How does Russia use Wagner Group to Intervene in Economic Liberalism of Africa?
Figure 1: Wagner Group mercenaries guard the president of CAR at a rally on 17 July 2023. Leger Kokpakpa/Reuters
Song Hyoseung (Aaron), Research Executive
Since Russo-Ukranian War, Russia has been heavily criticized by the international community. As a chief oil and energy producing country, Russia’s involvement in series of war not only disrupted the supply chain of raw materials but also increased inflation rate as prices of raw materials soared. During the war, Wagner Group, Russia’s Private Military Company, supported the invasion of Ukraine, noted for its cruelty and military power. Yet, Russia’s operations in Africa were less known despite its ripple economic effect on African countries. This article will focus on how Russia uses Wagner group to operate in Central African Republic (CAR) and Mali and how they violate economic liberalism of these countries.
What is Wagner Group?
Marten (2019) defined traditional Private Military Company (PMC) as military entrepreneurs which provide military and security service to foreign governments. PMC is a registered and legal entity, which is generally independent from their home states. However, Wagner Group has no legal standing ie. the Russian state has not officially registered them as an entity.
Despite Wagner’s lack of legal standing, Wagner Group has been suspected to be affiliated with Russian state, acting as Russia’s private armies in Africa. Their operations in Africa not only involved military and security service for politically fragile states but also illegal economic activities. On 27 June 2023, US Secretary of State Anthony Blinken warned Wagner’s operations in Africa. He commented that “they are committing criminal acts that threaten safety, prosperity, and natural resources of nations, thus sanctioning illicit gold companies that support Wagner Group” (US Department of the Treasury, 2023).
Russo-African Relations
In 2019, Vladimir Putin held the first Russia-Africa Summit to promote economic and military cooperation with African states. Indeed, Russia increased its economic footprint since 2019. Even though Russia’s Foreign Direct Investment (FDI) to Africa was less than 1% of its annual FDI, Russia produced trade revenue of $14 billion with Africa in 2022, where export level was 7 times higher than import level (Siegel, 2023). Russia’s main trading partners are Northern African countries like Egypt and Morocco, which constituted approximately 67% of the trade. Grain, arms, refined petroleum, and electronics were main exports to African states (Droin & Dolbaia, 2023). Besides trade, Russia’s economic involvement can be characterized by their oil and gas investments in Africa. Rosneft and Gazprom are state owned oil and gas firms that carry out oil and gas exploration across Africa. Russian export of refined products increased from 33,000 barrel per day in December 2021 to 420,000 barrel per day in March 2023 (Griffin & Mitchell, 2023).
The above shows legal economic activity between Russia and Africa, such as Russo-African Trade and Russia’s energy investments in Africa. However, Wagner Group’s activities in Africa are deemed illegal and highly questionable. Since Russian state does not officially report any activities, reports on Wagner heavily rely on the work of investigative journalists and International Organizations. Illicit trades, resource exploitations, and connections between Wagner Group and African States cannot be accurately tracked, only estimated by the experts (ENACT, 2021). Still, the consensus is that Wagner Group received lucrative mining concessions and access to resources from African states by actively engaging in recent conflicts of African states by providing military service (ACLED, 2023).
How does Wagner Group operate in CAR?
Located in the heart of Africa, CAR marked the lowest human capital and development indices with weak infrastructures and governance. In 2022, CAR’s real GDP growth rate marked 0.0%, down from 1.0% growth in 2021. More than 3.5 million people are estimated to live in extreme poverty between 2023 and 2025 in CAR (The World Bank, 2023).
Despite weak economic indicators, Russia continues to deploy Wagner mercenaries in CAR for their abundant natural resources. More than 60% of the country’s total surface area is rich in minerals, providing mining potential for diamond, gold, uranium, lignite and iron (CAR Ministry of Mines and Geology, 2022). Furthermore, CAR has immense areas of oil-bearing basins that are still unexplored, attracting investment opportunities of foreign nations (CAR Ministry of Mines and Geology, 2022).
Figure 2: Mineral and geological map of CAR. Ministry of Mines and Geology
Intrigued by CAR’s mining potential, Russia began their operation in CAR in 2018 by signing an agreement to exchange Russian military service and arms for mining concessions (Searcey, 2019). Wagner Group expanded their engagement in CAR from deploying military instructors and working as national security advisers. They also strengthened their control over local mining sites throughout multiple battles against other armed groups in CAR (Etahoben, 2023). Therefore, Russia uses Wagner Group, a semi-state force that is not restricted to international law, to consolidate their economic benefits from mining industries by further intensifying conflicts in politically unstable CAR.
How does Wagner Group operate in Mali?
Located in West Africa, or Sub-Saharan Africa, Mali has a low-income economy which is vulnerable to conflicts and fluctuations in commodity prices. Despite abundance of natural resources, Mali’s economic growth has stagnated after the 2012 military coup and ongoing civil wars. While Mali’s annual real GDP growth rate marked 5.4% in 2010, it fell into –0.8% in 2012 and 3.7% in 2023, showing how political instability impedes long-run economic growth (International Monetary Fund, 2023).
In June 2021, France decided to withdraw their military forces in Mali, a former colony of France, after the Malian military regime refused to return to democratic governance after series of coup d'état in 2020 and 2021 (Al Jazeera, 2022). This led Economic Community of West African States (ECOWAS) to sanction Mali by prohibiting the trade of goods with its neighbors and freezing state-owned assets. Following France’s withdrawal, Wagner Group began to expand their influence in Mali by consolidating security of Mali’s transitional government and participating in political violence with Malian Armed Forces (Serwat et al., 2023). Between 1 December 2021 and 30 June 2023, Serwat et al. (2023) estimated that there were 298 political violence events affiliated with Wagner Group in Mali, deploying over 1,645 Wagner mercenaries for securing the transitional government.
In return for services, Mali’s transitional government has also provided mining sites and service charges to Wagner mercenaries. While amount of benefits Russia gained from mining remained unknown, Malian government paid service charge of US$10 million per month to Wagner mercenaries, which has potentially led Mali into debt (Bos, 2023).
Figure 3: Comparison of Wagner Group’s annual budget and Malian annual budget by ministries. DW research, Ministry of Finance of Mali.
Consequently, Mali is experiencing a budget deficit due to the pandemic, ongoing civil wars and the economic sanctions by ECOWAS (The World Bank, 2023). Despite the budget deficit, Malian National State Security Agency increased its annual expenditure on security from 2 billion CFA francs to 71.5 billion CFA francs in 2022, suggesting there is a potential hidden payment to Wagner mercenaries (Bos, 2023). Hence, Wagner Group’s operation in Mali not only cause high casualties from numbers of political violence but also led the Malian government into debt, while benefiting largely from service charges and extraction of natural resources in troubled part of the world.
Why is Wagner Group’s Operations in Africa Problematic?
It is important to consider Wagner Group’s operations in Africa for their violence in economic liberalism. Adam Smith in his book “The Wealth of Nations” defined Economic Liberalism as an economic ideology that supports market economy based on individual’s rights to secure private property and pursue profits. Liberals emphasizes that international trade, the spread of democracy, and international institutions are key factors to encourage more cooperation among states, while rejecting expansion through warfare.
In contrast, with rising presence of Islamic extremist groups in West Africa, geopoliticians coined the term “Coup Belt”, a term to describe high prevalence of coup d'état in West African region caused by political instability and potential resources. Russia saw these series of conflicts as an opportunity to expand their political and economic footprint by detaching Wagner Group to wartime African states. In this way, Russia is intervening in economic liberalism of Africa by using proxy forces “Wagner Group” to take away mining concessions and private properties by military and security services. Considering low economic indices of African states, their operations in the long run will have negative impact on the long run economic growth by decreasing available resources to allocate.
How does it Impact Foreign Countries, especially Singapore?
In 2022, FDI inflow to Africa reached $83 billion from $39 billion in 2020. Investments included $56 billion in energy and $26 billion in renewables, showing Africa’s potential for energy and renewables (UNCTAD, 2022). Despite positive trends in FDI inflow of Africa, Wagner Group largely contributes to the outbreak of major conflicts in West Africa, impacting the global economy by increasing investors’ expectations about potential political risks and violence. If Wagner Group’s indirect operations spread over West Africa, foreign investors will subtract foreign capital due to volatility and instability of Africa, which could result in contracting Africa's economic development and the size of the international economy. This also applies to Singapore because Singapore’s FDI inflow to Africa from 2016 to 2020 marked 8th highest among nations, investing 18 billion in 2016 to 21 billion in 2020 (UNCTAD, 2022). Primarily investing in natural resource industry of Africa, Singapore’s increasing pie of investments in Africa will inflict a loss if political instability continues in Africa. These numbers suggest that Wagner’s operations not only impede the long-term economic development of African states but can also lead to investment loss of foreign countries.
Conclusion
Therefore, despite Wagner’s identity as unregistered PMC at Russia, Russia utilize Wagner Group as their regular army, consolidating their economic and political position in Africa. Wagner’s presence in CAR and Mali proves Russia’s position in Africa. By gaining exclusive access to resources and properties in exchange of military and security service, Wagner’s operations in Africa violate economic liberalism, further impoverishing African states in the climate of political unrest. To contain Russia’s increasing presence in Africa, further international cooperation and sanctions are recommended.
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