How Myanmar’s wood funds its brutal military Analysis by Foreign Policy

The Foreign Policy magazine has published an article claiming that conflict timber flows to India and China from Myanmar. Caliber.Az reprints the article.

Myanmar is the most violent place in the world, ranking just above Syria and Palestine, according to data from the Armed Conflict Location and Event Data Project. Since the 2021 coup, the international community has imposed economic sanctions to restrict the military generals’ ability to enrich themselves from Myanmar’s natural resources and business ventures. Some experts claim that the regime is now weaker than previously thought, partly due to the success of a united front of ethnic armed organizations that have coordinated an offensive against the regime since late 2023. Yet the military’s relentless and brutal “four cuts” campaign demonstrates its resilience against the increasingly consolidated resistance and economic isolation.

One strategy that the military employs is circumventing sanctions in order to sell timber to international buyers. According to its own reporting, Myanmar exported $235.6 million worth of timber between October 2021 and mid-2023. Actual production levels are likely much higher than official reports due to the prevalence of cross-border smuggling.

As much as 80 per cent of timber leaving Myanmar is smuggled to India and China, according to research published in 2021 by the Global Initiative Against Transnational Organized Crime. The organization’s investigations show that smugglers often conceal logs in oil tankers and humanitarian vehicles, but in some cases, they operate out in the open. Domestic furniture makers also purchase illegal timber from Myanmar’s Sagaing region due to its lower price compared to certified logs.

While there is no clear-cut relationship between conflict and illegal logging, researchers have noted that countries with high degrees of conflict or fragility struggle to effectively and transparently manage forest resources. Global demand for tropical hardwoods is high, creating incentives for actors in regional conflicts and transnational criminal networks to circumvent sanctions, export bans, and certification programs.

Purchasing timber from such contexts is not always illegal; however, buyers confront greater risks of corruption and conflict financing. Many buyers accept these risks, as Interpol estimates that up to 30 per cent of the global timber trade may originate from illegal sources.

Wealthy countries such as China, India, and the United States are responsible for around 40 per cent of “imported deforestation”— that is, deforestation caused by demand for food and forest products—according to research published by data scientist Hannah Ritchie. While agriculture is the leading cause, demand for luxury hardwoods has decimated species such as rosewood, sapele, padauk, mahogany, and others, creating a robust illegal trade. Manufacturers and consumers covet these species because of their rich colours and durability.

Investigations conducted in the United States and Italy, for example, have found evidence indicating that timber businesses have illegally sourced teak from Myanmar to build yacht decks and high-end furniture. Large amounts of rosewood from Africa and Southeast Asia, including Myanmar, also end up as expensive furniture, or hongmu, in Chinese homes and businesses. One recent estimate put the Chinese market for hongmu at $26 billion per year.

Decades of advocacy by nongovernmental organizations and environmental defenders resulted in policies and supply chain solutions to address illegal logging. Key policies include the United States’ Lacey Act, European Union Timber Regulation, and China’s 2019 Regulation on the Administration of Import and Export of Endangered Wild Animals and Plants. The private sector has also adopted timber certification programs created by organizations such as the Forest Stewardship Council and the Programme for the Endorsement of Forest Certification. Yet these policies and certifications programs often fall short when it comes to detecting timber originating from sites of conflict and other high-risk settings.

This is because certification programs rely on unique identification numbers and documents to track timber as it moves down the supply chain. These indicators of legality do not always work as intended in settings with high levels of corruption. Smugglers circumvent the requirements set forth by certification programs and importers by employing a few common strategies.

First, they launder timber cross-concessionally. Much like laundering money, smugglers combine illegal logs with legally cut ones at agricultural concessions, timber yards, and sawmills. Those logs are then marked with identification numbers that do not reflect their true origin.

This is done within the countries where the wood is harvested—such as in Cambodia, where tycoon Try Pheap launders trees cut from the protected Prey Lang forest through his mining operation despite being sanctioned by the United States for using the state military to protect his timber trafficking operations. It also occurs across international borders, for instance, when smugglers funnel Cambodian trees into Vietnamese stockpiles. In the Democratic Republic of the Congo (DRC), transport trucks move logs into Uganda, where they then mix them with legal supplies.

Second, smugglers falsify the documents used to track and certify conflict-free timber, including certificates of origin and export permits. In some cases, the certificates are not forged, but they do contain false information about the cargo. When investigating charcoal from Somalia, the United Nations Panel of Experts observed forged certificates passing inspection with importing authorities. In the DRC, the U.N. found that a timber export company paid an armed group to log redwood and used falsified permits to comply with the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) to illegally export it. CITES has recently added requirements beyond the use of certificates in an effort to curb the illegal timber trade. But even CITES admits that smuggling and the misdeclaration of timber species remain a problem. All of this can cause discrepancies in trade data. One example of this is the lower amount of timber reported by Myanmar compared to the amount reported by the main destinations of those exports: China, Italy, and the United States.

Furthermore, widespread corruption and collusion between logging enterprises, organized networks, and state-embedded actors facilitate the illegal timber trade. From bribes paid to customs and border guards to corruption at the highest levels of government, U.N. experts have documented this feature of the illicit timber trade in numerous countries.

In South Sudan, for example, officers of the South Sudan People’s Defense Forces reportedly provide security and logistics to logging companies at a rate of $800-900 per truck, according to U.N. sources. Transport trucks receive safe passage to the border with Uganda, where timber is laundered into supplies shipped to Vietnam and India. In Myanmar, Cambodia, and South Sudan, smugglers pay bribes to key actors, allowing their trucks to cross borders in plain view of authorities on both sides.

Finally, weaknesses in financial systems and anti-money laundering regulations enable timber trafficking. In Myanmar, the military regime launders profit from timber through its many conglomerates and subsidiaries. Criminal actors also take advantage of loopholes in U.S. money laundering and regulatory frameworks. With relative ease, they register opaque shell companies and funnel illicit profit into the U.S. real estate market.

Some efforts have been made to address the regulatory loopholes. In January 2024, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) implemented its beneficial ownership reporting requirement to make companies disclose their owners and decision-makers. But for this to be effective, FinCEN will need to verify that information and have the resources necessary to follow the money behind environmental crimes.

When employed successfully, these strategies enable smugglers to traffic conflict timber into legal markets. Legal frameworks prohibiting imports of timber from illegal sources can do little to stop the trade in such cases. If companies do not conduct due diligence of their supply chains, neither they nor consumers will know the true origins of their purchases.

Demand for wood is growing worldwide. Companies may accept a higher risk tolerance to reach these markets, exposing them to conflict-affected timber in their supply chains. The good news is that scientists are refining techniques to verify the origins of timber and identify false declarations of origin. However, these methods are not yet scalable to match the volume of the trade, nor is it economically feasible to test all timber products in a lab.

Unless major importers of conflict timber strengthen their enforcement of anti-corruption, anti-money laundering, and due diligence requirements, consumption of wood products in wealthy countries will continue fueling conflict and deforestation in Myanmar, the DRC, and other countries around the world.