International Terrorism and its Key Market

MA-Thesis / Master von Özgür Göcer

Introduction:

Politics has always been committed to fighting terrorism by using deterrence: Terrorists are best dissuaded from attacking through the threat of heavy sanctions and by using police and military forces to fight them.

The reaction to the terrorist attacks of September 11, 2001 is a striking example. The American president first declared a „crusade“ against terrorists.

This “crusade” was, after some thinking, changed to a „War against Terrorism“. This war has been widely supported by a great many democratic as well as authoritarian countries. This war on terrorism is completely based on deterrence: Actual and prospective terrorists must be annihilated by killing them without any further ado, or they must, at least, be captured, held prisoner, or (perhaps) put on trial and sentenced to long or indefinite periods of time. It is expected that such harsh treatments impose such high expected costs on prospective terrorists that no individual will engage in terrorist activities in the future.

History, as well as recent experience suggests, however, that using deterrence in dealing with terrorism is ineffective and may even be counterproductive. The number of terrorist acts may well increase, rather than decrease. A policy based on deterrence also has a second disadvantage. It threatens civil and human rights in the countries engaged in fighting terrorism. Deterrence policy thus tends to undermine exactly those values it claims to protect. Even if deterrence were effective (which it is not) the world may end up significantly less democratic than before it was engaged in the war against terrorism.

Many people share these concerns but they do not see any alternative to deterrence. This contribution suggests that such alternatives indeed exists and are viable and that they are applicable both at the level of society as well as in businesses.

Two strategies are proposed here to deal with terrorism:

1. Decentralisation. A system with many different centres is more stable due to its diversity, enabling any one part to substitute for the other. When one part of the system is negatively affected, one or several other parts may take over. A country that is the prospective target of terrorist attacks can reduce its vulnerability by implementing various forms of decentralisation: (1) The economy, by relying on the market as the major form of decentralised resource allocation. It refers to both decision-making as well as over space; (2) The polity, by using to the classical division of power between government, parliament and the courts. Decentralisation over space is achieved by a federalistic structure, that delegates decision-making power to lower levels of the polity (states, provinces, regions and communes); (3) The society, by allowing for many different actors, such as churches, nongovernmental organisations, clubs and other units.

Decentralisation is effective in reducing risk and uncertainty. A target’s vulnerability is lower in a decentralised, than in a centralised, society. The more centres of power there are in a country, the smaller the chances that terrorists are able to harm it. In a decentralised system, terrorists will not know which targets to attack as any one part it that system can substitute for the other. An attack will have a much smaller negative effect than in a centralized society. As a result, terrorists will be dissuaded from attacking.

In contrast, in a centralised system, important decision-making power with respect to the economy, polity and society is to be found in one location. This power centre presents itself as an ideal target for terrorists and therefore is in great danger of being attacked. If the centre is targeted and hit, the whole decision-making structure may collapse and could so promote chaos.

2. Positive Incentives to Leave Terrorism. Actual and prospective terrorists could be offered rewards for not engaging in violent acts. This represents a completely different approach from the conventional anti-terrorist policy of deterrence, which is based on coercion, or “the stick”. By offering more favourable alternatives these proposals seek to break the organizational and mental dependence of terrorists on their terrorist organizations. They are given an incentive to relinquish terrorism. In contrast, deterrence policy locks prospective and actual terrorists into their organisation and provides no alternatives to staying on. When incentives to leave the terrorist organization exist the interaction between terrorists and the government is transformed into a positive sum game: both sides benefit. The government’s effort is no longer directed towards destruction. Rather, the government makes an effort to raise the utility of those terrorists who choose to enter the programmes offered. The government so provides alternatives to engaging in terrorism. This strategy undermines the structure and cohesiveness of the terrorist organisation. That its members do have an incentive to leave is an ever-present threat to the terrorist organisation. When good outside offers are available to the members of a terrorist group, its leaders tend to lose power and authority. The terrorist organisation’s effectiveness is thereby reduced.

The next section analyses the consequences of applying deterrence by focusing on the incentives offered to potential terrorists. The problems of anti-terrorist policy using deterrence will be pointed out. Section III presents the first alternative to deterrence, namely decentralization. Decentralising prominent, potential targets makes them less attractive to terrorists and can so reduce terrorist attacks. The fourth section discusses the second strategy, the raising of opportunity costs – rather than the material costs – to terrorists. Two specific strategies of raising terrorists’ opportunity costs are suggested.

The next section`s evaluate the weaknesses and strengths of the general strategy. The following section considers the extent to which businesses may profit from adopting the two strategies discussed. Followed by conclusions.

Table of Contents:

1.	Introduction	5
2.	Deterrence Policy	7
3.	Decentralisation	8
4.	Offering Alternatives to Terrorists	9
5.	Application to Enterprises	12
6.	Conclusions	13
7.	Summary	14
8.	Prices	15
9.	Background	15
10.	Oil Prices	16
11.	Reserves and Production	18
12.	Price and Markets	21
13.	Economic Growth	21
14.	Exchange Rates	22
15.	Gasoline Prices	23
16.	Industry Structure	24
17.	OPEC Policy	24
18.	Inventories	25
19.	Exceptional Events	27
20.	Sectoral Demand Patterns	28
21.	Countries and Regions	28
22.	Petroleum Product Demand	29
23.	Future Projections	30
24.	Conclusions (2)	31
25.	Introduction (2)	33
26.	Diplomacy	35
27.	Law Enforcement	36
28.	Intelligence	37
29.	Financial	37
30.	Military	38
31.	Conclusion (3)	39
32.	US Policy	41
33.	Note	42
34.	UN Role in Fighting Terrorism	43
35.	Definitions	44
36.	Antiterrorism Assistance Program	45
37.	Preface	46
38.	Dirty Money	46
39.	Criminal	47
40.	Corrupt	47
41.	Commercial	47
42.	The Western Role	48
43.	Magnitudes	49
44.	Impact on U.S. Interests	49
45.	Traditional Explanations	50
46.	Policy Implications	50
47.	Burying the Relic	52
48.	Summary (2)	53
49.	PART 1
50.	Weighing up the Risks	56
51.	Reality Check	58
52.	Nature of the Threat	59
53.	Why Us?	61
54.	An unpredictable Future	62
55.	PART 2
56.	Corporate Response	65
57.	Cyber Terrorism	67
58.	The Story of Celtel	74
59.	Conclusions (4)	77
60.	Permissions & References	78

Text Sample:

IL. PART 1:

Weighing up the Risks.

Companies believe they are operating in an increasingly dangerous world. The research reveals significant concerns among business leaders about the threat of terrorism and other forms of political violence, and how these issues might have an impact on their organisations. For the growing number of companies operating on a global basis, the risk of being caught up in political violence is very real. Roughly one-fifth of firms in the survey have either already suffered direct physical attacks in their home market, or believe such an attack is very likely. A similar number have either suffered an attack overseas or think an attack is very likely. Moreover, these numbers are significantly higher among larger firms in the survey.

Three in five executives predict that the business risks associated with political violence will increase over the next five years, with the Middle East and the US seen as the two most affected regions. Perceptions of risk in a particular region tend to be higher among those who are based there. For example, 47% of Asian respondents predict rising violence in that region, compared with 36% of executives based elsewhere.

The range of places cited by respondents as being potential sources of increased risk demonstrates the diversity of forms that political violence can take, and therefore the difficulty of addressing such violence. For example, the Middle East is no stranger to jihadi terrorism, local revolutionary movements, inter-state wars or complex amalgams of all three; the primary concern within the US itself is more specifically terrorism, particularly a repeat of 9/11; and various South Asian territories face ongoing efforts by nationalist or leftist groups to destabilise the state.

Companies also foresee a shift in the sources of violence, with international war and terrorism and home-grown terrorism the rising concerns, overtaking non-violent crime. On the one hand, concern over the impact of social unrest or riots is high but stable: for 34% of companies it was a top issue for the last five years, whereas 33% cite it as the top issue for the next five years. Likewise, concern about general criminal activity is stable.

On the other hand, international terrorism is rising to become the single greatest concern for 36% of respondents over the next five years, up from 28% over the last five years. Similarly, international war is rising as a concern for 27% (up from 19%) and home-grown terrorism for 24% (from 16%). International terrorism is cited as a particular concern for US organisations and for large companies globally.