Arms Industries and Trade

The fall of Kabul to the Taliban and the group's capture of U.S. military materiel highlights the risk inherent to U.S. arms deals with countries wracked with insecurity.

A legal framework agreement between Russia and Nigeria is likely to be primarily transactional in nature, with any political influence seen by Moscow as a secondary benefit.

Suing U.S. gun makers may be good law and politics, but that won’t fix Mexico’s police or courts and end its culture of impunity.

Weeks ago, bandits shot down a fighter jet in northern Nigeria. This comes amid questions over the Nigerian Air Force's readiness to curb insecurity and a slew of deals by the Nigerian government to upgrade its airpower.

Neil Edwards is an Open Source African Media Analyst at Novetta. Media analysis for this piece was enabled by Novetta’s Tracker for Foreign Investment in Africa (TFIA). In the Central African Republic (CAR), outside the capital Bangui, President Faustin-Archange Touadéra exerts little to no authority. Armed rebel groups control two-thirds of the country, including access to mining sites. Political instability is deeply rooted: CAR has endured four successful coups and two failed coups since 1979, including the unsuccessful attempt ahead of the presidential election in December last year. MINUSCA, the UN peacekeeping mission deployed in CAR since 2014, has helped bolster security but remains overstretched and under-resourced. Amid insecurity and competition for power, Russia has positioned itself as a partner to the Touadéra regime—at a price to CAR. The opening for Russia’s entry into CAR came in December 2017, when the United Nations granted Russia an exemption to provide light arms to the Touadéra government in order to strengthen the military’s campaign to regain rebel-held territory. Ties between CAR and Russia quickly deepened. By March 2018, Valery Zakharov, a former official in GRU, the Russian military’s intelligence arm, became the national security advisor to President Touadéra. Months later, President Touadéra appeared in public with a personal protection detail that included “Russian Special Forces troops,” widely believed to be part of the Wagner Group, a shadowy band of mercenaries controlled by Russian oligarch Yevgeny Prigozhin, a member of Russian President Vladimir Putin’s inner circle. President Touadéra’s decision to employ Wagner to train CAR’s army is an effort to “coup-proof” the regime. In exchange for protection, Lobaye Invest, a mining company also owned by Prigozhin, gained exploratory mining rights to seven gold and diamond mines approximately eighty miles from Wagner’s military training headquarters outside Bangui. The tradeoff reflects a Russian strategy of finding, securing, and extracting natural resources abroad. Russia’s economy relies heavily on natural resources, which have accounted for an increasingly large share of Russian output since 2016. Given the high cost of building infrastructure in the vast, far-flung corners of Siberia, Russia’s military expansion into CAR is likely part of a strategy to spur economic growth by securing access to resources beyond its own borders, including in the Middle East, Latin America, and Africa. Russian adventurism in CAR aims to replicate Wagner’s success in Syria. Since 2015, Wagner—just one arm of Russia’s military ground presence—has helped prop up the Bashar al-Assad regime by increasing its manpower and training the Syrian regime’s military personnel. Assad’s survival has benefited Russia's military, providing it with rights to operate Syria's Khmeimim Air Base on the Mediterranean Sea and explore potential offshore oil reserves. The resources-for-protection arrangement is also clearly at play in CAR. Novetta’s Tracker for Foreign Investment in Africa (TFIA), launched in 2020, dissects publicly available traditional media in all fifty-four African countries to identify, track, and trace Russian-linked energy and military investments across the continent. TFIA currently tracks sixty ongoing energy projects in thirty-three African countries and Wagner Group’s operations in fourteen African countries. One of TFIA’s primary objectives is to determine if Russia’s coup-proofing in CAR will be a blueprint for expanding the Kremlin’s military presence, by way of the Wagner Group, into providing protection for other African leaders—especially those with close ties to Russia and a history of military coups or insurgencies. Media analysis from Novetta’s TFIA uncovered that Wagner Group and Lobaye Invest have access to a variety of assets in CAR. Wagner Group, which has an estimated 1,500 troops in the country, along with Sewa Security Services, another Russian-linked military contractor, control three airfields near Berengo, N’Délé, and Birao—all strategically located to export natural resources extracted from mining sites and conflict minerals purchased on the black market. In addition to Lobaye’s receipt of exploratory rights in six mines following the initial deal with President Touadéra, in September 2018 the New York Times reported that “Russian contractors” were digging in diamond sites near Birao. Russian protection proved its worth—at least to Touadéra—in responding to the apparent attempted coup by former President François Bozizé in December 2020. After CAR’s constitutional court rejected Bozizé’s bid for the presidency due to his failure to fulfill the “good morality” candidacy requirement, Bozizé organized an alliance of six rebel groups—usually at arms with each other—to form the Coalition of Patriots for Change (CPC). The coalition quickly began a violent reign of terror across the country, with the aim of disrupting the presidential election. Russia was the first among an assortment of international actors to mount a military response; within days of President Touadéra’s call for international assistance, Russia sent an additional three hundred Wagner-linked “military instructors,” along with helicopters. These forces, joined by Rwandan troops, MINUSCA, and the country’s Russian-trained military, retook three towns and major roads near the capital, successfully repelling the coup and allowing the election to move forward. Touadéra won the election with just over 53 percent of the vote, despite CPC’s violent campaign, in which it burned ballot boxes, ransacked polling stations, and prevented the vote in fifteen percent of polling stations across the country. The violence displaced nearly 120,000 people, half of whom sought refuge in neighboring countries. The electoral victory granted Touadéra five more years in power and, for Russia, signaled a continuation of business as usual: military training, regime security, weapons shipments, and mining exploration—all through Kremlin-linked private companies. Wagner Group’s success in ensuring Touadéra’s safety suggests CAR, like Syria, has the potential to serve as a blueprint for Russia’s resource-intensive economic strategy. Russian efforts to expand and reinforce its presence in Africa through private contractors will likely focus on countries wracked by political instability and gifted with abundant natural resources. The TFIA lists five countries as the most likely targets for future Russian involvement: Burundi, the Democratic Republic of the Congo, Libya, Sudan, and Zimbabwe. Sudan’s December 2020 deal permitting Russia’s establishment of its first naval outpost on the continent—for twenty-five years—is a clear signal of Russian intentions to become a lasting presence on the continent and reinforces the need to understand how foreign investment is influencing Africa.

Tear gas is banned in international warfare, and its health risks are well-documented. Still, it remains a crowd-control agent of choice for police worldwide.

Navigating the geopolitical domain surrounding energy is always difficult, but in the lead-up to the U.S.-Russia summit in Helsinki, it is particularly complex. While energy is unlikely to be a first order item for the summit, a number of topics likely to be raised could intersect with energy issues. Senior Russian officials have been vocal about energy related items in the run-up to the July 16 meeting, perhaps hoping that recent oil market volatility will give Moscow a leg up to make the usual pitch about the positive role its energy trade can have in the bilateral relationship. Several energy related topics are likely front of mind for the American team traveling to Helsinki with U.S. President Donald Trump. Here are a few examples: 1. The United States would like Moscow’s help to restrain Iran’s expansive role in the Mideast because it believes that this would help U.S. regional allies and better enable the United States to exit costly conflicts in the region. The subject of the ongoing conflicts in Yemen and Syria is bound to come up at the summit, especially if the United States and Russia seek to open better lines of military to military communication between top U.S. and Russian military leaders. This consultative approach is considered critical to avoiding an accidental escalation of military conflict, the dangers of which have risen in recent years. For its part, Russia will argue it has offered some accommodation on the Iran issue and would like something back in return. First, Russia’s top diplomats announced Moscow wanted to see the withdrawal of all non-Syrian forces from Syria’s southern border areas. That move was taken as a betrayal by some in Iran where MPs accused Russia of being an unreliable partner that would willingly sacrifice Iran to bolster relations with the United States. Then Russia backed an agreement with Saudi Arabia and other oil producers including the Organization of Petroleum Exporting Countries (OPEC) to increase oil supplies. Iran was unhappy that Moscow showed its support for the oil producer agreement, especially given the context of the re-imposition of U.S. sanctions against Iranian oil export sales. President Trump made no secret that a Saudi-Russian agreement to raise oil production was the firm wish of the United States. But paving the way for the U.S. summit wasn’t likely the main reason Russia wanted to see oil prices stabilize at a lower level. Moscow had its own reasons to want to prevent a surge in oil prices. High oil prices make it harder for the Russian government to prevent ruble appreciation which would be bad for the Russian economy. 2. Arms control will be top of mind for the summit. The United States wants to signal its steadfast support for East Europe allies. This topic will trigger mutual accusations of violations in the Intermediate-Range Nuclear Forces Treaty (INF) treaty. While arms control will be a high priority topic, the back drop to any discussion of the INF and missile deployment will circle back to U.S. diplomatic support for Eastern Europe. That, in turn, could trigger a tangent to the United States’ open opposition to Russia’s Nordstream 2 direct natural gas pipeline expansion to Germany. Germany favors the expanded line to enhance its ability to bypass other gas pipeline transit countries like Poland, Belarus, or Ukraine, saying this will promote Germany’s energy security. The United States argues that the pipeline project, which would benefit Germany economically and strategically, could raise Europe’s dependence on Russian energy and weaken the Eastern European countries’ status vis-à-vis Russia as well as potentially shift needed income from the smaller Eastern European economies to to Germany. 3. The United States would like Russia to play a helpful role in negotiations for the denuclearization of North Korea. If past efforts are any indication, energy could be a piece of the economic package North Korea can hope to achieve through a peace treaty. Russia stands to be an important beneficiary of any energy deal that is part of the North Korean negotiations since one obvious option to North Korea’s energy problems could be a natural gas pipeline that would carry Russian natural gas via China to both North and South Korea. It’s not new for Russia to figure energy could be a constructive force to any U.S.-Russia relationship reset. Energy has been part and parcel of several U.S. attempts to improve relations with Russia in the past, as far back as 1993. At that time, the U.S.-Russia summit led to the creation of the Gore-Chernomyrdin Commission to promote economic and technological links, including energy. As part of that diplomatic process, the United States offered up American know how to help Russia revitalize its oil sector. ConocoPhillips was an early mover with its Polar Lights venture, but eventually it and other U.S. oil companies that entered Russia at the time found a host of legal, regulatory, and logistical barriers that turned profitable ventures into losing propositions. The failure of U.S. oil investing in Russia mirrored similar setbacks in U.S.-Russia arms control agreements. In the aftermath of the terrorist attacks of September 11, 2001, the United States and Russia revived their bilateral energy dialogues, after Vladimir Putin signaled that Russia was ready and able to help diversify global energy supplies away from the Middle East. In May 2002, President George W. Bush and President Putin initiated a new high-level dialogue on energy that led to several energy specific summits and new deals for American oil and gas companies in Russia. But soon after billions of dollars of fresh U.S. investment began flowing to Russia, the Kremlin began to renationalize its energy sector, and by 2005, U.S. companies not only faced difficult renegotiations of their oil and gas deals but in some cases, outright arrests of partners and the taking of assets. Obama era proposed resets similarly ran aground after Russia invaded Ukraine in 2014. The United States and Europe imposed sanctions on Russia in response, creating problems anew for the few U.S. oil companies that were still remaining on the ground in Russia. This time around, sanctions are top of mind when it comes to energy relations between the United States and Russia. Russian Energy Minister Alexander Novak visited U.S. Treasury Secretary Steven Mnuchin during his visit to Washington D.C. in late June. Reports say the meeting focused on sanctions, which for obvious reasons, the Russians would like removed, and the Nordstream 2 pipeline which Washington has threatened with possible new sanctions. Treasury, at the urging of Congress, has played a pivotal role in showing the Kremlin that it is not out of U.S. reach when it comes to economic levers. The United States targeted Russian aluminum firm Rusal and others with sanctions back in April to punish Moscow for malign activities, such as interference with U.S. elections, and amid suspicions that the Kremlin was behind the murderous use of nerve gas in the United Kingdom. The U.S. imposed April sanctions against Russia caused $12 billion in losses for Russia’s fifty wealthiest oligarchs. With both of Russia’s largest state-controlled energy companies, Rosneft and Gazprom, carrying huge corporate debt loads, further sanctions against those entities could be a major hassle for the Kremlin, which would be forced to intervene, possibly triggering more acrimony and rivalry inside President Putin’s inner circle.    From its side, Russia is likely to argue that it has been accommodating to U.S. priorities on Iran and oil prices and try to leverage those actions as evidence that the United States should offer concessions to its concerns. That means the United States will have to think carefully about how energy intersects with other priorities ahead of the summit because it will be tricky to both discourage Moscow from an aggressive posture on U.S. hacking, on military positioning in Eastern Europe, and on arms control and still reap the benefits of its cooperation in the Middle East and oil markets. Keeping items compartmentalized and in different buckets might seem feasible at first glance. The United States still achieved successful détente with the U.S.S.R. during the Cold War, for example. But as the U.S. summit with Russia approaches, better definition of priorities when it comes to energy will be necessary. Some items are already creating inconsistent messaging; for example, asking European nations to veto the Nordstream 2 pipeline to avoid over-dependence on Russia while at the same time, encouraging Russia to sell more oil to Europe to replace Iranian barrels and elsewhere to lubricate the oil market. Backing a Russian natural gas pipeline to the Korean peninsula could also seem untoward both to European advocates of Nordstream 2 as well as to U.S. exporters of American liquefied natural gas (LNG) who have been making headway lining up long term supply contracts to South Korea. The U.S. advance team to the summit will have to align competing interests to prepare more consistent messaging for Russia on these various energy elements, even if energy isn’t going to be in the top three topics for deeper discussion. Lack of clarity could muddy U.S. effectiveness in discussions or worse, leave Russia with geopolitical advantages it has shown it will exploit to divide the United States from its allies. Russia is likely hoping that energy exigencies will create an opening for it to gain concessions from the United States in other areas. The fantasy that Russia could somehow provide the United States a big lever against Iran in Syria and elsewhere may have initially clouded U.S. judgement over what is possible. Iran is unlikely to go quiet into the night, as it has made clear recently with threats against international shipping, regardless of how Moscow plays it. The United States needs to seek substantive discussion on other areas that don’t involve Iran, to avoid having the summit success reduced to empty promises on cooperation between the United States and Russia regarding Iran, when in reality, Moscow cannot likely impose sustainable constraints on Iran’s military actions, even if it wanted to. When discussing the topic of Europe, the United States should keep in mind China’s massive energy and other critical industry investment expansion into the continent. That could be a more fruitful topic that is putting Russian leaders on a back foot. To date, the real challenge to marketers of Russian oil and gas to Europe has not been U.S. LNG exports which are only just starting (U.S. energy sales to Europe are still a negligible volume compared right now to Russian natural gas sales which have been on the rise). It is renewable energy which is the bulwark of Europe’s energy independence from Russia. China could become the major actor in Europe’s clean energy future and that will influence both long run U.S. and Russian links to the continent as it has in Central Asia. The United States has been downplaying expectations for the Helsinki meeting, noting the fact that it is taking place is an improvement to escalating tensions. Preparations for a summit will likely force U.S. policy makers to square the circle on apparent inconsistencies in U.S. international energy diplomacy. Given the wary eye of Congress, the Trump administration is unlikely to offer Russia any sanctions relief until when and if Russia demonstrates substantive results on the ground. The United States should also be cautious about trying to orchestrate future participation of American oil and gas companies in Russia as a possible diplomatic carrot. The history of such initiatives is spotty at best, and it only takes one reckless unexpected action by Moscow to force Washington to press companies yet again to cut back on any progress on energy cooperation that could be made in the short run. A cautious approach to talk of energy cooperation would be wise at this juncture until more progress is made on higher priority issues.

China and Israel have sharply ramped up trade, investment, and cultural ties in recent years, but obstacles to closer relations may yet emerge.

As the White House hosts Saudi Crown Prince Mohammed bin Salman today, policy makers need to be reminded that any new arms sales across the Middle East could become part of a repeating pernicious cycle that could lay the seeds to the next big oil crisis. That’s an important conclusion of my new economics and policy paper published today with co-author Rice economics professor Mahmoud El-Gamal in the academic journal Economics of Energy and Environmental Policy (EEEP). Bin Salman kicked off the preliminary public relations for his current trip with an important and serious interview aired on the American TV news magazine 60 Minutes, in which he noted “Saudi Arabia doesn’t want to own a nuclear bomb. But without a doubt, if Iran develops a nuclear bomb, we will follow suit as soon as possible.” While Saudi Arabia and the United States share a common view that Iran is a destabilizing force the region, the United States has been resistant to Saudi lobbying that standards for a U.S.-Saudi nuclear deal should not ban enrichment of uranium. Westinghouse and a consortium of U.S. companies are discussing a bid for the multi-billion tender to build civilian nuclear reactors in the kingdom in competition with China. Coincidentally, the U.S. Department of Energy (DOE) tweeted today that the United States needs to “modernize our nuclear weapons arsenal, continue to address the environmental legacy that the Cold War programs, further advance domestic energy production, better protect our energy infrastructure, and accelerate our exascale computing capacity,” noting that nuclear deterrence is a core part of the DOE mission.” In our EEEP article, we argue that geopolitical events that are often considered exogenous to the debt-driven financial boom and bust global economic cycle are part of an endogenous and self-perpetuating meta-cycle, linked by high petrodollar recycling during periods of high oil prices that typically accompany high economic growth periods, like the one seen in the early 2010s. Petrodollar recycling takes many forms, including rising military spending and buildups. El-Gamal offers a theoretical model that explains why an oil exporting country could be “incentivized” to time its military activism during periods of oil price slumps, with the coincident effect of boosting national revenues, thus converting military capital into civilian capital. A significant part of Arab countries’ military equipment (and Russia’s) used in recent conflicts was accumulated during oil boom years following the Iraqi invasion (2003-2007) and during the Arab Spring uprising (2011-2013). Last year escalations in conflict across the Middle East from Yemen to Northern Iraq helped raise the price of oil on the heels of the major down cycle of 2014-2015. The paper using discrete wavelet analysis of oil production at the country level to demonstrate that military conflicts that destroy production installations or disrupt oil transportation networks are the “most significant antecedents of sustained long term disruptions in oil supply.” The paper recommends that “rather than increase arms sales as rentier states seek to externalize their problems, major economies such as the United States, China, Japan and Europe multilaterally and through international agencies should encourage the acceleration of economic reforms such as those proposed by the Saudi Crown Prince. Forty years of military buildups have failed to bring peace and economic prosperity to the Middle East. While it is unlikely that the Middle East oil exporters will intentionally escalate regional proxy wars in a manner that leads to the destruction of oil facilities, the nature of war can be irrational and unpredictable, hence explaining the return of the geopolitical risk premium to the price of oil. The hedge fund community, which trades in oil, has so far appeared relatively unconvinced by announcement of economic reforms in Saudi Arabia. It has also been skeptical of the success of the Iranian nuclear deal. Meanwhile, the oil industries of Syria and Yemen have been decimated by recent geopolitical conflicts. A similar fate befell Iraq and Iran during their eight-year war, our research shows. In light of this self-perpetuating cycle, industrialized governments would benefit from revisiting coordination mechanisms for use of strategic stocks, including discussions with Saudi officials currently visiting for how the United States could respond (in conjunction with Saudi Arabia?) to further deterioration of Venezuela’s oil industry. The United States imported just over 500,000 barrels per day (b/d) of Saudi crude oil last fall, the lowest level since May 1987 and down from 1.5 million b/d a decade ago. The kingdom is now the fourth supplier after Canada, Mexico and Iraq. The drop reflects more than rising U.S. production since Saudi Arabia and Venezuela supply a heavier grade of crude oil used by coker units that economically upgrade poorer quality crudes into light products like naphtha and gasoil. Rising tight oil production is a lighter grade of crude oil less desirable for coker units of the U.S. gulf coast. In years past, the U.S.-Saudi security partnership has included coordination of responses to sudden changes in global oil supply, including strategies that involved targeting Russia when lower oil prices were needed to send a firm message of geopolitical deterrence. The question is with the current Saudi-Russian oil bromance and the United States itself now an oil exporter, is this critical element to the U.S.-Saudi relationship still viable?

According to Russian media, the Nigeria is buying twelve Su-30 fighter jets from Russia, two of which have already been delivered. The aircraft has two seats for long-range missions and is known for its high maneuverability. It is is manufactured by the Sukhoi Aviation Company. There has been no public announcement of the cost or how Nigeria will pay for them, but, according to past transactions, the fighter jet can cost upwards of $30 million each. Su-30’s have be seen in sub-Sahara Africa before: according to the Stockholm International Peace Research Institute, Uganda and Angola inked deals to purchase the fighters within the last decade. The Su-30 fighters, and their subsequent iterations, remain a mainstay of the Russian air force and have seen considerable action in Syria. Among other things, the Su-30 fighter is used in air-to-ground operations. Presumably, the Nigerian government is buying them for use against Boko Haram, the Jihadist terrorist group in the north. They might also be used against Niger delta militants operating in the country’s oil patch. Details are sparse, but from the Sukhoi Aviation Company’s perspective, this appears to be a straight commercial deal. Nigeria has also sought aircraft from the United States, most recently the A-29 Super Tucano, a light, turbo-prop (propeller-driven) aircraft that specializes in air-to-ground operations. However, there has been opposition among some members of Congress and within the human rights community to the sale because of concern about Nigerian military human rights abuses along with questions about the operational appropriateness of such aircraft. (The Trump administration has since reportedly given the twelve-plane sale the green light, but congressional opposition remains.). With respect to the Su-30 fighters, thereis congressional concern about possible civilian casualties from their use in the fight against Boko Haram. In the past, Nigeria has turned to Russia or China for weapons if its efforts were blocked elsewhere. A lesson for U.S. policy makers from this arms sale might be that there is always a willing seller of arms for a willing buyer—unless the technology is so advanced that only the United States can provide it. That is not the case with the S-30 fighter jet.