'Shadow economies' are growing. Military planners and operators must take them into account
Black markets prolong wars, defang sanctions, fray alliances, and help rogue governments and groups survive and thrive.
Maj. Benjamin Backsmeier | October 2, 2025
Vast and global “black markets”—what national-security practitioners call shadow economies—are no longer peripheral nuisances but core strategic terrain. Trade executed outside regulatory, taxation, and enforcement frameworks prolongs wars, defangs sanctions, frays alliances, and helps rogue governments and groups survive and thrive. These flows have long been treated as problems for law enforcement, but military and defense policymakers and planners must increase their efforts to account for and stem them.
Shadow trade enables regimes and insurgent groups to survive extreme pressure. Iran's illicit oil exports help sustain the regime amid punishing sanctions. North Korea endures through complex illicit portfolios: counterfeit currency, arms smuggling, cyber theft, and forced labor. Russia earns billions by evading sanctions on oil, gas, and gold exports. Oil-smuggling states create front companies and “dark fleets” of tankers—Russia alone has more than 600—that swap oil at sea to evade sanctions. Shadow insurers and financiers based in Russia, India, other Asian countries, and the Middle East have replaced Western underwriters, generating billions of dollars for the Kremlin's war machine.
Shadow economies blunt the efforts of countries and international organizations to coerce behavior, both in the near and long term. In the near term, revenue lost to sanctions can be made up by illicit trade. In the longer term, rogue states create new systems of patronage to replace formal systems of trade and finance—for example, Russian elites cut off from Western financial systems learn to profit from smuggling and offshore schemes. Shifting influence from formal institutions grants states the operational deniability and adaptability needed to evade economic warfare. There are risks—illicit actors may be empowered to pursue divergent interests—but the benefits are usually worth the costs. And all this erodes deterrence, for why should a regime fear sanctions they can evade?
https://www.defenseone.com/ideas/2025/10/shadow-economies-are-growing-military-planners-and-operators-must-take-them-account/408560/?oref=d1-skybox-hp
