The Profiteers Of Perpetual War: Examining The Afghanistan Conflict

The war in Afghanistan has been profitable for some, despite the human and economic costs. The US government has spent trillions on the war effort, with a significant portion going to military contractors. Lockheed Martin, Boeing, Raytheon, Northrop Grumman, and General Dynamics are among the top defence contractors that have profited immensely from the war. These companies have benefited from lucrative contracts, with workers outnumbering soldiers in Afghanistan. The war has also resulted in the extreme militarisation of the country, with the US supplying 74% of Afghanistan's weapons. While the human and economic costs of the war are undeniable, the profits for some have been significant.

Private military contractors profited immensely

The U.S. government's spending on contractors was enormous. By 2019, there were 50% more contractors than troops in the U.S. Central Command region, which includes Afghanistan. Payments to contractors had risen by more than 164% since 2001, from $140 billion in 2001 to about $370 billion in 2019. The Pentagon's spending totalled over $14 trillion since the start of the war in Afghanistan, with one-third to one-half of that amount going to military contractors.

A large portion of these contracts went to just five major corporations: Lockheed Martin, Boeing, General Dynamics, Raytheon, and Northrop Grumman. These companies profited from arms sales, aircraft manufacturing, missile defence systems, and other military equipment and services. Lockheed Martin, the largest defence contractor in the world, made an estimated $44.9 billion in arms sales in 2017 through deals with governments worldwide.

The war in Afghanistan also created opportunities for smaller businesses and entrepreneurs to profit. For example, a California businessman started a fuel business that brought in billions in revenue, and an Afghan translator transformed a deal to provide bed sheets for forces into a business empire.

While contractors profited handsomely, their involvement also led to fraud and waste. The U.S. government often had no-bid and no-cost contracts with these companies, leading to a situation where contractors could charge excessive prices with little oversight. For example, Supreme Foodservice pleaded guilty in 2014 to overcharging the U.S. military for food and water in Afghanistan.

The use of private military contractors in Afghanistan had far-reaching consequences, with some arguing that their involvement contributed to the collapse of the Afghan military and the rise of the Taliban.

Oil companies profited from fuel sales

The war in Afghanistan has been profitable for oil companies that profited from fuel sales. Oil companies like ExxonMobil shipped the fuel that the US army runs on, and have profited immensely from Washington's lucrative contracts.

In 1998, Dick Cheney, then-CEO of Halliburton, a major US oil-services company, commented on the emergence of the Caspian region as a “strategically significant” hub for around 50 billion barrels of oil and natural gas. The US expected to import more than 80% of its petroleum from this region by 2050, with much of the oil expected to be extracted from Afghanistan and Pakistan.

In 1995, Unocal, with the assistance of former US Secretary of State Henry Kissinger, began negotiating with the Taliban to build a pipeline across Afghanistan. The Taliban leaders were flown to the US and hosted in five-star hotels. The US State Department and Houston-based oil company Unocal offered the Taliban a "generous cut of the profits" from the pipeline.

In 1998, Unocal signed a deal with the Taliban to build an 890-mile natural gas pipeline from Turkmenistan to Pakistan. However, the plan was disrupted due to the civil war in Afghanistan.

In 2009, the Afghan government implemented a new Hydrocarbon Law that privatized its oil and natural gas sectors, allowing foreign companies greater control and profits. The contracts did not require these companies to reinvest their earnings in Afghanistan or share new technologies.

The US has also been pursuing the creation of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, which would carry natural gas from Turkmenistan through Afghanistan and Pakistan to India. The Bush administration made the completion of the TAPI pipeline a core part of its Afghanistan war strategy.

The war in Afghanistan has provided the US with a justification to establish a permanent military presence in the region and secure access to valuable energy resources.

Defence stocks outperformed the stock market

While the Afghanistan War may have been a failure in terms of its human cost and political outcome, it was profitable for some. The US government's spending on the war effort in Afghanistan—which totalled $2.26 trillion, or $300 million a day—was largely funnelled into private military contractors.

The top five US defence contractors—Boeing, Raytheon, Lockheed Martin, Northrop Grumman, and General Dynamics—saw their stocks boom during the war. If you had purchased $10,000 of stock evenly divided among these contractors on 18 September 2001, the day President George W. Bush signed the Authorization for Use of Military Force in response to the 9/11 terrorist attacks, and faithfully reinvested all dividends, it would have been worth $97,295 by August 2021. This is a 58% greater return than was available in the overall stock market over the same period.

These defence contractors are part of the S&P 500, so their success meant that the remaining firms in the index had lower returns than the overall S&P returns.

The war in Afghanistan was effectively a privatised endeavour, with the US military relying on private security contractors to power the logistics of the war. These contractors received about $104 billion for services in Afghanistan since 2002, including nearly $9 billion in the last five years of the war.

The boards of directors of all five defence contractors include retired top-level military officers. This has led to a "revolving door" between the security establishment, Congress, and Corporate America, perpetuating the war machine and allowing a multitude of parties to benefit from the Pentagon's war chest.

Weapons makers spent $2.5 billion on lobbying over the past two decades, employing on average over 700 lobbyists per year in the last five years. That's more than one lobbyist for every member of Congress.

The success of defence stocks during the Afghanistan War is not an isolated incident. Historically, fresh turbulence in the Middle East has been good for defence stocks. For example, in the one and three months after the fall of Saigon on 30 April 1975, while the S&P 500 gained 4.4% and 1.7% respectively, the S&P 500 Aerospace Defense sub-industry jumped 15.4% and 26.0%.

With the Taliban's takeover of Afghanistan, investors are paying close attention to defence stocks, as this turn of events could breed increased demand for intelligence, surveillance, reconnaissance equipment, and military equipment.

Corruption and fraud among contractors

The war in Afghanistan has been highly profitable for military contractors and private security companies. However, corruption and fraud among contractors have been rampant, with the US government turning a blind eye to the graft it fuelled.

The US Department of Defense confirmed using the services of over 27,000 contractors as of the fourth fiscal quarter of 2020. A significant portion of the almost $5 trillion spent and obligated to be spent on the wars in Afghanistan and Iraq has gone to these military contractors, whose workers outnumbered soldiers in Afghanistan three to one. Lockheed Martin, DynCorp, Academi (formerly Blackwater), Black & Veatch, and ExxonMobil are just some of the companies that have profited immensely from Washington’s lucrative contracts.

Numerous companies took advantage of wartime conditions to overcharge the government or engage in outright fraud. In 2011, the Commission on Wartime Contracting in Iraq and Afghanistan estimated that waste, fraud, and abuse had totaled between $31 billion and $60 billion.

The "Afghanistan Papers" published by The Washington Post in 2019 revealed the scale of corruption among US-funded contractors. The influx of aid and defence contracts created so much excess that opportunities for bribery and fraud became almost limitless. The US government turned a blind eye to the graft it fuelled, with one State Department official commenting:

> "We used the bad guys to get the badder guys. We [thought we] could circle back and get the bad guys later, only we never did."

One example of corruption involved the Kabul Bank, Afghanistan's largest bank, which liquefied into a cesspool of fraud. In 2010, Afghan anti-corruption agents, with the help of US forces, raided the headquarters of the New Ansari Money Exchange, one of the country's largest financial institutions, seizing incriminating evidence of money laundering for narcotics traffickers and insurgents. Despite the huge cache of evidence, no one was held accountable, and the investigation soon hit a wall.

Another illustrative case involves Mir Rahman Rahmani and his son, Ajmal Rahmani, who were sanctioned by the US Department of the Treasury's Office of Foreign Assets Control (OFAC) for their extensive roles in transnational corruption. The Rahmanis perpetrated a complex procurement corruption scheme, misappropriating millions of dollars from US government-funded contracts that supported Afghan security forces. They artificially inflated fuel contract prices, fraudulently imported and sold tax-free fuel, and under-delivered fuel. They also bribed their way into the Afghan Parliament, using their official positions to perpetuate their corrupt system.

Corruption among contractors in Afghanistan has had severe consequences, including undermining the legitimacy of the Afghan government, strengthening popular support for the insurgency, and channelling resources to insurgent groups. It has also damaged the faith of the Afghan people in the international reconstruction effort, empowering abusive warlords and their militias.

Arms trade and weapons manufacturing

The arms trade and weapons manufacturing industry has been a significant beneficiary of the Afghanistan War. The war resulted in a substantial increase in arms sales and military spending, with numerous companies profiting immensely from government contracts.

The Afghanistan War led to a significant increase in arms sales and military spending globally. According to the Stockholm International Peace Research Institute (SIPRI), the 100 largest arms producers and military services contractors recorded $395 billion in arms sales in 2012. This was during a period of overall decline in military spending due to the withdrawal of US troops from Iraq and Afghanistan and austerity measures. However, despite the overall decline, the business of war remained lucrative for many companies.

Lockheed Martin, the largest arms seller in 2012, accounted for $36 billion in sales during that year. Other top arms sellers included Boeing, Raytheon, General Dynamics, and Northrop Grumman. These companies are among the top defence contractors in the world and have benefited from increased military spending and contracts related to the Afghanistan War.

During the war in Afghanistan, the US Congress provided $2.02 trillion to the top five weapons companies: Raytheon, Lockheed Martin, General Dynamics, Boeing, and Northrop Grumman. These companies spent $1 billion lobbying Congress and received $2 trillion in Pentagon contracts, resulting in a substantial return on investment.

The war also led to an increase in arms sales to other countries in the region. For example, the US provided military aid to Ukraine, with billions of dollars worth of military equipment, including state-of-the-art tanks, missile systems, helicopters, and ammunition.

The Afghanistan War also resulted in the proliferation of weapons in the region. According to the SIPRI Arms Transfer Database, 16 states supplied weapons to Afghanistan from 2001 to 2020, with the US providing 74% of Afghanistan's weapons and Russia supplying 14%. The US military also left behind significant equipment, including aircraft and armoured vehicles, which were seized by the Taliban, inflating their arsenal.

The arms trade and weapons manufacturing industry played a significant role in the Afghanistan War, with companies profiting immensely from government contracts and increased military spending. The war resulted in a proliferation of weapons in the region and contributed to the extreme militarisation of Afghanistan.

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