Published March 2019
This module is a resource for lecturers
Exploitation of natural resources and terrorism
The Taxation of Illicit Charcoal Trafficking
In 2011, the UN Security Council Monitoring Group on Somalia and Eritrea estimated that between nine and eleven million sacks of charcoal were exported from Somalia, generating annual revenues for Al-Shabaab in excess of $25 million. The following year, in 2012, the Monitoring Group estimated that the rate of export had risen to 24 million sacks per year, representing an overall international market value of $360 million to $384 million. Al-Shabaab benefits from the revenue generated at charcoal production sites, from checkpoints along trucking routes and from exports.Al-Shabaab allegedly uses the taxation of the illicit trafficking of charcoal to fund its daily operations and to pay the salaries of its fighters. There is also evidence to suggest that these revenues are used to purchase weapons.
Case Study: Al-Shabaab's "Charcoal for Sugar" Trade Cycle
Illicit charcoal export trade is closely linked to the importation of sugar to Al-Shabaab-controlled areas. Many vessels discharge sugar before loading charcoal cargoes. The UN Security Council Monitoring Group on Somalia and Eritrea conservatively estimates the total volume of sugar imports in southern Somalia to be between 20,000 and 40,000 metric tons per year. The sugar is smuggled overland to neighbouring countries, particularly Kenya. According to the Monitoring Group, well-organized criminal networks with links to Al-Shabaab take advantage of the porosity of the border with Kenya to smuggle sugar, as well as arms and people. The Kenyan authorities have also discovered light weapons and ammunition concealed in some sugar consignments. Several of the individuals involved are well-established businessmen and real estate investors. Allegedly, an opportunistic and mutually beneficial kind of "pax commercial" has been established between those criminal networks and Al-Shabaab. Import taxes on this trade represent estimated revenues of between $400,000 and $800,000 per year for Al-Shabaab, although this estimate is claimed to be conservative. In its 2016 report, the Monitoring Group observed an estimate claiming that the volume of illicit sugar trade may be as much as 230 trucks per week. This could equal as much as $12 million-$18 million in revenue per year for Al-Shabaab. Al-Shabaab generates revenue from taxing the illicit sugar trade at checkpoints, ports and border crossings (UNSC, 2016)
The connection between Al-Shabaab and sugar smuggling came to the fore in Kenya in 2014. Following Al-Shabaab's attack at Garissa University College, the Government of Kenya issued a confidential list of 30 individuals who the government claimed were 'engaged in sugar smuggling' and whose accounts had accordingly been frozen. The Kenyan security forces in turn launched a crackdown on the sugar trade in the Dadaab refugee camps, and a 'sugar unit' was created within the Kenya National Intelligence Service for that purpose. In mid-April 2015, the sugar unit arrested six mid-level smugglers in the Dadaab camps.
The profits of the sugar trade can be used to launder voluntary contributions to Al-Shabaab through fraudulent invoicing, overvaluing of import proceeds and undervaluing of exports.
ISIL is thought to be the richest terrorist group, with a turnover of roughly $2 billion in 2015, a substantial proportion of which was derived from oil trafficking: ISIL was producing up to 75,000 barrels a day in generating revenues of $1.3 million per day (Institute for Economics and Peace, 2017). Between 2015 and 2017, however, ISIL suffered territorial losses and therefore obtained lower income and revenue from oil. It is estimated that ISIL's revenue has fallen from $81 million per month in 2015 to $16 million per month in 2017. Similarly, it is reported that The Al-Nusra Front generally acquires funds through oil sales, among other methods (Institute for Economics and Peace, 2017).