Militarised Multinationals?

Why the decline in State Security forces is leaving the private sector to provide its own security.

Since the 1990’s Immanuel Kant’s perpetual peace thesis, nowadays better known as the Democratic Peace Theory, has returned with a vengeance. The theory, for those who were spared having to actually read Kant (a good save there) is that Democracies do not fight democracies and so as the world has become more democratic it has become less violent.

Now admittedly this topic has primarily stayed as a bitter debate in the academic world of International Relations, but what is important for those without MA’s and PhD’s in Political theory is that the nature of warfare and violence has been changing.

Since the 1990’s (and well before too) there has unquestionably been a dramatic rise in violence conducted by non-state actors, with the most famous contemporary group being probably Al Qaeda (with the IRA, FARC, MEND and ETA all being close contenders too). But the problem with saying the world is less violent because less states fight each other is that this argument becomes a political cover for politicians to cut defence spending, and contrary to popular belief this is a problem.

Taking aside the ridiculously expensive F-35 programme (at over $200 million a jet on current estimates) and the Trident nuclear submarine project (at £100 Billion for 4 submarines over 25 years), the British armed forces has never been smaller. By 2015 the Air force and Navy will number under 70,000 on current estimates with only 120 fighter jets (the same number as Belgium) and 80,000 members of the army across all disciplines (engineers, artillery, infantry, armour). And Britain is not alone.

Only 5 members in NATO managed to keep to the charters 2% of GDP on defence spending in 2012 and this may fall even lower in 2013.

So why is this relevant and how does it fit into this articles premise? Quite simply, I want to argue that as governments reduce their ability to provide physical security against the threats of violence by non-state actors, businesses will take their personal security into their own hands. And in fact this is already happening.

Marine Piracy and the Private Sector:

Piracy since 2007 has largely been internationally associated with one word, “Somalia”. In a country where the state has not technically had an Armed Forces since 1991 and where the UN and USA have been forced to pledge commitments of around $390 Million to the AMISOM mission it is perhaps not surprising that piracy has been able to flourish. What had been so surprising was its success.

With certain vessels like the Samho Dream being released after the payment of $9.5 million (2011) and an estimated $135 million being netted in ransom payments in 2011, it is hardly surprising that piracy groups proliferated and became so well equipped at such a fast level. Combine that with an area of over 3.4 Million km2 at risk (IISS) and the fact that round 22,000 vessels pass through the Gulf of Aden each year and it’s not hard to see why 802 people had been taken hostage by pirates in 2011 on the East and West coasts of Africa.

In fact between 2008 and 2010, NATO claim that 131 vessels were hijacked and 315 vessels were physically attacked by pirates. As a direct consequence of this an estimated $7.5 billion is now being spent by navies from across the world under 3 separate multinational missions, which would seem to emphasise that the issue is being taken pretty seriously.

Sadly though it is not the response of governments that seem to have led to the much lauded reductions since 2012. According to data from Lloyd’s List there was nearly a 65% reduction in piracy attacks in 2012 and what people are saying behind the scenes (and seeing in the budget sheets) is that this change all comes down to one main reason, Armed Guards.

Since the advent of Armed Guards there has been a significant drop in successful piracy attacks and then you have Typhoon. Typhoon is a private security firm that provides close quarter support for convoys of vessels traveling through the Gulf of Aden and is being rolled out in collaboration with Glencore. The firm aims to replicate the tactics of pirates by using smaller fast response, armed patrol boats, launched from mother ships to counter the pirates using their own tactics. By using this method Typhoon believe they can deliver a more robust and effective deterrent to would-be attackers in a far cheaper and more advantageous way than the Royal Navy can.

In effect, the private sector has the flexibility to adapt rapidly to demand where there is a personal financial gain. Armed forces and certainly naval forces cannot.

Whilst Typhoon is just limited to the Gulf of Aden it is important to note that the highest region in the world for piracy historically and in 2012 is actually Indonesia. In addition West Africa and many of the Littoral South-East Asian states experience significant piracy threats, in particular in the Malacca straits. With an increasing amount of global trade going through more politically insecure areas and the value of vessels increasing (think of the ransom on an 18,000 TEU Maersk C-Class vessel) the relative success of Typhoon will be watched closely and almost certainly emulated in some form.

Most significantly in this rise of privatised security arrangements are the terms of engagement these new actors adhere to. Yet again the lead in this respect has been left to a variety of non-governmental bodies like the International Maritime Bureau to listen to the concerns of their members (shipping companies largely) and then recommend best practises. The reality however is very complicated.

As the demand for armed guards has soared, the cost and quality for these PMSC’s[1] has continued to diverge and the lack of reporting when arms have been discharged is a growing concern for those maritime forces operating in the region. In essence the issue is becoming one of which the PMSC’s are able to decide what is a legitimate target and what is an appropriate level of response and may hide behind flags of convenience and the legal ambiguity of combat in the high seas. The lesson being taken is clearly that if security is left to private actors then private actors will also take the lead on establishing how they provide their own security. 

Oil and Gas – Africa and the Middle East

As the recent situation in Algeria has demonstrated, Oil and Gas workers are always a high value target regardless of their location. The very fact that this particular BP facility was so far from the Mali border, where AQIM[2] are said to operate, is merely a further reminder that private sector actors in even relatively secure developing nations cannot rely exclusively on state protection for their security.

 Image Courtesy of Statoil

Figure 1 – Courtesy of Statoil

But the recent flurry around Algeria is just the tip of the global issue of kidnapping the employees of oil and gas businesses. Whether it is Shell employees and their families in Nigeria or BP, Shell, Exxon staff facing threats to security in places like Iraq or the high kidnapping rate in Venezuela and Colombia, there has been a long growing trend for multinational firms to seek their own security arrangements.

On the face of it again this pattern is inherently logical. A states armed forces and police cannot anticipate and protect every employee of a foreign national effectively and often the state may not have the resources to do this anyway. By contrast, Multinational companies like Shell may use their provision of private security staff to re-assure their employees and contractors to work for them in high risk areas instead of their rivals. How staff are treated in high risk areas is increasingly becoming a very significant factor within the Oil and Gas industry, with the various different levels of response to Oil and Gas firms in Libya, where Russian and Chinese nationals were effectively abandoned by their respective national industries, being a case in point. That sort of care towards staff matters.

The problem again though of relegating the security of these employees to the firms themselves is perhaps best explained by the controversy of private military contractors in Iraq. If a PMSC kills or injures a foreign national (assuming they can carry some form of weaponry, or is particularly adept with his/her hands), then how does the host state respond? If they prosecute the individuals due to public pressure then multinational firms whose investment is so desperately sought and required may not feel able to ensure it employee’s security and so may restrict their operations in that region or pull them entirely. On the other side, if individuals are not subject to local laws though this can lead to a back-lash against the government for being seen as under “foreign influences”.

General Issues:

Further highlighting these issues is the basic fact that across all industries operating in developing nations, establishing which individuals are threats and which are not is incredibly difficult. With regards to piracy, the vessels used by pirates are often identical to local fishing vessels and in certain cultures the carrying of weapons in public is not an uncommon occurrence, thus how do you distinguish between those who are carrying weapons for personal security and those carrying weapons to threaten others?

Even more worryingly many people are realising that the local state security forces may even be part of the risk themselves. The “Green-on-Blue” incidences in Afghanistan are the most high profile of these, but actual involvement by local state police with would-be-kidnappers is certainly not unheard of. Is it not perhaps un-surprising then that multinational companies are beginning to turn to the private sector for their security?

The private sector itself now provides comprehensive risk mitigation methods to enhance the security of Multinational firm’s people and assets. Whether this is in the form of better knowledge of market risks by using ControlRisks or bespoke products like the WorldRiskReview, the purchasing of Political risk insurance and Kidnap and Ransom policies or at the first (or last) stage, directly hiring PMSC’s.

Concluding remarks:

In 2004 the BBC suggested the global private security industry was globally worth $100 Billion, would anyone even be able to truly guess its value today? I doubt it. Companies like G4S and Blackwater now employee 100’s of thousands of employees each and even in combat location like Iraq the number of PMSC’s has risen from 1 in every 100 soldiers in 1991 to around 1 in 4 soldiers in 2011. The increasing use of the private sector is here to stay, and the private sector is responding to this. 

As States have gradually allowed the private sector to take responsibility for their own security, the private sector has gradually started to shape the rules and behaviour that govern their use of Private Security Providers. Furthermore, as attacks against firm continue (with a 300% increase in kidnapping’s in Mexico between 2005-2011 being just one example), the speed of these changes and the move away from the traditional reliance on the State for their security will decline.

If States do not begin to respond much quicker and more robustly to the changing threats faced by companies then there will inevitably be either a move away from the state as the sole legal source of security to a system were the private sector begins to define what is necessary for its security not the state.

 This is not just un-democratic and lacking transparency. This is a genuine concern for all states and their claim to the “Monopoly on the legitimate use of Violence” which has underpinned the modern state we live in. Governments need to start being creative or risk being outflanked on this issue.


[1] Private Military Security Providers

[2] Al Qaeda in the Islamic Maghreb

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