Transnational Criminal Organizations: Strategic Alliances

17 November 2005
TNI

 

Transnational Criminal Organizations: Strategic Alliances
Phil Williams
The Washington Quarterly 1994

I Introduction

Organized crime has traditionally been seen as a domestic problem bedeviling a relatively small number of states such as Italy, the United States, and Japan. In the last few years, however, there has been a recognition that the problem is no longer limited to a few states and can no longer be treated as something that falls within a single jurisdiction. The rise of a global market for illicit drugs, the end of the Cold War and the breakdown of the barriers between East and West, the collapse of the criminal justice system in Russia and the other states of the former Soviet Union, the development of free trade areas in Western Europe and North America, and the emergence of global financial and trading systems have fundamentally changed the context in which criminal organizations operate - and encouraged what had been predominantly domestic groups to develop into transnational criminal organizations (TCOs).

The threat posed by these organizations has been dramatized by a variety of developments. The struggle of the Colombian Cartels to change the government's extradition policy; the attack by theSicilian Mafia on the Italian state and the killing of judges such as Falcone; the emergence of Russian criminal organizations not only in the Commonwealth of Independent States but also in Western Europe and the United States; the vast upsurge in money laundering; and, perhaps most dramatically, the revelations about nuclear material trafficking, have all helped to imprint the new threat on the consciousness of policy makers and publics alike. Congressional hearings in the United States during the latter half of 1993 and much of 1994 revealed that the problem has also evoked the attention of national intelligence agencies, with testimony being provided not only by representatives from the Drug Enforcement Administration and the FBI but also the Director of Central Intelligence.

This upsurge of attention is, in most respects, very welcome. The problem of transnational organized crime is a real one that demands both more careful investigation and greater resources than have so far been devoted to dealing with it. It is clear that the Chinese Triads, Russian criminal organizations, the Colombian Cartels, The Japanese Yakuza, the Sicilian Mafia (as well as the other Italian groups such as the Neapolitan Camorra, 'Ndrangheta and Sacra Corona Unita), the Nigerian criminal organizations, and the Turkish drug trafficking groups engage in extensive criminal activities on a regional and often a global basis. Developments at the national level have provided new opportunities to exploit and enabled TCOs to attain a level of activity that threatens national and international security in a variety of ways. Theseorganizations violate national sovereignty, undermine democratic institutions even in states where these institutions are well established, threaten the process of democratization and privatization in states in transition, and add a new dimension to problems such as nuclear proliferation and terrorism.

As the policy community begins to get a handle on the issue, however, it is essential to conceptualize the threat posed by TCOs in ways that are most appropriate. Without a valid assessment of the challenge posed by these organizations, the prospects for effective action against them are minimal. Unfortunately there are some indications that the assessment is moving in directions that are not completely warranted, and that could lead to inappropriate and ineffective policies.

Part of the problem is a form of threat inflation that, paradoxically, ends up under-estimating the threat. Dramatizing the challenge can be understood largely as an effort to galvanize public attention, mobilize support and generate the resources necessary to deal with a problem that traditionally has had a relatively low profile - at least at the international level. Overselling the threat is understandable particularly for intelligence communities that have lost their enemy and not yet found a role. Treating transnational crime as some kind of monolithic global conspiracy is particularly appealing as it suggests - implicitly at least - that a threat to international security may be emerging that is a worthy successor to the challenge posed by the Soviet Union during the Cold War. This hasparticular resonance for intelligence agencies used to dealing with a centrally controlled enemy and finding it difficult to adjust to a world where there is no overwhelming threat to provide either intellectual rationale or budgetary legitimacy.

The irony is that an assessment of this kind is not only misleading and, therefore, pernicious in its consequences, but may actually under-estimate the threat. It is misleading because it lumps together different kinds of threat and fails to distinguish clearly between those transnational criminal organizations, for example, that exploit the openness of the global financial system through money laundering and those that want to disrupt the system through terrorist actions. Most transnational criminal organizations are concerned about profit rather than politics, and are unlikely to want to undermine a system that they are able to exploit and abuse for their own purposes. A few other groups, especially those linked to "pariah states" may have more disruptive goals. Treating these very different organizations as part of a single global challenge is not only misleading conceptually, but could encourage a policy response that is as ineffective as it is undifferentiated.

Ironically, the notion that there is a relatively small number of global conglomerates linked in a vast criminal conspiracy also under-estimates the threat. An assessment of organized crime that focuses exclusively on large organizations such as those mentioned above implies that the problem is relatively straightforward - and that if enough resources are devoted todismantling a few organizations then transnational organized crime will be virtually eliminated. The reality is not only more messy but also more unsettling - and less susceptible to simple solutions. Large, fixed monolithic, strictly hierarchical structures are relatively easy targets. They are vulnerable to decapitation and other forms of dismantling. Looser, less formal network structures, in contrast, are resistant to such efforts and actually more difficult to contain. The problem was neatly encapsulated by a British customs officer who commented that a smuggling organization is like a "plate we arrest someone we are sure is important. Well he may have been up to that moment, but once we get him, he suddenly becomes no more than a tiny cog. Someone else important pops up in his place". [Timothy Green, The Smugglers (New York: Walker, 1969) p. 9].

Moreover, the fluid network organizations of various sizes engage in a mixture of cooperation and competition not only with each other but with governments and other non-governmental actors. The diversity of these organizations, their symbiotic relationships with legitimate businesses, their capacity to exploit (rather than disrupt) legitimate trading activities and financial institutions, and their ability to corrupt governments and law enforcement agencies, make efforts at decapitation somewhat moot to say the least. And even if government actions do lead to the indictment or elimination of the top leadership, unless the organization itself is destroyed, this simply provides new opportunities for internalpromotion. And even in those cases where the organizational structure itself is compromised or dismantled, this merely allows other organizations to make up the shortfall in the supply of illicit goods and services. The way in which the Cali Cartel succeeded Medellin as the dominant force in cocaine trafficking is indicative of the kind of succession that can take place in transnational organized crime. Indeed, the succession issue highlights the need to consider very carefully the consequences of one's strategy, especially in the event that it might prove effective. Even without a clear succession, however, the cocaine trafficking industry would have continued to operate - albeit in a less centralized way. This suggests that transnational organized crime is constantly evolving in ways that make it particularly difficult to counter. The low entry barriers combined with the ease of international travel and communication have helped to create an entrepreneurial free for all with potentially high payoffs that outweigh the risks associated with law enforcement and regulatory efforts. As a result, small businesses and individual entrepreneurs flourish alongside their larger and more extensive counterparts. While the Cali Cartel may have devised the perfect blend of corporate and criminal cultures, even smaller criminal organizations display considerable business acumen as well as a high level of operational sophistication and organizational adaptability. Moreover, the sheer number and diversity of criminal organizations is part of the challenge facing governments and law enforcement agencies. The beginning of wisdom in dealing withTCOs, therefore, is to recognize
that fashionable and relatively straightforward labels not only hide enormous complexity but can seriously mislead policy makers.

Such complexity is not fully captured by labels such as global organized crime or "Pax Mafiosa". Even if these labels carry the wrong connotations, however, they do help to draw attention to the growing linkages amongst transnational criminal organizations that make them an even more formidable challenge than they are in isolation. The main purpose of this paper is to identify the nature of these linkages and to assess the implications for law enforcement efforts to respond to the challenges posed by TCOs. As it stands, the connections among criminal organizations are not well understood. This is partly because of the paucity of evidence but also because little effort has been made to conceptualize the nature of the linkages. Indeed, the linkages have developed with such rapidity and are so novel - especially for criminologists who have a primarily domestic focus - that they have outrun efforts both to delineate the phenomenon and to explain it.

In attempting to provide a solid conceptual foundation to enhance our understanding of the nature of the cooperative linkages among transnational criminal organizations, it is possible to draw on the literature regarding the way in which transnational corporations cooperate and compete, and in particular the way they form and maintain strategic alliances. This body of literature offers considerable insights into the functioning of transnational enterprises. And since organized crime is essentially enterprisecrime, the motivating principles underlying the activities of transnational criminal organizations are usually very similar to those of transnational corporations. The differences between legitimate and illegitimate enterprises are not insignificant, but the fact that criminal enterprises operate in illicit markets conditions their behavior in ways that accentuate rather than obviate the driving forces of economic principle and good business practice - especial [Samuel S. Huntington, "Transnational Organizations in World Politics" World Politics Vol. 25 No.3 (April 1973) pp.333-368 discusses this aspect of transnational organizations more fully.]. The overall effect of illegality may be to provide additional motivations for the development of strategic alliances.

In spite of the differences between the licit and the illicit business worlds, therefore, an analysis of strategic alliances among licit corporations should facilitate greater understanding of the conditions and considerations that lead to strategic alliances among TCOs, make it easier to elucidate the nature of these alliances and provide insights into the problems that can arise in their operation and management.

II. Transnational corporations and strategic alliances

Business linkages can take many forms, but often revolve around what has been described as the global commodity chain. [Gary Gereffi and Miguel Korzeniewicz, (eds.) Commodity Chains and Global Capitalism (London: Praeger, 1994)]. The chain from raw material to final product tends to encourage the development of a series of supplier relationships as well as the emergence of links with companies providing ancillary specialized services. Such linkages form an integral part of the normal operation of the market. They also underline the fact that forms of vertical cooperation are central to the effective operation of even very competitive markets.

This is not to say that all the firm's interactions are regularized. In thinking about cooperation it is important to recognize that there is a continuum from complete mergers between companies at the one extreme to independent spot market transactions on a one-off basis at the other. [The range of cooperation is discussed more fully in G. B Richardson, "The Organization of Industry" in Peter Buckley (ed.) Cooperative Forms of Transnational Corporation Activity (London: Routledge, 1994) pp. 23-37]. Strategic alliances among companies tend to be at the more regularized end of the spectrum and generally involve systematic forms of cooperation that have a high degree of regularity and predictability. These alliances can take many forms, including operating linkages, licensing or franchise agreements and joint ventures. [See Ibid.]

One analysis has suggested that the essence of a strategic alliance is cooperation to exchange technology and goods and services across national and firm boundaries, an exchange that can be accomplished through informal agreements, contractual collaborations, joint ventures and minority equity alliances. [See G E Osland and A Yaprak, "A Process Model on the Formation of Multinational Strategic Alliances" in R Culpan (ed.) Multinational Strategic Alliances (New York: International Business Press, 1993) pp. 81-102 at p. 82]. Another analyst has contended that the requirements for cooperative strategies to encompass strategic alliances are more stringent. [R P Lynch, Business Alliance Guide: The Hidden Competitive Weapon (New York: Wiley, 1993) pp.24-25]. In this view, strategic alliances involve tight operating linkages, with the participants having a vested interest in each other's future, long term time horizons and significant competitive advantages. [Ibid.] Tactical arrangements are not strategic alliances because they lack the expectation of long term cooperation.

With this understanding of strategic alliances, it is necessary to examine the reasons companies engage in the process of alliance formation. In general terms, the development of strategic alliances can be understood as a response by individual firms to the business environment and as an attempt to overcome their own limitations. Within this overall framework, however, it is possible to delineate several more specific reasons why firms engage in strategic alliances.

In the first place, strategic alliances are a rational response to the emergence of global markets, and in particular to what might be described as the global-local nexus. A global market can be understood, in one sense at least, as simply a composite of local markets that have become increasingly homogenized. Yet they are extremely important to companies. As one commentary has pointed out, the strategic management literature emphasizes that firms seek to maximize long term profits through improving their competitive position vis a vis rivals - and one of the most important ways of accomplishing this is by aggressively gaining access to new markets; expanding market share in existing markets is another. [See Osland and Yaprak, op. cit.]. To enter local markets that have hitherto beenoutside the firm's purview or range of activity, it is often better to cooperate with those firms already entrenched in these markets - and that have greater knowledge of local conditions and are more attuned to local problems - rather than try to insert oneself as a competitor on unfamiliar territory. Linking with host-nation companies to facilitate access to new markets is a major reason that transnational firms form strategic alliances.

Closely related to this is a second consideration, involving the desire to neutralize and even co-opt actual or potential competitors. Paradoxically, cooperative strategies offer a rational and effective response to a highly competitive situation. Cooperation through the development of a strategic alliance for example, could facilitate the neutralization of major competitors. As one analyst has noted "A strong competitor that already enjoys a profitable position in its own market can become a fierce ally. Better to fight the competitive battle alongside an ally than to face this same competitor in open combat". [Lynch, p. 5]. Obviously the firms already in the market have to be offered something substantial in return. This might be a share in a market that is made more lucrative through the introduction of more diverse products, the promise of greater profit through the creation of an entirely new market, or some other form of reciprocity. Whatever, the case, it is the promise of mutual benefit that underlies the formation and maintenance of strategic alliances.

Strategic alliances can also provide an effective means of circumventing restrictions and can pave the way for entry intostrictly controlled markets. [R Culpan and E A Kostelak Jr. "Cross-National Corporate Partnerships: Trends in Alliance Formation" in Culpan, op. cit. pp. 103-165 at p. 117]. Where government regulations make it difficult for foreign corporations to enter a market, the formation of an alliance with a firm that already has access to the market is an attractive means of overcoming obstacles.

Another closely related consideration is that a strategic alliance can be an indispensable means of spreading or minimizing risk. Attempts by transnational corporations to expand their activities or to enter new markets often require new investments of resources with uncertain payoffs. A strategic alliance offers an opportunity to minimize these investments and to spread or reduce risks. In effect, it enables companies "to tackle opportunities that might otherwise be too risky". [Lynch, op. cit. p. 21]. The synergy is that the participants in a strategic alliance are able to do things that neither one could do alone - at least not with anything like the same effectiveness or confidence.

Synergy is central to strategic alliances. Such alliances effectively enhance the resource base available to the participants, whether it be in terms of capital, technology, the capacity to develop new markets, or simply greater access to a more extensive set of inter-organizational networks. The opportunities for organizational learning through the exchange of information and expertise among the partners may also be important. Accordingly, a strategic alliance may enable the individual firm to close what has been termed a strategic gap - the difference between what that corporation would like to achieve and what it has the resources to achieve. [T T Tyebjee quoted in Osland and Yaprak p. 86]. This is particularly the case when the strategicalliance involves specialization and complementary expertise, and each therefore brings to the alliance something that the other lacks.

Another reason for forming strategic alliances is that they can be a useful means of reducing the unpredictability of the free market and of regularizing relationships. Strategic alliances offer a means of ensuring specialization and division of labor often in relation to suppliers. By allying with a firm that supplies raw materials, it is possible for a corporation to obtain both better financial terms and to guarantee that supplies of necessary materials will always be available. This form of strategic alliance is perhaps best encapsulated in the Japanese keiretsu, a set of arrangements in which suppliers are bound very closely to those firms that depend on the product for their manufacturing processes.

Although it is possible to identify several distinct reasons why firms engage in strategic alliances, in practice more than one consideration is usually involved. Strategic alliances promise multiple benefits: they "enable partners to share financial and operating risks and costs, obtain benefits associated with scale economies and operating synergies, and increase market share". [Culpan and Kostelac, op. cit.p. 116]. Not surprisingly, these alliances can take many different forms. One type is the franchise alliance, which generally involves an alliance between a larger, more developed company and numerous independent, smaller, more tightly managed companies. [Lynch, p. 12]. A second form is what might be termed the compensatory alliance inwhich two companies recognize that each one acting alone has inherent weaknesses that can be offset by the other's strengths. A variation on this is what could be described as a specialization alliance in which one company forms an alliance with another that can fulfil specialized tasks beyond the existing capacity of the first organization. There is a kind of contractual relationship as regards specific tasks and responsibilities. Another form of strategic cooperation occurs through what are sometimes described as countertrade alliances in which goods are exchanged for goods. Yet another variant is the supplier alliance in which there are regularized relations between the suppliers of basic raw materials and firms that transform these materials into consumer products. This is not a comprehensive description of the infinite variety of strategic alliances, but it does highlight some of the most important forms of these alliances. It does nothing, however, to explain why some strategic alliances succeed and others fail. The starting point for considering this issue is a recognition that the basis for strategic alliance is mutual need. Each firm has something that the other needs or wants. Yet, even if ally selection is appropriate and there is a basic mutuality of interest underlying the initial impulse for cooperation, this is no guarantee either of continued harmony or that the alliance will be successful. Strategic alliances between transnational corporations encounter many problems. The strategy, chemistry and operations must all be right. [ Lynch p. 22] At the outset it may appear that this is the case, but unforeseen problems can all too easily arise. The participants in strategic alliances usually come from different cultures, operate according to different precepts and principles, and, in spite of their common interest, may have different needs and priorities. Clash of cultures, discrepant and incompatible operating procedures, and divergence of interests and priorities are all inherent possibilities in strategic alliances amongst transnational corporations from different home nations.

Another consideration is that the alliance may result in unequal or asymmetrical gains. This can lead to resentment on the part of the firm that believes its benefits are not commensurate with what it has put into the alliance. Even if this does not occur, the possibility that the partner may defect - for example, after assistance with the initial market penetration one of the firms might conclude that it is now capable of going it alone - can create an aura of suspicion that can undermine continued cooperation. As one analyst has argued, when one of the participants engaged in cooperation can obtain considerable short term advantage by defecting, then the possibility for the breakdown of the alliance is ever present. [See the excellent discussion on this and many other problems associated with cooperation in Debora Spar, The Cooperative Edge: The Internal Politics of International Cartels (Ithaca: Cornell University Press, 1994)].

Another cause of alliance breakdown may be unauthorized actions by subordinates or particular divisions within the corporation. The effective functioning of an alliance generally requires that the top level management has strong internal control. [This is argued very effectively in Spar.]. Actions taken by subordinates that are not congruent with top level directives can prove particularly disruptive, especially in instances where companies remain competitors in spiteof their strategic alliance. If one transnational corporation -for whatever reason - continues to engage in independent marketing activity, for example, even though it has agreement with another on joint marketing or selling this could provoke a reappraisal of the alliance. Yet another possibility is that the alliance simply does not live up to expectations. In counter-trade alliances, for example, late delivery of goods or the supply of inferior products can erode the level of trust and may lead one of the partners to seek an alternative ally.

In short, strategic alliances may be easier to create than to maintain. Expectations that were very high will often be disappointed as performance falls short of promise. Disappointed expectations can result in lack of trust and the erosion of effective communication. The result is that while strategic alliances are very popular initially they often lose some of their luster. "Although the number of international cooperations appears to be increasing dramatically, they are notoriously unstable, prone to failure, and at best, difficult to govern." [See R Osborn and C Baughn, "Forms of Interorganizational Governance for Multinational Alliances" in Culpan, op. cit. p. 59].

III. Transnational Criminal Organizations and Strategic Alliances

Since transnational criminal organizations are essentially profit maximizing and risk reducing entities, it is hardly surprising that they too engage in strategic alliances. Cooperation among these organizations is a natural activity particularly as they share the common problem of circumventing law enforcement and national regulations. As suggested above, there is an added incentive forcooperation that stems from the illicit nature of the activity. Whereas transnational corporations have to negotiate with governments in order to obtain access to new markets, TCOs have to negotiate with the illicit power structure. This again may encourage a propensity to create strategic alliances.

From this perspective it is clear that at least some of the alliances among transnational criminal organizations can be understood as risk reduction alliances. There are several kinds of risk that criminal organizations are anxious to reduce: the risk of interdiction or seizure of the illicit product they are supplying, the risk of apprehension of members of the organization; the risk of infiltration of the group; and the risk of their profits being seized. A very good example of a risk reduction alliance - at least from the perspective of one of the partners - is that between the Colombian Cartels and Mexican drug trafficking families.

In many ways, this is a very natural alliance that can also be understood as a contractual relationship in which the Mexicans perform a highly specialized task for the Colombians. Mexican criminal groups, often with a family basis, have long had a well-developed smuggling infra-structure for the transport of goods and services across the extensive frontier with the United States.

The Sinaloa drug trafficking organization led by Joaquin Guzman Loera (who was arrested in 1993) is one of the best connected of these groups but there are several others that have extensive and systematic linkages with Colombian drug trafficking organizations. The Mexican groups understand the "frontera" and what is required to ensure the viability of smuggling activities. For the Colombian Cartels, therefore, allowing the Mexican families to do something in which they are extremely experienced and skilful makes eminent sense. The strategic alliance with Mexican smuggling organizations is an important means of risk-sharing or even risk avoidance for the Cartels in one of the most high risk aspects of the business -crossing the border into the United States. And for the Mexicans, the alliance is important in allowing significant participation in the cocaine industry - an industry that has higher profit margins than the marijuana industry that has traditionally been the preserve of Mexican smugglers. Although the risks are certainly not negligible in cocaine smuggling, they are outweighed by the very substantial economic benefits that come both from the contractual arrangements and the fact that Mexican organizations control much of the cocaine distribution in California. Elsewhere in the United States, the cocaine is returned to Colombian traffickers who control the wholesale trade.

Another intriguing alliance has developed between Mexican smugglers and Chinese criminal organizations involved in trafficking illegal immigrants into the United States. Once again, the Mexicans are able to provide a major service since they possess the ability to smuggle migrants across the border into the Southwest United States with minimum risk of detection. The result has been what the Los Angeles Times described as"a clandestine corridor linking the villages of Fujian, the shores of Mexico andCentral America, and suburban safe houses in heavily Chinese enclaves of the San Gabriel Valley". [Sebastian Rotella and Lee Romney, "Smugglers Use Mexico as Gateway for Chinese". Los Angeles Times June 21, 1993 p. A3.]. The scale of the enterprise became clear during the first six months of 1993 when the Border Patrol arrested over 500 Chinese, 400 of them in San Diego, and acknowledged that for every captured illegal alien two others escape detection. The implication is that when trafficking routes and methods of proven effectiveness are available not only is the product (drugs or people) virtually irrelevant so far as the criminal organizations are concerned, but these organizations are willing to engage in any kind of alliance that facilitates their illegal enterprise.

Another kind of alliance is that between some of the Nigerian drug trafficking organizations and the Colombian Cartels. The Nigerian criminal organizations are classic free market entrepreneurs. Engaged in both cocaine and heroin trafficking, they have progressed from being couriers for others to being major players in their own right. They have developed an alliance of sorts with the Colombians based on product exchange. There have been several instances in which Nigerian trafficking organizations have supplied heroin to Colombians in return for cocaine. This has helped the Colombians to develop their own heroin market, while also offering opportunities for the Nigerians to sell cocaine in Western Europe. How extensive this form of counter-trade actually is remains uncertain. Nevertheless, there is some evidence that it is a not insignificant set of activities.

Another important motive for the development of strategicalliances has been the desire to enter new markets. This has been perhaps most evident in the relationship between the Colombians and the Sicilians. During the late 1980s and the early 1990s it became clear that there were growing linkages between the Colombian Cartels, especially the Cali Cartel, and the Sicilian Mafia. These linkages can be explained in large part by the desire on the part of the Colombians to enter the European market. Such an entry was necessary because of the saturation of the United States cocaine market, and highly desirable because cocaine sold for higher prices in Europe and therefore offered higher profit margins. In some respects Europe was also an area of lower risk of product seizure in that European law enforcement was not as engaged in counter-narcotics activity as the United States authorities who had even mobilized the United States military in the war against drugs.

At the same time, it was not risk free especially for Colombians who generally had a higher profile and greater visibility than was desirable. Although the Colombians had developed their own marketing and trafficking strategies for Western Europe - with access mainly through Spain and Portugal - the costs had been relatively high in terms of the number of arrests. In 1991 2,048 cocaine traffickers were arrested in Western Europe 27 per cent of whom were Colombians.

Against a backdrop of this kind, alliance with the Sicilians had a dual payoff. The Cosa Nostra not only had well established distribution networks for heroin that could also be used for cocaine, but also had excellent knowledge of local conditions andwas able to go further than the Colombians in neutralizing law enforcement authorities through bribery and corruption. If marketing considerations drove the alliance, therefore, it can also be understood as an attempt by the Colombians to overcome limitations in their indigenous capacity to penetrate the European market. Alliance with the Sicilians, in effect, compensated for the lack of a Colombian ethnic network in Europe that had been central to the success of Colombian drug trafficking activities in the United States.

From the Sicilian perspective, there was also considerable benefit to be gained from alliance with the Cartels. The Sicilian role in the heroin market in the United States had been superseded to a large extent by the Asians themselves. What at one point had been predominantly an alliance in which the Chinese supplied the opium and the processing was done in Sicily, was transformed as the Chines began to integrate forward and do much of the processing and trafficking for themselves. The results were evident in the way in which Southeast Asian heroin came to dominate the United States heroin market in the latter half of the 1980s. And even in Europe, Turkish criminal organizations, trafficking heroin from South West Asia, made great inroads into the heroin market. For the Sicilians, therefore, alliance with the Colombians offered opportunities to recoup some of the ground that had been lost in other areas.

Although the needs of the two organizations were very different, therefore, they were sufficiently compatible to lead to a strategic alliance. The effects of this alliance can be seen inthe way in which the cocaine market has developed in Europe. American law enforcement officials had been warning their European counterparts for some time about the impending cocaine blitz on Western Europe, but it was not until 1993 and 1994 that this materialized. Although seizures alone are not a particularly good indicator of supply levels (since they can also be explained by greater law enforcement effectiveness in interdicting supplies) they do tend to reveal broad trends. In this connection, the number of seizures went up so dramatically between 1993 and 1994 as to suggest that there had been a qualitative leap in trafficking cocaine to Western Europe. In the first three months of 1993 around 2300 kilos of cocaine were seized (counting seizures over 100 kilograms each). In the first three months of 1994 that figure had risen to almost 12,000 kilograms.

Another kind of relationship has arisen reflecting the need for specialized services on the one side and the capacity to provide them on the other. Once again, it appears that the Sicilian Mafia and the Colombian Cartels have developed arrangements in which the Sicilians engage in money laundering on behalf of their Colombian allies. There have also been agreements between the Sicilians and some of the Russian organized crime groups to engage in money laundering. The Cali Cartel has also been laundering money through illegal numbers racketeering in Rio De Janeiro that may be closely linked to the activities of the United States Mafia.

The notion of neutralizing potential competition throughalliances - or at least through tacit agreement on limiting competition - has also been discernible. A good example of this occurred in the Czech republic. [See "Russian, Italian Mafias Divide Republic" in Mlada Fronta Dnes 12 October 1993]. In October 1992 members of the Italian and Russian Mafias met in Prague, and divided up the areas of their respective operations. Italian gangs use the Czech Republic as a place for recreation and support, while the Russians use it for money laundering as well as arms dealing, drug trafficking, blackmail and prostitution. Even if this agreement does not qualify as a strategic alliance, it does highlight one means of limiting conflict among TCOs.

Other important relationships, especially those in the drug trafficking industry, can be understood as franchise alliances. There are many well established relationships of this kind, with African-American groups, Dominicans, Puerto Ricans and others involved as retailers for Colombian wholesalers of cocaine and Chinese and Nigerian wholesalers of heroin.

It is clear even from this brief survey that strategic alliances among TCOs have become increasingly common. Some observers have seen this as the development of a Pax Mafiosa and argued that it involves an attempt to carve up the globe into criminal fiefdoms. [This is argued most strongly in Claire Sterling, Thieves' World (New York: Simon and Schuster, 1994)]. The analysis here, however, suggests that these linkages can be understood in less grandiose and more prosaic terms. They are essentially alliances of convenience based on strictly economic considerations rather than part of a global criminal conspiracy. This is not to denigrate their importance as it is clear that they greatly enhance the capacity of transnationalcriminal organizations to circumvent government controls.

Moreover, it has to be recognized that alliances are only one of the many instruments used by transnational criminal organizations to further their activities. There are several alternatives to fully fledged alliances. Criminal organizations sometimes reduce their vulnerability by co-opting non-criminals. The Nigerian organizations have been particularly good at this and have succeeded in recruiting couriers (especially American women) who did not fit a profile that would immediately arouse suspicion on the part of customs or law enforcement officials.

It is also clear that fully fledged alliance between large criminal organizations such as the Cartels and Sicilian Mafia provide only part of the picture. Strategic alliances between large organizations are accompanied by many smaller, more tactical alliances. A good example of this was uncovered in January 1994, when Mexican authorities seized 52 kilos of heroin and arrested 4 Thais, a Laotian and 4 Mexicans in Ensenada, a port city 70 miles south of San Diego. The scheme was an ingenious one in which heroin was sent into the United States by mail. It was operated by criminals who had infiltrated the postal services in both Mexico and Thailand. Initially bath products were sent to Thailand to false addresses. They were then stuffed with heroin and sent back as undeliverable. Because they had not originated in Thailand they were not inspected by Mexican customs. [Sebastian Rotella, Mexican Police make record heroin seizure" Los Angeles Times (January 19, 1994) p.A3].

In many respects such activities seem to be typical of a significant part of the drug trafficking industry ie. activities bysmall independent organizations that have come together to exploit a particular trafficking route and a specific way of circumventing customs and law enforcement. Not only are there many of these small tactical alliances based on transnational networks, but when they are effective then they have an inherent capacity for growth. At the same time, the loose, fluid nature of these networks makes it equally plausible that they will be disbanded and their constituent elements reformed in different constellations. Tactical alliances are made for specific purposes and are often followed by the search for other partners to make shipments to different locations using different modes of concealment.

In attempting to place strategic alliances in perspective, it is also necessary to keep in mind that TCOs also make alliances with governments - either through corruption or coercion or, more often, a mix of both. Corruption can reach such a level in some cases that the government can be regarded as collusive (ie. hand in hand with the criminal organizations). High ranking members of the government may benefit directly from the actions of transnational criminal organizations, receiving large payoffs in return for facilitating trafficking activities, and providing protection and safe havens.

There are also increasing links between transnational criminal organizations and terrorist organizations. Indeed, the distinction between terrorist groups pursuing essentially political objectives and transnational criminal organizations pursuing economic goals is likely to be become increasingly blurred. The loss of statesponsorship for terrorist organizations means that they are likely to seek alternative sources of financial support for their activities. Drug trafficking and other forms of enterprise crime are obvious means of doing this. On the other side, criminal organizations may find that the opportunities for large scale extortion through the possession of smuggled nuclear material encourages them to use the threat of terror for business purposes. This process of convergence is likely to make cooperative linkages more frequent.

Another point that needs to be made about strategic alliances - particularly if the parallels with corporate alliances are accepted - is that although these alliances can be very effective means of enhancing the capacity for criminal activity, both their initial development and their continued maintenance may encounter significant problems. The desire to circumvent the common enemy of law enforcement provides an underlying incentive for sustained cooperation. Even so, alliances may encounter significant problems. These can stem from different criminal cultures and codes of honor among thieves, from different priorities, and from concerns over relative gains and who is benefiting most from the collaborative ventures. In addition, the lack of total control over operatives and the inability to prevent independent actions may cast doubt on the validity of the cooperative agreement. Continued independent marketing operations outwith the alliance may also be seen by one of the partners as inconsistent with any accord that has been reached.

Some of the problems that can arise are revealed by even a brief examination of the evolution of the relationship between the Medellin and Cali Cartels. During the early 1980s there was a close working relationship between drug trafficking organizations in Medellin and those in Cali. The cartels themselves were formed partly because of a recognition of the benefits of cooperation but there was also an element of serendipity. The kidnapping of Martha Ochoa, daughter of a leading drug lord led to a meeting of traffickers in which they agreed to form a paramilitary arm to take action against the kidnappers. This marked the beginning of a period of intense collaboration, joint ventures in transportation, and the common underwriting of large cocaine loads into the United States. It was also a period of rapid market expansion in which profits burgeoned. During this period the relationship between the Cali and Medellin Cartels was exceptionally good. The two cartels shared risks, sometimes used the same airstrips and processing facilities, and appeared to have agreed on market shares in the United States. By the end of the 1980s, however, this relationship had deteriorated almost completely and although there were still lingering elements of cooperation, the two cartels were, in effect, at war with one another.

The breakdown of cooperation was rooted partly in the regional rivalries that have made Colombia particularly difficult to govern. Regional tensions were accentuated by what was virtually a difference of social class: members of the Cali Cartel were, in some cases, businessmen who had moved into narcotics but who stillacted as legitimate businessmen; the Medellin leadership consisted of petty hoodlums from the slums who had become major traffickers. Not surprisingly the latter group was more publicly flamboyant and used violence more extensively than did their counterparts in Cali. The different attitude to violence was also rooted in divergent investment strategies. [I am grateful for this point to Bruce Bagley.]. The Cali Cartel invested in legitimate business, while Medellin invested in land and then developed para-military groups to protect their holdings. It was a natural extension of this for the Medellin Cartel to adopt a confrontational strategy towards the government whereas the Cali Cartel adopted a strategy of co-option, corruption and assimilation. The unwillingness of the Cali Cartel to join Medellin in a frontal assault on the Colombian state was also a source of tension between the two organizations and may have contributed significantly to the split.

These structural and strategic differences between the two Cartels were exacerbated by personal rivalries. Moreover, once the conflict began, it appeared to take on its own momentum. Pressure from the government led to allegations by Pablo Escobar that the Cali Cartel had provided the information that led to the killing of one of his partners in the Medellin Cartel, Rodriguez Gacha. The familiar problem of trust and concern over relative gains also took on a new dimension with concern over relative losses by the two Cartels in the struggle with the government. The tensions were exacerbated by the fact that the cocaine trafficking industry was also coming under intensive pressure in the United States. Withmarket saturation in Miami and the Bahamas and a significant drop in prices as a result, the Medellin Cartel tried to enter the New York market that had hitherto been the almost exclusive preserve of Cali. This represented a major escalation of the conflict and led to press reports in the latter half of 1988 that the conflict between the cartels was over the control of the New York wholesale cocaine trade worth about 1 billion dollars a year. Although the reports themselves may have been too narrowly focused the market share issue was certainly of great significance.

The implication of this brief survey of the conflict between Medellin and Cali is that even where cooperation between transnational criminal organizations appears to be well established, (and does not involve problems of different nationalities) it retains a certain fragility. If this is extrapolated, it suggests that some of the other strategic alliances identified above might be less robust and resilient than expected. There may even be a life cycle of cooperation in which the initial benefits from cooperation appear to outweigh any negative consequences, but which is followed either by a phase of consolidation or a period in which the difficulties and costs of cooperation come to the fore. The implications of all this for government and law enforcement agencies must now be considered.

IV. Implications for Policy

The development of strategic alliances amongst transnational criminal organizations is clearly a cause for considerable concern on the part of governments. Strategic alliances augment the capacity of transnational criminal organizations to circumvent law enforcement and implement strategies central to the success of their illicit enterprises. While this problem has to be put in perspective and seen in terms of many little alliances as well as a small number of alliances among major TCOs, it does present a new challenge to law enforcement - but also offers some opportunities.

  • The first challenge is for national governments, partly through more systematic and careful integration of law enforcement intelligence and that from intelligence agencies, to develop better predictive intelligence about the formation (and the demise) of strategic alliances.
  • The second challenge is for governments and law enforcement agencies to develop cooperative strategies to match those of the transnational criminal organizations. Such cooperation includes more extensive information and personnel exchanges, a greater emphasis placed on judicial assistance to those states who lack an effective criminal justice system, more widespread use of both Mutual Legal Assistance Treaties and extradition treaties. The formation of multinational task forces to go after TCOs and their activities, including money laundering, should be given high priority. There are many problems inhibiting more extensive cooperation of this kind, most of which come down to the familiar issue ofpreserving national sovereignty. Governments have to realize, however, that unless they are willing to sacrifice some of the formalities of sovereignty they will be unable to take effective actions against criminal organizations whose cross broader activities erode the foundations of real sovereignty.
  • The third challenge is to recognize that the development of strategic alliances not only presents dangers but also offers opportunities for law enforcement. Given the problem of establishing and maintaining trust in an area that depends on mutual confidence regarding the ally's reliability rather than formal agreements and legal contracts, the potential for creating suspicion and sowing discord is very considerable. Consequently, strategic alliances could become a source of weakness for TCOs. Law enforcement activities can help to create discord where there is none and exploit problems that arise naturally between organizations engaged in cooperation. Strategic alliances offer many opportunities for the development of a counter-competitive strategy by intelligence and law enforcement agencies. It might be possible, for example, to interdict supplies of drugs but somehow make it look as if one of the organizations involved is betraying its partner for short term gain. Alliances also offer opportunities for undercover work and infiltration of both organizations. The overall aim of a counter-competitive strategy is to turn the organizations against one another so that cooperation is replaced by intense competition and, in some cases, even open confrontation or hostility.

The only caveat in proposing such an approach is that governments should recognize the need to understand the operation of the market and to consider the possible impact of successful actions on the market structure as well as the individual organizations that are being targeted. Setbacks for one organization can all too easily provide opportunities for others that may ultimately pose even more serious challenges. In this connection, it might have been better if the United States and the Colombian authorities, instead of giving highest priority to the recapture of Pablo Escobar after his escape from prison, had actually allowed him to wage an effective campaign against his rivals in Cali. In the event, by focusing primarily on weakening the Medellin Cartel, they simply allowed Cali to emerge as the premier drug trafficking organization in Colombia. Balance of power policies in which governments effectively throw their weight behind the weaker rather than the stronger of two rival criminal organizations - thereby perpetuating competition rather than allowing the creation of a near monopoly - need to be considered much more seriously than hitherto.

Even were such a strategy to be adopted, it would need to be used with consummate care and skill. The evolution of law enforcement efforts against the drug trafficking industry is replete with instances of policies that had inadvertent and unforeseen consequences that made the problem more rather than less formidable. It is particularly important, therefore, in dealing with TCOs to be sensitive to the way in which law enforcementactivities can shift the distribution of power from one organization to another. It is also important to fully understand the nature of the linkages that develop among transnational criminal organizations. The analysis here does not pretend to offer a comprehensive understanding of this kind. The intention is simply to generate a dialogue about the nature of the alliances among transnational criminal organizations. It is essential to go beyond generalizations about a Pax Mafiosa and provide a conceptual framework for understanding both the strengths and the weaknesses of the transnational linkages of criminal organizations. If this article contributes to the opening of such a dialogue, it will have served its purpose.


The author would like to express his appreciation to Maria Velez and to Carl Florez and several of his colleagues at the National Drug Intelligence Center for helpful discussions of many of the issues raised in this paper.

Copyright 1994 The Washington Quarterly