Introduction
In our twenty-first-century world the lethal combination of technological
advances, terrorism, global crime, state-sponsored violence and socio-economic
inequality has raised instability and insecurity to alarming levels. At the same
time, the engine that has driven this escalation, the global arms trade, grows ever
more sophisticated, complex and toxic in its effects.
It might therefore be thought essential that the world’s democratic nations
should address this trade collectively and urgently. If it must exist, then surely it
should be coherently regulated, legitimately financed, effectively policed and
transparent in its workings, and meet people’s need for safety and security?
Instead the trade in weapons is a parallel world of money, corruption, deceit
and death. It operates according to its own rules, largely unscrutinized, bringing
enormous benefits to the chosen few, and suffering and immiseration to millions.
The trade corrodes our democracies, weakens already fragile states and often
undermines the very national security it purports to strengthen.*
Global military expenditure is estimated to have totalled $1.6tn in 2010, $235
for every person on the planet. This is an increase of 53 per cent since 2000 and
accounts for 2.6 per cent of global gross domestic product.
1
Today, the United
States spends almost a trillion dollars a year on national security with a defence
budget of over $703bn.
2
The trade in conventional arms, both big and small, is
worth about $60bn a year.
3†
The US, Russia, the UK, France, Germany, Sweden, Holland, Italy, Israel and
China are regularly identified as the largest producers and traders of weapons and
matériel.*
Almost always shrouded in secrecy, arms deals are often concluded between
governments who then turn to manufacturers, many of which are now privately
owned, to fulfil them. In some instances, governments enter into contracts directly
with commercial suppliers. And companies do business with each other or third
parties,

some of whom are not even legal entities. These include non-state actors –
from armed militias to insurgent groups and informal clusters of ‘terrorists’ – and
pariah states. The sale and supply of weapons often involves murky middlemen or
agents, also referred to as arms brokers or dealers.
†
Many arms deals contain elements of all these arrangements stretching across a
continuum of legality and ethics from the official, or formal trade, to what I will
refer to as the shadow world, also known as the grey and black markets. The grey
market alludes to deals conducted through legal channels, but undertaken
covertly. They are often utilized by governments to have an illicit impact on
foreign policy. Black market deals are illegal in conception and execution. Both
black and grey deals frequently contravene arms embargoes, national and
multilateral laws, agreements and regulations. In practice, the boundaries between
the three markets are fuzzy. With bribery and corruption de rigueur there are very
few arms transactions that are entirely above board.
‡
The arms trade operates on collusion between world leaders, intelligence
operatives, corporations at the cutting edge of technological development,
financiers and bankers, transporters, shady middlemen, money launderers and
common criminals.
This unholy alliance attempts to avoid responsibility for the gruesome
consequences of their actions with the oft-quoted mantra: ‘Guns don’t kill people,
people kill people.’
4
But even technologically advanced forms of warfare, such as
the use of unmanned drone aircraft to eliminate enemies, cannot minimize the
sheer brutality of the trade and the destruction it causes.*
Supplying conflicts from world wars to the Cold War to the War on Terror, from
small insurgencies to large-scale revolutions, arms dealers, weapons manufacturers
and even governments have fuelled and perpetuated tensions in pursuit of profit,
on occasion selling to all sides in the same conflict.
In addition to the primary moral

The Shadow World is a journey of discovery into this powerful, but secretive world.
It begins with an arms company founded by a group of senior former Nazi
officers in the aftermath of Germany’s defeat that developed into one of the most
nefarious networks of arms dealers the world has known. And it ends with the ill-
conceived wars in Iraq and Afghanistan that have been a goldmine for US and
allied defence manufacturers, as well as for the shadow world.
Along the way, the book traces the growing wealth of Saudi Arabia and its
increasing influence on the global weapons trade, and especially its role in the
development of the British defence behemoth BAE via the world’s largest arms
contract, the infamous Al Yamamah deal. It looks at how BAE and its US
counterpart, Lockheed Martin, consolidated their relationships with governments
and intelligence agencies in order to win weapons deals in their home countries,
while also using these contacts and dubious agents to bribe their way into
spectacularly lucrative contracts abroad.
It tracks the rise of rogue dealers like the Lebanese-Armenian Joe der
Hovsepian, and the merging of the state, criminal activity and gun running which
reached its apogee with the diamonds-for-weapons transactions overseen by the
former Merex agent and Liberian President, Charles Taylor. It surveys the
devastation of swathes of the African continent, enmired in seemingly endless civil
wars and ethnic conflicts, fuelled by the rapaciousness of the arms trade. And it
examines the role of the very wealthiest nations of the world, from Israel to
Sweden, in facilitating this trade.
Finally, The Shadow World reveals the current status and whereabouts of the
main characters and companies chronicled, before highlighting emerging trends in
the arms trade, as well as the prospects for improved regulation, enforcement and
accountability.
At our journey’s end, I hope that you might ask whether we, the bankrollers,
should not know more, far more, of this shadow world

that affects the lives of us
all. Whether we shouldn’t demand greater transparency and accountability from
politicians, the military, intelligence agencies, investigators and prosecutors,
manufacturers and dealers, who people this parallel universe. Whether we
shouldn’t emerge from the shadows that blight our world.