Optimal Hiding Strategy for Transshipments under Trade Embargoes

Abstract

Trade embargoes, often imposed for political, economic, or security reasons, have long been a tool of international diplomacy. Transshipments may be employed as a strategic mechanism by nations and organizations to circumvent trade embargoes. Transshipment involves rerouting goods through intermediary ports or countries to obscure their origin, destination, or the parties involved. This practice may be subject to investigation, which could lead to exposing the entities employing it. Strategic management of transshipments has to be devised by those entities (the attackers) battling against the transshipment detection mechanisms adopted by the embargo-setters (the defenders). In this paper, we consider an entity exploiting transshipments through several intermediaries. We derive an optimal strategy for that entity wishing to minimize the probability of being exposed. Our strategy provides the optimal number of intermediaries and the optimal distribution of goods among those intermediaries.