by Andrew Scanlon
The use of minerals to fund conflict presents one of the clearest cases of the vast complexities of globalisation. Materials extracted in one region will be sent to a second region to be used in production of goods which will then be sold in a third region. In some cases, this cycle fuels and prolongs conflicts near the origin points of the metal. Tracking these supply chains is crucial in cutting off the flow of funds which arms groups use for conflict. Blockchain technology is the most promising means of doing so. Blockchain is both inherently decentralised and integrated. No one person can control the entire chain of data, but all actors with permission can see the entire ledger. The peer-to-peer decentralized ledger within blockchain provides a credible and verifiable real-time tracing tool that provides clarity as to the origins of each product and trace inconsistencies to a specific point in the supply chain.
Armed groups often attempt to control and profit from natural resources that fund and extended conflicts. Cases range the spectrum of minerals and regions including Myanmar, Afghanistan, Angola, and Peru. Amongst the various minerals that can fall into the classification of conflict minerals. One of the most famous examples are conflict diamonds. However, in recent years more attention has been paid to gold and the three Ts – tungsten, tin, and tantalum. These minerals have been the target of EU and US regulation. In 2010, the Dodd-Frank Act required restrictions on these materials as a result of their use in funding conflict in the Democratic Republic of the Congo. On January 1, 2021 new EU import rules regarding minerals took effect. The regulations impose some new due diligence measures on importers and require them to determine if their import volumes exceed mandated thresholds, conduct audits of their supply chains and third-party contractors, and assess risk management strategies. This is a positive initiative and a step in the right direction, but it will ultimately fall short of what is needed to stem the flow of conflict minerals and the income they create if they do not incorporate emerging technologies.
The mineral industry can be incredibly important to local economies. Although armed groups may control a mine whose proceeds contributes to conflict, it must be noted that not all mining in the area is used to fund all conflicts. Previous efforts at regulating conflict minerals have imposed restrictions on locals who rely on the industry for a living while not sufficiently solving the problem of minerals funding conflict groups. These efforts relied on more traditional means of supply chain management and oversight that can be prone to mistakes, fraud, and bribery. Many of these issues are the result insufficient resources and the fragmented nature of supply chains. Blockchain offers a compelling new method to trace and verify goods and transactions along a supply chain. The use of distributed ledgers offers a number of advantages over traditional methods. Its core features increase transparency and reliability while reducing costs and corruption. A central component of blockchain is its immutability; once data is entered into the ledger it is not capable of being erased or overridden without a consensus approval from other nodes in the chain.
And blockchain has been noted to cut down on transaction costs along various points in the supply chain. If integrated properly it can help digitise and automate border entries. Recently, Brexit and the entry of British goods into French ports has provided a real-world lesson in the importance of efficient border crossings. Mexico, Peru, and Costa Rica have been working with the Inter-American Development Bank to develop CADENA, which uses blockchain to modernize their customs operations and mutual recognition agreements. These cuts in transit costs offer miners, importers, and manufacturers incentive to integrate the technology into their supply chains.
The technology has already been utilised in efforts to increase sustainable supply chains management and strengthen fair trade practices in commodities such as coffee. The idea to introduce blockchain into the sphere of conflict minerals is not completely novel, Usman W. Chohan wrote on its applicability to the case of the mineral cobalt. Its interoperability is an asset that allows for various jurisdictions to combat a globalized problem more efficiently.
However, blockchain, as with any emerging technology, does present a few challenges. First and foremost, the governance of blockchain is still in need of work as it continues to grow and mature. The same interoperability which makes the technology an asset also presents the challenge of coordinating policies across jurisdictions and enforcement bodies. Procedures for issuing certificates, verification of authorised actors, and end-station protocols would have to be agreed upon before it could successfully be implemented.
Additionally, blockchain’s success in tracing conflict goods is dependent on its implementation at the origin point of the supply chain. If a percentage of miners are not willing to implement the system and tag their minerals at the source, then that same percentage of minerals may not be accurately labelled as conflict-free. At a certain point the percentage would negate the usefulness of the remaining supply chain. Ensuring that all legitimate miners are included in the blockchain is essential to the success of the overall project.
However, as long as armed groups seize control of natural resources and use the profits to fund conflict, we will need to scrutinise supply chains. Traditional methods have left gaps open, challenged locals who rely on the industry for their livelihood and allowed bad actors to continue profiting. There are issues to any disruptive technologies, but the benefits outweigh the challenges. Blockchain offers the most innovative and efficient way to manage supply chains, cut the flow of conflict minerals, and ultimately help slow the conflicts they perpetuate.
Andrew Scanlon is an MSc student in International Relations at the University of Edinburgh and an external representative for Strife. His research interests focus on the Indo-Pacific region and the use of emerging technologies in international regimes.
