Low-Risk, High-Reward: Transnational Organized Crime’s Growing Reliance on Natural Resource Exploitation

Introduction

Research Question

Why Logging and Oil?

Roadmap

Figure 1. Natural Resource Funding Sources for Armed Groups (OECD, 2017)

Low Est. ($B)

High Est. ($B)

Illegal Logging $52 $157

Illegal Mining $12 $48

IUU Fishing $16 $36

Crude Oil Theft $5 $12

TOTAL $85B $253B

Table 1. Top Four Annual Revenues from Natural Resource Exploitation (Global Financial

Integrity, 2017)

TOCs & National Security Interests

Extremely important: Suppress terrorism (especially state-sponsored terrorism),

transnational crime, and drug trafficking

Al-Shabab threatens US interests in preventing Somalia for becoming a refuge for

radicalization, recruitment, and training of terrorists. In 2010 al-Shabab pledged loyalty

to al-Qaeda.

“God willing, we will attack America”

TOCs & National Security Interests

Vital: Ensure US allies’ survival and their active cooperation with the US in shaping an

international system in which we can thrive:

Mexico Cartel violence threatens US physical security and human security through

gang violence and the proliferation of drug use (and deaths) in the US.

Illegal Logging

Who: al-Shabab

What: Charcoal

Where: Somalia with exports to

Kenya, UAE

How: Taxation + Trade

Timeline of Recent Events2010: Al-Shabab pledges loyalty to Al-

Qaeda.

2011: Kenya Defense Forces liberate

Somali port of Kismayo

2012: UN Ban on Charcoal Trade

(UNSC 2036)

2013-2018: Numerous high-level attacks

2016: UN report says charcoal trade

down - UAE assisting

2017: Charcoal trade returning to al-

Shabab control

Supply Chain● Poor workers

● Network of traders

● Distributors (Largely Maritime)

Al-Shabab Profits● Checkpoints - $15M annually

● Port taxation - $24M annually

● Trade Partnership - $100M annually

Crude Oil Theft

Who: Los Zetas

What: Oil Bunkering

Where: Mexico/U.S. Border

How: Shipments and Cargo

Supply Chain● Local Citizens

● PEMEX Employees

● International Oil Supplies

● Distributors

Los Zetas Profits● $400+ Million per year

Timeline of Recent Events

1997: Defectors from Mexico’s Special Forces create the Los Zetas Cartel

2005: Sicarios murder Neuvo Laredo, TX Police Chief Alejandro Coello

2009: Los Zetas uses violence on law enforcement to formalize power over the city’s

distribution networks

2015: State owned oil company PEMEX sues 23 US companies for purchasing stolen

oil from Mexico

2018: Leader of Los Zetas Jose Valencia is captured in Mexico City.

Supply Side Demand Side

TOC Exploitation Model

Vulnerable, low-skill labor force

TOCs take advantage of local labor forces with few economic opportunities to earn an “honest” living.

Weak local law enforcement

TOCs either capture or supplant local government authorities.

“Launderable” global commodities

TOCs pool illegally sourced goods with legitimate ones, making it difficult for buyers to distinguish.

Low-risk, high-reward potential

These factors are common across several kinds of natural resource exploitation crime, including illegal logging, mining, fishing, and wildlife trade.

Addressing the Demand Side

● Developed nations are largest consumers of resources like timber and oil

○ It is in their own security interests to curb the illegal trade

● International norms are indeed changing, but help needed

○ Many treaties formed (e.g., 2010 European Union Timber Regulation), but assistance needed to

enforce due diligence and monitoring more locally

● Outright bans at country level are impractical and have unintended side effects

○ Punishes legitimate business and drives the activity further into criminal hands

○ E.g., UN Ban on Somali charcoal backfiring a few years later

Countering Labor Force Exploitation

● Disincentivize locals from working for/helping TCOs

● The formalization of jobs in Mexico

○ Pressure from NAFTA

● USAID in Somalia

○ Domestic Resource Mobilization (DRM)

■ Public Sector- Infrastructure/Public Works Projects

■ Private Sector- Investors creating economic opportunities and jobs

Conclusion

+ There are common factors in TOC operations, despite geographical and socio-

economic differences

+ Largely no one-size fits all approach

+ Attacking supply and demand sides is important, but strong local government

needed for long term stability