Contemporary war economies in places such as the Balkans, the Caucasus, Central Asia, and West Africa tend to be clandestine economies, utilizing criminal actors as combatants and smuggling networks and black marketeering for financing and supplies. The importance of clandestine flows and criminal actors becomes even more apparent in the context of evading international economic sanctions and arms embargoes. Consequently, the business of war and the business of crime closely intersect—producing a form of criminalized conflict. In the case of the 1992-1995 Bosnian war, for example, understanding the role of criminal actors and clandestine flows is crucial in explaining the war's outbreak, persistence, termination, and aftermath. Calling this war a criminalized conflict does not take politics out and simply reduce all aspects of the conflict to criminality and economic motives. It does, however, stress the analytical insights that can be gained from a more sharply-focused exploration of the intersection between smuggling practices, criminal actors, and warfare. It also has important implications for understanding the challenges of post-conflict reconstruction.
The Outbreak, Persistence, and Termination of the Bosnian War
Clandestine activity (especially weapons smuggling) is critical in explaining the initial military power imbalance in Bosnia and the effects this had on the subsequent outbreak of armed conflict in the spring of 1992. It is also important to note that the first decisive advances in ethnic cleansing in Eastern Bosnia were made with the clandestine assistance of irregular paramilitary units, covertly imported and subcontracted from Serbia. The criminally-aided and smuggling-enabled, initial military power imbalance created high Serb expectations of a quick and easy victory - thus, enhancing the incentive and willingness to go to war in the first place.
Clandestine flows and the involvement of criminals also helps explain why the conflict did not end quickly and decisively, as Serb leaders expected. Bosnian government-supported forces - including criminal gangs - developed their own clandestine supply networks. The involvement of the criminal underworld and engagement in large-scale, cross-frontline commerce was essential in sustaining the war. This was strikingly evident, for example, in the Sarajevo siege. In the absence of an established professional military, the Sarajevo government initially survived by relying on the city's criminals and gangsters for its defense. While Serb leaders expected the city to fall within days or weeks, it turned into the longest siege in modern history.
Finally, the fact that the war took place under conditions of economic sanctions in Serbia and Montenegro and an arms embargo on all countries of the former Yugoslavia suggests that an important part of the explanation for the persistence of the war lies in the effective utilization of illegal supply networks to bypass international prohibitions. Indeed, the profits from embargo-busting arguably created vested interests in the continuation of the war as well as international sanctions.
As has been well documented elsewhere, a variety of domestic and international factors helped to finally bring about an end to the war in Bosnia. But the growing strength of the Bosnian army and the eventual shift in the military balance on the ground - made possible by heightened Bosnian government access to clandestine arms supplies - was an essential ingredient in creating the necessary conditions for a negotiated settlement. While Bosnian forces were on the defensive for most of the conflict, the influx of smuggled weapons helped them to regain large swaths of territory lost at the beginning of the war. And this, in turn, helped to render the Serb leadership more open to negotiating an end to the conflict. Thus, ironically, the very failure of the international arms embargo contributed to ending the war.
Aftermath: The Legacy of the Clandestine War Economy
The legacy of the clandestine war economy has profoundly shaped the post-conflict reconstruction process in Bosnia. The smuggling networks that proved so essential to the war effort have also contributed to the criminalization of the state and economy in the post-war period. Crime-fighting problems now overshadow war-fighting problems. Key players in the covert acquisition and distribution of supplies during wartime have emerged as a new criminal elite with close ties to the government and nationalist political parties. While new elite formation has been part of the transition process throughout post-Communist Eastern Europe, in Bosnia, the process is distinct in that it was accelerated by, and took place under, conditions of criminalized warfare. Thus, in contrast to East Central Europe where the old nomenklatura converted political capital into economic (and sometimes criminal) capital, in the case of Bosnia, criminal capital accumulated during a criminalized war has been converted to political capital after the war.
Sarajevo's social structure, for example, has been totally transformed - while many of the most educated professional technocrats have fled abroad, many who were previously on the margins of society have experienced rapid upward mobility thanks to their wartime roles and political connections. An enduring legacy of the war has been the criminalization of the city, as power and influence shifted to those most connected in the shadowy world of clandestine transactions. Entrenched political corruption - based on close relationships of loyalty and trust between nationalist politicians, the security apparatus, and criminals - has undermined the rebuilding of the city, eroded public trust in government, and impeded democratic reform. War profiteers, including many local politicians and military commanders, are now shielded from prosecution thanks to a sweeping amnesty law that includes such crimes as illegal commerce and illegal use of humanitarian aid. Many war entrepreneurs have "cleaned" their wealth, presenting themselves as legitimate new elites and taking advantage of the privatization and deregulation process promoted by international financial institutions.
While the formal economy has struggled to recover from the war and has been highly dependent on external donor support, the informal, underground economy is thriving. Clandestine economic activity has generated substantial revenue and employment, becoming a key part of the survival strategy for many impoverished Bosnians. However, the clandestine economy has also been an obstacle to creating effective state institutions and the establishment of the rule of law. Much of the country's imports arrive in the form of contraband, which provides consumer goods at a discount but which simultaneously enriches smuggling organizations and deprives the government of desperately needed tax revenue. The highly fractured and fragmented nature of the Bosnian state that emerged from the Dayton Agreement has invited rent-seeking and made border controls and collection of customs duties extremely cumbersome and difficult.
Partly as a legacy of the war, Bosnia has also become a major human cargo trans-shipment point for illegal entry into the European Union (EU). For example, the routing of thousands of Iranian migrants through Sarajevo has been a direct consequence of the close wartime ties between Bosnia and Iran. As thanks for Iranian assistance during the war, until December 2000, Iranian passport holders did not need a visa to enter Bosnia. Chartered flights from Teheran regularly landed at the Sarajevo airport and returned virtually empty. Pressured by the EU, the Bosnian government has imposed a visa requirement on Iran, but the country continues to be a major migrant smuggling hub. The UN mission in Bosnia reports that the Bosnia route is taken by about 10 percent of the smuggled illegal migrants entering Western Europe. Even more profitable than migrant smuggling has been the trafficking of women into the region, where a core part of the customer base is the substantial international community presence (including thousands of NATO troops).
The transformation of the clandestine war economy into a post-war criminalized economy is nowhere more visibly evident than at the "Arizona market," an area which once was a NATO-enforced "zone of separation" and checkpoint between Serb, Muslim, and Croat forces that has now grown into a massive complex of some 2,000 plywood and steel shacks covering about 35 acres. Roughly 20,000 people reportedly owe their livelihoods to the Arizona market (named for NATO's designation of an adjacent highway). Western officials promoted the site as a way to nurture local entrepreneurship, and the Pentagon provided some of the start-up costs. The sprawling market, however, has become a smuggler's paradise. It is a glaring symbol of the Bosnian government's inability to regulate the flow of goods across its borders. As many as 25,000 shoppers visit the market on a single weekend. The state looses an estimated $30 million in tax revenue every year from contraband goods sold at the market. Unable or unwilling to close the market down, the Office of the High Representative has been trying to clean it up, with mixed results so far. The market is considered a success story by some observers, since Serbs, Croats, and Muslims now interact peacefully through trade in a place that once was bitterly contested. While Western officials have been enthusiastic promoters of the classic liberal notion that peace can be fostered through trade, it remains to be seen whether durable peace can also come through illegal trade.
Some Brief Extensions: Kosovo and Macedonia
The analysis can also be briefly extended to other recent armed conflicts in the Balkans. For example, variation in access to clandestine flows helps to explain variation in the timing of the region's conflicts. Based on levels of ethnic tension alone, one would expect Kosovo to have been the first powder keg to explode in the former Yugoslavia. An initial lack of access to arms is an essential part of the explanation for why the ethnic Albanian push for independence took place considerably later than the conflicts in Croatia and Bosnia. A sharp rise in the availability of cheap smuggled weapons - due to the collapse of the neighboring Albanian government and the looting of armories in the spring of 1997 - was a prerequisite for escalation in the armed confrontations between members of the Kosovo Liberation Army (KLA) and Serb forces. The KLA also benefited from the substantial remittances from ethnic Albanians living abroad, part of which included funds from illegal activities such as heroin trafficking in Western Europe.
The "mini war" in Macedonia between the Macedonian state and the Albanian-led National Liberation Army (NLA) has been closely connected to cross-border crime, including the smuggling of arms and other contraband. Indeed, some observers have argued that the conflict has been less about ethnic disputes and more about maintaining smuggling routes. In this regard, it is important to point out that the outbreak of armed conflict in Macedonia started in Tanusevci, a remote smuggling village bordering Kosovo, when Macedonian soldiers attempted to impose border controls.
As the Bosnian case and these brief comparative extensions suggest, understanding the mechanics of many contemporary conflicts and their aftermath requires taking much greater account of the various roles of criminal actors and clandestine flows. Doing so means taking topics traditionally studied primarily in the world of criminology - criminal networks, black markets, underground economies - and making them of more central importance to the study of armed conflict and post-conflict reconstruction.
To address the growing challenges of terrorism and crime and focus attention on the need for sustained American leadership and engagement in the region, East European Studies launched a seminar series in April 2002 to examine the role of the region as a conduit for transnational organized crime and terrorism and seek strategies to help curb this trend. The second session, on October 30, 2002, featured Peter Andreas. The above is an edited summary of his presentation. Meeting Report #261.