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Belarusian Review


Belarusian Weapons Exports:A Possible Source of Laundered Funds?


As noted by Transparency International, accurate accounting for the composition and volume of the world trade in weapons is a difficult task.1 This is due to a variety of reasons, including the secrecy surrounding the size of defense budgets, the large amount of money involved, the prevalence of middlemen in transactions, the difficulty in comparing the sale price of weapon systems (which must cover servicing and spare parts), and other factors. While certain reporting is mandated under U.N. rules, such rules do not cover all military-related weapon sales and are not universally followed. Transparency International estimates that although weapons sales constitutes less than 1% of total world trade, U.S. Department of Commerce sources estimate that corruption plays a role in 50% of arms purchases. Commissions on arms sales (including kickbacks) are conservatively estimated at 10%.2

The Significance of Belarus' Role in the World Export Market

Increasing international attention has focused on Belarusí role as a major arms exporter. According to Belarusian Minister of Defense Leonid Maltsev, Belarus exports approximately $200 million dollars of weapons annually.3 This figure almost certainly understates actual levels. A Congressional Research Service Report estimates that Belarus made arms deliveries of approximately $1.7 billion between 1994-2001; this figure does not seem significantly out of line with the official Belarusian figures.4 Some observers are more skeptical, as the conventional arms data typically discussed relate to public agreements and not the shadow trade in weapons. Thus, actual levels are almost certainly higher than reported levels. For example, in 2001, Mark Lenzi wrote in the Wall Street Journal Europe, that Belarus sold over $500 million to Palestinian groups and countries sheltering terrorists.5
Belarusian weapons exports are significant for a number of reasons. First, Belarus has almost certainly violated certain U.N. Security Council's arms embargoes by either selling used Soviet-era arms that had remained on its territory or weapons received from Russian weapons producers and then re-exported (e.g. to countries such as Iran Iraq, North Korea, Peru and Syria (sometimes for further shipment to Iraq)6) as well as Islamic extremist organizations in the Middle East).7 Second, Russian arms manufacturers, legitimate export enterprises and organized crime groups seem to use Belarus to transship military-related equipment and services to countries to which the Russian government does not want to export directly for political reasons or is unable to prevent such exports by individual enterprises or organized crime groups.8 Third, the revenues from the sale of Belarusian arms by state enterprises reportedly do not go into the national budget and thus are not officially published in their entirety.

Following the Money?

At the encouragement of the International Monetary Fund, has recently announced the creation of a Financial Monitoring Department within the State Control Committee to detect transactions constituting money laundering. According to the Belarusian authorities, the newly created Department is to function on the basis of Financial Action Task Force (FATF) Recommendations.9 It will be interesting to observe what human and material resources are devoted to this new body and the manner in which it functions.10
Some specialists have suggested that one source of laundered funds pass through a "Special Presidential Fund" controlled by Mr. Lukashenka.11 On June 21, 2001, then Belarusian Finance Minister Nikolai Korbut revealed the existence of this fund before the lower house of the Belarusian National Assembly in response to a question by Deputy Ivan Pashkevich. According to Mr. Pashkevich, Mr. Lukashenka at one point indicated that the fund contained approximately $1 billion from arms sales.12
Subsequently, at a news conference, Mr. Lukashenka denied the existence of an extra-budgetary fund financed from the sale of arms. He stated, "as for arms sales revenues, you should not worry about that as it is a closed topic in any country. Our arms sales are insignificant and the revenues goes to the reserve of our state to prop up the Belarusian currency, to the Governor of the Belarusian National Bank Pyotr Prakapovich."13
Later speaking on national television, Mr. Lukashenka denied Belarus' involvement in the illegal arms trade, terming it "misinformation" fed to the western media by members of the Belarusian political opposition.14 Later, he acknowledged that weapons manufactured in Belarus were indeed present in Iraq, but he claimed that the Belarusian Government was not responsible for these exports.15 Mr. Lukashenka also has denied profiting personally from such arms sales as well as arms sales to Iraq. He termed the revenues from Belarusian arms sales as "insignificant."16 Similarly, Mr. Aleksandr Andron, the General Director of Belunshpramservis, a company that upgrades Soviet-produced military equipment, stated in an interview that Belarus has not illegally sold weapons to Iraq.17

The Belarus Defense Industry

During Soviet times, Belarus'radio-electronic industry was primarily oriented towards military applications. Its industry represented 25% of Soviet production of machine building production. With the break-up of the Soviet military and the reduction in the size of the successor stateís military establishments, the Belarus defense sector desperately needs to export to survive.18
Currently, under Belarusian domestic legislation, its weapons exports are required to be carried out through one of four licensed weapons trade exporters: Belspetsvneshtekhnika,Beltekhexport, Belvneshpromservis and Belorusintorg. Certain other enterprises are permitted to sell products that they developed or control.19 It is likely that significant flows of weapons are transshipped through informal channels and the profits from arm sales end up in the hands of corrupt government officials and organized crime.20


The political legitimacy of Aleksandr Lukaskenka is subject to challenge.21 Since the revenues from weapon sales belong to the Belarusian government, they likely constitute the theft of state property under Belarusian law. It might be useful to conduct research into the scale and modalities of Belarusian weapons exports (in particular, revenue flows from such exports), the role of organized crime in the process, and the implications for U.S. national security and anti-money laundering policy.
It is indeed possible that individuals within the Belarusian Central Bank are aware of how this revenue flows. A detailed examination by the financial intelligence units of the major members of the Egmont Group might provide some answers whether Belarusian officials, particularly those who have traveled abroad,22 are laundering funds from weapons exports and other sources.


1). Catherine Courtney, "Corruption in the Official Arms Trade," Transparency International (UK) Policy Research Paper 001 (April 2002), at 8, available at http://www.transparency.org/working_papers/arms_trade/courtney_tiuk/courtney-official_arms_trade.html (accessed November 15, 2003).
2). Id.
3). " Belarus Cashes $200 million from Weapon Sales Every Year," Pravda, [On-Line], February 19, 2002, at http://english.pravda.ru/economics/2002/02/19/26488/html.
4). Congressional Research Service, "Conventional Arms Transfers to Developing Countries, 1994-2001," August 6, 2002, at CRS-56. According to the Stockholm International Peace Research Institute, between 1997-2001, Belarus exported $1.518 billion dollars in military products and services, making it the tenth largest exporter of weapons in the world. Bjorn Hagelin, Pieter D. Wezeman, Sieon T. Wezeman and Nicholas Chipperfield, " International Arms Transfers" {Appendix 8A2: The Volume of Transfers of Conventional Weapons: by Recipients and Suppliers, 1997-2001, Stockholm International Peace Research Institute (2002), at 407. In some cases, Belarus seems able to produce the equipment, but not the servicing; in others the opposite is true. See Mark Falkoff, "Arms Sales: An Old Issue Revisited," Columbia International Affairs Online, available at http:www.ciaonet.org/wps/fam03/.
5). Mark Lenzi, " Selling Guns to Terrorists From the ' Heart of Europe'," The Wall Street Journal Europe, April 26, 2002.
6). See Gary C. Gambill, " Syria Rearms Iraq," Middle East Intelligence Bulletin, Vol. 4, No. 9, September 2002, available at http://www.weib.org/articles/0209_s2.htm (accessed November 11, 2003).
7). Jane's Intelligence Digest, " Russia?s illicit arms export," November 20, 2002; PRIMA News Service " Belarusian Weapons in the Middle East," April 23, 2003, available at http://www.prima.news.ru/eng/news/articxles/2003/4/23/23202.html (accessed November 14, 2003); Lee S. Wolosky and Mark D. Lenzi, International Herald Tribune, August 27, 2003; Natalya Hmelik, ? Arms Manipulation: How Lukashenka 'assists' Putin,? Charter 97 News, August 19, 2002, available at http://www.charter97.org/eng/news/2002/08/19/40 (accessed November 11, 2003); Valentinas Mite, " Belarus: How Close Are Military Ties with Iraq?," Radio Free Europe/Radio Liberty, October 3, 2002, available at http:www.rferl.org/nca/features/2002/10/0310200215280.asp (accessed November 23, 2003) (noting, inter alia, that UNSCOM inspectors in 1996 and 1997 discovered that Iraq was using Belarusian-supplied plasma spray machines to protect nuclear weapons components. Furthermore, in March 2002, U.S. Deputy Secretary of State Steven Pifer said that the U.S. had credible evidence that a group of Iraqi officers traveled to Belarus for training in the use of S-300 anti-aircraft systems. Belarus has officially denied this was the case.
8). This may be one explanation for why 19 Russian producers of military equipment chose to participate in MILEX?2003, the second international arms exhibition in Minsk. The eventís organizers claimed that representatives from " over 100 companies, design offices and research bureaus from all over the world attended." RosBusinessConsulting Database, " 19 Russian firms to participate in arms exhibition in Minsk," See also Alexander Vasilevich, " Belarus on Arms Market", Eksport Vooruzheniy, May-June 2002, p. 13 (citing Stanslav Shushkevitch, " Amerikansntsy boyatsya belorusskikh tankov," Narodnaya Volya, No. 55, 2002. Another example of this sort of activity may be Russia's planned sale of S-300 anti-aircraft missile systems to Belarus, which might be the first step to a subsequent transfer, where the Russian arms export agency Rosoboronexport did not want to be identified as the seller to the end-user. See RosBusinessConsulting Database, " Russia to supply S-300 to Belarus," October 22, 2003.
9). BBC Monitoring International Reports," Belarus Sets-Up Money-Laundering Watchdog," September 16, 2003 (from Belapan News Agency), the guidelines for a financial intelligence unit are available on the website of the Financial Action Task Force at http://www1.oecd.org/fatf/; Prime-Tass English-language Business Wire, " Belarus creates anti-money laundering financial monitoring department," September 23, 2003; Andrei Fromin, " IMF urges Belarus to create financial intelligence," TASS, August 18, 2003.
10). According to the former head of the Belarusian Bank Tamara Vinnikava, many Russian " oligarchs" used Belarus for money laundering purposes. BBC Summary of World Broadcasts, " Fugitive Banker says Russian oligarchs play dominant role in Belarus," December 24, 1999 (BelaPAN News Agency); see also Yulia Latynina, " Bachelor Lukashenka's Dirty Diary," The St. Petersburg Times, June 24, 2003 (discussing the laundering of Russian money in Belarus).
11). Alexander Vasilevich, " Belarus on Arms Market"|, Eksport Vooruzheniy, May-June 2002, p. 11 (this article states that there are approximately $24 million dollars in this fund ? which seems low given the size of Belarusian weapons exports. See remarks of Rafal Sadowski, an analyst on Belarus for the Center for Eastern Studies in Warsaw, Poland and Jan Maksymiuk, an analyst for Radio Free Europe/Radio Liberty at the New Atlantic Initiative Conference: " Axis of Evil: Belarus ? The Missing Link," November 14, 2002.
12). " Presidential Fund Remains in Secrecy," Charter í97 News, June 21, 2002, available at http://www.charter97.org/eng/news/2001/06/22/04 (accessed on November 14, 2003); see also Jeffrey Donovan, " Iraq: Are Belarus, Ukraine Selling Arms and Providing Training," Radio Free Europe/Radio Liberty, March 14, 2002, at http://www.rferl.org/nca/features/2002/03/1403202104954.asp and RFE/RL Newsline, Central & Eastern Europe, June 22, 2001, available at http:www.rferl.org/newsline/2001/06/3-cee/cee-220601.html.
13). BBC Monitoring International Reports, " Belarus Central Bank Spokesmen Corrects President on Arms Sale Revenues," September 18, 2002 (BelaPAN News Agency) (in his clarification, Belarus National Bank Spokesman Anatol Drazdow said that Mr. Lukashenka probably meant the Ministry of Finance?s Account at the Belarusian National Bank.).
14). BBC Monitoring International Reports, " Belarusian President Rejects Illegal Arms Trade Accusations," February 20, 2002 (Belarusian Television, Minsk).
15). Deutche Presse-Agentur, " Belarus President Admits arms sent to Iraq," April 25, 2003. Perhaps Mr. Lukashenka was referring to military equipment allegedly sold to Lebanese individuals who then were engaged in smuggling it to Iraq. BBC Monitoring International Reports, " Lebanon Seizes Belarusian Military Equipment Intended for Iraq," January 14, 2003 (Radio Moscow); see also BBC Monitoring International Reports, " Belarusian Foreign Policy Official Says Arms May be Sold On By A Third Party," February 28, 2002 (NTV, Moscow).
16). BBC Monitoring International Reports, " Belarusian President Denies Pocketing Arms Sales Proceeds," September 17, 2002 and " Belarusian Leader Denies Sales to Iraq," September 23, 2002 (Belarusian Television, Minsk).
17). BBC Monitoring International Report, " Illegal Weapons Sales Impossible in Belarus ? Arms Trader," July 23, 2002 (Vo Slavu Rodiny, Minsk).
Belarus' Defense Industry, published by Global Security.org., at http:www.globalsecurity.org/military/world/Belarus/industry.htm. For an overview of the Belarusian economy, visit the website of the U.S. Department of Commerce's Business Information Center for the Newly Independent States, at http://www.bisnis.doc.gov/bisnis/country/belarus.cfm.
19). Alexander Vasilevich, " Belarus on Arms Market" , Eksport Vooruzheniy, May-June 2002, p. 10.
20). For an interesting, albeit dated, discussion of Belarusian organized crime, see Phil Williams, " Drug Trafficking and Organized Crime in Belarus: Threat and Response," available at http:www.rol.home.by/publications/drtraf.html.
21). See Final Report of the Organization for Security and Cooperation in Europe?s Office of Democracy and International Human Rights on the Republic of Belarus Presidential Election, September 9, 2001, available at http://www.osce.org/odihr/documents/reports/election_report/by/bel_sep2001_efr.php3. See also Raf Casert, Associated Press, " Most EU nations impose travel ban on Lukashenka and seven other Belarusian officials," at http:story.news.yahoo.com/news?tmpl=story&u=/ap20021119/ap_wo_en_po/eu/Belarus_4; see also Ethan S. Burger, "The Recognition of Governments under International Law: The Challenge of the Belarusian Presidential Election of September 9, 2001 for the United States," 35 GEO. WASH. INT?L L. REV. 107 (2003).
22). For example, on March 12, 2002, then Belarusian Prime Minister Genadz Navitski confirmed that Mr. Lukashenka took a short "holiday" in Austria (a favorite place of some to launder funds), RFE/RL Newsline,? "Belarusian President Reportedly Vacationing in Austria,? Central and Eastern Europe, November 13, 2002 http://www.rferl.org/newsline/2002/03/3-CEE/cee-130302.asp (accessed November 14, 2003); see also Anatoly Lebedko, "How Much Does 'President' Lukashenko Cost?," Charter ' 97 News, available at http://www.charter97.org/eng/news/2001/080806 (accessed November 11, 2003) (mentioning Mr. Lukashenka's visit to Qatar).

By Ethan S. Burger, Esq.
School of International Service
Adjunct Associate Professor
Washington College of Law
American University
Washington, D.C.
This article appeared in
Belarusian Review, Vol. 15, No 4
Copyright 2003 Belarusian Review
All rights reserved.

Ethan S. Burger

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