interests ahead of arms control, a policy that in the past has resulted in U.S. troops facing an enemy armed with American-made weapons.

Fewer than 500 of the Customs Service’s 18,000 employees are detailed to watch exports along the nation’s borders, says Richard mercier, director of the Strategic Investigations Division of the Customs Service. That compares with some 4,000 agents on patrol for the Immigration and Naturalization Service (INS). As former Customs chief William Von Raab explains, “It has always been anathema in the United States to somehow prohibit stuff from going out, and so I must say it was always very difficult to enforce the export [laws].” The lion’s share of Customs’ resources focus on illegal imports. “With all the inspectors at the border looking at drugs that are coming in, very few people are looking at what is going out,” says a Customs agent. “We don’t have the time or the manpower.”

There are also the legal hurdles. The Commerce and State departments share responsibility for the arms trade, screening export applications to ensure they pose no threat to national security. Each year they grant more than 75,000 licenses for weapons, weapon parts, equipment used to make weapons and items ranging from high-speed computers to ballistic missiles.

The licensing process is supposed to serve as a key checkpoint to prevent violations of the Export Administration Act, which prohibits arms sales to terrorist nations, and the Arms Export Control Act, which controls arms exports in general. The process has been deemed “haphazard and often ineffective” by numerous inspectors general’s offices, which investigate government agencies. “This bungling would be one thing if you were talking about rice exports, but this stuff kills people,” says an aide to a committee overseeing arms exports.

The system’s inadequacies became painfully clear after the Gulf War, when United Nations weapons inspectors found U.S.-manufactured weapons that had been legally sold to Iraq. But these discoveries have not produced any tightening in U.S. arms control policy.


Even a single American-supplied weapon can change an entire contry’s history. Luis Donaldo Colosio, the 44-year-old heir-apparent to the Mexican presidency, was killed in March by two bullets fired from a .38-caliber Taurus. The gun was originally purchased in 1977 by a security firm executive in San Francisco and had crossed the Mexican border some time later without a legal trace, say authorities from the Bureau of Alcohol, Tobacco and Firearms (BATF).

Yet the problem of illegal arms exports extends far beyond handgun smuggling. Every year $2 billion to $10 billion in illegal arms are traded, experts say, the demand for them fueled by regional conflicts around the world.

While the legal arms trade provides countries like Norway with the weapons they need, other customers must resort to the black market. The Justice Department’s log of Significant Export Control Cases provides a glimpse into the world of illicit arms. The Provisional Irish Republican Army, factions attempting to overthrow the government of Trinidad, and Iraqi interests seeking assault rifles and grenade launchers all made Justice’s list of would-be illegal arms buyers.

Each year federal prosecutors secure a modest number of convictions for arms export violations, a fact experts and Customs agents say reflects both the difficulty in uncovering these cases and the scant resources devoted to policing illegal arms exports. Far more illicit arms get through than get stopped.

In 1992, $727 billion of goods were shipped out of the United States, everything from dishwashers to ari-planes. While Customs cases resulted in 4,844 convictions for narcotics and dangerous drug smuggling, there were just 21 for Arms Export Control violations. Agents estimate that they stop only 10 percent of the illegal drugs that come into the country — and less than 10 percent of the illegal weapons that get out.

“If you want to send a weapon, you put it in a box and you mark it car parts,” one agent says. If this sounds like hyperbole, consider a shipment of 65 revolvers, handguns, machine pistols and ammunition that was passing through Chicago’s O’Hare International Airport en route to Croatian forces in the Balkans. Customs officials decided to inspect the crates, which were marked “swimming pools,” when it seemed that shipping costs exceeded the declared value. At trial it was learned that some 235 of the weapons had already made it out of the country.

While Customs agents may know an assault rifle when they see one, they can-not always recognize high-tech weapons. If a package has been mislabeled, Customs officials are hard pressed to distinguish between a “ship’s gyroscope or [a detonator for] an atomic bomb,” says Von Raab. This is particularly disturbing given the demand for high-tech items like missile nosetips, chemical compunds used in cluster bombs, spare helicopter parts, TOW missile launchers, night vision devices and high-speed computers. Such illegal transfers may be all but untraceable, experts say, at least until the weapons have been put to use.

In the midst of the Gulf War, Allied forces were surprised by signs that Iraqi forces were using night-vision equipment. After the war, a U.S. Customs investigation revealed that U.S.-manufactured night-vision equipment had been illegally diverted to Iraq. From 1988 through 1990, a Dutch company called Delft obtained State Department licenses for components to build a factory that would manufacture night-vision equipment for sale to the Dutch and Indian armies. Instead, those components were illegally sold to Iraq and Jordan.

Customs officials say they are only one link in the arms control chain. As Customs’ Mercier explains, “Our job is to enforce the law as far as what other people say should be controlled. The United States Customs [Service] doesn’t decide what should go out. We only decide if it applies to the criteria that are set by others, the regulatory agencies and the licensing agencies.”


The current regulatory framework has its roots in the 1960s. The policy of sending arms instead of troops was born during the Vietnam War and later produced an arms export explosion. This conspicuous reliance on arms exports led Congress to pass the Export Control Act of 1976, but day-to-day control of arms exports has been essentially left to the Commerce and State departments. It is this process that persistently draws criticism.

When a business wants to export arms, it must get an export license from either State or Commerce. If the item is on the State Department’s munitions list, which includes everything from nuclear triggers to Patriot missiles, State issues the license. Dual-use items, such as computers with both civilian and military applications, are licensed by Commerce. It takes an average of four days to secure a license, according to inspector general audits.

When Congress examined the export licensing process in the mid-1980s, a congressional aide described the State Department’s operation as akin to “a rabbit warren with licenses stacked everywhere,” according to William Hartung’s And Weapons For All. Sen. David Pryor (D-Ark.), one of the leading critics of the process, characterized State’s licensing work as “shuffling paper,” not “regulating.” Since then, the State Department’s licensing branch has been relocated and been renamed. But problems persist.

A key factor in determining whether a weapon can be exported is its destination. The State Department keeps running lists of terrorist nations where no arms can go, and so-called “countries of non-proliferation” where arms exports are limited. As Edward Laurance, a professor at the Monterey Institute of International Studies, has explained, “Since all of the participants in this trade are aware of the prohibited countries, the object is to get a country on the approved list to certify that equipment is for them, not [a banned] country. This has created a cottage industry in the trading of either forged documents (entries forged on blank forms that are obtained) or authentic end-user certificates signed by an official of the country.” These documents have a street value of at least $100,000, Laurance says.

One of the best known cases of this kind of diversion occurred in the mid-1980s when brothers Ronald and Barry Semler, owners of the Los Angele-based trading firm Associated Industries, shipped 87 Hughes helicopters to North Korea. The Semlers altered documents that led Hughes to believe that the helicopters were bound for Nigeria and several European countries, according to Laurance. “In reality, however, the shipments traveled a tortuous course. For example, 15 helicopters were shipped to Antwerp, trucked to Rotterdam, and loaded onto a soviet merchant ship supposedly bound for Hong Kong that actually took the helicopters to North Korea.” The scheme was exposed in 1985 when a shipment through Japan prompted an investigation.

“Taken from start to finish, the helicopter incident shows how the new gunrunning works: through the corruption of legitimate corporations, the exploitation of differing national restraints on arms sales and the connivance of hostile governments. The deal was no isolated event, but a small part of a large and growing problem — the illegal export of American weaponry to the Third World,” Laurance said.

For years the United States relied on nothing more than assurances from foreign governments that they would not “re-transfer” sensitive items and technologies. But such agreements are clearly inadequate without verification. A computer, for instance, can be legally shipped to Italy, but once it arrives in Rome, smugglers can relabel it and send it to Libya, which is on the prohibited list.

A 1992 inspector general’s audit documented this type of problem. It “identified instances where U.S. items and technology were retransferred or were used in violation of the assurances.” The unclassified version of the report did not name the countries that failed to comply. In one instance the State Department knew that a country systematically violated U.S. laws through diversion yet continued to grant it licenses.

Similarly, the inspector general’s audit found problems with State’s selfprescribed “end-use verification mechanism,” designed to ensure that weapons were not diverted once they left the United States. The system under fire was the State Department’s Blue Lantern program, implemented in 1990. Under Blue Lantern, State Department officials were supposed to conduct pre-license and post-shipment checks of export applicants, and designate overseas officials to conduct end-use inspections.

State cabled all foreign posts requesting that they set up Blue Lantern offices, but “did not describe the type of activities required or define the responsibilities of these personnel,” the inspector general reported. “The cable did not explain the intended scope of the program, how posts were to deal with foreign-country concerns, what end-use check mechanisms were to be established, and other relevant information.” The report found that Blue Lantern officers often had no inspections training, and passed on their duties to Customs.


Instead of reinforcing the infrastructure to monitor arms exports, both the Bush and Clinton administrations have addressed these regulatory headaches by reducing the numbers of items that need to be licensed.

The Bush administration, arguing that the nation’s licensing laws often carry an unnecessary burden for American businesses, drastically cut back on the kind of items that need a license. While the Commerce Department issued 65,658 dual-use licenses in 1989, that number dropped to 18,839 in 1992, largely because of changes in licensing requirements.

The Clinton administration has adopted a similar policy. “By liberalizing licensing requirements on items that routinely are granted licenses, we will concentrate our export control efforts on denying technologies that still make a difference to the development of dangerous arms,” said a White House statement released in March.

But easier licensing doesn’t make exported weapons any less dangerous. Just as a typewriter still functions although it has been largely replaced by the computer, likewise technologically outdated weapons are still dangerous, says a congressional aide.

In addition, although a high-speed computer may be an essential component for running a power plant, it is also needed to build certain nuclear weapons. Thus, the aide says, if a country wants to build weapons its government will declare: “We want [the computers] for weather forecasting.”

The rationale for decontrolling licensing boils down to money. Arms manufacturers say export controls hurt businesses and cost jobs. “A lot of companies, whether they were being sincere or insincere, always complained that [the Export Administration Act was] adversely affecting their ability to compete abroad,” says Von Raab.

Defense cutbacks intensify these complaints, leading the arms industry to use what William Hartung calls “job blackmail” to push Congress to support exports. “The trump card in the arms industry’s lobbying arsenal has nothing to do with national security, the balance of power, or how U.S.-supplied weapons end up being used in areas of conflict,” Hartung writes in And Weapons For All. “When all else fails, the most convincing argument in favor of a major arms sale can be stated in one word: jobs.”

One of the most obvious lobbying efforts on this front was mounted in 1992 by McDonnell Douglas, which was seeking approval to sell about $9 billion worth of F-15 fighters to Saudi Arabia. McDonnell Douglas launched a campaign that produced more than 20,000 letters to members of Congress, reminding them that the F-15 had 2,070 suppliers in 345 congressional districts in 46 states, Hartung says. Company officials also distributed brochures promising the creation of some 40,000 high-skilled jobs. The effort paid off. Not only did President Bush support the plan during the fall campaign, so did then-candidate Clinton.

But a Senate Governmental Affairs Committee report issued last fall undercut the jobs argument. More than 97 percent of U.S. exports require no licenses, according to the report. In fact, less than one percent of one percent of the goods exported from this country are blocked by arms control restrictions. Further easing of export controls would “stimulate proliferation far more than our economy,” Committee Chair John Glenn (D-Ohio) said in a study.

But with a smaller domestic U.S. military budget, arms makers are increasingly dependent on overseas sales. Last year the industry exported a record-high $34 billion in weapons. “A lot of that has to do with very aggressive government and industry lobbying,” said arms trade expert William Hartung. Arms makers know how to make themselves heard; in the ’92 election cycle “leading arm exporters made $4 million in contributions to various members of Congress, and I think that buys them a great deal of access,” he says.


Arms control advocates hoped President Clinton would provide a change in direction. In a postelection press conference, he said, “I expect to review our arms sale policy and to take it up with the other major sellers of the world as part of a long-term effort to reduce the proliferation of weapons of destruction in the hands of people who might use them in a very destructive way.”

This policy seemed to be echoed by William Perry, then deputy secretary of Defense, who prohibited any direct participation of the Department of Defense in the 1993 Paris Air Show, the arms industry’s international trade bazaar. In 1991, the Bush administration had sent veterans of Operation Desert Storm to peddle weapons. After some members of Congress balked at paying soldiers to serve as salespeople, Defense Department officials decided to stay on the sidelines in the future.

But at the ’93 air show, Commerce Secretary Brown officially opened the U.S. pavilion. “The prsident is committed to moving beyond the arm’s-length relationship that has too long existed between the public and private sectors,” he said. “We will work with you to help you find buyers for your products in the world marketplace, and then we will work to help you close the deal.”

This aggressive promotion of arms sales focuses on short-term economic health at the expense of long-term global security, says Rep. Henry Gonzalez (D-Texas), who uncovered rampant abuses of the export system in his ongoing investigation of U.S. policy with Iraq. Commenting on the U.S. role in helping to arm Iraq, Gonzalez says, “I don’t think the country has learned anything.”


In the 1980s, trade policy was used as a surrogate for foreign policy in U.S. relations with Iraq. This policy produced “a case study in the dangers of failing to stop arms proliferation,” according to Gonzalez.

His House Banking Committee investigation revealed that out of 771 export licenses granted to Iraq, worth $1.5 billion, Commerce conducted a follow-up investigation of only one shipment.

When the Commerce Department finally released information about the sales to the banking committee, it showed that changes were made to more than 60 export licenses for sales to Iraq. A 1992 inspector general’s report found that on five licenses the phrase “vehicles designated for military use” was changed to “commercial utility cargo trucks” or “vehicles.” The total value for the licensed trucks was more than $1 billion.

In the end, Gonzalez said, while the United States may not have supplied Iraq with nuclear weapons, it certainly provided it with the means to develop them. “Did we sell Iraq bombs? Maybe not,” he told the Senate Banking Committee in 1992. “But it is clear that we sold Iraq the equipment and the know-how needed to make conventional weapons, and equipment that was clearly useful in developing nuclear bombs and long-range ballistic missiles.”

Gonzalez’s revelations, not to mention the Gulf War, might have resulted in tightening of export policies. That has not been the case. “I don’t think anything has changed,” he says. “I think the current administration is more concerned about ensuring U.S. firms access to export markets than weapons proliferation.”

But William Hartung says, “One of the unintended lessons of Iraq is that some of these regional tyrants learned if you are going to put yourself in a situation where you might have to go to war with the United States you are better off having nuclear weapons. Once you have the weapons they [the United States] won’t be so free to level your country. Even if [Americans] want to bomb North Korea there is no guarantee [we] could wipe out their nuclear program.”

With renegade countries and loosely organized terrorist organizations ready to act in defiance of global controls, a new set of rules is needed to deal with international outlaws, experts say. Nevertheless, by all appearances the White House is treating marketing arms as part of America’s traditional free-trade policy. With looser export controls and lightly manned borders, the transfer of lethal materials abroad will become easier than ever: “Made in the USA” will echo like a rifle shot in every bloody regional conflict.

It is the new global instability — the widespread appearance of “micro-conflicts”–that makes the Clinton administration’s approach to arms control so difficult to comprehend, experts say. During the Cold War, the United States effectively used arms export controls to block the sale of military technology to communist countries. But the Cold War’s chessboard tactics are not effective in the new world disorder.

Michael Klare, a leading expert on arms control at Hampshire College, notes: “We are now asked to deal with ethnic separatists, terrorists, warlords and gangs. And they don’t need missiles. They want M16s and AK-47s. These are the nuclear bombs of the 21st century.”

To deal with the rising tide of regional violence and instability, a new type of arms control system is needed, Klare says, but it has yet to be created. With a steady stream of nightmarish images from places like Rwanda and Bosnia, Americans may soon be as ready for arms control half a world away as they are on their own block.

“Come to Baghdad”

“OPERATION QUARRY” BEGAN ON A SEPTEMBER AFTERNOON in 1988 when a London-based company called Euromac inquired about purchasing electronic components called capacitors from CSI Technologies in San Diego. Capacitors can look something like soda cans and have a range of uses, from defibrillation of a stalled human heart to launching a missile carrying a nuclear warhead. When a CSI official determined that Euromac represented Iraqi interests and sought the kind of capacitors that might be used to launch a missile, he tipped off the U.S. Customs Service.

Thus begins an all-too-rare story of an undercover arms export investigation that worked. It was a tale that eventually led to the Cavendish Hotel in central London, which served as the stage for the first meeting between Dan Supnick, an 11-year agent of the Customs Service, and Ali Daghir, the head of the London office of Euromac, an alleged front for the Iraqi military. Euromac described itself as a food exporter specializing in frozen french fries.

At the meeting, Supnick played the role of Dan Saunders, an engineer with CSI. Daghir took the bait, promising Supnick a pipeline to Iraq. “Come to Baghdad. I will get you contracts that nobody else can get,” Daghir offered. “I will get you introductions to the ministries that no one else can get. You will make millions of dollars.” Supnick was told that a visa from the Iraqi embassy could be secured overnight and that they could leave for Baghdad the next day. Supnick, with no authorization for such a trip, begged off, claiming scheduling conflicts.

While Daghir accepted the rain check, Supnick worried he may have blown his cover. “[There are] all these things you have to think of when you are an agent, when you go into these things,” Supnick says. “Is one of these guys going to pull a gun? Are they going to invite us to the Iraqi embassy and the recording device on my back will be exposed with the magnetometer? Are these guys going to lead us away from here and am I going to wind up in the Thames the next day?”

Long before Supnick had arrived in London he had already had to navigate his way through a labyrinth of export control laws. He had to find out whether the capacitors in question would be licensed for export to Iraq. In the complex and confusing regulatory framework governing arms exports, this turned out to be no simple task.

Before approaching the Commerce and State departments, Supnick wanted to clarify exactly what kind of capacitors Euromac had requested. With the specifications in hand, Supnick contacted two manufacturers and one laboratory. Their reports indicated the capacitors were for military use.

Supnick sent his findings to the State Department. Six months later they got back to him, telling him it was illegal to send such capacitors to Iraq. At that point he went under cover, and soon flew to London for the meeting at the Cavendish Hotel.

During the meeting, a Euromac official asked if the capacitors could be exported legally from the States. “I said they require a license, and probably a license will not be provided if they go to Iraq,” Supnick says. When it came time to ship the capacitors, Supnick was told to send them in boxes marked “air conditioning equipment,” because labeling them as general use capacitors “would be too suspicious.”

On March 15 CSI sent a dummy shipment of capacitors to London. When the shipment was claimed, British authorities arrested Ali Daghir and other Euromac employees. They were subsequently convicted under British law of illegal arms sales to Iraq and received sentences of up to five years in prison. In May, a British Court of Appeals overturned the case, ruling that the judge had misdirected the jury. A U.S.-issued indictment is still outstanding.

COPYRIGHT 1994 Common Cause Magazine

COPYRIGHT 2004 Gale Group