Global Guerrillas

JOURNAL: After Abqaiq

"concentrate their attacks on Muslims' stolen oil, from which most of the revenues go to the enemies of Islam while most of what they leave is seized by the thieves who rule our countries." Ayman al-Zawahiri

More notes on the path to $100 a barrel oil...

After the near miss on Saudi Arabia's huge Abqaiq facility/field in February, additional elements of the group were rounded up (including the discovery of two more VBIEDs and ARAMCO documentation). These guerrillas learned the hard way that while the potential pay-off of a coup de main on the center of gravity of the Kingdom's oil production system was huge, the risks far outweigh the benefits. A similar lesson was taught to Zarqawi in Iraq when he attempted a speedboat attack on Basra's offshore tanker loading terminal in April of 2004.

Unfortunately, within open source warfare, weakness and failure is often a catalyst for radical improvement (under the assumption, which is a good one, that there is still a large undercurrent of support for the movement in Saudi Arabia). First, a failed large scale effort forces a collapse of centralized leadership. This devolution allows individual members more room for innovation. In general, within the context of systems disruption, brain power outweighs brute force 10 to 1. This is due to the leverage provided by network dynamics (ROI -- returns on investment -- of 200,000 to 1 are possible with the correct analysis). Second, since the group size is diminished, it dictates smaller attacks rather than larger ones. These smaller attacks naturally gravitate to undefended sections of the system. NOTE: It can take several iterations of failure to learn that symbolic terrorism has diminishing returns and concentrated conventional attacks aren't in line with the war's new equilibrium.

If the Saudi open source war proceeds according to form, it will inevitably move towards the disruption of coupled systems that support the oil system. These include water (used to inject into the fields to maintain positive pressure) and electricity (Saudi Arabia's grid is sparse and easily disrupted). A more complete description of how this would work can be found by reading this scenario in full:

Just after the second attack, the water group attacked their first target. It was one of the three major seawater pipelines feeding the water injection systems of Ghawar. Since seawater is injected into oil fields to maintain positive pressure, the loss of one of the major sources of water caused engineers to shut down oil production. This was due to the fear that asymmetrical water flows in the field could result in the flow of oil into unrecoverable pockets.

JOURNAL: Thriving in Nigeria

Here's a classic description of open source warfare by a Nigerian general named Gbadebo, “We are no longer facing one group, we are now facing so many factions." As the government is slowly realizing, the open source war in Nigeria is flying under its own power now. One of the reasons for this is that the criminal economy -- oil bunkering (smuggling stolen oil), arms trafficking, corporate warfare, corruption, etc. -- gets positive feedback from disruption. This criminal "economy," which I call the bazaar, is an economic platform that connects transnational crime with local global guerrillas. The more the state hollows out, the faster the transactions (due to less friction) in this economy occur. Their strategy of combining warfare, disruption, and criminality makes it not only possible for these groups to survive, but to thrive. It's a classic sign of a dynamically unstable system.

As this movement spreads towards the fields and pipeline infrastructures around Bonny (see map on previous post, in the eastern delta), rich targets await: Gbadebo, "If you blow up a flow station in Bonny, the entire place will cease to exist. It could take more than six months to quench the fire." Meanwhile, ongoing attacks on corporate psychology are devastating the legal economy in the western delta. For example, the construction in the western delta has ceased which throws currently employed workers into the arms of insurgents: Meanwhile, Wilbros Offshore Nigeria, employers of the hostages, has signified its intention to close down operation(s) in the Shell Western Division following the continued incarceration of the three workers. Wilbros, a pipeline construction and maintenance contracting firm in charge of Shell’s Focardos terminal projects, has told its sub-contractors to withdraw their equipment from the Western Division comprising Bayelsa, Delta and Ondo states. One of the contractors whose barges were hired by Wilbros said over 10,000 Nigerian workers will be affected by the evacuation.

BURNING DOWN THE HOUSE IN NIGERIA

The problem with dynamically unstable systems, like our current global social and economic environment, is that once they lock into a feedback loop they are almost impossible to control. As quickly as you move to dampen one problem others emerge. Eventually, these problems multiply, overwhelming the controller's ability to mitigate their impact and the entire system fragments.

You can see this process in action right now. As we put all of our energies into dampening the potential of civil war in Iraq, additional threats emerged in Saudi Arabia and Nigeria. While we got lucky in Abqaiq (the massive Saudi Arabian oil facility that was attacked unsuccessfully by al Qaeda) the situation in Nigeria is rapidly falling apart. In a sign of things to come, Nigeria's global guerrillas set a target of an additional one million barrels a day of disruption for March (from a MEND e-mail, notice the Islamic caveat):

"God willing, we hope to reduce Nigeria's export by a further one million barrels for the month of March"

February's 20% realized reduction in production (455,000 bpd) is pretty close to the 30% target they set. Standard global guerrilla technique made this possible -- a combination of selective sabotage, based on network analysis, and attacks on corporate psychology through hostage taking and threats.

To scale the disruption, the guerrillas will need to move to the eastern side of the Niger Delta. Most current guerrilla operations are in the western delta, including attacks on corporate facilities in Warri. This is reflected in an e-mail from one of the many spokesmen for MEND:

"There will be inland operations in March as well as standard creek attacks"

Ongoing attacks on the recently abandoned facilities in the western delta will ensure that most of the production already lost will not resume. Our new epochal war's feedback loop is just starting to settle in...

JOURNAL: Nigeria's Guerrillas Leverage Decentralized Initiative

The open source MEND movement (Movement for the Emancipation of the Niger Delta), an amalgam of numerous guerrilla groups and bunkering gangs (bunkering is the theft of oil from pipelines for resale, it is big business), have begun a campaign against the country's oil industry. E-mails from people in the movement, to the press, say that they have launched "impromptu" strikes. The word "impromptu" -- prompted by the occasion rather than being planned in advance -- is exactly the word to describe the decentralized decision making used in open source systems disruption (I described this method in the previous post on the next attacks against America). Local decision makers -- in response to local conditions and the signaling of nearby actors -- decide how, when, and where to exploit the situation. Results so far: 9 foreign oil workers, working for Shell (specifically for the subcontractor Willbros), have been kidnapped (3 Americans) and numerous facilities have been destroyed.

JOURNAL: Iraq's IED micro-markets

Iraq's insurgency is a cooperative community arrangement between many diverse groups that operates much like open source development in the software industry. As an adjunct to this cooperative arrangement, micro-markets have formed around the arming and prosecution of specific forms of attack. These micro-markets enhance innovation, participation, and skill development.

The best example of this is in the building and emplacement of IEDs, where guerrilla entrepreneurs have form cells for hire that specialize in certain aspects of the IED operations chain (the IED, or homemade bomb, has become the weapon of choice for Iraqi guerrillas fighting US soldiers). Greg Grant, a reporter just back from Iraq, wrote extensively about this micro-market in an article for the Defense News back in August 2005. He continues with a follow-up piece for Defense Technology International on the same topic (many thanks to Noah at DefenseTech for the heads-up).

The arrival of adaptive micro-markets (just like traders using rules of thumb gleaned from experience to recognize changes in global financial markets) or bazaars for violence in Iraq has changed many of the ways US forces fight. Most interestingly, an increasingly valuable form of measurement for success or failure is the market price of IED materials:

The market in Iraq for.. IEDs, has come to resemble that of any other commodity: It is well-financed and effectively managed, with supply adjusting to meet demand. U.S. military officers use the street price of an IED in Baghdad as an important measure of success in the war...

A competitive marketplace:

According to U.S. military intelligence, more than 100 cells operate in Iraq. Most limit attacks to roadways and neighborhoods near where the cell members live (NOTE: local action, global impact). Cells advertise their technical skills on the Internet, posting streaming video of IED attacks to jihadist web sites.

A combination of cooperative sharing and micro-market competition has led to the rapid proliferation of new technology and innovation among insurgent cells:

The most deadly device, however, is the explosively formed projectile (EFP), often called the shaped charge. Designed to attack armored vehicles in an urban environment, EFP's impart tremendous lethality in a small, readily concealable device not much larger than a coffee can.... According to U.S. intelligence officials who asked not to be identified, EFP's were first supplied to Shiite insurgent groups in Iraq allied with Lebanese Hezbollah. (since early 2005) EFP use has since migrated to Sunni insurgents and the devices are now found throughout Baghdad... "The Internet has changed the nature of warfare," says (Lt. Col. Shawn) Weed (U.S military intelligence officer in Baghdad). "Someone can learn how to build a new bomb, plug the pans into the Internet and share the technology very quickly."

JOURNAL: Adaptive Markets

Andrew Lo, of MIT, has an interesting paper called, "The Adaptive Markets Hypothesis" (AMH) He applies evolutionary biology to trading strategies in financial markets. In short, the AMH theorizes that:

• The market environment's risk and reward ratios are constantly changing. Think of this as an evolving market ecology.
• Inefficiencies exist. There are arbitrage opportunities that can be exploited.
• Investment strategies wax and wan (due to their applicability to an evolving market ecology).
• Innovation is the key to survival. Rapid adaptation improves risk/reward.
• Survival is the only objective that matters. "While profit maximization, utility maximization, and general equilibrium are certainly relevant aspects of market ecology, the organizing principle in determining the evolution of markets and financial technology is simply survival."

All of Lo's rules for traders and investors participating in financial markets apply to global guerrillas engaged in open source warfare. It also implies that static doctrines (as we see in conventional militaries) and formulas for nation-building are likely to break given rapid changes in the warfighting ecology.

In contrast, the trial and error approach of local actors, often yields improvements in methods that improve risk/reward ratios. These local innovators can quickly find and exploit arbitrage opportunities (risk free success) when they arise. Local strategies can also be quickly replicated across the horizontal networks of open source warfare (which may allow locally developed innovation to apply to the strategic level through the emergent intelligence of the aggregate network). Finally, the only goal we may be able to discern from an open source warfare movement is the need to survive (beyond being a "old saw" of guerrilla warfare, it also explains the movement's rapid adoption of transnational crime and its rapidly changing target sets).

JOURNAL: Vulnerability to Systempunkts

When the entire country of Georgia was cut off from natural gas supply for weeks through the destruction of two collocated pipelines (a couple of hours of work), the assumption of many in the West is that our more complex system would prevent that level of vulnerability. This is a bad assumption. While it is true that Western countries do maintain more of a reserve capacity (up to 45 days in LNG storage depots, although this depletes over the winter) than Georgia (1 day), the vulnerability of centralized routing still exists. Most US natural gas is transported via pipeline from the New Orleans area or Canada. The vulnerability of this "long supply line" can be seen in this example of open source research put together by John Young of Cryptome: Washington DC area natural gas system. Europe has similar vulnerabilities.

JOURNAL: Opportunities in Nigerian Outcomes

Port Harcourt, Nigeria. There have been two large robbery/raids on corporate compounds in the past week. The first was on Agip's (an Italian oil company) headquarters where seven were killed. The most recent was on Saturday when Daewoo's (a South Korean conglomerate) compound was raided and $285,000 was stolen. The objective of these raids and recent kidnappings, beyond the immediate financial gain, is to coerce corporations. It's working.

In further signs that this movement is adopting global guerrilla methods: 1) they have released the foreign hostages after a payment of $770,000. The moral damage to the marketplace was already maximized (Shell has withdrawn 500 employees and hundreds of contractors have fled), and a bloodless release makes it easier for corporations to deal with them in the future. 2) the group has set a GOAL (!) of a 30% reduction in Nigerian production by the end of February!

Naturally, the research analysts at the major global banks/hedge funds and government agencies are scrambling to understand the implications of this new wave of violence -- given that the fate of several major corporations, a trillion dollars of oil, and the world's oil price is at stake. Unfortunately, this effort may fall short given that the type of warfare that is evolving in Nigeria (and other places) is very new and complex. To really take full advantage of this opportunity (for financial speculators) or to mitigate the risks (corporate participants that want to limit their downside risk), a team that combines expertise in the oil market, regional knowledge, and this new form of warfare (this analyst has built an excellent track record by anticipating outcomes in Iraq, Nigeria, and Russia) should be assembled to build an actionable model and potential scenarios. Further, this model could even be built as a service delivered via a private Web site for a hefty subscription (also something I have tons of experience with). The potential profit here is limitless and the downsides are catastrophic. Things are starting to move in earnest.

UPDATE: It appears that some global hedge fund managers think the same thing (although their scenarios need lots of work).

JOURNAL: System Disruption meets the Internet

An unfortunate consequence of the war in Iraq has been rapid improvements in the ability of guerrillas to disrupt modern infrastructure (oil, gas, water, telecom, etc.). The wide ranging success of these attacks has eliminated any potential economic gains from the tens of billions of dollars spent on the US reconstruction effort and seriously damaged the legitimacy of both the US occupation force and sequential Iraqi governments. The impact of this reverse "effects-based operation" has not gone unnoticed. Al Qaeda's leadership has made systems disruption a central aspect of its campaign against the West.

Recent information indicates that the concept has become the topic of widespread discussion among members of Jihadi forums. On these forums there is a growing realization that the only way to damage the West strategically (without a nuclear weapon) is through the destruction of critical global economic networks. Stephen Ulph of Jamestown summarizes recent activity on these forums. His group found detailed documents that provide explicit instructions on facilities and pipelines that are termed global "economic joints". For example, one set of instructions provided data on the Alaskan oil distribution infrastructure and recommendations for maximizing the value of the attack.

While this effort is still in its adolescence, Ulph has detected signs of the type of collaborative open source development we have seen among guerrilla groups in Iraq. If so, it will advance to maturity rapidly. As that happens, be prepared to see a growing emphasis on the selection of targets (or more accurately "systempunkts") that cause cascading system failures -- failures that maximize the scope of the damage to the scale free and tightly coupled networks we see in developed countries.

NOTE: It's important to remember that in this epochal war, the guerrillas don't need to achieve either an absolute moral or economic victory. All that is needed in this hyper-competitive globalized economic environment is an effort that damages the ability of the target state to compete -- Adam Smith's invisible hand will quickly take care of the rest.

SWARM: Nigerian Oil Disruption

A group called the Martyr's Brigade (a new group, splintered off of the NDPVF, that is part of the growing community of open source insurgency in Nigeria), claimed credit for a dynamite attack on a major Shell oil pipeline in the Niger Delta. The blast killed 8 tribesman, living in a nearby fishing village, and has been burning out of control for days. While the destroyed pipeline carried only 7% (180,000 bpd) of the country's crude oil exports, the cascading effect (due the destruction of four lines and the shut down of a pumping station due to co-location and mutual vulnerability) of the disruption has halted the export 300,000 barrels of light crude for a week or more. This is the third major attack in the last months and in the case (which is on par with most systems disruption) the attackers escaped without incident or identification. NOTE: Nigeria supplies 14% of US crude oil imports.

The Martyr Brigade's statement: "Today, we took out 200,000 barrels of oil per day from Shells production this year. Since the produced oil cannot provide any economic and social benefit ...more of such sabotage shall be carried out with great pace... " NOTE: A second pipeline explosion has been reported, again in a remote area.