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How literal roadblocks are hampering the supply chain

Global supply chains have extended to the developing world, offering economic opportunity even to countries whose governments have little control over their territory. Contrary to the old adage that trade lessens war, trade in these places breeds conflict because fighters employ a lean business model, often using just a few Kalashnikov rifles to extort money from anything under their control moved on the streets – including working vehicles for multinational companies and aid organizations.

You can buy a Coke in Iraq, a Heineken in Congo and Nestlé powdered milk in Myanmar, and you can easily share selfies from these places thanks to the coverage of Huawei and Ericsson antennas. All of these products and services make their way to consumers in conflict-affected areas, driven by truckers who supply global brands through intricate networks of contractors and suppliers. This mundane, logistical element of supply chains leaves them vulnerable to rebel blackmail.

Whether in Afghanistan or Yemen, South Sudan or Syria, supply chain extortion involves encountering a roadblock — typically gunmen in improvised army uniforms and a wire or car tire stretched across a road, or a lengthy but largely one symbolic document check . Most of the time, a wad of cash changes hands. As any local van will tell you, it’s never just one. Because blackmailing local transporters is so profitable, rebels and soldiers are increasingly fighting for control of trade routes in conflict zones around the world.

In February, analysts at Citibank rated Ericsson shares “uninvestable” after a Feb. 27 report by the International Consortium of Investigative Journalists detailed how the Swedish telecoms giant killed ISIS fighters at checkpoints in Iraq in 2016-17 had paid. Ericsson could have transported its cell towers and equipment via a government-controlled road between Ramadi and Erbil, but chose a different route to avoid delays related to Iraqi customs checks, according to an internal Ericsson report available to the consortium. Going this route required paying tens of thousands of dollars in checkpoint “taxes” to ISIS. (In March, Ericsson confirmed the report’s authenticity and said it was disclosed to the Justice Department under a 2019 deferred prosecution agreement.)

Ericsson was not alone: ​​France’s Supreme Court found that cement maker Lafarge also contributed to IS finances by paying checkpoint taxes in Syria for supplies to and from its factory in 2013-14. (Lafarge has acknowledged the payment but continues to seek charges of complicity in crimes against humanity dismissed.)

At the same time, Heineken, the world’s second largest brewer, was funding an armed group in war-torn eastern Congo. In 2012, an armed group known as the M23 ruthlessly took over key trade routes and border crossings and built a profitable checkpoint business. An M23 rebel told me in an interview, “This is where the road goes through,” said the last word while pointing to his bag. Heineken’s market dominance in Congo relies on a vast distribution network — the country is three times the size of Texas — and, according to my own reporting, included paying $300 for every truck carrying clinking beer crates that passed M23 checkpoints. M23 issued receipts to truck drivers passing through its checkpoints, allowing hauliers to pass costs on to their customers; I received such a receipt.

In response to my request for comment in 2013, Heineken said it was immediately suspending payments to carriers. And it acknowledged, in response to a 2019 query from Danish company watchdog Danwatch, that “third-party carriers made certain checkpoint payments to rebel groups to let trucks carrying our product through,” adding, “based on our volumes in the area estimates the maximum these third-party carriers could have made in payments at $50,000, probably less.” But Heineken was not the only company paying such fees, and the checkpoint revenues put M23 at an estimated $200,000 per month, turning its years-long rebellion into a commercially viable and potentially self-sustaining enterprise.

Today there are more than 800 roadblocks in two of Congo’s eastern provinces. Since roadblocks are attractive sources of income, rebels and army factions are increasingly fighting for control of them. The Central African Republic counts around 300 roadblocks, which provide most of the funding for its armed groups. In South Sudan, soldiers and rebels extort millions of dollars every year along important trade and aid routes. Scattered evidence shows that similar extortions occur in Yemen, Libya and Somalia.

Global supply chains weaving through countries whose governments do not fully control their transportation networks mean that corporate profits and Western taxpayers’ money are ending up in the pockets of rebels and prolonging conflict. Dependent on checkpoint taxes, roadblock rebels are careful not to kill the goose that lays the golden egg. They settle for a tax rate that comes close to choking off trade, and sometimes work hard to make the roads they control more attractive than state-controlled roads by offering smoother transit and standard or reduced tax rates.

The complexity of supply chains makes it difficult to understand what is happening on the ground. A recent Deloitte survey found that few leading companies have insight beyond the first tier of suppliers, and what happens in conflict zones is several layers away from corporate responsibility. Without oversight, there is no incentive for local contractors to stop paying rebels, or for rebels to stop blackmailing suppliers. Due diligence must catch up with supply chains to ensure trade is a source of development, not conflict, where it is most needed.

Mr. Schouten is Senior Researcher at the Danish Institute for International Studies, Associate Researcher at the International Peace Information Service and author of Roadblock Politics: The Origins of Violence in Central Africa.

Review and Outlook: Two million migrants have been turned away under Title 42 authority, and President Biden has no backup plan to control immigration when the May 23 health measure ends. Images: Reuters/Getty Images Composite: Mark Kelly

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https://www.wsj.com/articles/preventing-supply-chain-extortion-terrorism-jihadist-islamist-isis-rebels-heineken-ericsson-sanctions-iraq-congo-warzone-conflict-zone-11650474876 How literal roadblocks are hampering the supply chain

Ethan Gach

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