Investing in Fragility:

A controversy is brewing in Western foreign policy circles over the expansion of the economic presence of the Russian military company the Wagner Group in Africa. Many reports have pointed to this increasing role. On December 2, the Belgian Belga News Agency published a report on the involvement of the Russian military group Wagner in diamond trading and smuggling operations from the Central African Republic to Belgium, which raises questions about the extent of the economic expansion of the Wagner group in the African continent.

Gateways of Influence

In order to diversify its sources of income and economic presence in Africa, the Russian Wagner Group has taken several approaches, the most important of which are:

1- Diversification of security protection contracts: The Russian Wagner Group seeks to diversify its sources of funding. While it is partially funded through close ties between its director Yevgeny Prigozhin and the Kremlin, the group also relies on external sources of funding. Wagner obtains a share of gold and diamonds in exchange for its security services in the Central African Republic. Moreover, the head of the US military command in Africa (Africom), Stephen Townsend, confirmed last February that Mali contracted with Wagner to pay them $10m per month, and concluded that Mali will have to "trade natural resources such as gold and precious stones in order to pay this amount."

2- Concluding political deals to protect officials: Wagner relies on making political deals that include providing security protection for heads of state and members of the government in exchange for economic concessions that facilitate their access to mineral resources. For example, Wagner secured a political deal with the Central African Republic when it arrived in 2018 to protect besieged President Faustin-Archange Touadéra, and trained local security forces to repel rebel attacks in early 2021. Similarly, Wagner reached a political deal with the military junta in Mali after the coup of May 2021, and the two parties agreed that Wagner would provide its security services and protect the members of the junta from assassination plots and attempted coups d’état in exchange for economic privileges inside the country.

3- Physical presence in mining regions: Many reports confirmed that Wagner obtained 78% of the shares of the national company in Mali, Marina Gold, in charge of gold mining and refining, where four international companies are competing with Russia over gold mines: Canada-based Barrick Gold and B2Gold, Resolute Mining from Australia, South Africa’s AngloGold Ashanti from South Africa, and "B2Gold" from Canada. Mali ranks as the third largest gold producer in Africaa after Ghana and South Africa. Its gold production reached 63.4 tons in 2021. Moreover, according to the Ministry of Mines, the country has "2 million tons of iron ore, 5,000 tons of uranium, 20 million tons of manganese, 4 million tons of lithium, and 10 million tons of limestone." Wagner has also worked to establish itself in the northern and central regions of Mali. Likewise, Wagner sought to establish a presence in northern Mozambique, deploying some 160 fighters in the gas-rich region of Cabo Delgado.

4- Diamond smuggling and money laundering activities: Reports indicate that Wagner has been violating the Kimberley Process run by the United Nations Office on Drugs and Crime (UNODC), which prohibits the trade of illicit diamonds. Wagner is careful to hide its financial resources, investing in the transportable gemstone trade, which can be easily laundered, and bypassing the formal financial system. Thus, Wagner proceeded to found many companies for money laundering purposes, especially from the smuggling of gold and diamonds in Central Africa. According to a recent report published by De Standaard, Wagner established in 2019 a front company called Diamville in the Central African Republic. USAID considers it one of the four largest diamond exporters in Central Africa and it is estimated to have exported €132,000 worth of diamonds to Belgium. The Belga News Agency report considers the Deauville company to be a front for Wagner that is active in the diamond sector in Bangui. Wagner also established the company Lobaye Invest which is active in the food industry in Central Africa, as they continue to develop subsidiaries in other sectors.

5- Working in the commodities and timber trade: A report by European Investigative Collaborations (EIC), a cross-border investigative journalism project, confirmed that the Wagner Group is active in the forestry sector within the Central African Republic. Bois Rouge is an active timber exporter also based in the Central African Republic and serves as another front for Wagner. Reports indicate that Wagner has increased its investments in the forestry sector through this company, as they also work in the supply and sale of goods within African countries to increase their revenues and financial resources while concealing their illegal activities. In addition to importing machinery for the exploitation of timber and minerals, Wagner buys products such as cheap Nigerian alcohol from Douala, which is then processed and manufactured at Lobaye Invest and later sold in the Central African Republic.

6- Blackmailing the population with violence or forcing them to migrate: Wagner has often used militia practices to finance its activity in Africa, particularly by displacing people from resource and mineral-rich areas, or blackmailing the population and threatening them with violence. For example, on August 23, Asharq Alawsat newspaper quoted The Wall Street Journal as saying that Wagner had displaced populations in mineral-rich areas of Mali. Several reports indicated that Wagner had taken over the diamond sector in Central Africa by forcing local diamond dealers to sell exclusively to Diamville or risk violent reprisals. In fact, Wagner members have already carried out assassinations against dealers that refused to cooperate.

Catalytic Contexts

The Wagner Group builds on the fragile security and political contexts in African countries to strengthen its economic presence on the continent, as follows:

1- Investing in political and security fragility: Wagner targets countries with fragile governments yet abundant key raw materials, such as oil, gold, diamonds, uranium and manganese. They purport to intervene in order to address the complex domestic military and terrorist conflicts that African Governments are struggling to repel, and to provide them with the capacity of conducting counter-insurgency and counter-terrorism operations. In return, they obtain payments and concessions for access to natural resources, large commercial contracts, or access to strategic locations such as air bases or seaports.

2- Cooperating with the African smuggling mafia: There are several reports that diamond smuggling is prevalent in the Central African Republic, and is not limited to individuals associated with Wagner. Gemstones are often smuggled to foreign markets through neighboring countries, especially Cameroon, Chad and Sudan, and then smuggled abroad. Sources indicate that goods pass through the port of Douala by the International Global Logistic Company (IGL), founded by Anouar Madjidou in Central Africa and unofficially managed by a man named Nicolai. The company currently operates from the Cameroonian capital and remains in close contact with Roman and Vitaly Perfilev in Bangui. According to reports, the company deals with the transit of goods and containers through the port of Douala, after which the goods are shipped abroad – particularly to Russia – through that same port.

3- Connecting with international smuggling networks: Official statistics indicate that the company has exported nearly 1,000 carats of diamonds between October 2019 and January 2021, and $12m of diamonds were sold in Antwerp, Belgium. According to a report published by The Guardian last November, Belgium imported about €1.2b of Russian diamonds in the first eight months of 2022. This informal economy appears to be of great importance to the diamond industry in Belgium. According to AWDC, banning diamonds from entering the country would result in the loss of some 10,000 jobs in Belgian industry. However, some estimates suggest that sales from the Central African Republic account for less than 1% of Antwerp’s total diamond imports.

Possible Implications

Wagner’s efforts to strengthen its economic presence in Africa are expected to result in the following:

1- International sanctions on Wagner’s activity are expanding: The United States, the United Kingdom, and the European Union have imposed sanctions on Prigozhin and others associated with Wagner’s operations. The expansion of the multilateral sanctions campaign against Wagner is likely to put constant pressure on its ability to operate. However, Wagner’s financial structures appear to be deliberately complex and ambiguous. It mostly relies on front companies to hide its operations and assets. The group includes a loose and secretive network of companies and financial intermediaries who have links with Prigozhin and the Russian State. This loose structure weakens the effectiveness of sanctions and other financial targeting policies, which private military companies can avoid by changing their structure as well as reorienting their financial activities and obscuring them. Therefore, many security experts believe that the expansion of sanctions will be very useful as one of the important strategies to disrupt Wagner’s economic and financial operations.

2- The rise of anti-Wagner Western propaganda: International criticism of Wagner’s violations in Central Africa is mounting. US Ambassador to the United Nations Linda Greenfield stated last October that the Wagner Group is plundering Africa’s natural resources to help pay for the Russian war in Ukraine and the Middle East. Linda Greenfield accused Wagner of taking advantage of the countries in which it operates, channeling "illicit gains" to help support Russian military operations. Wagner exploited client States that paid for their security services with gold, diamonds, timber and natural resources. Meanwhile, Western countries have repeatedly criticized Wagner’s practices in the Central African Republic, accusing Wagner of crimes against local populations, including the rape of teenagers in villages near Russian company camps. Local reports in Central Africa indicated growing resentment and frustration towards the Russians and their practices as well as their economic exploitation.

3- Moving to classify Wagner as a terrorist entity: There are mounting demands by US military and political officials to classify Wagner as a terrorist entity. This contingent argues that classifying Wagner as a terrorist entity would have a major impact, and reduce the cost of dealing with it.  It expects to drive countries, companies, and institutions to reconsider their relations with Wagner and treat it as a terrorist organization. Furthermore, many other benefits will ensure a move forward in this direction, the most important of which is limiting Wagner’s access to ports and natural resources.

Overall, the Russian Wagner Group appears to be targeting States in the African continent that are fragile from a political and security standpoint yet rich in resources, particularly the Central African Republic, Madagascar, Mozambique, and Mali. These countries are using military activities to finance their activities, which also play a role in achieving Russian foreign policy goals as well as economic, geopolitical, and military gains for Moscow. Nevertheless, Wagner’s economic expansion faces many challenges from Western States, the most important of which is the sanctions policy adopted by the United States and the European Union, with the aim of increasing the costs and risks of Moscow using the Group to increase its influence on the continent.