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Transforming War Economies:Challenges for Peacemaking

and Peacebuilding

International Peace Academy

Report of the 725th Wilton Park Conference,in association with the International Peace Academy

Wiston House, Sussex27-29 October 2003

Rapporteur: Heiko Nitzschke

DECEMBER 2003 ■ NEW YORK

Wilton Park

Acknowledgements

The program on Economic Agendas in Civil Wars (EACW) wishes to thank Isobelle Jaques, Jo Childs, JackieRoberts and the rest of the Wilton Park Conference Center staff for their excellent cooperation in organizing thisconference.

The author is grateful to Karen Ballentine and Kaysie Studdard for their extensive comments on an earlier draftof this report.

Table of Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

II. Economic Dimensions of Civil Wars:Challenges for Peacemaking and Peace Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Targeted Sanctions: Achieving Peace by Reducing theEconomic Opportunities of Combatants? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

The Political Economy of Peace Processes: Making Peace Pay? . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Disarmament, Demobilization, and Reintegration (DDR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

III. From War Economies to Peace Economies: Challenges forPeacebuilding and Post-Conflict Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Transforming Shadow Economies and Addressing Economic Criminalization . . . . . . . . . . . . . . . 10

Securing Natural Resource Wealth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

IV. Conclusion: Recommendations for Policy Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Conference Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Contents

Executive SummaryPolicy analysis has produced important insights on theimpact that the predatory and illicit exploitation ofnatural resources and the pervasive criminalization ofeconomic life can have on conflict dynamics. Theoperational challenges of transforming the ‘wareconomies’ sustaining those conflicts, however, is stillan underdeveloped area of policy research andpractice. The International Peace Academy-sponsoredconference at Wilton Park sought to discern as towhether and how the legacies of war economies inconflicts such as those in Afghanistan, Sierra Leone,and the Democratic Republic of Congo (DRC) createdistinctive challenges for conflict resolution, and toidentify strategic priorities for policy-makers engagedin peacemaking and peacebuilding.

Challenges for Peacemaking and Peace Implementation:Preliminary analysis suggests that the increasinglyself-financing nature of many contemporary conflictscreates a more difficult environment for conflictresolution, peacemaking and peace implementation.War economies are sustained by regional and globallinkages with both licit and illicit actors, each withvested interests in the continuation of conflict andinstability. Both rebel or government combatants whobenefited from predation during war may act as‘spoilers,’ using force to undermine peace processes.The economic opportunities and rewards availablethrough predation may also influence combatants’proclivity to voluntarily disarm and return to a civilianlife.

• The effectiveness of UN commodity and financialsanctions as a tool for conflict resolution isseriously undermined by widespread ‘sanctions-busting’ by neighboring states, criminal networksand corporate actors, and the lack of complianceand enforcement by relevant government agencies.To effectively curtail resource flows to belligerents,governments need to follow-up on reports by theUN Expert Panels and adopt appropriate nationallegislation to criminalize UN ‘sanctions-busting.’The UN Security Council should impose, whereapplicable, secondary sanctions, ensure memberstate compliance with sanctions resolutions, and

strengthen the mandates and administrativecapacities of UN Expert Panels.

• Assessing the economic endowments and activitiesof combatants may help third-party mediators ofpeace processes to identify potential spoilers.Possible strategies for management of spoilersinclude their cooptation, criminalization or benignneglect. Alone or in combination, each strategyinvolves difficult tradeoffs that may underminesustainable peace. Where politically feasible, third-party mediators should seek to include provisionsfor resource-sharing into peace agreements orestablish benchmarks for responsible resourcemanagement, that could serve as reference fordonors and civil society to hold governmentaccountable. IFIs should be included in the peaceprocesses, whether formally or informally, toensure coordinated policy action among thirdparties, and to match peace agreements with post-conflict economic recovery strategies.

• Disarmament, demobilization and reintegration(DDR) programs face additional challenges wherethe possession of arms is not just a function ofongoing insecurity but is also an importanteconomic asset. In such settings, the UN and theWorld Bank need to make disarmament and reinte-gration parallel and complementary, not sequen-tial, processes. Socio-economic support to formercombatants needs to be provided early on in theDDR process, taking account also of the differentincentives of rank-and-file soldiers and middle-level commanders. Importantly, DDR programsmust form an integral part of national post-conflict development and reconstruction strategies.

Challenges for Peacebuilding and Po s t - C o n f l i c tRecovery: Economic activity during wartime serves avariety of functions, which can be usefully distin-guished as combat economies, shadow economies, andcivilian coping economies. Often controlled bycombatants, criminal entrepreneurs, and corruptgovernments, these economic relationships tend topersist after the formal resolution of active hostilities.In these settings, a main challenge for peacebuildingefforts is to address the dysfunctional elements of the


Executive Summary 1


shadow economy, while retaining its socially beneficialaspects. Where the illegal exploitation or inequitable,unaccountable management of natural resources hasbeen central to conflict dynamics, improved resourcegovernance needs to be a central element ofpeacebuilding and post-conflict reconstruction strate-gies.

• Shadow economies and economic criminalizationneed to be addressed through both, ‘sticks andc a r r o t s .’ The former includes improved lawenforcement and judicial reform, possibly as anintegral part of the mandate of international peaceoperations. The latter requires incentives forshadow entrepreneurs to join the legal economy, aswell as the strengthening of the state’s capacities toprovide basic services, security, and employment.Importantly, donor agencies need to review theirpost-conflict macro-economic strategies, not leastto adequately account for the social functions ofshadow economies. Tackling cross-border shadowtrade requires improved regulatory efforts withinregional organizations or initiatives, comple-mented with regional economic integration toeliminate the structural incentives for shadowtrade.

• Donor agencies and regional organizations need todesign and support tools and strategies for more

effective, equitable, and transparent systems ofresource management by the government, whileensuring benefits for those civilians who aredependent on resource exploitation. Importantly,this should also include new regulations andlegislation on corporate engagement in naturalresource industries to minimize corruption andimpede ‘rogue companies’ from underminingfragile peace. Support to civil society organizationsis crucial for holding governments and companiesaccountable. When properly mandated andequipped, UN peace missions may support theestablishment of state control over resource-richareas and borderlands to impede illegal resourceexploitation and smuggling activities.

Viewing intrastate conflict from a political economyperspective affords important insights for ourunderstanding of conflict and, consequently, forimproved peacemaking and peacebuilding. Economicfactors play a different role in different conflicts. Yet,the legacies of economic predation, militarized produc-tion, and criminalized trade in many of today’sconflicts highlight the different challenges that conflictmanagement faces in these settings. While moreresearch is needed on these issues, a range of policylevers can, when applied in a robust and coordinatedeffort, raise the odds for successful peacemaking andpeacebuilding.

2 Executive Summary


I. Introduction

To date, international policy efforts to address theeconomic dimensions of intra-state conflict havelargely focused on curtailing resource flows to combat-ants through global control regimes.1 Yet, the creationof robust regulatory frameworks addressing the globaltraffic of resources that make armed conflict feasible isa long-term objective. While important for structuralconflict prevention, this approach offers comparativelyfew practical insights for confronting the immediatechallenges of transforming war-ravaged countries, inparticular those where lengthy conflict has distortedpolitical and economic relationships in favor of theentrepreneurs of violence.

Recent years have seen the end of conflict or majorhostilities in Sierra Leone, Angola, Afghanistan,Liberia, the Democratic Republic of Congo (DRC), andSudan, all conflicts in which violent struggles overnatural resource wealth have figured prominently. Yet,there is still a lack of understanding as to whether andhow the violent and illicit exploitation of naturalresources and the pervasive criminalization ofeconomic life during conflict create distinctiveobstacles for designing and mediating peace processesand developing and implementing programs for post-conflict peacebuilding and recovery.

Against this background, the International Pe a c eAcademy sponsored a conference at Wilton Park on“Transforming War Economies: Challenges forPeacemaking and Peacebuilding” on 27-29 October2003. The conference expanded on the collaborativeresearch efforts of the IPA’s Economic Agendas in CivilWars (EACW) program and drew on operational lessonslearned by practitioners from Afghanistan, SierraLeone, and the DRC. By bringing together experts fromacademia, the UN system, governments, and civilsociety, the conference sought to discern the main

legacies of war economies and their operationalchallenges for conflict resolution, and to identifystrategic priorities for policy-makers engaged inpeacemaking and peacebuilding.

This report synthesizes the main themes arising fromthe panel presentations and ensuing discussions. Itdoes not necessarily represent a consensus view.Presentations and comments made during the confer-ence were not for attribution.

II. Economic Dimensions of CivilWars: Challenges for Peacemakingand Peace Implementation

Recent academic and policy research has producedimportant new insights on the economic dimensionsof contemporary civil wars.2 Most importantly, studieshave pointed to a subset of civil wars that havebecome increasingly self-financing, as both rebels andgovernments, faced with a post-Cold War decline insuperpower support, have sought alternative sourcesof revenue to sustain their military campaigns. Oftencentered on the predatory exploitation of lucrativenatural resources, such as oil, diamonds, or narcotics,or the capture of trade networks, diaspora remittances,and informal economies, the resultant ‘war economies’have become intricately linked with regional andglobal trade and finance networks, both licit andi l l i c i t .

The extent to which these dynamics have qualitativelydistinct legacies for conflict resolution andpeacemaking remains an ongoing question of policyresearch. Preliminary analysis suggests, however, thatthe political economy of armed conflict may, forvarious reasons, influence the effectiveness of policytools such as targeted sanctions, third-party mediationof peace processes, and programs for demobilization,

IntroductionEconomic Dimensions of Civil Wars: Challenges forPeacemaking and Peace Implementation

3

1 See also Jake Sherman: Policies and Practices for Regulating Resource Flows to Armed Conflict. IPA Conference Report, 2002; andPhilippe Le Billon, Jake Sherman and Marcia Hartwell: Controlling Resource Flows to Civil Wars: A Review and Analysis of CurrentPolicies and Legal Instruments . IPA Background Paper.2 See Mats Berdal and David M. Malone (eds.): Greed and Grievance: Economic Agendas in Civil Wars, Boulder: Lynne RiennerPublishers, 2000; Karen Ballentine and Jake Sherman (eds.): The Political Economy of Armed Conflict: Beyond Greed and Grievance,Boulder: Lynne Rienner Publishers, 2003.


4 Economic Dimensions of Civil Wars: Challenges forPeacemaking and Peace Implementation

disarmament, and reintegration (DDR) of formercombatants.

Combatant self-financing may lead to a mutation inthe character and duration of conflict, as economicconsiderations, while not the sole or even primarycause of conflict, become more important to somecombatants than political factors. Quite apart from thepetty criminality that typically accompanies warfare,contemporary conflicts have become systemicallycriminalized, as insurgent groups and rogue regimesengage in illegal economic activities either directly orthrough links with transnational criminal networks.The war economies fuelling conflict also thrive onlinkages with neighboring states, informal tradingnetworks, regional kin and ethnic groups, armstraffickers and mercenaries, as well as legally operatingcommercial entities, each of which may have a vestedinterest in the prolongation of conflict and instability.3

Access to lucrative resources and smuggling networksmay prolong conflict, as weaker parties can avoid‘hurting stalemates’ by generating finances necessaryto continue hostilities. Particularly where armed groupsdepend on lootable resources, such as alluvialdiamonds, drugs, or coltan, there is a greater risk thatconflict will be lengthened by the consequent fragmen-tation and fractionalization of combatant groups, asinternal discipline and cohesion is undermined.4

In particular, continued combatant access to lucrativeresources and the proliferation of combatant partieshave been identified as key factors in failed peaceimplementation, multiplying the number of potential‘spoilers’ who resort to violence to thwart peacemediation or implementation.5 Peace spoilers may alsobe situated beyond the borders of the state, particularlywhere a civil war is embedded in a wider ‘regionalconflict formation,’ such as Sierra Leone in West Africa

and Afghanistan in Central Asia.6 Neighboring states,for instance, may benefit economically from conflict,as exemplified by the business networks set up bygovernment and military officials from Rwanda,Uganda, and Zimbabwe in the DRC and by the Liberiangovernment in Sierra Leone.

Targeted Sanctions: Achieving Peace by Reducingthe Economic Opportunities of Combatants?

In the 1990’s, UN Security Council-imposed targetedsanctions, such as those taken against the Union forthe Total Independence of Angola (UNITA), SierraLeone's Revolutionary United Front (RUF), and theLiberian government under Charles Taylor, reflected anincreased willingness of the UN to utilize sanctions asa mechanism of conflict resolution. By aiming tocurtail the flow of resources to combatants, they havealso represented a direct attempt to end hostilities byreducing the opportunities for combatant self-financing through the trade in conflict commoditiessuch as diamonds and timber. Yet, at best, commoditysanctions appear to have had a limited and indirecteffect in bringing conflict to an early resolution.Typically, too, they have involved negative humani-tarian effects and have reinforced the criminal tradethey seek to curtail. While some of these shortcomingsare a function of continuing problems with enforce-ment and compliance, others are inherent to sanctions.

The imposition of targeted sanctions, as well theincreasing willingness of UN Expert Panels to engagein ‘naming and shaming’ of those circumventingsanctions, has raised awareness of the economicdimensions of many contemporary conflicts, in partic-ular the salience of ‘conflict trade.’ Yet, as described innumerous UN Expert Panel reports, the effectiveness ofsanctions continues to be undermined by widespread

3 Neil Cooper and Michael Pugh, with Jonathan Goodhand: War Economies in a Regional Context: The Challenge of Transformation ,Boulder: Lynne Rienner Publishers, forthcoming.4 See Karen Ballentine: “Beyond Greed and Grievance: Reconsidering the Economic Dynamics of Armed Conflict,” in Ballentine andSherman, op. cit. pp. 259-283.5 George Downs and Stephen J. Stedman, “Evaluation Issues in Peace Implementation,” in Stephen J. Stedman, Donald Rothchild,and Elizabeth M. Cousens (eds.): Ending Civil Wars: The Implementation of Peace Agreements, Boulder: Lynne Rienner Publishers,2003, 43-69.6 Andrea Armstrong and Barnett Rubin: Policy Approaches to Regional Conflict Formations, Center on International Cooperation, 20November 2002.


Economic Dimensions of Civil Wars: Challenges forPeacemaking and Peace Implementation

5

‘sanctions-busting’ by actors located within andbeyond of conflict zones. Both rebel groups andgovernments targeted by sanctions continue to procureweapons and trade in conflict resources throughtransnational criminal and arms trafficking networksspecialized in the circumvention of regulations.Neighboring states, often with the consent of theirgovernments, serve as conduits for the two-way flowof conflict goods and weapons. And even legallyoperating companies may knowingly or unknowinglyviolate sanctions by trading in sanctioned commodi-ties, often through complex and intransparent supply-chains.

While naming and shaming has, in several cases, led toimproved compliance with UN-mandated sanctions,there is some concern that this progress will be short-lived. At stake is their capacity to function as a credibledeterrent. Neither the Security Council nor UN memberstates have taken robust action to follow up on the UNExpert Panels’ recommendations. The Security Councilhas thus far imposed secondary commodity sanctionsonly in one case, UN Resolution 1343 on Liberia, for itsrole as an export nation for smuggled ‘conflictdiamonds’ from the RUF rebels. There have also beenno legal prosecutions by governments of anysanctions-buster, despite accumulating evidence that afew well-known arms merchants and commoditytraders have been involved in numerous armedconflicts. To some degree, the lack of robust follow-through is due to a lack of adequate intelligence anddocumentation required to establish evidentiary trailsthat would stand in national courts. There is also a lackof clarity as to the standing of UN sanctions-bustingunder national law and the legal status of economicactivities in conflict zones. Yet, even in cases where theprima facie evidence is clear, there has been ademonstrated unwillingness on the part of relevantgovernment authorities in the developed world toundertake prosecutions of their own nationals. Thislack of enforcement, coupled with the missingadministrative and regulatory capacity of states in theconflict region for monitoring cross-border trade,

means that sanctions-busting continues to be arelatively low-risk, high-profit activity.

The Interlaken, Bonn-Berlin and Stockholm processeson targeted sanctions have generated several usefulrecommendations for improved sanctions enforce-ment.7 Even if reasonably well-enforced, however,sanctions have inherent limits as a mechanism forconflict resolution. First, their effectiveness depends onthe reputational concerns of those targeted. Rebelleaders, for instance, may be relatively less receptive tothe threat of international ostracism than sittinggovernment officials. The impact of sanctions may alsovary with the character of the insurgent groups theytarget. Indeed, sanctions appear to have a greater effecton constraining coherent rebel armies facing strongstates, than on ‘rag-tag’ rebel groups, such as the RUF,fighting weak and corrupt governments and theirincoherent military. Sanctions can influence thisbalance of forces, but only at the margins. In Angola,the diamond embargoes did increase UNITA’s transac-tion costs for procuring weapons. But it is widelyagreed that the main factor for UNITA’s willingness tocome to the negotiation table was not the impact ofsanctions but, rather, the prospect of imminent militarydefeat at the hands of government forces and – notleast - the death of UNITA’s leader, Jonah Savimbi. Thisoutcome underscores that sanctions work best wherethey complement rather than substitute crediblemilitary threat. Far from being neutral and non-violent, sanctions are thus a highly coercive andpartisan policy instrument that needs be seen as part ofa comprehensive politico-military framework forending conflict.

The Political Economy of Peace Processes: MakingPeace Pay?

The post-Cold War period has seen the UN and othermultilateral organizations play a greater role inmediating and supporting peace agreements betweenwarring factions. Ending civil wars through negotia-tion rather than by outright military victory of one

7 See Targeted Financial Sanctions: A Manual for Design and Implementation, The Watson Institute, 2001; Michael Brzoska (ed.):Design and Implementation of Arms Embargoes and Travel and Aviation Related Sanctions, Bonn International Center for Conversion,2001; Peter Wallensteen, Carina Staibano, and Mikael Eriksson (eds.): Making Targeted Sanctions Effective: Guidelines for theImplementation of UN Policy Options , Uppsala University, 2003.

side, however, poses challenges for peacemaking andpeace implementation, as former rebel groups orseparatist movements need to be included in peaceprocesses. Where economic dimensions featurestrongly in conflict dynamics, third-party mediatorsface the important challenges of managing potentialspoilers and designing peace agreements that reflectthe political economy of the conflicts that they seek toend.

Revenues generated from the production and trade inlucrative resources not only provide a means ofcontinued fighting. They also become the rewardagainst which those combatants who have profitedfrom predation during war weigh the potential benefitsof peace. Those engaged in conflict mediation and thedesign of peace agreements, thus, need to anticipatepotential peace spoilers. While making a priorijudgments is often difficult, assessing the economicendowments and activities of combatants may be asimportant in identifying potential spoilers as takingstock of their military and political power. Doing so,however, does not ease the problem of how best tomanage spoilers in particular cases. In practice, there isno ‘one size fits all’ approach, as combatant incentivesfor committing to peace are often mixed and shifting.Cooptation, criminalization, and benign neglect arethree main options for managing spoiler problems.Whether alone or in combination, each strategyinvolves difficult tradeoffs.

The cooptation of potential spoilers through economicand political carrots was attempted with RUF leaderFoday Sankoh in Sierra Leone and Jonah Savimbi inAngola, where the political offices granted to them inthe respective peace agreements would have allowedthem some continued, if circumscribed, control overmineral wealth. Similarly, the military regime in Burmagranted ethnic insurgent groups tacit license tocontinue their wartime business ventures in exchangefor informal cease-fires, which proved to be remark-ably robust despite the absence of a formal or compre-hensive peace accord.8 Yet, in the former cases, coopta-tion efforts failed, in large part due to misplacedassumptions on the part of mediators that economicbenefits were more important to the parties than

political advantage. Furthermore, continued access toresources through illegal diamond mining allowed bothSankoh and Savimbi to consolidate their militarystrength during the peace negotiations. In Burma, bycontrast, the economic inducements offered toinsurgents operated alongside the government’scontinued and credible threat of resumed counter-insurgency, a factor that was missing in Sierra Leoneand Angola. For cooptation to be effective, then,economic carrots need to be reinforced by crediblecoercive sticks. Importantly, cooptation through ashare in the spoils of peace also rewards those mostresponsible for violence, thereby establishing peace atthe expense of justice. At best, this can lead to negativepeace, a condition in which the risk of renewed conflictremains high.

Criminalization as a strategy to manage spoilers, bycontrast, has the potential of holding to account theentrepreneurs of violent economies. This can includeindictments from international criminal tribunals, suchas those against Foday Sankoh and Charles Taylor, orthe listing of insurgent groups as terrorists, as in thecase of the guerrilla and paramilitary forces inColombia. Often, these legal prohibitions have beenaccompanied by parallel efforts to interdict resourceand financial flows to targeted armed groups. Yet, forcriminalization to be effective, it requires a consider-able outside commitment of financial and policingresources. Too often, this commitment is notforthcoming, and this strategy is seldom pursued in acoherent and sustained manner. In Afghanistan, theresumed ban on poppy cultivation – urged by donorsoften more concerned with stopping drug flows to theircountries than with depriving opposition warlords ofrevenues – has proceeded in the absence of anymeaningful enforcement capacity. The predictableresult was a rise in poppy prices, increased incentivesfor cultivation, and a reinforcement of the criminalactivities the ban sought to curtail. Criminalizationmay also add considerable political complexity todiplomatic efforts to secure peace, particularly wherethose targeted as criminals are still critical interlocu-tors in peace negotiations. Charles Taylor’s indictment,just as African mediators were seeking his commitmentto ending the Liberian conflict, merely served to



8 Jake Sherman: “Burma: Lessons from the Cease-Fires,” in Ballentine and Sherman, op. cit. pp. 225-255.

strengthen his resistance, which was overcome only bymore robust military and diplomatic intervention.

Seldom a considered policy, benign neglect tends to bethe default option for managing spoilers, both becauseof a lack of political will among parties to address theeconomic corruption from which spoilers havebenefited, and because of lack of external or internaleconomic and military leverage against increasinglywell-endowed belligerents. Indeed, the very availabilityof lucrative economic endowments to combatants is asubstantial impediment to third-party influence insecuring their commitment to peace, particularly wherepeace missions are severely under-resourced. The DRCpeace process is a case in point. Despite accumulatedevidence of the critical role played by illicit and violentexploitation of natural resources in that conflict,neither the restoration of good governance overnatural resources, nor the restoration of propertyrights, nor the pursuit of economic justice was apriority issue for negotiation. Quite obviously, theparties to the peace process had no interest inrelinquishing their ill-gotten gains, nor did the interna-tional community have the political will to press themto do so. The consequences of this neglect may in factbe quite malign, as the scramble for control of theDRC’s resource wealth continues and issue of legiti-mate property rights remains unaddressed.9 Similarly,in Afghanistan, the enlistment of predatory warlords inthe war against the Taliban now poses seriousproblems to the Karzai government’s attempts tocurtail the warlords’ often substantive sources ofincome from drug trade and smuggling as part of itsexternally-supported state-building efforts.

Political power-sharing and the restoration of securityremain critical to the cessation of hostilities. Yet,economic struggles figure strongly in many separatistand non-separatist conflicts. In separatist conflicts,such as in Nigeria, Bougainville, and the Sudan, theinequitable sharing of resource-rents by exclusionarygovernments may spark or fuel grievances of localgroups who may turn violent. In non-separatistconflicts, access to resources may provide both themotive and means for armed rebellion, while govern-

ment mismanagement and rent-seeking can underminelegitimacy and create socio-economic grievances. Withfew exceptions, however, the tendency of peaceprocesses to date has been to neglect these economicdimensions of conflict. Instead, they are relegated tothe secondary stage of post-conflict reconstruction,where they are treated as a largely technical orhumanitarian matter rather than as an integral part ofsuccessful peacemaking. One important exception isthe current peace process in the Sudan, which incorpo-rates agreements for the sharing of oil wealthalongside power-sharing between the North and theSouth.

Greater operational emphasis needs to be directedtowards reducing the economic opportunities for peacespoiling through complementary programs of resource-sharing, economic governance, and livelihood creation.Addressing contentious economic issues may riskoverburdening and even derailing progress on negoti-ating peace. Some have justified the absence of acomprehensive agreement on resource exploitation inthe DRC peace process on these grounds. Yet, greaterpolicy recognition of the prevailing political economyof a conflict has the potential for securing morecomprehensive peace agreements and reducing the riskthat economic competition will lead to renewedconflict. Where politically feasible, third-partymediators should therefore explore ways to ensure thatthese economic issues are addressed by incorporatingformal economic agreements into peace accords. Suchagreements could include provisions for more equitableresource-sharing and the restoration of legallyprotected property rights, as well as third-partymonitoring and verification of responsible resourcemanagement and restitution packages, backed bytargeted donor commitments. Doing so would have theadvantage of establishing common and transparentrules of the game and promoting clear expectations thatproperty rights and economic justice will be respected.In the longer term, designing economically sensitivepeace agreements would also establish benchmarks forpost-conflict governance that could serve as a referencepoint for multilateral and bilateral donors and civilsociety to hold government accountable.


Economic Dimensions of Civil Wars: Challenges forPeacemaking and Peace Implementation

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9 See Karen Ballentine and Michael Nest (eds.): The Democratic Republic of Congo: The Economic Dimensions of War and Peace,Boulder: Lynne Rienner Publishers, forthcoming.

Disarmament, Demobilization, and Reintegration(DDR)

The disarmament, demobilization, and reintegration(DDR) of former combatants have become a standardtool of UN missions and external donors operating incountries emerging from conflict, as physical securityis commonly held to be an essential precondition forpeace implementation. While current practice reflectsgrowing awareness that the provision of economicopportunities is integral to the effort of demobilizingand disarming former combatants, there has been littleconcerted academic and policy focus on the specificchallenges for DDR in conflict settings beset by violenteconomic struggles over natural resource wealth andsystematic predation. For some observers, the mixedsuccess of past DDR efforts have raised the question asto whether dedicated DDR programs should beundertaken at all. While DDR programs have a strongsymbolic value as a confidence and trust-buildingmeasure, they are very costly, often drawing scarcedonor resources away from development programs thatmay even have bigger impact on peace outcomes thanDDR itself. Yet, taking into account the self-financingnature of many contemporary conflicts may help thosedeveloping and implementing DDR programs in thesesettings to develop strategies that offer meaningfulincentives for combatants to comply.

As the recent experiences of Afghanistan, the DRC, andSierra Leone suggest, the continuing availability oflucrative resources and entrenched economic predationpose additional challenges to an already difficultprocess. Importantly, where fighters are remuneratedthrough pillage of lucrative natural resources orcivilian predation, the possession of arms is not just afunction of ongoing insecurity but is also an economicasset. For some fighters, the economic opportunitiesand rewards available through violent predation mightexceed those expected to be available after conflict,thus influencing a combatant's decision whether tovoluntarily disarm and return to a civilian life. DDRmay also be hampered by the lack of discipline andfractionalization of combatant groups, which makes itmore difficult for leaders to convince rank-and-filesoldiers to disarm and demobilize. Other complicatingfactors are the involvement of large numbers of

mercenaries, such as in the West African conflicts, aswell as the entrenched business interests ofneighboring armies, such as by Ugandan and Rwandanofficers in the Kivu provinces of the DRC.

The particular emphasis of DDR programs shouldreflect not only combatants’ security concerns but alsothe wider political economy of war and peace. Wherecombatants’ livelihoods have become dependent onviolent predation, the proclivity of rank-and-filesoldiers to disarm depends on the expected opportuni-ties of socio-economic reintegration, most importantlyaccess to land or other employment and incomeopportunities. In Afghanistan, for example, there havebeen numerous instances of voluntary demobilizationof underpaid soldiers who ‘melt away’ from their unitsand return to their former rural livelihoods. Bycontrast, where conflict has destroyed pre-conflictlivelihoods, such in eastern DRC, where vast swathes offertile land have been ruined by coltan exploitationand where conflict has led to a consolidation of large-scale landholdings, effective disarmament and demobi-lization will depend on the provision of new forms ofcivilian economic opportunity. DDR programs alsoneed to better identify and target the differenteconomic interests of fighters of different ranks. Theincentives offered to rank-and file fighters to disarmand return to civilian life may be insufficient topersuade middle-ranking, local commanders, who arenot only the critical agents of mobilization, but alsooften control access to lucrative resources and havewell-established informal taxation regimes that dependupon the continued threat or use of violence. In thecase of Afghanistan, these middle-ranking, localcommanders remain critical assets to regionalwarlords.

Against this background, the standard donor practiceof treating disarmament and demobilization as prior toreintegration and rehabilitation, rather than as paralleland mutually reinforcing processes, needs to berevised. Establishing security is crucial for peaceimplementation and post-conflict recovery. Yet, theconcept of post-conflict security should be broadenedbeyond the immediate ‘security dilemma’ faced byformer combatants. Security encompasses bothphysical and economic security, the latter being a



function of development and poverty reduction. Thus,only by ensuring expanded and meaningful economicopportunities of former combatants alongside theirdemobilization and disarmament, will DDR programssucceed in undercutting the temptations for continuedparticipation in the war economy. Rather than takingaway the guns, then, the priority for DDR should be ontaking away the incentives to make use of them.

Not only does this require more targeted humanitarianand development aid programs early on in the DDRprocess, it also requires considering a range of employ-ment and income-generating activities for formercombatants that go beyond the standard ‘DDR-packages’ offered by the international community. Thecurrent DDR program in Afghanistan, for instance,directs the majority of ex-combatants to take the ‘ruraloption,’ despite the fact that the agricultural sector isnot large enough to absorb the considerable numbersof former combatants. Yet, different employment sectoropportunities in the non-agricultural sector have thusfar not been sufficiently factored into DDR planning.Importantly, this shows that DDR should not bepursued as a ‘quick-fix’ strategy and needs to beintegrated into a larger, long-term framework of post-conflict peacebuilding and economic reconstruction.

III. From War Economies to Pe a c eEconomies: Challenges for Pe a c e-building and Post-Conflict Recove r y

Economic life does not cease to exist during armedconflict. Rather, it adapts and takes on new forms.Often referred to by the shorthand term, ‘wareconomies,’ economic life in wartime in fact servesdifferent functions for different groups, functions thatmay be usefully understood by distinguishing betweencombat, shadow, and coping economies.10 The combate c o n o m y is based on economic interactions thatdirectly sustain actual combat, including armssmuggling, the exploitation of natural resources, andcontrol over other income-generating activities by

combatants. The shadow economy encompasses thebroad range of economic activities that fall outsidestate-regulated frameworks. These informal economicrelationships, such as the illicit mining and smugglingof diamonds in Sierra Leone, are often alreadywidespread before the outbreak of conflict. Shadoweconomies also thrive in borderlands, typically areasthat are politically and economically the most margin-alized, which lack effective policing by central govern-ments. Once conflict has erupted, shadow economiesare easily captured by combatants either directly or inclose cooperation with criminal entrepreneurs. Shadoweconomies, thus, often become the basis for combateconomies, while also providing income for criminalelites and mafia structures, such as in Kosovo andBosnia-Herzegovina. Yet, with the breakdown of theformal economy, shadow economies become importantsources of civilian incomes. In conflict situations,where traditional livelihoods are destroyed, civiliandependence upon shadow economic networks andactivities is even more critical. These coping economiescan encompass economic activities centered onlootable resources such as coca and poppy in Colombiaand Afghanistan, alluvial diamonds in Sierra Leone,coltan in the DRC, as well as smuggling and contra-band in the Balkans.

While the 1990’s witnessed the creation of complexpeace operations, in which traditional security prioritieswere complemented by efforts to establish governanceand rule of law, operational strategies to address theeconomic dimensions of peacemaking and peaceimplementation have lagged behind, often with direand lasting consequences for stability and recovery.11

I m p o r t a n t l y, peacebuilding efforts need to distinguishbetween those actors who engage in armed conflict forprofit and power, and those who are forced to partici-pate in war economies to sustain their civilian liveli-hoods and who may suffer as much from indiscriminatepredation as from ill-conceived efforts to end it. Afunctional distinction of economic activities may helpidentifying specific actors, their incentives, and theirvulnerabilities. Yet, weeding out the dysfunctionalelements of the shadow economy that may benefit the


From War Economies to Peace Economies: Challenges forPeacebuilding and Post-Conflict Recovery

9

10 Jonathan Goodhand: “Afghanistan in Central Asia,” in Cooper and Pugh, op.cit. pp. 45-89, 60.11 Susan Woodward: “Economic Priorities for Successful Peace Implementation,” in Stedman, Rothchild, and Cousens, op. cit. pp.183-214.

enemies of peace and justice, while retaining its sociallybeneficial aspects, is complicated by the fact thateconomic activities make use of the same or overlap-ping trade and financial networks.

Transforming Shadow Economies and AddressingEconomic Criminalization

Where shadow economies are based on illegal naturalresource exploitation, and where smuggling andcontraband trade have become implicated in thepolitical economy of conflict, economic criminalitytends to be systemic and well-integrated into regionaland global criminal networks. Once entrenched,criminality can seriously undermine peacebuilding andpost-conflict recovery. Those who have generatedeconomic benefit during conflict, not least fromsanctions regimes, such as the mafia structures inKosovo and Bosnia, seek to consolidate their power infragile post-conflict situation by expanding controlover the local economy and political processes.

Quite clearly, the more widespread is the informaleconomy, the fewer are the tax revenues that accrue tothe state. This undermines the ability of statesemerging from war to finance the provision of basicgoods and services, most importantly security, tou n d e r t a ke needed reconstruction projects, and toestablish viable institutions of governance. While post-conflict foreign aid may bridge this finance gap, it doesnot provide a sustainable basis for state finance.Importantly, the failure of the state to provide basicservices, with their de facto provision by criminal orshadow networks, undermines the creation of the‘social contract’ necessary for stable and accountablegovernance.

For peacebuilding efforts to address these twinchallenges, policy action requires both ‘carrots andsticks.’ A primary task is to take the violence out of theeconomy by strengthening law enforcement and thejudicial sector in post-conflict countries to address thesystemic criminality of shadow economies. Where

these capacities are weak, outside cooperation on lawenforcement and mutual legal assistance, as well asdirect policing operations by UN peace missions, mayprovide necessary support.1 3 The Organization forSecurity and Cooperation in Europe (OSCE), forexample, established an organized crime unit inKosovo to deal with the criminal economic activitiesthat sustained the militants and to curtail their abilityto divert guns and money to support hostilities inSouthern Serbia and Northern Macedonia. Wherepolitically feasible, the most egregious crimes,including those of economic nature, should beprosecuted domestically or, where applicable, byinternational courts. Recently, both the InternationalCriminal Court for the Former Yugoslavia (ICTY) andthe Sierra Leone Special Court issued indictments for,inter alia, participation in ‘joint criminal enterprises,’while the Porter Commission in Uganda, despite itsflaws, led to the purge of high-ranking Ugandanmilitary officials engaged in illegal resource exploita-tion in Eastern DRC.

Economic criminality is difficult to root out, not onlybecause criminal networks are highly adaptive, butalso because of the vital economic and social functionsthat they have often come to serve. For this reason,increased policy attention needs to be paid to creatingincentives and alternative income-generating activitiesfor entrepreneurs and other beneficiaries of the shadoweconomy to ‘turn legal’ and join the formal economy.This requires attention to the full range of reasons thatindividuals continue to participate in shadow activities.In Afghanistan, for example, farmers continue to growpoppy not only because it is a lucrative crop, but alsobecause the poppy trade has generated a complexsystem of patron-client relations and an elaborate, ifhighly extortive, system of credit. For many poorfarmers and sharecroppers, poppy cultivation is oftenthe only way to access credits needed to secure theirlivelihoods and to pay accumulated debts to localwarlords. Policy efforts to reduce poppy cultivationthus need to address the socio-economic structures thatcharacterize the ‘poppy cultivation environment.’


10 From War Economies to Peace Economies: Challenges forPeacebuilding and Post-Conflict Recovery

12 Sarah Collinson et al.: Power, Livelihoods, and Conflict: Case Studies in Political Economy Analysis for Humanitarian Action. HPGReport 13. Overseas Development Institute, 2003.13 Transnational Crime and Corruption Center: Transnational Crime and Peacekeeping: Comparative Perspectives. Conference Report,Cantigny in Wheaton, Illinois, 6-7 September 2001.

Simple eradication or crop-substitution programs arefruitless unless the problem of the coercive creditsystem controlled by strongmen is addressed.

Transforming shadow economies also requires aregional approach, as they are often integrated intraditional trade routes, cross-border smuggling, andare reinforced by cross-border social and kinship ties.This makes borderlands, often endowed with naturalresources, the center of illegal activities. Yet, state-centric regulatory efforts risk generating cross-borderdisplacement effects, simply moving the undesiredactivities - and their conflict-potential - to neighboringcountries. Drug eradication efforts in Colombia andAfghanistan, for example, have encouraged increasedcultivation in Bolivia and Pakistan. Similarly, thesanctions imposed against Liberia in 2001 perverselyencouraged a reverse smuggling flow of illegallyexploited diamonds back into Sierra Leone, in order tothen export them ‘legally’ under the government-established diamond certification scheme.

Strengthening border security as part of peacebuildingefforts is necessary, yet largely insufficient toeffectively address shadow trade, especially incountries with long and inaccessible borders and weakcapacities for border policing and customs control. Amore promising strategy would be to complementborder control with policies that address the structuralfactors that encourage cross-border shadow trade. Inthe case of drug cultivation, this may includeaddressing the cross-border environment throughbilateral cooperation on poverty eradication, alterna-tive livelihood development, and socio-economicintegration of neighboring communities in borderareas. Similarly, efforts to address regional shadowtrade and smuggling should support cooperationwithin regional and sub-regional organizations toeliminate differentials in prices, tariffs, and quotasystems that raise the profitability of, and thus createthe incentives for, cross-border conflict trade.

Regional economic integration could also help tocreate regional markets for legitimate and mutuallybeneficial economic relations between neighboringcountries, thus strengthening the ‘buy-in’ of influentialneighbor states to regional stability and peace. Where

they exist, regional or sub-regional organizations, suchas the Economic Community of West African States(ECOWAS), can play an important role in addressingshadow trade and criminality. Despite its shortcomingsand unclear mandate vis-à-vis the African Union (AU),the New Partnership for African Development (NEPAD)is a promising initiative that could developmechanisms to collectively address the problem ofshadow trade and promote the responsible manage-ment of natural resources. This would require coordi-nation with the AU’s CSSDCA, which has explicitlylinked the need for improved natural resource manage-ment with conflict prevention and sustainable develop-ment.

Securing Natural Resource Wealth

The high risk of violent conflict that has been attrib-uted to natural resource dependence in a given countryis not a direct relationship, but one that is mediated bycritical governance failures. Systemic corruption andeconomic mismanagement, patrimonial rule, and thee xclusionary ‘shadow state’ often associated withresource abundance may fuel political and economicgrievances by undermining the state’s legitimacy andby weakening its capacity to perform core functions,such as the provision of security, the management ofpublic resources, and the equitable and efficientprovision of basic goods and services. The state’sfailure to manage natural resource exploitationeffectively and equitably strongly influences theopportunity for and feasibility of rebellion – and thusalso the re-emergence of violence in post-conflictsituations - as it affects the relative strength of thestate being challenged. The improved governance ofnatural resources, thus, needs to be made a centralelement of statebuilding efforts within a comprehen-sive peacebuilding strategy.

Rebuilding the capacity of domestic institution andpromoting good governance of natural resource wealthafter years, if not decades, of war, mismanagement andsystemic corruption is a long-term task, but it is acritical one. Importantly, peacebuilding needs toaddress the predatory culture of state institutions, aproduct of colonial rule and post-independence leader-ship, that promotes rent-seeking rather than socially


From War Economies to Peace Economies: Challenges forPeacebuilding and Post-Conflict Recovery

11

beneficial economic activity. In countries such asSierra Leone and the DRC, this requires the outrighttransformation of governance structures, rather thantheir mere reconstruction. Importantly, where themilitary and police were part of the ‘industrial organi-zation’ of the predatory state structure, donor-supported security sector reform (SSR) can play acrucial role in transforming the security apparatus’ rolefrom economic predation to civilian protection.

Where the illicit exploitation of natural resources hasbeen central to conflict dynamics, the early restorationof responsible resource management should be apriority. Here, international donors can assist post-conflict countries to design transparent accountingpractices and to develop schemes for equitable andsocially beneficial sharing of resource revenues.International agencies may also play an important rolein acting as independent monitors to ensure compli-ance through externally-monitored natural resourcefunds or escrow accounts for income generated fromthe exploitation of non-lootable resources, such as oil,gas, or mining. If properly administered, these couldprotect the large inflows of revenues from rent-seekersand provide a degree of financial transparency. Todate, natural resource management initiatives of thissort have been conceived and implemented as a meansof preventing conflict rather than assisting countriesrecover from war. This is the case with the Chad-Cameroon Pipeline Project’s fiscal management andsocial revenue-sharing components, and the UK-sponsored Extractive Industries Transparency Initiative(EITI), which seeks to promote fiscal transparencyamong corporations and host governments engaged inextractive industry operations. There is no reason thesemechanisms cannot be adapted to the needs of post-conflict recovery. Indeed, as donor leverage is oftengreater in these settings, the potential for securingeffective resource governance is strong. In SierraLeone, for instance, support by the UN and multipledonors has made a priority of restoring order to thediamond industry. Programs such as the Diamond Area

Community Development Fund and the Kono PeaceDiamonds Alliance not only provide benefits to thegovernment by expanding the scope of licensedmining and raising official diamond exports, but alsoensures regular incomes to artisanal miners and theircommunities.

Effective national resource management also requiresan adequate regulatory framework for private sectoroperations in the extractive industries and commoditytrade to ensure that private investment in post-conflictsettings serves the public interest. Clear and enforce-able regulation is necessary not only to provide legiti-mate companies with a secure business environment,but also to hinder ‘rogue companies’ from exploitingfragile post-conflict situations for pecuniary benefit. Inthe absence of such regulation, extractive companies inthe DRC, for instance, continue to sign contractsoutside of governmental control with strongmen thatclaim to be the legal bearers of concession rights.

The creation of transparent economic and equitableeconomic governance highlights the important role ofcivil society in post-conflict peacebuilding andrecovery. In the long-term, the success of resourcemanagement systems will depend on the emergence ofa strong civil society that is able to hold governmentsto account. In the short and medium term, civil societyorganizations will need external support in developingrelevant capacities, particularly in collecting informa-tion on illegal resource exploitation and governmentcorruption and mobilizing public awareness. Supportfor civil society can also be indirect. The UN ExpertPanel report on the illicit exploitation of naturalresources in the DRC, for example, helped Congolesecivil society and church groups raise these issuesduring the peace negotiations. A potential forum forassisting the new government to fulfill its commitmentto improved economic governance is the InternationalSupport Committee (CIAT), created to advise on thetransition program established in the December 17,2002 power-sharing agreement.


12 From War Economies to Peace Economies: Challenges forPeacebuilding and Post-Conflict Recovery

IV. Conclusion: Recommendationsfor Policy Action

Not all conflicts feature strong economic dimensions.Those that do, however, pose different and at timesgreater challenges for conflict management. Moreresearch is needed on the political economy ofpeacemaking and peacebuilding in order to inform andimprove policy action. Still, research to date suggestsseveral policy mechanisms and strategies that govern-ments, aid agencies, regional organizations, interna-tional financial organizations (IFIs), and the UN systemmay undertake to deal more effectively with theeconomic legacies of war, and to increase the odds forsuccessful peacemaking and peacebuilding:

Governments and Bilateral Aid Agencies

• Given the crucial role that licit and illicit interme-diaries based in the developed world play insustaining war economies, their governments areobliged to act and to end the impunity forcriminals and sanctions-busters. This includesrobust follow-up on reports by the UN SanctionsPanels, including: the adoption of appropriatenational legislation to criminalize UN sanctions-busting and, where feasible, conflict trade; acommitment to enforce legislation against theirown nationals, including corporate actors; andbetter cooperation in the fields of international lawenforcement and mutual legal assistance.

• Governments need to put pressure on their homecompanies to adhere to codes of conduct andglobal industry regulations dealing with corporatebehavior in conflict zones, or vis-à-vis humanrights, to minimize potential conflict-promotingactivities and contribute to post-conflict recovery.Policy levers can be both positive and negative,such as preferred access to insurance and procure-ment contracts, or, conversely, ‘black listing’ oreven the threat of law suits.

• Bilateral donor agencies need to focus moreattention on effective, equitable, and transparent

natural resource management as part of theirstructural conflict prevention and post-conflictpeacebuilding strategies. This includes capacity-building for public administrations, particularly inthe areas of financial oversight, budgeting,accounting, and public expenditure review, as anintegral part of the wider governance reforms. Justas efforts to prevent and resolve conflict need to bemade more ‘development sensitive,’ so, too, doesdevelopment policy need to be consciously‘conflict sensitive.’

• Governments need to increase political andeconomic support to regional organizations orinitiatives that have the potential to address theregional dimensions of conflict and peacebuilding,such as in the form of the G8’s Africa Action Plan.This includes, where feasible, technical assistanceand capacity building for border monitoring andcustoms control, as well as targeted support formore coordinated trade and economic policies toaddress the structural factors of conflict trade.

Sub-regional Organizations and Initiatives

• Regional or sub-regional organizations should settheir own standards on government accountabilityand transparency, as well as corporate conduct, tocomplement national and international standards.The establishment of an Africa-wide standard forcorporate conduct in extractive industries, forexample, was discussed during the AU-NEPADconsultations on peace and security.14 Critically,policy efforts by member states and donor govern-ments, as well as advocacy by civil society need tofocus on the establishment of monitoring andenforcement mechanisms, such as the peer reviewmechanism entailed in the NEPAD initiative, toensure adherence to the standards set.

• Regional standard-setting might usefully becomplemented with renewed regional cooperationon trade issues identified as conflict-promoting.Where they exist, regional and sub-regionalorganizations should be encouraged to developtheir capacity to promote regional cooperation on


Conclusion: Recommendations for Policy Action 13

14 African Union: Report of the AU-NEPAD Consultations on Peace and Security, Addis Ababa, 17-18 February 2002.

issues of economic governance, complementaryand effective regulation of natural resources,commerce and trade, and increased cooperation onborder security to remove structural incentives forsmuggling and conflict trade.

International Financial Institutions (IFIs)

• While limited in terms of leverage for conflictresolution, the World Bank, the InternationalMonetary Fund (IMF), and regional developmentbanks are influential to peacebuilding through theprovision of aid and, most importantly, throughthe conditionality attached to it. IFIs need tostrengthen peace processes with targeted supportand ‘peace conditionality,’ for example, by makingpost conflict aid disbursements conditional uponthe achievement of benchmarks set in peaceagreements. Importantly, IFIs should be included inpeace negotiations, whether formally orinformally, to ensure coordinated policy actionamong donors and the UN, and to match thecontent of peace agreements with post-conflicteconomic recovery strategies.

• The Word Bank as a lead agency for DDR programsneeds to revise its DDR models to adequatelyreflect the wider political economy of conflict. Thisincludes improved generation of post-conflictsocio-economic data on issues such as land tenure,employment sectors, and industry revitalization, toadequately devise reintegration programs.I m p o r t a n t l y, DDR programs need to form anintegral part of national post-conflict developmentstrategies. This will require improved coordinationboth within the World Bank itself, as well asbetween the World Bank and different ministries inpost-conflict governments.

• IFIs need to review their neo-liberal developmentstrategies and policies to adequately reflect theparticular needs challenges of transforming war-torn societies in settings with widespread andsystemic economic predation. Early privatizationand demands for a ‘minimal-state’ may well becounter-productive by holding back importantfunds needed to establish strong states and createemployment, and may foster even more corruption

and patronage. Importantly, IFIs need tounderstand the beneficial social functions thatshadow economies fulfill. Reconstruction strategiesand models based on formal economies alone mayrisk failing to address the shadow entrepreneurswhile hurting those who have come dependent onthe shadow and coping economies in conflict andpost-conflict settings.

• IFI loan agreements and technical aid in post-conflict settings needs to include requirements foreffective legal and administrative regulation forcorporate engagement in natural resourceindustries. The World Bank's private sector arm,the International Financial Corporation (IFC), canplay a crucial role in designing extractive industrycodes and developing mining policies that helpminimize the risk of corruption and corporatemalfeasance, by, for instance, integratingtransparency provisions for corporations and hostgovernments. Importantly, IFIs should supportprovisions for revenue-sharing schemes thatredress horizontal inequalities, and mitigate orcompensate for the socio-economic and environ-mental externalities that affect local communities.

The UN System

• To effectively curtail resource flows to belligerents,UN targeted sanctions need to be supported by acommitment to effective enforcement. The SecurityCouncil should routinely include the provision oftechnical assistance and financial compensation tofront-line states in the design of sanctionsmandates and impose, where applicable, secondarysanctions against governments aiding the circum-vention of sanctions regimes. The Security Councilmust also redouble its efforts to ensure memberstates’ compliance with sanctions resolutions,particularly by pressing them to follow up onfindings from UN Expert Panel reports, and to takelegal action against nationals involved insanctions-busting.

• The Security Council needs to strengthen thecapacity of UN Expert Panels, which have provento be innovative and effective policy mechanismsfor sanctions monitoring, the generation of intelli-


14 Conclusion: Recommendations for Policy Action

gence, and for raising awareness of sanctions-busting. To ensure the Panels’ independence andavoid political constraints, as well as to improveintelligence capacities, the work of the ad-hocPanels should be complemented by an expandedadministrative facility. Better information-sharingbetween panels needs to be ensured, through, interalia, a centralized information storage.

• The UN and its member states need to overcometheir hesitation to integrate economic dimensionsin peace negotiations. Where politically feasible,peace accords should include provisions forwealth-sharing or other resource managementissues in order to address the structural causes ofinequality and grievances and set benchmarks forresponsible post-conflict governance.

• Mediating and designing durable peaceagreements also requires taking the regionalpolitical economy of the conflict into account. TheUN needs to pursue this through cooperation withformal regional organizations and withininformal, ad hoc arrangements. The alreadyestablished West Africa office of the UN, as well asthe efforts by the Special Representative on the

Great Lakes Region should focus more attentionon the economic dimensions of these regionalconflict formations.

• The mandates of UN peace operations should betailored to address the political economy ofspecific conflict settings. The UN Security Councilshould consider non-traditional issues ofpeacekeeping and peacebuilding, such as the earlydeployment of civilian police, as well as criminaland other law enforcement agencies to addresswidespread criminalization in post-conflictsettings. Also, UN peace keepers should bemandated to report evidence of sanctions bustingwhere it occurs.

• The regional dimensions of war economies alsohighlight the inadequacy UN peace operationswhose center of gravity typically remains innational capitals. When adequately staffed andfunded, peacekeeping forces should be employedto establish state control over resource-rich areasand borderlands to impede illegal exploitation andsmuggling activities. Examples for this areUNAMSIL’s present operations in Sierra Leone’sKono diamond district.15


Conclusion: Recommendations for Policy Action 15

15 Eighteenth Report of the Secretary General on the United Nations Mission in Sierra Leone, 23. June 2003, UN Doc. S/2003/663.

Transforming War Economies:Challenges for Peacemaking and Peacebuilding

725th WILTON PARK CONFERENCEin association with

the International Peace Academy (IPA), New York

27-29 October 2003

Conference Agenda

Monday, 27 October

15:00-15:15 Introduction to the Conference

Isobelle Jaques, Associate Director, Wilton ParkDavid M. Malone, President, International Peace Academy, New York

15:15-16:45 Economic Agendas in Armed Conflict: How do Economic Factors Contribute to the Origins,Duration, and Character of Intra-State Conflict?

Chair: David M. Malone, President, International Peace Academy, New York

Andrew Mack, Director, Centre for Human Security, Liu Centre for the Study of Global Issues,University of British Columbia, Vancouver

17:30-19:00 Transforming War Economies: What are the Issues and Challenges?

Chair: Mr. Anders Jägerskog, Deputy Secretary, Expert Group on Development Issues, Ministry for Foreign Affairs, Stockholm

What are the main legacies of war economies and the challenges posed for post-conflicttransformation?Tony Addison, Deputy Director, World Institute for Development Economics Research (WIDER),Helsinki

What are the operational challenges for transforming war economies?Nigel Fisher, Executive Director, United Nations Office for Project Services (UNOPS), New York


16 Conference Agenda

Tuesday, 28 October

09:00-10:30 Challenges for Peacemaking I - Sanctions Predation: Does Reducing Combatant Access toResources Facilitate Peacemaking?

Chair: Don Hubert, Deputy Director, Peacebuilding and Human Security, Department of ForeignAffairs and International Trade, Ottawa

What is the impact of UN-targeted sanctions in curtailing commodity flows tocombatants/war zones?Christian Dietrich, Associated Researcher, International Peace Information Service, Antwerp

What is the impact of UN-targeted sanctions on insurgent behaviour?Jeffrey Herbst, Professor of Politics and International Affairs and Chair of the Department ofPolitics, Princeton University, Princeton

11:00-12:30 Challenges for Peacemaking II - Deterring Economic Spoilers: What can mediation efforts doto incorporate economic incentives in peace processes?

Chair: Lansana Kouyate, Special Representative, Organisation internationale de la francophonie,Abidjan

Lucrative resources, economic spoilers, and peacemaking strategies: Cooptation, criminaliza-tion or benign neglect?Karen Ballentine, Senior Associate, International Peace Academy, New York

What are the challenges of addressing economic agendas of conflict parties through peaceprocesses in the Democratic Republic of Congo?François Grignon, Project Director, Central Africa, International Crisis Group, Nairobi

15:00-16:45 Confronting the Legacies of War Economies I: How do the Specific Legacies of WarEconomies Affect the Process of Disarmament, Demobilisation, and Reintegration (DDR)?

Chair: Margaret Carey, Principal Officer, Africa Division, Department of PeacekeepingOperations, United Nations, New York

What are the economic challenges of DDR in Africa?Joanna Spear, Director, United States Foreign Policy Institute, The Elliott School of InternationalAffairs, George Washington University, Washington DC

The political economy of DDR: Challenges in Afghanistan Vikram Parekh, Senior Analyst, South Asia, International Conflict Group, Islamabad


Conference Agenda 17


17:15-19:00 Confronting the Legacies of War Economies II: How to Promote Alternative Livelihoods forCivilians?

Chair: Michael Small, Department of Foreign Affairs and International Trade, Ottawa

What framework in Afghanistan for creating alternative livelihoods?Jonathan Goodhand, Lecturer, Department of Development Studies, School of Oriental andAfrican Studies, London

Tackling the challenges of the opium economyDavid Mansfield, Head of Research and Analysis, Drugs and International Crime Department,Foreign and Commonwealth Office, London

What are the challenges for the Democratic Republic of Congo?Aloys Tegera, Researcher, Pole Institute, Goma

Wednesday, 29 October

09:00-10:30 Confronting the Regional Dimensions of War Economies: How can Regional Initiatives AssistTransformation?

Chair: Adonia Ayebare, Ambassador of Uganda to the Republic of Rwanda, Kigali

What are the regional dimensions of war economies and what are their implications forpeacebuilding?Neil Cooper, Principal Lecturer, Department of International Relations, Plymouth University,Plymouth

The New Partnership for African Development (NEPAD): Can regional cooperation assistgood governance and sustainable peace?Peter Mwangi Kagwanja, AU-NEPAD Program, Saferafrica, Pretoria

11:00-12:30 Improving Governance over Natural Resource Assets: How to Combat Shadow Trade and the‘Resource Curse’?

Chair: Mohammed Swarrey Deen, Minister of State, Ministry of Natural Resources, Freetown

Natural resources and conflict management: What are the key challenges and potentialresponses?Leiv Lunde, Senior Research Associate, Centre for Economic Analyses (ECON), Oslo

What role for civil society in restoring good governance over natural resource exploitationin the Democratic Republic of Congo?Floribert Kayembe Shamba, Senior Lecturer, College of Education, Kinshasa

18 Conference Agenda


15:00-16:45 Parallel Working Groups on Economic Aspects of Peacemaking: Post-Conflict Reconstruction:What are the Policy Lessons of Recent Experience?

AfghanistanFacilitator: Michael Pugh, Reader, Department of Politics and International Relations, PlymouthUniversity, Plymouth

Sierra LeoneFacilitator: Kwesi Aning, Senior Researcher, African Security Dialogue and Research, Accra

Democratic Republic of CongoFacilitator: Ciru Mwaura, Independent Consultant, London

17:15-19:00 What are the Strategic Priorities for the International Community in Peacemaking andTransforming War Economies?

Chair: David M. Malone, President, International Peace Academy, New York

Susan Woodward, Professor, City University of New York (CUNY), New York

Mukesh Kapila, United Nations Resident and Humanitarian Coordinator for Sudan, Khartoum

Conference Agenda 19


20 Participants

Participants

Dr. Tony Addison World Institute for Development Economics Research(WIDER)

Dr. Kwesi AningAfrican Security Dialogue and Research

Major General Henry KanyidohoConflict Management Consultant

H.E. Mr. Adonia AyebareEmbassy of Uganda to the Republic of Rwanda

Ms. Karen BallentineInternational Peace Academy

Ms. Isabelle BalotUN Office of the Resident/Humanitarian Co-ordinatorfor Sudan

Ms. Helen Barber Foreign and Commonwealth Office, UK

Dr. Robert Bartlett Jr.United States Army

Mr. Sunil BastianInternational Centre for Ethnic Studies

Mr. Hans BeckDepartment for International Development (DfID), UK

Mr. Fedor Broek Ministry of Defense, Netherlands

Dr. Gilles Carbonnier International Committee of the Red Cross

Ms. Margaret Carey United Nations Department of PeacekeepingOperations (DPKO)

Ms. Francesca CookDevelopment Assistance Committee (DAC), OECD

Dr. Neil CooperPlymouth University

Ms. Katherine CroakeUS Agency for International Development (USAID)

Ms. Corene CrossinGlobal Witness

Mr. Edward DallasForeign and Commonwealth Office, UK

Mr. Mohamed Swarray DeenMinistry of Natural Resources, Sierra Leone

Dr. Christian DietrichInternational Peace Information Service (IPIS)

Dr. Marion EeckhoutMinistry of Foreign Affairs, Netherlands

Ambassador Hassan GadkarimMinistry of International Cooperation, Sudan

Dr. François GrignonInternational Crisis Group

Dr. Jeffrey HerbstPrinceton University

Dr. Don HubertDepartment of Foreign Affairs and International Trade(DFAIT), Canada

Mr. Anders JägerskogMinistry of Foreign Affairs, Sweden

Ms. Isobelle JaquesWilton Park

Mr. Muhiddin KabirovIslamic Revival Party, Tajikistan

Dr. Peter M. KagwanjaSaferAfrica


Participants 21

Dr. Mukesh KapilaUN Resident and Humanitarian Coordinator for Sudan

Dr. Saman KelegamaInstitute of Policy Studies of Sri Lanka

Ms. Diana KleinInternational Alert

Dr. Rein KoelstraMinistry of Foreign Affairs, Netherlands

Mr. Lansana KouyateSpecial Representative of the Secretary General ofLa Francophonie to Côte d’Ivoire

Ms. Nathalie KrönerMinistry of Foreign Affairs, Netherlands

Ms. Elisabeth KvitashviliUnited Stated Agency for International Development(USAID)

Mr. Ole LindemanMinistry of Foreign Affairs, Norway

Mr. Leiv LundeECON Analysis

Dr. Andrew MackLiu Center for the Study of Global Issues,University of British Columbia

David M. MaloneInternational Peace Academy

Mr. David MansfieldForeign and Commonwealth Office, UK

Dr. Benoit MassuyeauAgence Française de Développement

Ms. Ciru MwauraIndependent Consultant

Mr. João Luís NgimbiMinistry of Finance, Angola

Mr. Javier Niño-PérezEuropean Commission

Mr. Heiko NitzschkeInternational Peace Academy

Mr. Gérald PachoudFederal Department of Foreign Affairs, Switzerland

Ms. Nicola PalmerBerghof Foundation for Conflict Studies

Mr. Vikram ParekhInternational Crisis Group

Ms. Natalie PauwelsFree University of Brussels

Dr. Roman PoeschkeGerman Agency for Technical Cooperation (GTZ)

Dr. João PortoInstitute for Security Studies, Pretoria

Dr. Michael PughUniversity of Plymouth

Mr. Christian RugeFafo Institute for Applied International Studies

Mr. Kazuhiko SakamotoJapan International Cooperation Agency (JICA)

H.E. Mr. Negassi SengalEmbassy of the State of Eritrea to theUnited Kingdom

Mr. Kayembe ShambaCollege of Education, Kinshasa

Mr. Michael SmallWeatherhead Center, Harvard University

Mr. Malcolm SmartDepartment for International Development (DfID), UK

Mr. Roland Smith CMGSt. Ethelburga’s Centre for Reconciliation and Peace

Ms. Kaysie StuddardInternational Peace Academy

Mr. Jeffrey SwedbergUnited States Agency for International Development(USAID)

Mr. Aloys TegeraPole Institute, Goma

Mr. Salil J. TripathiAmnesty International

Dr. Necla TschirgiInternational Peace Academy

Mr. Elon D. WeinsteinDepartment of State, USA

Dr. Susan WoodwardThe Graduate Center, City University of New York

Participants22


About the EACW Program

Senior Associate: Karen Ballentine [email protected] Program Officer: Heiko Nitzschke [email protected] Officer: Kaysie Studdard [email protected]: September 2000-December 2003

Initiated in September 2000, the EACW program follows from a conference held in London in 1999, which produced theseminal volume, Greed and Grievance: Economic Agendas in Civil Wars, Mats Berdal and David M. Malone (eds.) (LynneRienner, 2000). The program addresses the critical issue of how the economic agendas of armed factions sustain violentconflict and inhibit durable peace, while also assessing the role of globalization in creating new opportunities for combat-ants to finance their military operations. This hitherto under-developed field of research holds particular promise of policyrelevance for those international and national actors seeking more effective strategies for both conflict prevention andconflict termination.

Beginning with an overall commitment to durable conflict resolution, the broad aims of the program are:

• to improve understanding of the political economy of civil wars through a focused analysis of the economic behaviorsof competing factions, their followers, and external economic actors in conflict zones;

• to examine how globalization shapes the economic interests of belligerents as well as creates new opportunities forcompeting factions to pursue their economic agendas through trade, investment and migration ties, both legal andillegal, to neighboring states and to more distant, industrialized economies; and

• to evaluate the effectiveness of existing and emerging policy responses used by external actors, including govern-ments, international organizations, private sector actors, and NGOs, to shift the economic agendas of belligerents fromwar towards peace and to promote greater economic accountability in conflict zones.

Policy research and development proceed along two tracks: four expert working groups (Advisory Group, Working Group onEconomic Behavior of Actors in Conflict Zones, Private Sector Working Group, and Policies and Practices Working Group)and commissioned research. EACW publications (all at Lynne Rienner Publishers) include: The Political Economy of ArmedConflict: Beyond Greed and Grievance, Karen Ballentine and Jake Sherman (eds.) 2003; War Economies in a RegionalContext: The Challenge of Transformation, Michael Pugh and Neil Cooper, with Jonathan Goodhand, forthcoming; and TheDemocratic Republic of Congo: Economic Dimensions of War and Peace, Karen Ballentine and Michael Nest (eds.)forthcoming. A volume of analytic studies assessing policy responses to the economic dimensions of armed conflict will bepublished in Spring 2004. Other products include periodic meeting reports, policy briefs and background papers, which areavailable electronically on our website.

Policy development also involves on-going consultations with international experts and practitioners, academic confer-ences, and workshops and briefings that bring together relevant UN actors, governments, private sector actors, and NGOs.As part of a continuous outreach effort, the program has engaged in several partnerships, including with the Fafo Instituteof Applied Social Science (Oslo); the Institute for Security Studies (Pretoria); the Woodrow Wilson International Center forScholars (Washington, DC); the International Institute for Strategic Studies (London) and the World Bank’s DevelopmentResearch Group (Washington, DC). We have also built a virtual network of experts and policy practitioners through sponsor-ship of an electronic list-serve, [email protected].

Acknowledgements:The EACW program enjoys the generous support of a number of donor states and private foundations, including: theCanadian Department of Foreign Affairs and International Trade (DFAIT), the Canadian International Development Agency(CIDA), the Department for International Development (DFID) of the United Kingdom, the International DevelopmentResearch Centre (IDRC) of Canada, The Government of Norway, the Government of Switzerland, the Government of Sweden,the Rockefeller Foundation, and the United Nations Foundation.

More information on program events and all of the program reports are available on the program website athttp://www.ipacademy.org

International Peace Academy777 United Nations PlazaNew York, NY 10017-3521Tel: (212) 687-4300Fax: (212) 983-8246www.ipacademy.org

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