Financial Transparency Coalition

Does anyone remember “Angolagate?”

The scandal involved a ring of French government officials that were complicit in illegal arms trading in order to secure French oil interests with the Angolan government. The trading took place between 1993 and 1998 during Angola’s civil war, which re-kindled after the country’s first round of democratic elections in 1992 and lasted until 2002. The scandal, which was picked up by the European media, was highly covered as it involved several public and popular figures. However, the broader implications of Angolagate were overlooked; while the media focused on corrupt public figures, the systems that facilitate corruption were overlooked.  Given the current discussion concerning global transparency, the case of Angolagate deserves another look.

A report by Global Witness offers in depth coverage of the details and extent of the Angolagate scandal. At the beginning of the 1990s, France and the U.S. were jockeying to secure interests amongst Angola’s major oil producers. In 1993, President Clinton ended U.S. support for the National Union for the Total Independence of Angola (UNITA), which put the U.S. in a favorable position with the Popular Movement for the Liberation of Angola (MPLA), the regime in power. Concerned it might lose access to Angola’s oil markets, members in the French government sought to secure the MPLA’s good graces by supplying the regime with the weapons it sorely needed in its struggle against UNITA. In brief, members of the French government illegally traded weapons to the MPLA to secure French oil interests in Angola.

The scandal began with the investigation of former French Interior Minister Charles Pasqua, and came to a head in late 2000 when Jean-Christophe Mitterrand, son of the former French President Francois Mitterrand, was arrested on charges of illegal weapons dealing, tax fraud, and corruption. Further investigations into the scandal revealed that several members of the French government were aware of over US$790 million in illegal weapons trading between France and Angola. After years inquiry, a French judge called 42 people to trial for the scandal in 2007. In October of last year, a verdict was handed down that included a three year jail sentence and a US$150,000 fine for Pasqua, and a 2 year jail sentence and a US$500,000 fine for Mitterrand.

What occurred in the Angolagate scandal is a strong argument for global economic transparency as a benefit to both developed and emerging economies. In an attempt to secure oil interests, members of the French government, in direct violation of a United Nations weapons embargo, traded weapons to the MPLA through a series of shell companies. These weapons were exchanged for several millions of US dollars – undoubtedly siphoned off from public funds raised through the sale of Angola’s oil – which were deposited in bank accounts in Switzerland, Luxembourg, and Portugal. Tax Justice network classifies all of these countries as secrecy jurisdictions for their opaque banking systems. As the MPLA armed itself using oil revenues, UNITA used the sale of diamonds smuggled out of Angola and absorbed by diamond markets in Zaire and Antwerp, Belgium to finance its war effort.

The US$790 million of the Angolagate scandal pales in comparison to the US$2.73-2.76 billion in illicit financial flows (IFFs) that GFI estimates to have left the country annually between 2002 and 2006. These IFFs represent approximately four times the amount of official development assistance given to Angola per year between 2002 and 2006 by OECD countries. A recent report by GFI which examines IFFs from Africa using a different methodology estimates that between 1981 and 2008, US$29.17-29.5 billion left the country in illicit financial flows. Using the same report, US$4.68 billion left Angola during its last bout of civil war which spanned from 1993-2002.

These illicit flows, which are absorbed by a veiled banking system, represent the proceeds of blood diamond sales, crooked oil deals, and a myriad of corrupt transactions which undermine the country’s development. While the sources of these proceeds are unsavory, the current financial system has enough loopholes and secrecy laws to absorb this money as easily as a child can deposit fifteen dollars made in lemonade sales into a personal savings account. The world’s shadow banking system, which enforces opacity and anonymity, facilitates the movement of illicit funds. These illicit funds, as illustrated in the case of Angolagate, find their way into developed countries while continuing a cycle of violence and poverty in their source countries.