The US Treasury Department on Tuesday imposed sanctions on gold and diamond mining companies linked to the Wagner Group in Mali and the Central African Republic after Yevgeny Prigozhin, the mercenary group’s founder, tried to incite a mutiny in Russia last weekend.
The gold and diamond mining companies, along with a UAE-based distributor and a Russian company involved in the plan, according to the Treasury Department’s Office of Foreign Assets Control (OFAC), serve to sell some Wagner members and their employees in Russia to enrich the African countries where they have established a foothold. However, the amount the group earns from its illegal mining activities is negligible compared to its significant funding from the Russian government.
For several years, part of Wagner’s appeal was that he promoted Russia’s foreign policy goals with a modicum of plausible denial. Wagner’s connection to the Russian government has been an open secret since the mercenary group began in 2014 and brought Crimea and the Donbas under Russian control. But it wasn’t until Russia’s invasion of Ukraine that connection became clear.
Part of Wagner’s appeal lies in its effectiveness compared to its relatively low price to the Russian government. Putin has admitted that the Russian government funded Wagner with $1 billion over the year to May 2023, while Prigozhin earned just over $900 million on top of that. Although the Russian government is not the only entity funding Wagner and his leaders, all indications are that it is by far the main insurer. Everything else, whether it’s diamonds, gold, oil, nickel or gas, is just a drop in the bucket – “pocket money, a few tips for the Russian generals who control the mercenaries,” according to Pavel Luzin, a Russian military analyst and foreign senior Fellow of the Democratic Resilience Program at the Center for European Policy Analysis.
Unraveling Wagner’s mining problems in Africa
Extractive industries such as mining are notorious for funding conflict and human rights abuses. The term “conflict diamond” was specifically coined to refer to the system by which diamond mining and sales contribute to, or even fund, conflict and insurgency. This is especially true in countries that are rich in natural resources but have unstable governments, such as Mali and the Central African Republic (CAR).
The US, UK and European Union have focused on sanctioning Russia’s oil and gas sector – the government’s main source of revenue and thus the main source of funding for the war in Ukraine. But Russia’s own diamond industry, which relies on domestically mined small diamonds, is under international scrutiny for its potential contribution to the war effort. Citing US government data, The New York Times reports that Russia’s diamond industry accounted for $4.5 billion in exports in 2021, making it one of the largest non-fuel sectors in Russia.
But Wagner’s raw material concessions in Mali and the Central African Republic are not so easy. According to OFAC’s statement on Tuesday, the U.S. has sanctioned Midas Resources SARLU, a Prigozhin-affiliated company based in the Central African Republic that “occupies mining concessions and licenses in the Central African Republic for the exploration and extraction of minerals, precious and semi-precious metals and gemstones.” controlled. In addition, the company is “crucially important, along with other Prigozhin-affiliated firms operating in CAR, to fund Wagner’s activities in CAR and beyond” and works with the rebel group Unité pour la Paix en Centrafrique together.
Diamville SAU, another Central African Republic-based company affiliated with Prigozhin, supplies raw materials to Industrial Resources General Trading in Dubai, as well as other companies in Europe and the United Arab Emirates, which the statement said have remitted proceeds from illicitly acquired materials Russia and Prigozhin.
Other companies linked to Prigozhin also operate in the CAR – but so far these companies are more useful for the state conquest project than as sources of financing. According to a June report by The Sentry, an investigative and policy group campaigning to take down conflict-profit networks, Wagner has seized several of Central African Republic’s most productive mines, including the Ndassima gold mine, and is reported to have terrorized civilians in the conquered territories.
Wagner’s mining operations serve a political rather than a financial purpose
“Given that this sector is highly corrupt and there are a number of local beneficiaries (local criminal groups, corrupt officials and politicians, etc.), the amount of money that the Wagner Group could hypothetically extract from this sector does not exceed much. “The operating costs of the Russian mercenaries there,” Luzin told Vox.
“The important fact: the Russian mercenaries are not about profit at all, they play a political role as proxies for the Kremlin, it’s none of their business.”
Rather than trying to profit from commodities, Wagner’s co-opting of mining corporations and other major industries in the African countries in which the company operates is about taking control of that economy and shaping government decision-making to its advantage, a form of political appropriation, which is called the state.
“It has always been primarily a political tool and always a means to co-opt isolated regimes dependent on an outside force and effectively gain state control,” said Joseph Siegle, director of the Africa Center for Strategic Studies , opposite Vox. Wagner – as the surrogate of the Russian state – is able to entrench itself deeply in countries like Mali, Central African Republic and Sudan where leadership is unstable or non-existent, and as these countries become increasingly isolated they increasingly rely on Wagner and Russia, Siegle said.
“American sanctions against Wagner Group-controlled gold/diamond smuggling are largely counterfeit activities and not the complete annihilation of Russian mercenaries in Mali and the Central African Republic through the use of force,” Luzin told Vox via email.
Although OFAC’s sanctions are limited — they don’t currently represent a major blow to Wagner’s income or his state conquest plan — they did have benefits, Siegle said.
“To me, one of the values of the sanctions is that they provide evidence of the connections that many of us only suspect based on our observations. It provides actual, empirical evidence for this association.”
The sanctions also[call] “Discover the regimes that make Wagner possible,” such as that of Faustin-Archange Touadéra in the Central African Republic and the junta in Mali, Siegle explained.
Wagner’s financing and future are in doubt
It’s impossible to know the full extent of Wagner’s funding — how much of it came from mining concessions in Africa, how much through the carousel of shell companies that Prigozhin and other Wagner-connected players have championed over the years, and how much through state contracts with Prigozhin’s Concord Group business and how much of it comes directly from the state.
“Basically, it’s a slugfest with the enforcement agency because there are about 400 companies within the broader Prigozhin network and it takes very little effort for them to defend LLCs and other corporate entities,” says Ben Dalton, the program manager for the New America’s Future Frontlines program, Vox said.
However, the Russian state seems to have already taken some measures against Prigozhin’s empire; Luzin told Vox that his media group, which includes news site RIA FAN and newspaper Nevskiye Novosti, was disbanded after his attempted insurrection last weekend. Radio Free Europe reported on Sunday, citing Kommersant, that Roskomnadzor, Russia’s media regulator, blocked access to Prigozhin’s news media sites.
With the state appearing to be retaliating against Prigozhin and Wagner’s status remaining unclear, it’s hard to imagine how Russia will continue to fund the company, if it exists, going forward.
As Siegle told Vox, some Wagner customers have negotiated directly with the group, but others are negotiating deals through the Russian state; It is possible that Wagner continued to negotiate at least some of these contracts and benefited from in-kind benefits such as access to mining concessions in exchange for protection.
Although Wagner’s Africa operations did not appear to have changed significantly over the past week, the future of Prigozhin’s forces is at best weakened and complicated, Siegle said. A week after Wagner’s March on Moscow, questions about events still outweigh answers, and likely will continue to do so for some time to come.
But Russia’s foreign policy goals remain the same; Since it cannot gain allies with diplomacy or soft power, it must do so through state conquest or force. Whether Wagner or someone else, Luzin said, “Russia still needs proxies there to continue its troublemaker approach in Africa.”
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