INTERNATIONAL ISSUES REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01184R000200730001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 22, 2016
• Document Release Date: October 14, 2010
• Sequence Number: 1
• Publication Date: October 1, 1984
• Content Type: REPORT

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International Issues
Review
October 1984`
..cam
--~Z, GC
GIIIR 84-005
October,1984.'
G'opy-
~t~ eti,. Directorate of ~ 1, ~ , ~ ~ ~ ~, ~ ~~
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Intelligence 25X1
Review
International Issues
This publication is produced by the Office of
Global Issues. Some issues contain articles drafted in
other offices. Some articles are preliminary or
speculative in nature, but the contents are formally
coordinated as appropriate with other offices
within CIA.
Secret
GI IIR 84-005
October 1984
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Contents
Page
Nigeria: Emerging Hub of African Drug Trade~~ 1 25X1
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Nigeria's role as a major transit point on the heroin trail between
Southwest Asia and the United States is likely to grow over the next
several years as Nigerians move from their roles as couriers to
asserting greater control over drug movements that run through
Lagos to Western Europe and the United States. ~ 25X1
Worldwide Narcotics Highlights 5 25X1
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The International Issues Review will publish a bimonthly review of
key developments that affect US antinarcotics efforts. ~~ 25X1
Argentina: Continued Poor Sales Prospects for TAM Tank
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~~x~
continued sales difficulties for the Argentine tank.
tag, and the poor prospects for sales of any light tanks point to
Recent reports of possible sales of Argentina's TAM light tank are
probably exaggerated. The TAM's limited capabilities, high price
the necessary technology.
France has often been willing to license the production of French-
designed arms to states seeking to develop their defense industries.
These sales help support the French arms industry without creating
competition because many licensees still lack the ability to absorb
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Arms Transfers: Significant Sales and Negotiations 21
Reviews key arms sales and negotiations that took place during the
summer of 1984.
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Narcotics
Nigeria: Emerging Hub of
African Drug Trade
Summary Nigeria is emerging as a major transit point on the heroin trail between
Southwest Asia and the United States. Severe economic and social
problems provide the incentives for Nigerians to serve as drug couriers.
Expatriates from the Middle East and Southwest Asia living in Nigeria
provide connections to sources of supply, and the large Nigerian communi-
ties in the United States provide the links to distribution networks. The
military government of Nigeria is ill equipped to deal with the heroin
traflic; its drug enforcement elements are untrained, poorly motivated, and
often corrupt. We believe that Nigerian involvement in drug smuggling
will grow over the next several years. Moreover, we expect the Nigerians to
attempt to assert greater control over the heroin pipelines that run from
Southwest Asia through Lagos to Europe and the United States. ~~
The US Connection
Nigeria has become a major transit point for South-
west Asian heroin bound for the United States. Illicit
drugs formerly smuggled into European cities-be-
cause of Nigeria's historic ties with Great Britain-
now are headed for New York, Boston, Philadelphia,
and other American communities. The shift to the
United States is apparently due to US drug prices
significantly higher than those in Europe. For exam-
ple, Drug Enforcement Administration (DEA) sources
report that at least two major Nigerian smugglers
who previously shipped heroin to the Netherlands
shifted their operations to the United States after they
found American prices more attractive. The relative
strength of the US dollar also serves to draw heroin
away from the closer European market.
This trend is supported by data on arrests over the
past three years. Seven heroin-smuggling incidents
involving Nigerians occurred in 1982, three of them in
the United States and four overseas. The total amount
of heroin seized in these incidents was only 3 kilo-
grams (kg). In 1983 the United States arrested 21
Nigerian smugglers, other countries, 15; and the
amount of heroin seized rose to 30 kg. If the rates
reported during the first five months of 1984 are
sustained, arrests this year will rise to more than 100,
three-fourths in the United States; and heroin seizures
will increase to almost 60 kg.
A Fertile Environment for Drug Traffickers
The impetus for Nigeria's emergence as a link in the
Southwest Asian heroin trail is most likely the deteri-
oration in trafficking conditions elsewhere, coupled
with worsening socioeconomic conditions at home.
The Lebanese civil war, the Iranian revolution, and
the Soviet occupation of Afghanistan have shut down
some of the traditional trafficking routes, and Nigeri-
ans have stepped in to fill the gap. At the same time,
the Nigerian economy has been increasingly unable to
accommodate the rising expectations of its large and
rapidly growing population.
Secret
GI IIR 84-005
October 1984
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Nigeria possesses:. the infrastructure to develop into an
effective, large-scale drug-smuggling center. Lagos is
the air hub of West Africa and serves as a major
transport link between South and Southwest Asia and
heroin markets in Europe and the United States. A
large mercantile class of Pakistanis, Syrians, Leba-
nese, and Indians provides the necessary connections
back to heroin sources in Southwest Asia. At the
other end of the heroin pipeline, smugglers are able to
blend easily into the large, closely knit communities of
Nigerians residing in European and east coast US
cities. The US Immigration and Naturalization Serv-
ice estimates that about 40,000 Nigerians reside
legally in the United States, and, according to a
recent FBI report, many of these residents are adept
at defrauding US banks, insurance and credit compa-
nies, welfare agencies, and other institutions. The
skills developed in white-collar crime have enabled the
Nigerians to become proficient quickly at concealing
illegal government involvement with drug trafficking.
Social and economic conditions within Nigeria also
encourage drug smuggling:
? Domestic drug abuse, especially of marijuana and
methaqualone, is spreading rapidly, according to
DEA
? Nigeria has only 90,000 police officers, not nearly
enough to control routine forms of criminal activity
in a society of 40 million.
? Financial mismanagement has wreaked havoc on
the Nigerian economy. High unemployment, infla-
tion, and weak currency have caused a sharp drop in
living standards and fueled increases in narcotics
trafficking and other illicit activities.
Furthermore, drug smuggling is abetted by traditional
Nigerian attitudes toward corruption. Called dash in
Nigeria, corruption is pervasive at all levels of govern-
ment and societyand is encouraged by the system of
extended families in which a civil servant or military
official is responsible for the economic support of
large numbers of people. Thus, lucrative arrange-
ments between government officials and smuggling
operations are not uncommon. For example, two DEA
sources report that a Nigerian Interpol official in
Lagos is taking payoffs from drug traffickers. And
Nigerian diplomatic personnel have been implicated
in drug smuggling; a diplomat at a Nigerian embassy
was arrested in 1983 for smuggling heroin from
Pakistan.
Routes, Methods, and Markets
According to DEA
Nigerian heroin smugglers are supplied al-
most exclusively from Pakistan
the single dominant supplier was Ghulan Juma
Khan of Peshawar. Khan is said to have a reputation
for supplying high-quality heroin at $6,000 to $8,000
per kilogram. Khan
also has the connections necessary to arrange for
Nigerian couriers to clear Pakistani customs at Kara-
chi and Islamabad without inspection. Analysis of
1984 seizure data confirms that almost all of the
Nigerian heroin couriers return from points in Paki-
stan to Lagos, although they occasionally pass
through third countries. The heroin is broken down
into smaller amounts in Lagos and then carried by air
to New York, Boston, or other US cities.
Nigerian traffickers generally prefer the body-cavity
method of smuggling and frequently load several
couriers on board a single flight. The couriers are
often women accompanied by a male controller on the
same flight. For example, an incident at JFK Airport
on 26 May 1984 involved four female couriers on a
Nigerian Airways flight, each carrying 5 ounces of
heroin internally. They were accompanied by a single
male courier whom they identified as their source of
supply. The body-cavity method is a crude technique
but is frequently replaced by more sophisticated
methods as the trafficking network matures; the
French/Corsican organizations used this method to
transport heroin in the 1960s, as did the Colombians
for cocaine in the 1970s, before both graduated to
larger loads and more imaginative smuggling meth-
ods.
Little is known about the distribution and marketing
of the Nigerian heroin once it reaches the United
States. DEA sources believe some of it enters the US
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market through connections with black American
organizations.
Similarly, little is known about the financing of
Nigerian heroin smuggling. A DEA case has impli-
cated the African Continental Bank of Lagos in drug
smuggling, and five Nigerian drug couriers have been
arrested carrying checks drawn on a single account
there. One of these couriers claimed that a senior staff
member was the financier of the drug venture. It is
also possible that the bank is being used as a source or
conduit of drug financing without the knowledge of its
officers.
Outlook
The flow of heroin through Nigeria is likely to
increase rapidly. The social and economic incentives
to drug traffickers are strong, and the government,
faced with resource constraints, has other more press-
ing priorities to address. Lagos does regard domestic
marijuana abuse as a major concern but cares little
about heroin transiting Nigeria. A stronger commit-
ment by the new government to crack down on heroin
smuggling is unlikely to have any effect. Police lack
the motivation, training, and equipment necessary for
successful drug interdiction, and there is no readily
available cure for the corruption in their ranks. ~
The Nigerians are an enterprising people and have
shown a willingness to move into criminal ventures if
they cannot find legitimate ways to earn a living.
There are no criminal activities that are as profitable
as the trafficking and sale of illicit drugs. Thus
Nigerian drug smugglers are not likely to remain
content to serve as couriers for Southwest Asian
organizations.
Any move by the Nigerians toward greater control of
the trafficking links between Southwest Asia and the
United States would first require connections at the
sources of supply as they attempt to cut out the
expatriate middlemen who introduced them to the
trade. This is a normal stage in the development of a
smuggling system, and the Nigerians have almost
certainly taken steps to gain tighter control over the
links between Southwest Asia and Lagos. Similarly,
the Nigerians would need to establish their own
distribution networks in US cities. This step will
evolve gradually as the Nigerians become increasingly
accepted into the US criminal community. Character-
istics common to Nigerians, such as kinship ties and
facial scarring, will make their networks almost im-
possible for police to penetrate using traditional un-
dercover techniques.
Any success the Nigerians achieve in developing
trafficking networks will not go unrecognized in Afri-
ca. Other African societies afflicted by economic
hardships, political instability, and administrative
confusion are likely to note the Nigerians' success and
seek to imitate them. There is already evidence that
drug traffickers from Zaire, Ghana, and Togo have
entered the European drug market, and there is no
reason to expect other African drug smugglers not to
look to the United States as a profitable destination
for heroin and other illicit substances. ~`~
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Worldwide Narcotics Highlights
Summary The International Issues Review will present in each issue a summary of
recent developments affecting narcotics production and trafficking in host
countries and US attempts to halt illicit drug activities abroad. The items
in this summary cover the period from 1 August to 30 September 1984.
South America
Meeting in Ecuador on 11 August 1984, the Presi-
dents of Venezuela, Ecuador, Bolivia, and Colombia,
joined by representatives of Panama, Nicaragua, and
Peru, issued a declaration that calls for the establish-
ment of an international fund to combat drug traf-
ficking in Latin America and urges the United Na-
tions to pass a resolution condemning drug trafficking
as a crime against humanity. International reaction to
the "Quito declaration" has been favorable, although
several countries have expressed reservations about
creating yet another international organization to deal
with the drug issue when appropriate mechanisms
such as the United Nations Fund for Drug Abuse
Control and the South American Narcotics Accord
already exist.
President Lusinchi of Venezuela used his 25 Septem-
ber address before the UN General Assembly to push
his multilateral narcotics initiative. Lusinchi believes
the Quito declaration offers several important advan-
tages that existing regional mechanisms do not-
especially stronger international supervision of gov-
ernment drug enforcement and drug-control efforts
and a politically viable mechanism through which
Venezuela could channel resources for regional drug-
control programs. The United States and existing UN
drug-control agencies oppose the Quito declaration
for legal, administrative, and budgetary reasons, and
In September organized labor groups in Colombia and
Bolivia for the first time issued statements critical of
their governments' position on certain narcotics issues.
In Colombia, according to the US Embassy in Bogota,
the two largest democratic labor confederations, the
UTC and the CTC, have gone on record opposing the
extradition of Colombian nationals to the United
States as required by the US-Colombian extradition
treaty. In Bolivia, the recent congress of the country's
largest labor confederation passed a resolution calling
for the demilitarization of the Chapare coca-growing
region, the free marketing of coca leaves, and the
abrogation of the US-Bolivian accords on drug-con-
trol. The groups' actions, although probably influ-
enced by protrafficking elements within the member-
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immediate threat to their governments' current drug-
control efforts. Drug traffickers, however, are likely to
use the statements in carefully orchestrated cam-
paigns designed to change government drug-
control policies-especially those supported by the
United States.
Drug-control officials from Colombia met with repre-
sentatives from Brazil, Ecuador, and Bolivia in Sep-
tember to plan cooperative measures to control the
the proposal will probably be buried in committees.
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spread of illicit narcotics in the region. Colombian
officials hope to reactivate regional and bilateral
drug-control agreements as well as negotiate new
accords designed o interdict regional trafficking ac-
tivity and deny traffickers safehavens. Among the
items to be discussed are the establishment of a
regional police cooperation network; communications
links and intelligence sharing; controls on air and
surface transport, precursor chemicals, and question-
able bank accounts; and more timely extradition and
prosecution of traffickers. These measures, if effec-
tively implemented, could greatly curtail the traffick-
ing activity in major drug-producing countries. ~~
Colombian Justice Minister Enrique Parejo an-
nounced on 13 September that the government in-
tends to submit to congress a bill to facilitate the
expropriation of property and real estate of individ-
uals guilty of drug law violations. This proposed
legislation would strengthen the government's hand
after the state of siege is lifted and narcotics offenses
are returned to civil jurisdiction.
Colombia's herbicidal eradication campaign was crit-
icized by one of Colombia's leading journalists, Dan-
iel Samper, in a 7 September column in El Tiempo,
one of Bogota's leading newspapers. Samper is the
first major media; personality to attack the govern-
ment's use of herbicides in eradicating marijuana.
According to the Embassy in Bogota, his column and
the effort of other herbicide opponents have provoked
no significant reaction from the public, largely be-
cause preliminary tests found no adverse environmen-
tal impact from the use of glyphosate. Field observa-
tions indicate that the herbicide effectively kills
marijuana without harming other plant life. Also,
early test results indicate that 100 percent of the
glyphosate residue on sprayed marijuana is broken
down into nontoxic substances in the smoking process.
Colombia continues to develop its antinarcotics capa-
bility. The herbicidal drug eradication program will
be substantially strengthened with the addition of five
Bell- 206 L-3 helicopters to the National Police (NP)
Air Wing later this year. Twelve Colombian National
Police pilots have-been selected for helicopter training
in a move to lessen reliance on contract personnel.
Hangar and maintenance facilities at Guaymaral
were completed in August, and construction was
begun on forward base hangars and maintenance
facilities at Santa Marta and San Jose. More impor-
tant, the Air Wing has been granted. autonomy from
civil aviation authorities in conducting its operations.
According to a US Embassy report of 25 September,
the Colombian Government has eradicated over 1,300
hectares of immature cannabis plants since the start
of the herbicidal spray campaign in July. In addition,
units of the Colombian National Police and armed
forces have seized over 2,000 metric tons of marijuana
and 13 metric tons of cocaine, dismantled 68 cocaine
labs, arrested over 2,000 suspects, and confiscated
more than 1;100 weapons, 250 vehicles, and 16 boats.
Thus far, most of the major traffickers have been able
to elude authorities, and they will likely resume
normal activities when the state of siege is lifted.
In Bolivia the long-delayed deployment of government
forces into the Chapare, the country's principal coca-
growing region, on 10 August 1984, resulted in few
arrests and minimal disruption of trafficking patterns.
Several days of publicized government negotiations
with dissenting campesino groups prior to the opera-
tion gave both traffickers and coca farmers ample
time to flee the area. Conflicts between the military
and police also impeded the enforcement action and
may have contributed to the unexpected withdrawal
of the police from the area.
A government operation begun in Ecuador on 24
September has resulted in the eradication of 12
hectares of coca and the destruction of three cocaine
labs. According to the DEA, the operation proceeded
smoothly, and cooperation between National Police
and Army units was better than expected. Authorities
plan to eradicate another 30 hectares of coca in the
next few weeks if additional funding is forthcoming.
The. operation may be an indication that the new
administration is taking seriously its promise to US
officials to make drug control a priority.
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The Peruvian Government's counterinsurgency opera-
tions against the Sendero Luminoso (SL) in the Upper
Huallaga Emergency Subzone begun in August are
hurting the region's drug trade, disrupting trafficking
activity, and turning many of the coca growers and
traffickers against the SL. Some traffickers have been
forced to move into more remote areas to avoid
military and police patrols. The police will probably
be unable to keep traffickers on the defensive once the
military units are withdrawn.
Mexico
Miguel Conde Comacho-the director of eradication
in a key northern poppy-growing region in Mexico-
was reassigned permanently in early August to over-
see antidrug operations in a less important zone. The
transfer was a result of a crackdown by President de
la Madrid against drug-related graft, according to
press reports.
The Jamaican Government, in cooperation with the
United States, conducted an aerial photographic sur-
vey to determine the location and extent of marijuana
cultivation on the island. Although technical problems
with the camera limited the scope of the survey,
information on some of the major growing areas was
acquired and passed to the Jamaican Government for
use in planning eradication operations. The agreement
of the Jamaican Government to do the survey may
indicate an increased willingness to eradicate; howev-
er, their main emphasis will probably continue to be
against trafficking as the politically safest approach to
disrupting illicit drug activities.
Conde's reassignment could
set the stage for stricter drug-control efforts in north-
ern Mexico, which accounts for about two-thirds of
the country's annual opium production, and will help
dispel any notion in the drug industry that the
Mexican Government might tolerate further increases
in output.
Caribbean
Traffickers in Jamaica in recent months have resorted
increasingly to use of commercial ships to smuggle
drugs to the United States because of intensified
interdiction operations by US authorities against
On 11 September, customs officials in Port-of-Spain,
Trinidad and Tobago, arrested four Venezuelan na-
tionals for cocaine smuggling. The men had embarked
from Carupano, Venezuela, aboard an unregistered 3-
ton vessel. Customs officials found the cocaine-6
pounds-hidden in the ship's hold. The cocaine was
probably destined for distributors on the island. ~~
small pleasure craft
We believe, however, that traffickers will
resume using the more numerous and harder-to-catch
pleasure craft as their principal means of drug smug-
gling by sea as soon as they conclude that enforce-
ment efforts have eased or focused on commercial
vessels.
Thailand's share of the
US market historically has been very small, but
Embassy officials in Bangkok believe that exports to
the United States are increasing. Thailand is aiming
almost all of its antinarcotic resources at opium
cultivation and smuggling, a fact that will limit the
effectiveness of its efforts against marijuana.
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China will become a
party to the 1961 Single Convention on Narcotics
Drugs and the 1972 Psychotropic Convention, the two
major international treaties on narcotics and drug
abuse. Narcotics have been treated by the government
as anon-Chinese problem since opium abuse was
eliminated in the 1950s. Beijing's signing of an inter-
national drug treaty is unprecedented and probably
reflects heightened concern over the increasing use by
traffickers of Chinese territory for drug smuggling
and transshipment.
Southwest Asia
Pakistani authorities are planning their most system-
atic campaign yet against opium poppy cultivation in
the North-West Frontier Province. In September,
they reportedly warned growers that poppyfields
planted in October and November would be de-
stroyed. The early warnings were designed to give
growers a chance to plant other crops and to avoid
another bloody confrontation similar to the one that
occurred last November when enforcement authori-
ties surprised villagers in Malakand Agency. With
opium prices apparently increasing and the benefits
from rural development projects not yet materializing,
growers are not likely to forgo production voluntarily,
and the risk of more confrontations is high.
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Summary
Prospects for TAM Tan
Argentina: Continued Poor Sales
limited export prospects for the TAM.
Argentina is stepping up its efforts to sell the Tanque Argentino Mediano
(TAM) light tank for which it has not received any foreign orders since it
entered production in 1979. Buenos Aires is trying to make the TAM more
marketable by substituting West German components with locally pro-
duced items in order to circumvent Bonn's arms transfer restrictions. These
efforts, however, will probably be unsuccessful given Argentine technical
and funding limitations. several
countries have expressed interest in the TAM and sales are imminent or
have been completed, we believe such claims are exaggerated and that no
foreign orders have been obtained. Moreover, the high price of the TAM
and the poor sales record of light tanks in general point to continued
No Foreign Sales
Argentina has produced the TAM light tank for
domestic use since 1979 and continues to seek an
export market for the tank. The TAM-developed by
Thyssen-Henschel of West Germany for the Argen-
tine Army-is based on the chassis of a Marder
personnel carrier and carries a 105-mm gun. Argenti-
na produces the turret and chassis for the TAM, but
its sighting, electrical, and operational com onents
are supplied by West Germany (table).
Limited domestic requirements have forced Buenos
Aires to seek Third World buyers for the TAM, but
Equipment Supplied by West Germany
for the TAM Light Tank
no orders have been received. The Argentine Army early potential buyers were Chile, China, Ecuador,
has a requirement for 200 tanks of which 130 have Iraq, Pakistan, Saudi Arabia, Syria, and Venezuela.
been produced. Argentina for the past five years has Although some reviewed the TAM, none have placed
promoted sales to a number of countries to help keep orders for the vehicle.
production lines open and reduce unit costs. Among
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The relatively high asking price for the TAM has
contributed to its lack of foreign sales. The generally
reported price for the TAM is approximately $1.6
million per unit-significantly higher than quoted
prices for comparable tanks. The French AMX-13,
for example, is priced at approximately $1.2 million.
The lack of foreign sales and small domestic require-
ments keep TAM production low and drive up unit
costs-making the TAM a noncompetitively priced
light tank. Moreover, some purchasers probably be-
lieve that Argentina cannot be considered a reliable
supplier of spare parts given the TAM's dependency
upon West German equipment and Bonn's consequent
ability to block sales of spare parts.
Recent Marketing Efforts: Exaggerated Claims
Declining production rates have prompted Argentina,
recently to intensify marketing of the TAM tank, but
these efforts have been unsuccessful.
production of the TAM for national
military orders is nearing an end, with less than five
units bein? turned out monthly.
production may actually be
down to less than one unit per month as a result of
government austerity measures.
Although reporting from a variety of sources indicates
that sales of the TAM are imminent or have been
concluded, we believe such claims are exaggerated.
? Malaysia. The US attache in Kuala Lumpur re-
ports that in June a sales agent made several
presentations of the TAM to the Malaysian Army.
Efforts to diversify arms suppliers and the desire for
West German technology contribute to Malaysia's
interest in the TAM. Malaysia's limited budget,
however, will probably mitigate against the pur-
chase of the expensive TAM.
confirms that no sales of the TAM have been made.
We believe that much of this unsubstantiated infor-
mation originates with Argentine officials expressing
overly optimistic views on sales prospects in an effort
to refocus market interest on the TAM. In addition,
we have no evidence that West Germany has ever
approved sales of the TAM.
the future.
~We believe that West Germany will continue to
prohibit TAM sales to areas of tension and conflict in
from the local Italian Fiat company.
An Argentine officer claims a TAM prototype with a
domestically produced engine has already been built.
These efforts involve some adaptations of foreign
technology, and Buenos Aires has sought assistance
ment,
Outlook
Argentina is attempting to circumvent Bonn's restric-
tions on export of the TAM by substituting its West
German components with locally produced equip-
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Argentina's efforts in component substitution, howev-
er, will probably be unsuccessful because of technical
and funding limitations. Argentina cannot produce
the sophisticated operational and fire-control systems
currently supplied by West Germany. Argentina's
severe financial problems will probably also preclude
capital investment to develop this capability. Use of
other foreign-produced components is a possibility,
but peformance problems would probably be caused
by their incompatability with other systems. This
would further degrade the performance of the TAM
and expend additional scarce funds to correct the
problem.
In any case, Argentina will probably continue to be
frustrated in its efforts to sell the TAM because of the
limited Third World market for light tanks. Argenti-
na and several other countries-including Austria,
China, and France-have marketed tanks under 30
tons to meet a perceived Third World demand for
vehicles that are less expensive, cheaper to maintain,
and better suited to poor road and terrain conditions
than main battle tanks. The market for light tanks,
however, has been slow to develop. Industry sources
cite several factors to explain the lack of demand for
light tanks:
? Most Third World armies are reluctant to purchase
light tanks until they have been proved in combat.
? Third World armies view light tanks as less capable
in armor protection than their present main battle
tank inventories.
? Few Third World armies have the power-projection
requirements for which Western light tanks were
originally designed.
Industry officials believe that Third World coun-
tries-contrary to supplier expectations-are willing
to buy a smaller number of expensive main battle
tanks rather than purchase light tanks as less capable
substitutes
In addition, among the few Third World armies that
may purchase light tanks, the TAM will face stiff
competition from newer and less expensive models
being developed. Venezuela, for example, recently
favorably reviewed the US Rapid Deployment Force
Light Tank scheduled for production in 1987,
Finally, Thyssen-
Henschel has developed a light tank for the export
market similar to the TAM-the TH-301-which
may contribute to Bonn's reluctance in the future to
approve sales of the TAM.
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Summary
Arms Production
France: Licensing
competitors.
An examination of French licensing experiences provides some useful
insights into the complexities of licensed arms production. We have found
that France, to help its arms sales, has been willing to license the
production of its weapons to states hoping to develop their defense
industries. Purchasers, however, have not always been successful and
France-taking advantage of this-has been able to avoid creating new
Background
During the past 30 years, arms sales have increasingly
included provisions for the licensed production of
weapons or their components. Licenses have covered
the full range of conventional military equipment,
from pistols and munitions to high-performance fight-
er aircraft. Many countries have viewed the licensing
process as a means of obtaining technology to build or
advance their defense industries.
France, the world's third-largest arms seller, is one of
the largest licensors, dealing largely in the aerospace
area. Since 1975 Paris has provided 27 licenses to 14
countries. Of these, 11 have been for helicopters and
four for fixed-wing aircraft, including France's most
sophisticated fighter, the Mirage 2000.
French Motives
In the highly competitive international arms market,
France uses licensing as a sales tool. By offering
licenses as part of a purchase, France can compete
with other sellers, break into new markets, and make
the foreign sales that help support its domestic arms
industry. Egypt, for example, receives most of its
sophisticated arms from the United States. When
Cairo sought to assemble the F-16 under license and
the United States refused, France took advantage of
continuing delays in US approval of licensed assembly
of the F-16 and F-20 and concluded a licensing
arrangement for the Mirage 2000. France has not
ended the United States domination of the Egypt
market, but its willingness to license has won it a
substantial share.
As part of this strategy, France makes its licenses an
attractive way to acquire arms, with financing and 25X1
offsets tailored to each customer. Aerospatiale, in a
successful effort to conclude a helicopter assembly
deal with Brazil, did not charge royalties and agreed
to take back any unsold products. In a helicopter
license offer to the Philippines, the French Govern-
ment agreed to provide $16, million for plant construc-
tion. In the same deal, Aerospatiale gave the Philip-
pine company marketing rights in Southeast Asia and
manufacturing rights for spare parts and agreed to
buy those parts for its own use.
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French Licens
es'Since 1975
Date
Item
Buyer
Price
(million US $)
Remarks
1975
SA-330 helicopter
Romania
40
Assembly.
1975
20-mm cannon
South Africa
NA
1976
Alouette-III helicopter
India
23.5
Production continues, most parts made in
India.
1976
Mortars, 120-mm
Pakistan
xA
Production continues.
1976
Patrol boats
Greece
40
Built in Greece with French assistance.
1977
Matra 550 AAM
India
150
Production continues.
1977
Alpha jet
Belgium
NA
Assembly, with production of some parts.
1978
AS-350, SA-315 helicopters
Brazil
10
Assembly only so far.
1978
AIviX-30 tank
Spain
NA
Began with assembly, now 85 percent
Spanish parts.
1979
Puma helicopter
Indonesia
36
Assembly only.
1979
Milan ATGM
Italy
3.6
1979
Alouette-III helicopter
Romania
15
Production.
1980
Durance-class support ship
Australia
NA
Under construction in Australia.
1980
Dauphin-2 helicopter
China
100
Assembly, some parts.
1980
Alpha jet
Egypt
360
Assembly continues.
1980
Fuies
Egypt
NA
Technical assistance.
1980
Alouette-III helicopter
Romania
15
Production continues.
1980
Atar 9K50 jet engine
South Africa
NA
1981
Gazelle helicopter
Egypt
36
Assembly continues.
1981
Milan ATGM launchers
India
13.8
Followed sale of ATGMs.
1982
Balral-class transport ships
Chile
NA
Under construction in Chile.
1982
Super Puma helicopter
Indonesia
3.5
Assembly.
1982
Mirage 2000 (option as part of a
larger purchase)
India
xA
Option expired June (option expired June
1984).
1982
Mirage 2000
Egypt
1,000
Assembly.
1982
Alpha jet
Egypt
180
Assembly continues, 10 percent of parts
made in Egypt.
1983
Super Puma helicopter
Egypt
NA
Assembly with technology transfer for
composites.
Purchaser Motives
Most Third World purchasers have bought French
licenses as a step toward creating independent, mod-
ern arms industries. These states usually expect to
progress from assembling foreign provided kits, to
domestically fabricating parts, and then to the inde-
pendent design and production of future models. The
underlying assumption is that skills and experience
gained at each stage will allow progression to the next.
Egypt has been following this approach since termi-
nating its domestic fighter and trainer projects in the
1960s. Cairo's aircraft industry has been able to
perform minor overhauls on Egypt's MIGs and has
manufactured some MIG parts and other unsophisti-
cated aircraft parts. Since 1980, licenses have been
purchased to assemble Gazelle and Super Puma
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helicopters, Alpha jets, and the Mirage 2000. Egyp-
tian ambitions to begin progressing to a domestic
fabrication phase can be seen in its 1983 purchase of
French composite technology for the Super Pumas
and its ability to manufacture 10 percent of the parts
for the Alpha jets. The Egyptians hope to further
expand their share of the production, but we believe
that Egypt's limited base of technicians, resources,
and experience will keep Cairo from manufacturing
any but relatively simple parts.
Other French customers have had similar ideas, with
varying degrees of success. In the late 1960s, South
Africa purchased the technology for the Cactus air
defense system and has since developed an improved
version that is currently in production. The founding
of Helibras in 1977 by Aerospatiale and the Brazilian
state of Minas Gerais to produce the AS-350 and SA-
315 helicopters was to be the start of a Brazilian
helicopter industry that would complement Brazil's
successful airplane ventures.
however, Helibras has failed to advance
beyond the assembly of light helicopters or to win
Brazilian Air Force support. The French view the
venture as a failure and may decide to pull out. If
Greece purchases the Mirage 2000 as expected, the
contract will probably include some licenses for parts
or assembly to aid the development of the Greek
aircraft industry.
The idea of development often combines with a state's
desire to diversify its sources of weapons. India, for
example, receives most of its arms from the USSR
and has many Soviet licenses but has sought to
expand its suppliers in order to avoid total dependence
on Moscow and to gain leverage in negotiations with
the Soviets. As part of this policy, New Delhi has
sought licenses for the production of French helicop-
ters and, for a time, held an option on a license for the
Mirage 2000.
Motives for buying licenses other than development
also play a role. China's purchase of a license to
assemble Dauphin-2 helicopters is part of its drive for
industrial and technological modernization. For
Greece, domestic production may help mute political
criticism of new weapons purchases. Italy is con-
cerned with maintaining employment and licensing
provides a way for Rome to acquire arms as well as
create jobs.
Recipient Problems
While trying to build or expand their military indus-
tries, most countries find it difficult to make the
transition from licensed production to independent
design and production, and only a few have a good
chance of success. We attribute this to the technical,
financial, political, and infrastructural problems in-
herent in starting arms manufacturing programs and
believe that only a few countries have the good
planning, management, and government support
needed for success. The Spanish aircraft firm CASA
provides an excellent example. The company has
produced fuselage parts for the Mirage F-1, has done
subcontract work for Airbus and other foreign firms,
and performed maintenance for US Air Force fight-
ers. Using its experience, CASA has designed and
manufactured transports and a jet trainer/light strike
aircraft. With careful planning and marketing, the
company has been able to make an impressive number
of sales and establish itself as an aircraft producer. In
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New Delhi's attempts to move from licensed produc-
tion to indigenous design and production illustrate the
difficulties that many other ambitious licensees still
face. India acquired its license for Alouette helicop-
ters in 1964 and has since obtained licenses for an
additional French helicopter, while progressing from 25X1
kit assembly to domestic fabrication of most of the
parts used in the helicopters. Despite 20 years of
experience building French helicopters, India has
been unable to successfully develop a new light heli-
copter. New Delhi recently signed contracts for tech-
nical assistance in the design and production of such a
helicopter with West Germany's MBB.
Some French licensees may be unable to achieve
independence because of nontechnical problems.
Greece's Hellenic Aerospace Industries, which per- 25X1
forms maintenance for foreign airlines and produces
some parts for the French firm of Dassault-Breguet,
has been unable to develop a coherent marketing
strategy for making inroads in the Eastern Mediterra-
nean aircraft maintenance market or winning subcon-
tract work from West European companies. This is
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probably due in large part to HAI's unstable manage-
ment, which in turn results from frequent hirings and
dismissals, many politically motivated.
Licensing, however, has allowed France to continue
selling arms while satisfying buyer demands for a
production role. The French are able to make sales
and compete with exports of other suppliers-at a
time of shrinking world arms demand-and thereby
support their arms industry. This accomplishment,
made without significant loss of technology or the
creation of competitors, will provide the incentive for
France to continue using licenses as one of its princi-
The French do not appear to be concerned with the
possibility of creating competitors but are careful in
their dealings with successful licensees. For example,
Paris extensively- licenses helicopters; and, although
this aids the development of new aircraft industries,
by the time a client is able to produce its helicopter
independently, it will have become outdated and
France will be marketing a successor; no real competi-
tor for sales of advanced technology helicopters will
have been created. In cases where France has offered
its most advanced technology, such as the Mirage
2000s for Egypt and India, it has only been when
Paris is sure that the recipient is not capable of
duplicating the technology on its own. We also believe
that Paris is careful to protect technology that may
create new, advanced competitors.
Outlook
We believe that the French case is typical in that its
licenses have not-ended customer dependence on
outside suppliers:. Almost all developed countries,
despite the greatrange of military equipment that
they produce, have not been able to develop advanced
technologies on their own. This, coupled with a failure
to purchase or develop the production technology for
modern arms, will serve to perpetuate consumer de-
pendence.
pal marketing techniques.
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Summary
Arms Transfers: Significant Sales and Negotiations
This article presents a listing and analysis of recent significant arms sales,
negotiations, and trends. An item may be considered significant for
political, military, or economic reasons. Prices will be listed when possible.
Below are presented sales and negotiations from the summer of 1984.E
Asia
The July sale of Soviet MIG-29s to India highlights
the importance Moscow places on its relationship and
the concessions it will grant to please New Delhi.
Delivery of 40 MIG-29s-equipped with standard
electronics and weapon systems and not yet in War-
saw Pact inventories-probably will begin in Decem-
ber, and another 130 are to be assembled in India. As
usual New Delhi also received concessionary financ-
ing-a low interest rate and an extended repayment
period. The Soviet deal was more attractive than the
French offer for licensed production of the Mirage
2000. The Mirages would have been slightly more
expensive and their technology less advanced.
Sri Lanka purchased seven patrol boats from China
under a July agreement. The boats will probably be
used to patrol the straits between India and Sri Lanka
to try to intercept supplies bound for Tamil insur-
gents.
Italy has been developing an extensive arms relation-
ship with China
The Italian firms of Selenia an
Elettronica have signed contracts to sell electronic
warfare and antiaircraft defense systems.
In a July visit to West Germany, Burmese leader Ne
Win signed two arms agreements. The first was for a
$23 million sale of rifles, machineguns, mortars, and
antitank rocket launchers. The second was for atwo-
phase expansion of Burma's German-built arms
plants. The first phase will probably rebuild an arms
plant lost in a July explosion and add facilities to
produce rifles and ammunition, and the second will
expand it to begin the production of mortars and
rocket launchers.
Africa
Recent Soviet sales efforts in Africa have had mixed
results. In July an agreement was reached with
Tanzania to supply rocket launchers, howitzers, ra-
dars, ammunition, and parts.
the $19.5 million deal also includes training
and technical support. In August financial and politi-
cal reasons led Zambia to refuse a Soviet offer to
increase the level of military cooperation between the
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Arms Transfers: Highlights Mid-1984
two states.
Middle East
Jordan and the USSR are continuing to negotiate a
new arms sale that almost certainly will cover short-
political influence in Jordan.
terms than any other country. According to military
reporting, Amman is confident it can quarantine
Soviet advisers and prevent them from gaining any
With the drop in its oil revenues, Libya has been
increasingly hard pressed to pay for its Soviet weap-
ons. i
range air defense systems. King Hussein believes the ~_
Soviets will supply arms more quickly and on easier
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Libya has long made it a practice to diversify its arms
suppliers, and as part of this a delegation went to
Argentina and Brazil in August to see what equipment
is available.
Egypt continues to take delivery of Chinese-built
warships. In August Cairo received the first of two
frigates included in a $750 million arms agreement
signed in 1980. The frigate is the largest Chinese
warship yet exported, and Beijing is hopeful that this
will lead to further sales of major combatants to the
Third World.
Egypt is also taking steps to develop its domestic
aircraft industry. The US-built F-20 fighter was
demonstrated in Egypt on 19 September, and observ-
ers from Kuwait, the UAE, Saudi Arabia, and Sudan
attended. The Egyptians are hoping to promote
enough demand for the plane to justify licensed
production in Egypt.
Europe
France reportedly has loaned $81 million to Cyprus
for the purchase of Crotale SAM systems. The pur-
chase, probably of three or four batteries, plus radar
and support equipment, is part of the Cypriot Nation-
al Guard's modernization program and will help to
counter Turkish air superiority over the island.
Greece has purchased $25 million worth of Soviet
road construction equipment for its Military Con-
struction Service. The equipment, including bulldoz-
ers, graders, and trucks, will reportedly be paid for by
bartering agricultural products. The purchase may be
intended to deflect Communist Party criticism of the
government's purchases of military equipment from
various Western countries.
Persian Gulf
Kuwait's August purchase of unspecified antiaircraft
systems from the USSR appears to be the conclusion
of negotiations begun in 1982 and not a reaction to
the US refusal to sell it Stinger missiles. The military
significance of the sale will be lessened by manpower
receiving superpower support.
shortages and technical problems that will prevent the
Kuwaitis from making effective use of new Soviet
arms for some time. The main importance of the sale
is probably its reflection of Kuwait's hope that it will
deter Iranian atacks by showing that Kuwait is
South America and the Caribbean
The Government of Haiti, despite its economic prob-
lems, has moved in recent months to acquire new
weaponry. In July the Duvalier regime reportedly
signed a $12 million order for four Italian 5-211 jet
trainer/light attack aircraft with munitions and sup-
port equipment. In August the US Embassy in Port-
Au-Prince reported that Haiti had successfully nego-
tiated aline of credit for 2-3 million from Argentina
for arms purchases.
Argentina is continuing to try to find buyers for its
warships. No customer has been found for the Navy's
West German-produced Type-209 submarines and
Buenos Aires has received an extension of the manu-
facturer's permission to sell them. Buenos Aires is also
still searching for a buyer for its two British-designed
Type-42 destroyers.
Central America
In late August, Nicaragua opened letters of credit
with the USSR, Bulgaria, and East Germany for
about $67 million.
between Sofia and Managua.
Bulgaria will ship approximately $9 million worth of
communications gear to Nicaragua. A small part of
the payment will be made in currency, and the
remainder will be credited to a 1982 barter agreement
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