The latest incidents of terrorist attacks in Mumbai, the economic and financial hub of India, have caused severe damage in terms of loss of human lives and property. Over the years, particularly in the aftermath of the tragic incidents of 9/11, the terrorist groups have substantially changed their strategy. Instead of perpetrating stray incidents of terror violence causing limited damage, the terrorist outfits now indulge in striking at economic roots of the target in order to inflict heavy losses.
Viewed in a broad spectrum, phenomenon of terrorism is not new to India and we have been living under the scepter of terrorism for almost three decades now, but what is surprising is that the security agencies have not been able to cope with the mounting menace of terrorism effectively thus far because of changing tactics of the terrorist outfits and their strategies outwitting the security agencies and availability of more sophisticated weapons with the terrorists as compared to the weapons with the security agencies. This however does not belittle the significant role played by the security agencies in nabbing the culprits.
Recent years have witnessed shift of emphasis in terrorist strategy from political targets to economic targets. The recent terrorist attacks in Mumbai, Hyderabad and Bangalore prove that terrorists are bent upon causing severe damage to the Indian technical and commercial establishments in order to wreck the economy from within and slowdown the pace of economic growth. They are also eager to forestall the ambitious development projects by creating sense of insecurity and generating a kind of ‘fear psychosis’ among the foreign investment to discourage them from investing in India. In other words, they are indulging in Economic Terrorism to weaken India’s burgeoning economy.
Terrorism, according to Webster dictionary, is the state of being terrorized or the act of terrorizing; the use of intimidation to attain one’s goals, or to advance one’s causes. Accordingly, ‘Economic Terrorism’ can be defined as the act by any group or state for the sole and illegal purpose of creating economic chaos and collapse as a means of destroying the attendant society, for military, social, political, or religious purposes. Undoubtedly, Economic Terrorism goes well beyond any simple boycott, embargo, tariff, or trade war between two countries. This would not merely be a case where one country cried ‘foul’ over another’s unfair or even illegal commercial activities. Such actions would have to be shown to be the result of an outright attempt through some malign person or group to create economic chaos meant to undermine the ability of a country to mount a defence or even exist.
IMPACT OF 9/11
The impact of the 9/11 attacks upon the American economy, and by osmosis, the rest of the Western economies was staggering. There was overnight destabilization of the entire market areas, like the airline industry. The industries affected by the terrorist attack, inter alia, included travel, banking, stocks, national and international trade, and many others. The impact on the U.S. economy was certainly to the tune of billions of dollars, and around the world it was many times bigger. This was exactly the intent of the terrorists.
Knowing well that with very limited means they wouldn’t be able to do much damage to the U.S, the terrorists decided to maximize the impact of their efforts. Had they attacked a military facility alone, even the Pentagon; or simply a symbolic target, like blowing up the Golden Gate Bridge, or leveling the Statue of Liberty, they wouldn’t have created nearly the damage they did going after the added capitalist infrastructures. To start with, they managed to make the key emotional point of terrorism, the infliction of overwhelming fear, by letting Americans know that the terrorists would make no distinction between military and non-combatants. So public or private sites, secular or religious targets, or even the most well established non-players — killed at the terror sites — women, children, including even other Muslims, were targets.
ECONOMICS OF TERRORISM
Even till today, daily life of most of the terrorists is ruled by economics. Members of the terrorist organizations spend most of their time raising money to carry out their violent attacks, to buy weapons, to rent new safe houses. However, concomitantly there was lack of interest among the scholars, academicians, defence experts as well as strategic thinkers during the 1990s towards this subject, and even today, very little is known about how armed organizations fund themselves. Nevertheless, during the past couple of a lot of resources have gone to study this phenomenon, there is still a limited knowledge of the economics of terrorism. In part, the failure of the war on terror to end the threat of political violence is due to the lack of understanding of this phenomenon.
Viewed in a broad perspective, phenomenon of economic terrorism has undergone three main transitions:
- State sponsored terrorism
- The privatization of terrorism
- The globalization of terrorism
The State sponsored terrorism was common during the Cold War. Both superpowers fought war by proxy along the periphery of their sphere of influence funding armed groups. The Contras in Central America are a clear example of this type of funding. The erstwhile Soviet Union imparted weapon training and supplied arms and ammunition to the Latin American Marxist groups via Cuba. The US often used cash, administered by the CIA, to fund its terror groups, it also used covert and legitimate sources; the Soviet were reluctant to use cash and preferred to train and arm Marxist groups, in Latin America they operated via Cuba and in the Middle East via various spin-offs the PLO. Thus there were very little differences in the modus operandi of the two sponsors
The phenomenon of privatization of terrorism occurred during the late 1970s early 1980s and coincided with the desire of armed organizations to gain independence from the sponsors and to meet the rising costs of terrorist activities. Armed terrorist groups evolved strategies to self finance themselves. A mixture of legal and illegal activities constituted the core of their funding activities. The most successful organizations were the PLO, the IRA and ETA in Spain. The PLO, in particular, under Arafat was able to create the economic and social infrastructure of the Palestinian state without having a state.
It was during the 1990s that the globalization of terrorism took place, with the deregularization of the international financial markets. As economic and financial barriers came down, armed groups were able to become transnational, that is to raise money in more than one country and to operate cross border. Al Qaeda is a stark example of this phenomenon.
The deregularization of the international economic and financial markets enabled terrorist organizations to link up with each other and with the illegal and criminal economy. They began doing business with each other, particularly in drug trade, which travelled from Afghanistan to Europe crossing countries where terror and criminal activity was strong. According to media reports, in Chechnya drugs are carried across the country by Islamist armed groups while in Turkey the mafia take charge of it, bulk of all the narcotics which enters Europe transit via Turkey.
According to broad estimates, the Economy of Terror has merged with the international illegal and criminal economy and together they have a turnover of $1.5 trillion dollars, higher than the GDP of the United Kingdom. The main components of this economy are:
- $500 billions are capital flights, money which move from country to country undetected, unreported and illegally;
- $500 billions is what is commonly known as the Gross Criminal Product, money generated primarily by criminal organizations;
- $500 billions is the New Economy of Terror, money produced by terror organizations of which 1/3 is represented by legal businesses (which include charitable donations) and the rest comes from criminal activities, primarily drug trade and smugglings.
The bulk of the $1.5 trillion flows into Western economies, it gets recycled in the US and in Europe. It is a vital infusion of cash into these economies.
Curbing Terror Financing
In the immediate aftermath of the 9/11, Western Governments were very active to truck terror money raised via charities in the West. Several charities were closed in the US, Canada and in Europe and their accounts were frozen. However, recent data from the US State Department show that the total amount of money frozen worldwide since 9/11 is only $156 million.
Financial conglomerates run by bankers sympathetic to bin Laden and Al Qaeda have also been targeted. The Al Barakaat and Al Tawqa banks, for example, were shut down. The Al Barakaat was a financial conglomerated from Somalia which run Hawala exchanges across the world. Its international yearly profits were about $500 millions of which bin Laden got a flat 5% fee.
Admittedly, little has been done to follow the money trail and to block the money flows of terrorist outfits. It is because the real core of Islamist terror financing is not in the West but in the East. In 1990 bin Laden had issued a fatwa urging his followers to refrain from attacking Saudi Arabia because the revenues from the oil industry were needed to consolidate the Islamist revolution. Western countries have no control over Islamic banking and finance.
In order to block terror financing, cooperation between Western and Muslim governments is needed; however this often proves of little help. According to a recent UN report, about 20% of Saudi GDP went to fund al Qaeda alone. Recently, the Saudis froze $5.6 million of charitable money; they stopped collection of coins in shopping malls and close 6 of the 241 charities. However, in reality, these were only symbolic gestures to appease US public opinion.
Money laundering is another area which is directly related to funding terror. The Patriot Act in the US has restricted the freedom of Americans to deal with the banks and financial institutions but it has not made it more difficult for foreign money to get laundered in the US. The US treasury still admits that 99% of the money which try to get into the US illegally does get through.
Offshore banking seems to be the core of the problem. Illegal, criminal and terror money travel via the offshore banking network, which is highly unregulated. The speculation prior to 9/11 was done via offshore banking, as admitted by the president of the Bundesbank. There is a need to abolish offshore banking facility in order to stop this flow of funds. .
The Western government can do nothing to stop terror financing because the Islamist terror financing is out of their financial jurisdiction. In large part, the Western governments have to rely upon the work of Muslim and Arab allies, such as Saudi Arabia. These countries are ruled by the oligarchic, corrupted elites which are the primary target of Islamist terror; however, because Islamist insurgency is very popular among the population, they have to be careful in how they prosecute its supporters. A tough policy could easily generate a revolutionary process. Besides, blocking the flow of money will require unpopular decisions in the West, such as restricting offshore banking and therefore the free flows of funds across the world.
THE WAYOUT
Economic terrorism has come to rule the roost in India. The terrorist groups targeting India have chosen economic, business, technological and commercial hubs as their target to inflict heavy losses to reverse the process of India’s development. The recent spate of terrorist incidents in Mumbai, Hyderabad, Bangalore and elsewhere attest to it. Undoubtedly, the Central forces are well-equipped and trained to cope up with the menace of terrorism, but the real challenge lies with the state police apparatus.
The recent Mumbai terrorist incidents have pointed out many chinks in the preparedness of State police to meet the challenge. The NSG-type training and equipment should be made available to the special state forces dealing with terrorism. There is also dire need of revamping the state-level intelligence set-up, with increased coordination with Central intelligence agencies.
The business and commercial establishments in the private sector are being targeted by the terrorists and there is no clear cut strategy to deal with the security of the private sector. This scenario calls for a national quorum of leaders of all the major business types in the country meeting to discuss biggest dangers and remedies in each field. At a series of national meetings meant to dissect the industries and their typology, an outline of possible responses should be offered for the most trenchant specific possibilities for terrorism.
Having done this, the group should then draft a bill outlining general and specific suggested anti-terrorism guidelines for the different industries. Specifically the exact response to the most damaging types of attacks in each industry should be mapped out, and then the ingenuity, will and industrial might must be committed to this project. This ought to include a communitarian aspect where each participant, if called upon during an emergency, agrees to forego any excessive remuneration for their fees much beyond basic costs. This in itself will do much to develop goodwill and foster esprit des corps.
The captains of each industry ought to know best how to frame a responsive outline for their own fields. This is not to suggest that the government hasn’t made any plans along these lines, but plans have not been detailed nearly to the pragmatic optimum. While this might seem like more ‘red tape’ to be avoided, this reaction is extremely naïve, and ultimately horrifically naïve and shortsighted. It is the appropriate time to develop deep and infinitely well-considered long-term defensive strategies for the private sector. We need to take this time and use it to seriously examine our response to Economic Terrorism, because it is inevitable that the terrorists will return, or the ones here become active again. They have undoubtedly already hatched many plots and are waiting for them to come to fruition.
There is dire need of international cooperation under the aegis of the UN to deal with the growing menace of economic terrorism. All countries, irrespective of their socio-economic and political systems, should join hands to deal with this evil of economic terrorism. As we see how ripples from each attack spread from one country to another — we must now admit that an assault against one is a battle against all. In refusing to condemn the terrorists for fear of reprisals we give the killers victory. Instead condemnation against future attacks must be voiced loudly. In unity there is safety.
By Dr. Arvind Kumar
Post source : Article Published in SAR Economist/December 2008/P.no.09/
