The ongoing trade in conflict timber (commentary)

November 6 is the UN’s International Day for Preventing the Exploitation of the Environment in War and Armed Conflict. A decade after a tragic war in Liberia that was largely financed by the looting of its forest, and with 2017 ranking as one of the most violent years since the end of the Cold War, today is an important day to consider the ongoing trade in conflict timber.

Last year, the 28 Member States of the European Union imported €260 million-worth (about $296 million-worth) of timber from countries that the World Bank considers to be fragile and conflict-affected, according to those countries’ own statistics. That’s an increase of almost 20 percent in reported trade since 2014. Moreover, although there is significant variation in import levels across the EU, eighteen of the twenty-eight Member States reportedly increased their sourcing from fragile and conflict-affected states in 2016.

While there is no doubt that countries in these desperate states are in need of income and investment, there is also an extremely high risk that the revenues associated with the sale and export of natural resources, including timber, are used to finance and exacerbate conflict. And similarly, it is reasonable to assume that the political and practical chaos associated with conflict and fragile political situations undermines rule of law and results in illegal logging. Importers need to recognize that operating in these countries requires sufficient effort to ensure that their buying does not contribute to, benefit from, or result in the commission of the violations of human rights, international humanitarian law, or war crimes such as pillage.

In an attempt to take responsibility for the role of European companies in the cycle of conflict in many forest countries, the European Commission has recently published a Guidance Document for importers that is designed to ensure that companies are mitigating the risk of buying illegal timber in conflict situations and of exacerbating conflict in their day-to-day business. The Guidance remains in draft form, but is expected to be agreed by Member State governments and operationalized soon.

Notably, the Guidance includes requirements that bring the trade in timber in line with other natural resources imported into Europe, covered by the EU Conflict Minerals Regulation. It does this by directing companies to investigate their financial “supply chains” as well as those for timber – and to ensure that European businesses are not paying individuals that are sanctioned by the UN or EU, or others with government, political, or military affiliations.

However, some in Europe argue that understanding financial flows is beyond the abilities of timber companies — which are more used to tracking logs than dollars — and that the Guidance is unrealistic for ‘Mom and Pop’ importers. Aside from whether small companies without the capacity to manage all aspects of their buying should be importing from the most vulnerable countries in the world (here the EUTR guidance is clear: “In the case where all risk mitigation measures together cannot attain a negligible level of risk, the operator must refrain from placing the timber on the EU market”), there is no doubt that investigating financial flows, which are often routed through third companies and countries in order to obscure their trail, is extremely challenging.

Solving this dilemma will likely require another step towards harmonizing standards for timber with those of the extractives industry, where, for example, the Extractive Industries Transparency Initiative (EITI) has recently made disclosure of beneficial ownership a requirement. Almost half (15) of the 35 countries on the World Bank list of fragile, conflict-affected countries are presently members of the EITI and subject to this requirement (additionally Burkina Faso, Cameroon, Colombia, Ethiopia, Guatemala, Guinea, Honduras, Indonesia, Madagascar, Malawi, Mauritania, Niger, Nigeria, Philippines, Senegal, Sierra Leone, Tanzania, and Ukraine have all experienced episodes of extreme violence in the last five years and are also members of EITI). However, only Liberia and Myanmar currently include the forestry sector in their EITI reporting.

Without government-mandated reporting, sourcing in a conflict situation comes with a significant risk — for example, of purchases benefiting those financing the conflict, including people on the UN list of sanctioned individuals, as did the purchase of timber from the Oriental Timber Corporation (OTC) or its subsidiaries in Liberia after 2001. During the conflict, the UN Security Council sanctioned the OTC’s Joseph Wong Kiia Tai and Guus Kouwvenhoven years before timber itself was sanctioned. Furthermore, the Security Council had sanctioned individuals — Victor Haikal, Leonid Minin, and Mohammed Salaimi — associated with other logging companies, as well as DR “Bob” Taylor, Charles Taylor’s brother and then head of the Forestry Development Authority (the government agency that managed logging in Liberia).

In the absence of beneficial ownership reporting in these most vulnerable countries, characterized in EU regulation as having “weak or non-existent governance and security,” it is hard to imagine what mitigation actions importers could take to satisfy the EUTR requirement for “negligible risk.” The guidance suggests that operators should request “independently audited, forensic financial reports from suppliers to ensure no bribes or other payments were made to armed groups… or their affiliates in violation of applicable national law,” which would constitute a significant cost, and would still be subject to the risk of fraud.

If this Guidance is agreed and implemented, it will represent another important step towards making market access for natural resources contingent on government-mandated financial transparency, and, as a result, contribute €260 million a year to the growing incentive for governments in fragile countries to legislate measures for such transparency.

The vulnerable people in conflict-affected countries need more than just a day’s-worth of attention to preventing the exploitation of the environment in war. Sadly, conflict remains a presence in far too many countries. Buyers of timber from these egregious situations need to ensure that the link between conflict and illegality is broken for their imports. Let’s hope that the new EUTR Guidance Document can help push them to meet this responsibility.

Arthur Blundell, PhD (Natural Capital Advisors, LLC), works with Forest Trends at the intersection of natural resource management and conflict, and the reforms necessary to break the links. He is the former head of the Panel of Experts on Liberia monitoring sanctions for the UN Security Council. Art was an advisor to the Indonesian Corruption Eradication Commission; with DfID (UK) and the European Commission on Liberia’s VPA negotiations; with the Africa Development Bank to incorporate forestry into the Extractive Industries Transparency Initiative; with FAO on forest governance monitoring; and with Transparency International on anti-corruption monitoring. Previously, Art served as a Fulbright scholar in Indonesia, and as an AAAS Science-Diplomacy Fellow with both USAID and US-EPA. He received his PhD from Dartmouth College and BSc from University of British Columbia.

Jade Saunders is a Senior Policy Analyst with Forest Trends. Jade has been an associate fellow of the Energy, Environment and Development Programme at Chatham House since 2002, working extensively on forest governance and the FLEGT Agenda. Between 2007 and 2010 she was a policy analyst in the FLEGT Facility, responsible for policy analysis and strategic advice and support on governance and trade matters to the European Commission in the negotiation and implementation of FLEGT VPAs (a series of bilateral trade/aid agreements between the EU and timber-producing developing countries). She has also worked on environment, development and trade issues in a number of other sectors including global textile supply chains, natural resources and conflict, marine governance, the trade in illegal ozone-depleting substances, sustainable tourism in least developed states and climate change. She has degrees in international history and politics (BA, University of Leeds), and social anthropology (MSc, University College London).

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