EAST EUROPEAN INVOLVEMENT IN THE INTERNATIONAL GRAY ARMS MARKET

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 05462039
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 34
• Document Creation Date: March 9, 2023
• Document Release Date: August 28, 2020
• Case Number: F-2020-00133
• Publication Date: January 1, 1984

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Directorate of
Intelligence
e:'60
11:
NTRACT-
(b)(3)
East European Involvement
in the International
Gray Arms Market
An Intelligence Assesssment
Secret
GI 84-10019
January 1984
Copy 461
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(b)(3)
National Security
Information
Unauthorized Disclosure
Subject to Criminal Sanctions
Dissemination Control
Abbreviations
NOFORN (NF) Not releasable to foreign nationals
NOCONTRACT (NC) Not releasable to contractors or contractor/consultants
PROPIN (PR) Caution�proprietary information involved
ORCON (OC) Dissemination and extraction of information
controlled by originator
REL... This information has been authorized for release to...
FGI Foreign government information
WN WNINTEL�Intelligence sources or methods involved
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Directorate of
Intelligence
East European Involvement
in the International
Gray Arms Market
An Intelligence Assessment
This paper was prepared by
International Security Issues Division, Office of
Global Issues. It was coordinated with the
Directorate of Operations.
Comments and queries are welcome and may be
directed to the Chief, Weapons Proliferation Branch,
OGI, on
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GI 84-10019
January 1984
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�"Seer&
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Key Judgments
Information available
as of 15 December 1983
was used in this report.
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East European Involvement
in the International
Gray Mins Market
(b)(3)
In addition to the direct sale of military equipment to other governments,
most East European nations sell arms and munitions to private dealers and
brokers on the international gray arms market. Because of the absence of
effective end user controls, much of the ordnance sold on the gray market
is acquired by belligerent or embargoed nations and terrorist, insurgent, or
criminal groups throughout the Third World and Europe. (b)(3)
To ensure government control and to provide an element of cover, East
European gray-market arms transactions are conducted by state-owned
foreign trade organizations, which also engage in government-to-govern-
ment military sales or commercial arms deals with legitimate foreign
clients. Nominally subordinate to their respective ministries of foreign
trade, most of these organizations have ties to -Bloc military and security
services. Given the special role these services play in implementing the
policies of the East European Communist parties, we believe that these
state-controlled trading firms could not engage in gray-market arms sales
without the approval of the political leadership. (b)(3)
We believe that Moscow has traditionally imposed few restrictions on East
European gray-market arms sales.
however, that the Soviets may have
recently increased their control over such transactions as a result of
European press allegations of Bulgarian involvement in arms and drug
smuggling. (b)(3)
Most East European gray-market arms sales involve conventional small
arms that fire Soviet- and Western-caliber ammunition. Although far less
sophisticated than other weapons sold on a government-to-government
basis, such weapons constitute a major part of insurgent, terrorist, and
criminal arsenals. Some East European nations reportedly also supply
gray-market clients with unmarked "sterile" weapons or counterfeit copies
of Western small arms. In addition to pistols, rifles, and submachineguns,
East European arms suppliers also offer man-portable antitank and
antiaircraft weapons to gray-market clients (b)(3)
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We believe that East European involvement in the international gray arms
market is prompted both by political and economic motives:
� Gray-market arms sales allow Bloc nations to earn badly needed hard
currency. Our tentative estimate is that East European gray arms sales
amount to some $100 million annually. In contrast with many other East
European manufactured goods that have difficulty competing on the
international market, East European weapons are well made, relatively
inexpensive, and sought after by gray-market clients.
� The use of gray-market trading firms enables East European nations to
purchase advanced Western weapons, which they would otherwise be
unable to obtain, and to profitably dispose of their surplus and obsolete
military stock.
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� The use of gray-market intermediaries also allows East European
governments to distance themselves from the ultimate end user of their
weapons and to maintain an element of deniability should their weapons
be discovered in the possession of a politically embarrassing recipient.
We believe that Eastern Europe's involvement in the gray arms market will
continue and probably increase�given the growing demand for illicit
weapons throughout the Third World and the large sums of hard currency
to be earned in servicing this market. Moreover, East European nations
may begin selling more advanced ordnance to gray-market clients in order
to maintain and expand their share of lucrative sales. As a result, we expect
that significant quantities of silenced weapons, night-vision scopes, auto-
matic grenade launchers, and the newest versions of Bloc man-portable
antitank and antiaircraft weapons will soon become regularly available on
the international gray arms market. Much of this ordnance will be
acquired by nations or groups inimical to the interests of the United States.
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Contents
Page
Key Judgments iii
Introduction 1
Scope and Magnitude 1
Trading Mechanisms 2
Soviet Role 2
Gray-Market Weapons: Small Arms 3
Gray-Market Weapons: Advanced Equipment 4
Motivations 4
Economic Incentives V 4
Political Considerations 5
Outlook 8
Appendixes
A.
Czechoslovakia 9
B.
C.
D.
E.
Bulgaria
Poland
Hungary
Romania
15
19
23
27
F.
East Germany 29
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Eastern Europe
701106 (543707) 1-84
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Sec
East European Involvement
in the International
Gray Arms Market
Introduction �
Most East European nations are actively involved in
the gray arms market, the sale of arms and munitions
on other than a direct government-to-government
basis.' Because much of this ordnance is acquired by
belligerent nations or by terrorist, insurgent, or crimi-
nal organizations throughout the Third World and
Europe, such sales represent a dangerous form of
weapons proliferation. This intelligence assessment
examines gray-market arms dealings by East Europe-
an countries and the political and economic incentives
that prompt such sales. A discussion of individual
East European arms suppliers, their practices, and the
types and ultimate use of some of the weapons they
provide is presented in greater detail in the appendix-
(b)(3) es.
Scope and Magnitude
In contrast to government-to-government and licensed
commercial arms sales, the gray arms market encom-
passes the transfer of weapons and munitions from
legitimate arms suppliers through unofficial�and
sometimes illegal�intermediaries. Although the in-
termediary is often a private individual, corporation,
or group, state-controlled enterprises often facilitate
the movement of weapons into the international gray
arms market. East European nations are actively
involved in this market, primarily as suppliers, but
occasionally as middlemen or ultimate recipients:
� Czechoslovakia, the largest manufacturer and ex-
porter of land armaments in Eastern Europe, is
probably the single leading Bloc supplier of gray-
market weapons. Czechoslovak arms are reliable,
relatively inexpensive, and have been found in the
possession of criminal, insurgent, and terrorist
groups throughout the Middle East and Europe.
' This paper examines the gray arms market activities of Czechoslo-
vakia, Bulgaria, Poland, Hungary, Romania, and East Germany.
Yugoslavia is not discussed because it is not part of the Warsaw
Pact and its arms sales policies in general are formulated independ-
ently, without Moscow's direction and approval
1
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CT-
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Bulgaria purchases significant quantities of foreign
weapons for subsequent resale on the gray arms
market. Sofia, in exchange for a fee, will also
expedite the flow of arms and other contraband
across Bulgarian borders
and Drug Enforcement Administration
� Poland�with the largest trade deficit of all East
European nations�makes large numbers of weap-
ons available to gray-market dealers. Polish arms
may, in fact, soon replace some Czechoslovak mod-
els as the preferred weapons of many Middle East-
ern terrorist groups.
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(b)(3)
� Hungary also sells weaDons to Drivate arms dealers
Analysis of captured terrorist weapons suggests that
Hungary may specialize in the supply of counterfeit
Western weapons.
� Romania, a relatively new supplier to the gray arms
market, currently has more firms engaged in gray-
market transactions than any other East European
nation.
� East Germany has a limited capacity for arms
production and, like Bulgaria, may serve as a broker
of gray-market weapons. (b)(3)
We believe that East European nations are major
suppliers of gray-market weapons. Our estimate is
that East European gray arms sales amount to some
$100 million annually. Because of the secretive nature
of the market and general lack of sufficiently detailed
reporting, the actual value may be several times
greater. Although the amount of gray-market arms
sales is small compared to the annual value of East
European government-to-government arms deliver-
ies�which averaged $2 billion over the last five
(b)(1)
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Thrtret,
Table 1
State-Owned Trade Organizations
Engaged in Arms Transactions
Country
Trade Organization
Czechoslovakia
Omnipol
Merkuria
Bulgaria
Kintex
Romania
Romtehnica
National Aeronautical Center (CNA)
Dimex
Terra
Fata
DCD
Hungary Technika
Weapons and Gas Works Factory (FEG)
Poland
Cenzin
Universal
East Germany
This table is
(b)(3)
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Engineering-Technical Foreign Trade
Corporation (ITA)
years�gray-market sales pose a danger far in excess
of their actual monetary value. In contrast to most
official arms transactions�where at least nominal
control is maintained over the final disposition of the
weapons involved�the ultimate recipient of a gray-
market weapon is seldom known in advance. This lack
of accountability is further compounded by the lon-
gevity of modern small arms, which are easy to
maintain or refurbish. These factors allow gray-
market weapons to be bought and sold many times
and preclude tracing them through complete pur-
chase-to-delivery cycles
Trading Mechanisms
East European gray-market arms transactions are
conducted by state-owned foreign trade organizations
(table 1). Although nominally subordinate to their
respective ministries of foreign trade, most of these
state trading companies
are
security officers.
influenced by military and
special importance of Bloc military and security serv-
ices, it is highly unlikely that these state-controlled
trading firms engage in gray arms sales without the
approval of the political leadership.
Most of these foreign trade organizations are primari-
ly involved in overt arms transactions, which provides
an element of cover for their gray-market activities.
Omnipol, Kintex, Romtehnica, Technika, and Cenzin
normally supply weapons on a government-to-govern-
ment basis, and Merkuria, Universal, and Kintex
usually handle legitimate commercial arms deals with
foreign clients, but each of these firms also sells
weapons to gray-market clients. (s NF)
Soviet Role
We do not know if Moscow is directly involved in the
international gray arms market. Soviet firms and
officials do not appear to sell weapons to private arms
dealers as do their East European counterparts, but
Soviet weapons have been discovered in the possession
of a wide range of terrorist and insurgent groups. This
suggests that, at a minimum, Moscow fails to exercise
adequate control over the military equipment it sup-
plies to lesser developed countries.2 We believe, more-
over, that the Soviets provide weapons to Palestinian
groups and patron-state supporters of terrorism with
the full knowledge that some of these weapons are
resold, traded, or given to other recipients. Although
we do not know the exact amount, many of these arms
undoubtedly become available to gray-market dealers
and clients. (s NF)
There is little doubt that Moscow is well aware of
East European involvement in the international gray
arms market. We believe the USSR has traditionally
imposed few restrictions on these transactions provid-
ed the ordnance supplied is limited to small arms,
crew-served infantry weapons, and munitions. Press
2 Although it is common practice among states exporting military
weapons to impose some sort of nominal end-use controls over such
ordnance, these controls vary widely. Some suppliers, such as the
United States, insist as a precondition for arms transactions that
recipients agree not to retransfer any weapons without the consent
of the original supplier. Other arms-exporting states assume no
responsibility for retransfers of their military equipment.
Oiven the pervasive
power of East European Communist parties and the
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Th'rege