Interview: Sergio Finardi

Abstract

Want the truth about the hidden world of hazardous waste disposal and the arms trade? It's all about knowing how something gets from point A to point B.

The view from his apartment is spectacular–an almost unobstructed view of endless blue water. Overhead, there's a steady pulse of aircraft heading inland. This is an appropriate setting for someone who's dedicated his career to studying the international sea and air transportation of arms and dangerous materials. But Sergio Finardi is not looking out upon a port teaming with freight transfers. The planes overhead are mostly on their final approach to Chicago's O'Hare airport; and the water is fresh and belongs to Lake Michigan.

Finardi, 57, is trim, compact, and handsome. His apartment is pin-neat: the books and journals stand at attention in the bookshelves, the decor is crisp and clutter-free, his office–with its two computer monitors and their attendants–is an ode to cord management. This is the environment of a man who keeps a steady gush of complex information organized and poised to be useful.

Finardi holds a degree in philosophy and history of political doctrines from the University of Milan, and studied economic history at the Stockholm University on a fellowship from the Svenska Institut. For the past 20 years, he has focused on the international freight transport system and the production, trade, and logistics of oil and gas, metals, hazardous material, and weapons.

From 1989 to 1998 he was a consultant to the Saima-Avandero Group, the official logistic services provider of the Italian Defense Ministry, and an editor of the group's quarterly World Transport and Trade, for which he conducted desk and field research on the freight transport systems of several countries.

Since 1999, his research activity on the logistics of arms transfers and warfare has been supported by The John D. and Catherine T. MacArthur Foundation and Ploughshares Fund. He contributes research to Amnesty International and is a co-founder of the TransArms Research Center for the Logistics of Arms Transfers and TransArmsEurope.

From the most discontinuous and bland data, Finardi can extract patterns of subterfuge and foul play. His work has the almost magical ability to make things appear out of thin ether. He explained his work this way: “My friend, Carlo Tombola, and I were writing a book on the international freight transport system, and we realized that there was no data on arms transportation. We started to think about a separate project focusing on every nuance of the business: legal, illegal, responsible, irresponsible.” So they built a database from open sources of companies that transport military equipment for every purpose. They started to tour the world, targeting ports and airports where they knew there was sizable illegal trafficking. Around 2002, Finardi and Tombola found the only five or six other researchers in the world with the same singular approach. They then founded the TransArms Research Center and TransArmsEurope. The researchers gained expertise in the logistic activities of governments (deploying troops and equipment, controlling supply-chains, outsourcing military logistics), of non-state actors (organizing covert arms and ammunition supply-chains, deploying militias, infiltrating ports' and airports' activities), the logistics of hazardous materials, and the tracking of port and airport movements and cargoes. “We report on arms transport and deliveries,” Finardi explains, “and along the way we discovered how this commerce touches all sorts of conflicts including human rights violations. And so we publish reports on our findings.”

Managing Editor John Rezek met with Finardi in Chicago.

BAS: How can the logistics of transportation tell us so much about the nature of the dangerous waste and arms business?

FINARDI: You can hide the financial information, you can hide customer information, but you cannot hide the only visible part of every kind of international trade–transportation. You cannot obscure this physical part of the logistics chain. You have to load the goods in a certain port and you have to unload these goods in another port.

Knowing what is inside the ship is difficult, but not impossible. For example, the U.S. Coast Guard's website does a wonderful job in targeting ships that are believed to transport suspect cargo. Using that database and other similar databases, you can have an idea of which companies are transporting dangerous material, including nuclear waste. Sometimes dangerous waste is sent to countries, especially in Africa, that are willing to accept it, because they are poor or corrupt, without regard to whether it is treated in a proper way or not.

During the 1990s, the Italian Trade Commission was involved in sending very dangerous waste to Somalia. Part of the stuff was mixed with asphalt and used for building roads there. What they could not use in this way was dumped in the sea. When the 2004 tsunami reached the coast of Somalia, a lot of tanks full of dangerous chemicals washed up on shore, broke apart, and discharged the contents.

BAS: What are the procedures and responsibilities for the proper disposal of dangerous waste?

FINARDI: Government agencies have the responsibility to provide instructions and assistance for the safe and secure transfers of the waste. The company that produces the waste has the responsibility to declare the type of waste according to codes defined by U.N. regulations and international conventions, and to ship them in conformity with national laws and international conventions that regulate the transport of dangerous goods. It also has the responsibility to choose certifying laboratories, waste management companies, and carriers that can assure proper transport, treatment, and disposal.

Carriers have the responsibility to deliver the wastes to the indicated places and consignees with all the necessary protection. Managers of storage facilities, reprocessing and recycling plants, and sites used for waste disposal, have the responsibility to ascertain that what the carriers are consigning corresponds to the documentation and is appropriately allocated to their facilities.

Everyone involved on the chain is also responsible for the practical consequences of their business beyond the formal adherence to rules and regulations. For example, shipping dangerous wastes to countries whose governments are willing to accept them but lack the technical capacity to properly dispose of them and protect the population, might be strictly legal but is surely irresponsible. Each of the above-mentioned activities could be a source of problems and unlawful practices.

BAS: How large is the market for dangerous waste disposal and the arms business? What percent of total world trade is devoted to arms and waste transportation?

FINARDI: In terms of value, transporting 300,000 Kalashnikov rifles doesn't represent a lot of money. But in terms of the outcome, 300,000 Kalashnikovs could feed a war, and the consequences are significant.

The international trade in goods is so large that the transportation of defense material or chemical, biological, and nuclear stuff is, in fact, probably less than 1 percent of all international cargo. This kind of material is shipped along with normal goods, along normal trade routes, often in the same way that pasta is transported–and inside the same ships.

According to a recent study, the world produces 250 million metric tons of hazardous waste every year. The treatment and disposal of such a volume mostly occur within the national territory of the producers, but the tendency to export hazardous waste to developing countries is growing. Let's assume that only 10 percent, or 25 million metric tons, of that volume is exported yearly. That's enough to fill 500 to 700 cargo carriers each with a capacity of 50,000 metric tons. Chartering a cargo ship of that size costs between $20,000 and $50,000 a day, and even more for certain routes and ships. Considering an average 10-day voyage, the pure cost of transport could reach $200,000 to $500,000 for each shipment, plus other transport-related costs.

BAS: What are some of the side effects of arms transportation? How does that portion of their business influence the nature of the transport companies?

FINARDI: In the sense that there is monitoring of the companies who transport arms, the effect is that the operation becomes in some way militarized. When a company accepts this kind of business, it also accepts a certain kind of oversight. For example, the company I was working for had intelligence personnel inside the company because the work involves a lot of classified materials.

Since September 11, 2001, the intelligence agencies have been monitoring shipments in ports and at airports for anti-terrorist security reasons, and so the civilian side of international trade is under even more oversight from the military community and governments. This control could be only to collect information. But the information is useful not only for economic purposes, but also for strategic purposes.

Following the logistics side of the movement of chemical, fissile, and biological materials and arms–all sensitive, dangerous goods in general–not only allows you to understand what is going on in these fields, but also allows you to understand confidential business information. For example, we sometimes have information from people who want you to know that their competitors are doing something bad. What we are doing is just what the intelligence communities are doing, the same kind of approach.

BAS: Give us a step-by-step scenario of how the transportation of dangerous or illicit goods happens.

FINARDI: The logistics chain of illegal shipments–from drugs to arms to fissile materials–is just the same as all other logistics chains, except that certain aspects involve fake documents. The more they are able to hide this stuff inside other kinds of shipments, the more they are successful.

Inspecting all the containers coming into U.S. ports is an impossible task. It doesn't make sense, because 98 percent of the stuff does not pose any kind of threat. You have to do a risk assessment. In fact, before September 11, 2001, Customs and other authorities had developed the risk assessment models. They could look at 2 percent of the containers and have a good sense of what was coming in, because they had modeled to target certain kinds of provenance, certain kinds of documents, and so on. There are sometimes subtle differences. From the finance perspective, actors involved in certain sensitive goods use barter: diamonds, drugs, or arms. They do this because there is a built-in black mailing device. The diamonds were illegally traded or mined so, if you accept them, you accept involvement in a crime.

BAS: Imagine a pharmaceutical lab that has an enormous amount of medical waste. They contact someone who they believe is legitimate to get rid of it. They enter into an agreement and do business. Somehow irresponsible or ill-intentioned people introduce themselves into this process and the waste gets dumped someplace it was never intended to go. Is that a common scenario, and if so, how does it happen?

FINARDI: Let me give you an example and a premise. From my experience, I don't believe in the innocence of people who claim that some irresponsible or illegal actor intervened without their knowledge.

First, they have the duty to monitor all the actors in the transportation chain. Secondly, even if they can't monitor all the actors, they can afford to use established companies that don't do bad things and are very accountable. Those companies, of course, charge a certain kind of price, because they follow all the rules. If you accept a proposal whose price is too good to be true, I don't think that you are innocent. You know that there is a reason for the lower price.

There are more than 400 nuclear power facilities in the world, all of which produce waste. There is chemical and biological waste from the world's hospitals and laboratories. This is a large market and the cost to dispose of this stuff is very high. If a country starts a big research program in biological defense or infectious disease, you have to enter a disposal market which is already physically at its limit. So, the price goes up. But you have a limited number of ships or planes that cannot operate 48 hours a day. At this point, people who are less trustworthy and have cargo planes or ships that are old or dangerous themselves, enter the chain.

How can they offer lower prices? One way is to lower their transportation costs–they don't pay crew sufficiently, they don't pay the tolls, they abandon crew after the shipment is complete. And then there is the case of a European criminal network that managed chemical waste for three countries in Europe. They loaded the waste onto very old and very cheap ships. They filed manifests that declared the cargo's final destination–Africa or some other place. Then in the middle of the Mediterranean, another ship shows up, the crew transfers to it, and the original ship is sunk. You can save a lot this way, and there are probably dozens and dozens of these wrecks in the Mediterranean now.

Another method is to transport the waste to an official dumping site, but the manager of the dumping site classifies the waste not as dangerous material, but as scrap metal. They issue a bill to the transportation company that they can show to their customer. But this stuff does not stop there. It goes to another dumping site with a less dangerous classification, and so with a far lower price. The transportation company makes a lot of money.

BAS: Let's assume that there is no reason that any legitimate transportation corporation would wish to have its reputation in any way blemished by knowingly participating in shady transportation enterprises. However, they may be aware of certain actors within their own environment whose intentions may be separate from the intentions of the corporation as a whole. You contend that it's unlikely that managers do not know what's going on in their own companies, but is it ever in the interest of a legitimate company to cast a blind eye to certain kinds of extra-legal activities?

FINARDI: I can say that if the big companies in the international market are told to be involved in shady shipment deals, it's probably against their will, because they have no interest in jeopardizing their business for just a few hundred thousand dollars. Or it could be some kind of insider, inside the boat as we described before. We're trying to promote a code of conduct for the legal transportation of arms, dangerous goods, and fissile materials, to convince the big players that it is not in their interest to be involved in this stuff, because it's 0.5 percent of their business.

When you come to medium and lower players or newcomers, such as East European and former Soviet transportation companies, they are surviving on far less, so a deal of half a million dollars is the way to survive.

Most important, in order to enter a market, they have to use some kind of leverage, so they become known as the transportation companies who are willing to do certain things, and in terms of the market, that is an advantage. Instead of being a disincentive, for them there is an incentive to do deals that could be at the border between legal and illegal.

Bear in mind, there is no transport company in the world that is only dedicated to illegal or shady business because this could be very dangerous for them. In Africa, former East European and Soviet companies use old, but strong cargo planes to pick up, for example, 500 tons of fish every day from Lake Victoria. So maybe there are 10 Ilyushin IL-76s transporting tons of tilapia each day to the European market. When the plane is empty and set to return to Africa, what do you transport? What are the goods that they need that they can't pay for in cash? Armaments. One leg is armaments, and the other one is fish. They say we return empty there, and the price of fish is sufficient for justifying one empty leg. Actually this emptiness contains some green boxes, maybe not a chair, maybe not a tank, or a helicopter, but maybe 100 green boxes, negligible for the Ilyushin IL-76, but not negligible for the civil war that it's feeding.

BAS: It's not in the interest of large, legitimate companies to engage knowingly in illicit behavior. The middle- and lower-level transport companies to whom illicit trade is attractive then would have a disproportionate effect on the trade, correct?

FINARDI: Yes. In addition, because of the way the logistics side of the military or dangerous goods trade is organized, you have very strange chains, largely because legitimate companies frequently outsource their business to another company who outsources that same business to another, and another and so on. This kind of outsourcing fosters an environment for a less legitimate company to provide services.

For example, let's examine the crash of a chartered aircraft contracted to transport 62 Spanish troops back from Afghanistan in 2003. In the early morning of May 26, 2003, a 15-year-old, military-chartered Yak-42D crashed into a steep mountainside near the town of Macka, Turkey. All 75 people onboard died, including 62 Spanish troops, mostly from a regiment of engineers who had completed a four-month tour of duty in construction and bomb disposal in Afghanistan.

Soon after the crash, the Spanish defense minister, Federico Trillo-Figueroa, asserted that the plane was in “perfect condition” and “the best choice,” and that the company was contracted through NAMSA (NATO Maintenance and Supply Agency). A company representative stated that the plane “followed all security norms.”

In fact, the Yak-42D–operated at the time of the crash by the Kiev-based Ukrainian-Mediterranean Airlines and previously in service with Aeroflot, Lithuanian Airlines, Strezhevoy Airlines, and East Line Airlines–was in terrible condition and its crew was highly unprofessional.

On June 7, 2005, in a note to the Spanish defense minister, the NAMSA director accepted partial responsibility for not exercising control on the contract awarded to the Frankfurt-based Chapman Freeborn Airmarketing GmbH, part of the Britain-based Chapman Freeborn group of companies–one of the world's largest air charter brokers–that allegedly did not declare the complete chain of companies involved in its chartering. The contractual chain was as follows:

The Spanish minister agreed to pay NAMSA $205,000 for the chartering; NAMSA contracted Chapman Freeborn Airmarketing GmbH for $205,000.

Chapman Freeborn Airmarketing GmbH subcontracted with Volga Dnepr Ireland, a maintenance company based in Shannon and part of the Ulyanovsk-based Volga Dnepr Group (Russia), for $204,000.

Volga Dnepr Ireland subcontracted to Adriyatik Tasimacilik Dis Tic. Ltd, an aviation services and ground-handling company based in Istanbul, for an unknown amount.

Adriyatik Tasimacilik subcontracted to the Beirut-based JTR Company SAL that was the proprietor of the plane operated by Ukrainian-Mediterranean Airlines.

At the end of the day, Ukrainian-Mediterranean Airlines reportedly received only $50,000; the other $155,000 was lost in commissions. JTR, the plane's proprietor, received an insurance indemnity of $2 million for a plane that was air worthless.

BAS: Is air transport particularly susceptible to this sort of manipulation?

FINARDI: Aviation is used for faster deliveries, for getting cargo out of or into difficult locations, and so is the means of choice for anything shady or illegal or when you need to deploy something very fast. So it is in the nature of that business that the contracts are awarded very quickly without the benefit of a diligent, leisurely review. Say you need 5,000 troops flown somewhere next week. The right guy calls the right company and asks can you do this? The other guy has maybe two hours, three hours to say yes or no. Usually he says yes, even if he doesn't have the means to make good on this. So he calls another company to see if they can assemble the sufficient crew and equipment to do it. And so on down the line. The point is that the guy has maybe two hours to figure out how to make this happen. If he says yes, he gets the contract. If he says, I need time to make sure that we have the right aircraft, the right crew, and so forth, the job is lost.

This is standard practice not only for the military, this is just the way the business functions. It's the same for toys, for pasta, for oil, for everything. The way the first customer wants the business done, two days, three days, four days is just provoking a chain of disasters and a chain of lies. At the end, there is a solution, but in between there are a lot of lies.

BAS: Are there ways to predict government policy by how certain transportation patterns occur? For example, if the United States were planning a pullout from Iraq in the next 12 months, would you start seeing some telltale logistical maneuvers now?

FINARDI: By monitoring the contract awards of the U.S. federal logistic agency, we knew in March 2002 that the decision to invade Iraq was already made. The first public mention of it was in a Bush speech in 2002 at West Point. The discussion in the United Nations occurred later that fall.

The logistic agency had the bid for several big ships to be deployed around Diego Garcia, a small island in the Indian Ocean. The bid for this ship included the transport of hundreds and hundreds of ambulances. We wondered, what could be the purpose to send Diego Garcia hundreds and hundreds of ambulances? Are we sending one ambulance for each military guy there? This contract was awarded to Mersk in July 2002, for $600 million. Awarded means that the money is there and the company gets the money.

No matter what they were saying and no matter what they were discussing at the United Nations about weapons of mass destruction, the United States already had decided to go to Iraq.

If the United States, Britain, and other allies are serious about a troop pullout in March 2008, for example, the bid should be issued now. I don't see anything that is connected with this now in the transportation industry. Maybe in September or October they could start to make bids and then awards, but usually they plan these kinds of moves in advance. Coming back is a completely different business than going there. The logistic needs are different. The situation on the ground is not like it was one or two years ago. Some airports in Iraq are no longer available or are too dangerous for collecting troops or materials. I think the withdrawal from Iraq has yet to be planned.

BAS: What is your relationship to law enforcement agencies and how do you keep independent?

FINARDI: We have no relationship with intelligence or government agencies. If they ask for information we are willing to cooperate, but only if the purposes–both the official one and the hidden one–are good, or at least acceptable.

“We won't accept money until we are independent of the need for money. I prefer to see this not only in moral but in business terms. Our niche is the truth. Our product is the research of truth. The most successful consultants in the business are the people who tell their customers the truth because the big guys in the company don't need lies. At this level, you find fantastically honest people, because this is their business, not because they are saints.

BAS: This sort of honesty can be dangerous. Do you worry for your safety and do you worry for the continued availability of this kind of information?

FINARDI: Our first concern is to have the resources to carry out our research. The second concern is safety, but not for ourselves because you have to choose what kind of risk you want to accept. We're in no more danger than a pilot or a guy who works in a factory.

It's just a matter of deciding if you want to die by cancer or by a bullet. Are there people who want to silence us? Sometimes traffickers kill journalists or investigators, but it's very rare. But if they kill you, they just waste their time. It's too late to kill our research. We have spread our resources, our message, our reports and contacts in too many places.

In the last three or four years, other organizations are starting projects on arms transportation because we spread a way to think of this business. This is not stoppable. It's just like technology. You can have copyrights, but science is not privatized at a certain level.

Our product is an idea that could be used by everyone. Our real project is to add 10,000 competitors, centers, and nongovernmental organizations who can discover 10,000 more things than we could. We could die, we could disappear as many other businesses do, but the most important thing is the message is passed on.

Supplementary Material

Recommendations on the Transport of Dangerous Goods