GLOBAL GUERRILLA TARGET: INVESTMENT

Iraq's April 2004 Basra conference was an event planned to showcase investment opportunities in its oil industry. Iraq has reserves on par with Saudi Arabia that are far from fully exploited. Hundreds of billions of dollars is needed to transform Iraq into an oil powerhouse able to handle the rapid increase in demand expected over the next decade (the world economy needs Iraq to do this if oil prices are going to remain stable). Expected attendees included industry powerhouses like ExxonMobil and BP. However, things didn't work out as planned. The conference was cancelled due to security concerns (nobody wanted to come). Iraq's global guerrillas scored another tactical victory in their war on global markets.

While the continued dearth of investment in Iraq is bad, it pales in comparison to what is about to happen to Saudi Arabia. Saudi Arabia needs over one hundred billion dollars of outside investment in each of its major infrastructure categories: oil, electricity, and water. Global guerrillas operating in the Kingdom have this investment in their sights. Years ago, nation-states had the resources necessary to make investments in uncertain environments like Iraq. That is not possible today. The scale of what is needed is beyond the grasp of any nation or even groups of nations. What is needed are the deep pockets of global capital markets, and that money is flowing out of this region rather than in.

The fact that this aspect of the war against global guerrillas is off the map of our $700 billion (all-in cost) security establishment demonstrates how out of whack our approach to security is. In order to win this war we will need to change. Unfortunately, that change will probably take a decade or more.

Here's how the global guerrillas will attack investment. Corporate investors can handle risk. They run from uncertainty. Uncertainty in this context is an immeasurable threat to an investment. Because it can't be quantified, the expected returns can't be calculated. Without knowledge of a range of expected returns, particularly on investments of this size, they aren't made. Global guerrillas create uncertainty through the following mechanisms:

• Attacks on personnel. Global guerrilla attacks on key corporate personnel in country is already underway. The loss of this personnel is a direct attack on a long-term asset of a company that transcends the current investment they are working on. It also impacts future hiring. Most unsettling to CEOs is that an investment may result in attacks that follow the corporation back to the country of origin. CEOs do not want to become targets of terrorist assassination.
  
• Attacks on facilities. Ongoing attacks on investment properties in these countries can reduce an investment into a blackhole for cash. The potential that an investment can put an entire company at risk is not something most companies are willing to consider.
  
• Attacks against guarantors. Ultimately, companies can't turn to insurance companies for protection against this type of uncertainty. The rates they will charge would eliminate any potential returns (we are already seeing this in Iraq's reconstruction). This task will likely fall to Iraq and Saudi Arabia. Continued attacks on their sources of their revenue as well as key government figures makes their status as a guarantor of any investment questionable. The only remaining source of guarantees in the USA and it is unlikely that, given its current budget deficits, that this will occur.

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