Category: Analyse

Beyond the End of Globalisation – From the Brexit to U.S. President Trump

The world has entered a period where uncertainty rules and where surprises abound.

Focusing on 2016, the two major surprises usually singled out are the Brexit or the vote leading to the exit of the U.K. from the European Union, then the election of U.S. President Trump against favourite Democratic candidate Hillary Clinton. Even though a short-term focus could let us believe that the turmoil only or mainly hits “the West”, political and geopolitical surprises and uncertainties have multiplied worldwide, starting at least with the shock of the financial crisis in 2007 and 2008 and responses to it (see end note for some major instances*).

What is thus happening? How are we to tackle the uncertainty? Are these surprises related or discrete independent events that it would be wrong to link or try to understand together?

We shall start here with the 2016 surprises and related ongoing uncertainty, i.e. the Brexit and the U.S. Trump Presidency, and focus more particularly on the contradictions and questions that arise when we compare the two phenomena. We shall seek a framework for and elements of understanding, which can then be used in the development of scenarios for the future.

After having outlined the explanatory frameworks most used to describe the two surprises, we shall focus here on the first of them, globalisation. We shall look at populism, the second explanation with the next article.

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In this article, after having specified and defined globalisation, we shall explore the reactions of economic and financial actors. We shall point out that these reactions to the two events were often unexpected considering the anti-globalisation narrative, while also sometimes differing in each case. Using these unexpected results as indications and leads for further questions and research, we shall suggest that a new model of production might be emerging, a “nationalised globalisation”, leading potentially also to further geopolitical uncertainty. We shall then turn to the financial industry, start explaining the different behaviour in each case and envision possible tensions ahead, including political and geopolitical ones. Finally, we shall turn to the behaviour of the high-tech corporate actors, and suggest an explanation for their difference in each of the two cases, which goes beyond the classical anti-globalisation narrative.

Globalisation as an explanatory framework?

The Brexit and the election of Donald Trump as U.S. President are most often lumped together and seen as similar. They are portrayed as anti-globalization reactions, and as exemplifying the rise of populism or nationalism, as evidenced by the following headlines and reports (among many others): Larry Elliott, “Globalisation backlash enters new phase with Trump win“, The Guardian, 9 Nov 2016; Anatole Kaletsky, Economist at Project Syndicate “Trump’s rise and Brexit vote are more an outcome of culture than economics” [populism and anti-globalisation], The Guardian, 9 Nov 2016; John Rennie Short, Prof. Political Geography, “The new globalization: Brexit and Donald Trump represent a different backlash to free trade“, Salon, 30 Nov 2016; Ronald F. Inglehart and Pippa Norris, “Trump, Brexit, and the rise of Populism: Economic Have-Nots and Cultural Backlash“, Faculty Research Working Paper Series, Harvard Kennedy School, 29 July 2016; Justin Sink et al. “Obama Says Brexit and Trump Powered by Globalization Fears“, Bloomberg, 15 Nov 2016;  Will Martin, “These charts show all the trade deals the anti-globalisation movement could destroy“, Business Insider UK, 15 Nov 2016, also quoting Deutsche Bank strategist George Saravelos: “If 2008 marked the trigger, this year is likely to be remembered for signaling the persistence of a new mega-trend: the peak, and likely unwind of globalisation”; Washington’s blog, “You’ll Only Understand Trump and Brexit If You Understand the Failure of Globalization“, 13 Nov 2016; etc.

Globalisation is difficult to define as various scholars provide different definitions, often shedding light upon different aspects of a complex and multi-dimensional dynamics, while understanding of the word changes outside social science. From a social science points of view, a general definition has nonetheless emerged:

“Globalization refers to fundamental changes in the spatial and temporal contours of social existence, according to which the significance of space or territory undergoes shifts in the face of a no less dramatic acceleration in the temporal structure of crucial forms of human activity…. [the related] alterations in humanity’s experiences of space and time are working to undermine the importance of local and even national boundaries in many arenas of human endeavor. ” (“Globalization“, Stanford Encyclopedia of Philosophy, First published Jun 21, 2002; substantive revision Jun 10, 2014).

The globalisation of free-trade and deregulation – what many outside social science implicitly mean by globalisation – is one aspect of this more fundamental definition of globalisation. It takes place through the factors of “deterritorialization”, “interconnectedness” and “velocity of social activity” (Stanford, ibid – the two remaining characteristics being long-term and multi-pronged process). That expression of globalisation is aptly described by Short (Ibid.) as rooted in the Washington Consensus and the willingness to promote open market and free trade, including because it was meant to be more conducive of peace, as claimed by the liberal and neo-liberal schools of international relations.

The anti-globalisation narrative let us expect that those responsible for the two surprises – i.e. those who support the Brexit and voted for it and those who support Trump and voted for him – did so because, mainly, they were against the free-trade and deregulation globalisation, or more exactly because they belonged to those people left aside by globalisation. Then, according to this narrative, the implementation of the Brexit by U.K. Prime Minister Theresa May on the one hand, the governance of the Trump administration, on the other, would mean the end of globalisation as we knew it: i.e. the end of open market and free trade, notably in its multilateral component, the end of deregulation, while the state would find back a stronger role and the citizens would be better protected from the nefarious impacts of this economic globalisation.

Cadbury’s factory in Somerdale was closed in 2010 after take over by Kraft (BBC News, “Cadbury factory closure by Kraft ‘despicable‘”, 10 Feb 2010). Another 250 jobs were destroyed in Birmingham in 2015, Kraft having become Kraft-Heinz, bought in 2013 by U.S. Berkshire Hathaway (Warren Buffet) – and U.S. Brazilian 3G (Julia Kollewe, “Cadbury cuts 250 jobs in Birmingham“, The Guardian). Photo by Rwendland (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons.

Towards a nationalised globalisation?

Contradictions and questions

At first glance, we would thus expect the corporate sector, notably multinational companies (as well as very wealthy individuals), which are the main beneficiary of this very globalisation and thus may be expected to want to see it last, first to have supported neither the Brexit nor Donald Trump’s candidacy. We would then expect the same corporate sector to react negatively and strongly once the policies following the elections start being implemented, or to do their utmost to oppose and derail these policies.

Yet, both New York Stock and London Stock exchanges have never been so buoyant, the U.S . Dow Jones being over 20.000 and the U.K. FTSE 100 above 7200, as shown on the two 5-year graphs Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario, Dow Jones, stock exchange Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario, stock exchange, FTSE(Google Finance). Thus, as a whole, it would seem that the corporate sector is not that opposed to or concerned by this so-called anti-globalisation surprises, on the contrary. In the case of the U.S., tax reform certainly plays its part whilst corrections are foreseen by experts (e.g. Patti Domm, “Dow pulls off a stunt it hasn’t done in 30 years“, 23 Feb 16, CNBC), but the market has nonetheless so far been optimistic following the election and should it have been truly that overwhelmingly worried about anti-globalisation, tax reforms expectations may not have been sufficient to offset a fundamentally negative outlook.

Are we thus truly facing the end or a change of the free-trade and deregulation globalisation or, alternatively, is the corporate sector actually not hostile to a changed in globalisation?

If we look now at exchange rates, a first difference appears between the U.K. and U.S. situations. In the first case, the British Pound has taken a serious hit against the U.S. Dollar and, in a lesser way, against the Euro with the Brexit and has not recovered:

Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario, Pound rate

On the contrary, the U.S. Dollar has not stopped rising against the Euro and been mostly rising against the Japanese Yen:

Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario, USD rate

Hence, we may deduce that the U.K. and the U.S. surprises deserve to be treated differently and cannot be understood by a single anti-globalisation narrative.

If we start looking more specifically at the two phenomena and at some of the reactions not of the corporate sector in general, but of some of its actors, we also notice apparently puzzling behaviours.

In the case of the U.K., financial companies and banks, relayed by the media, almost every day, make declarations against the Brexit and how they may move part of their operations to continental Europe: e.g. “Goldman piles pressure on May to protect City post-Brexit” (Martin Arnold and Patrick Jenkins, for Financial Times, 30 Jan 17, CNBC), “Lloyds Bank closes in on Berlin as post-Brexit EU hub: sources” (Andrew MacAskill and Lawrence White, 13 Feb 17, Reuters), “City banks warn of Brexit job moves” (18 Jan 17, BBC News), etc.

In the U.S., President Trump has created a strategic and policy forum, which gathers powerful and experimented corporate and financial actors, from BlackRock and its USD 5.1 trillion in assets under management to Tesla and SpaceX or General Motors, as shown on the mapping below (The White House, Office of the Press Secretary, “Remarks by President Trump in Strategy and Policy Forum“, 3 Feb 17; Jacob Pramuk, “Trump to meet ‘frequently’ with Blackstone’s Schwarzman, other business titans to discuss policy“, 2 Dec 16, CNBC).

strategic and policy forum, Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario

It will be useful, to have a better idea of the power and weight of BlackRock alone, everything being equal, to note that the Gross World Product is estimated by the IMF at $75.21 trillion for 2016, thus only 15 times more than the value of the assets managed by BlackRock. BlackRock revenue was USD 11155 million (11.1 bn) for 2016 (Quarterly Earnings Release). For the sake of comparison, even though industries are different, Lloyds Banking Group reported for 2016 total income reaching £ 17.5 bn (BBC News, “Lloyds reports highest profit in decade“, 22 Feb 17). Each has thus a total income higher than the GDP of the countries ranking below 114 (LLoyds) and 129  (BlackRock) in size of GDP, out of 190 countries, i.e. respectively 77 and 62 countries. BlackRock’s net income was in 2016 USD 3.2 bn and Lloyds reported a £ 4.24 bn pre-tax profit, the highest in a decade  (ibid.).

Towards a new manufacturing model?

The participation of the CEOs to the U.S. forum, which is advisory, does not mean full support to President Trump’s policy, but indicates to the least that there is no confrontational behaviour. On the contrary, there is discussion and dialogue, as well as most probably attempts at making sure policy will suit these companies’ interests.

For example, if we briefly look at BlackRock, its CEO Larry Fink expressed both hope and concern over President Trump agenda: “We have high expectations with … [the] Trump administration [on] tax policy or infrastructure. It always take longer,” he said. “If the rollout of some of these growth initiative programs by President-elect Trump are slower, if they are less ambitious, then I think the market is ahead of itself” (interview (CNBC, 13 jan 2017).  Worries stem notably from uncertainty and forthcoming tensions between the President and the Federal Reserves (during Yahoo Finance All Markets Summit 8 Feb 2017, Sam Ro, “Watch: Larry Fink’s full interview at Yahoo Finance’s All Markets Summit” 9 Feb 17, Yahoo Finance).

However, Fink’s disquiet is also about the widespread short-termism within the corporate world he combats, and the “growing backlash against the impact globalisation and technological change … “, an impact he recognises as adverse for many, even though he still asserts to believe in the overall benefits of globalisation (Myles Udland, “Larry Fink: I see a lot of ‘dark shadows’ in the market right now“, 8 Feb 17, Yahoo Finance; Matt Turner, “Here’s the memo Larry Fink, the head of the world’s largest investor, just sent to staff on these ‘uneasy’ times“,  2 Feb 2017, Business Insider UK).

In a nutshell, the desired strategy Fink stresses is to act locally as a global company, emphasising “commitment to long-termism” and respecting diversity (“Here is the memo…”, ibid.). If we consider the examples Fink gives – “we also need to be German in Germany, Japanese in Japan and Mexican in Mexico” (Ibid.) – then it seems that by local Fink actually means national, or a recognition of the nation. Interestingly such a move towards a “nationalisation of globalisation” is also how Prime Minister May’s policy can be described (James Forsyth, Theresa May’s new third way“, 25 February 2017, The Spectator).

As noted by Washington’s Blog (ibid), referring to a 2015 article by The Washington Post explaining “that the giant multinational corporations themselves are losing interest in globalization” (Jeffrey Rothfeder, “The great unraveling of globalization“), Fink’s vision could be part of a larger movement away from the previous phase of economic globalisation. This new model would include next-shoring (manufacturing in the proximity of both demand and innovation as suggested by McKinsey in 2014) and reshoring (relocalising in original country – Wikipedia). Assuming this hypothesis is correct, then the anti-globalisation narrative must be revised not as something pitting people, state and government against the corporate sector, but as the start of the search for a new production model.

Thus, to answer to our previous question, it is not that large multinationals and many among the corporate sector are unconcerned about the Brexit and the Presidency of Donald Trump, but that they may be seeing them also as an opportunity to move towards a more adequate system in the making. This system would likely involve a measure of nationalisation or recognition of the nation as major unit.

Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario, liberalism, free tradeShould next-shoring and reshoring develop, then trade flows in value could diminish or become less important.

In that case, those entities and actors depending on the older classical “free trade and deregulation” globalisation, if they do not accompany the movement for change, could react adversely as it is not only their beliefs but also their survival, power and wealth that are at stake. The European Union, as well as China, come to mind here and scenarios considering such developments would deserve further research. Political and geopolitical crises would likely be expected.

As far as the U.S. strategic and policy forum is concerned, we shall also note the absence of any representative of the military-industrial complex (who can be present elsewhere), which should be further investigated considering its importance within the American system and for the U.S. Foreign and Defence Policy, and as a result for the world (Military-Industrial Complex Speech, Dwight D. Eisenhower, 1961; among many, Andrew J. Bacevich, “The Tyranny of Defense Inc.“, Jan/Feb 2011, The Atlantic).

The “puzzle” of the financial industry

If we now compare the attitude of the financial companies, notably banks in the U.S., to what is happening in the U.K. then we are faced with completely different behaviour, most probably because the interests, challenges and stakes are different in the two cases.

In the Brexit case, the issue it to keep access to the European banking needs, as well as financial business related to the Euro, such as, for example, euro denominated clearing (Huw Jones, “BoE’s Cunliffe says euro-denominated clearing Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario, liberalism, free tradeshould not be forced into euro zone“, 22 Feb 17, Reuters). Fascinatingly, in a complete reversal of ideological accusations, it led the Bank of England’s deputy governor to accuse Brussels of “currency nationalism” because of the attempt of the EU to reclaim euro denominated clearing (Ibid, Tim Wallace, “EU’s ‘currency nationalism’ could splinter world’s financial system, warns Bank of England deputy“, 22 Feb 2017, The Telegraph).

These potential losses of business worry not only British banks, but most if not all banks operating from London, including U.S. Banks. All will try getting a deal that is the best for them, including through expressing disapproval and acting accordingly.

U.S. banks, in their country, do not have to face at all this challenge and thus may behave in a totally different way, according to the issues specific to American banking, including those related to the still dominant position of the U.S. dollar in the world.

Moreover, a monetary policy continuing to support a strong U.S. dollar, as seems to be finally favoured by the new Treasury Secretary Mnuchin, a former Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario, liberalism, free tradeGoldman Sachs banker (e.g. Saleha Mohsin “Mnuchin Secures Senate Confirmation as Treasury Secretary” 14 Feb 2017 and “Inside the Mind of Mnuchin: Too-Strong Dollar May Hurt Economy“, 24 Jan 17, Bloomberg) is also favourable to investments abroad, including buying foreign companies. Should the hypothesis of a nationalised globalisation be increasingly likely, then a strong U.S. Dollar could help actualizing it not only abroad, but also domestically: import of raw materials would be cheaper and favour manufacturing domestically, the resulting products being then sold on the domestic market. The potential loss in terms of exports because of the strength of the U.S. Dollar would be offset by the fact that U.S. companies would need less to export, as they would be directly implanted in foreign markets.

This assumes, of course, that other countries allow it, which thus demands that we fully consider the beliefs, will and power of political authorities, besides other factors, including corporate culture. For example, Prime Minister May’s government “ordered officials to scrutinise the bid for the UK’s third-largest listed company, following high-level, separate talks between Number 10 and the two sides” to protect Anglo-Dutch Unilever, and its employees, when it faced and rejected the “surprise offer” of merger by U.S. Kraft-Heinz, backed by its main shareholders U.S. Berkshire Hathaway (Warren Buffet) – and U.S. Brazilian 3G (

Further in-depth research will be necessary to deal fully with the financial part of the Brexit and of the U.S. Trump Presidency, considering the specificity of each situation, the interactions with the fundamentals of globalisation, including claims regarding potential “currency nationalism”. It will also be crucial to consider the consequences on the supremacy of the U.S. dollar, and related geopolitical impacts as well as potential tensions pitting the political authorities of one country and the companies they protect against a similar political-business nexus of another country, without forgetting the new regulations that will need to be designed, voted and enacted.

The high-tech sector, the Brexit and the Trump administration

The high-tech or large web-based companies behave completely differently with regard to the U.K. and the Brexit compared with the U.S. and the Trump administration.

Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario, liberalism, free tradeApple, Google and Amazon have all asserted commitment to the U.K., even though the Brexit is taking place. Apple’s CEO Tim Cook, declared he was optimistic about the post Brexit UK, after having announced plans to build new headquarters in London, however warning they will pay attention to new regulations (Rhiannon Bury, “Apple to create new UK headquarters at London’s Battersea Power Station“, The Telegraph, 28 Sept 2016; BBC News, “Apple ‘optimistic’ about post-Brexit UK“, 9 February 2017). Meanwhile, business being business, the prices of apps in the Apple Store will be raised on the basis of a parity between the Pound and the Dollar, to reflect the drop of the British currency (Alex Hern, “Apple increases App Store prices by 25% following Brexit vote“, The Guardian, 17 Jan 2017), which is unlikely to hurt much consumers considering the still very low prices of these apps, e.g. from £0.79 to £0.99, as well as their non-essential character.

Google also announced plans to build large headquarters in London, raising the number of staff employed in the U.K. from 4000 to 7000 (Eric Pfanner and , “Google to Expand London Campus Despite Brexit Questions“, Bloomberg, 15 Nov 16). Meanwhile, Amazon will hire 5000 employees in the UK, which represents one-third of its expansion in (geographical) Europe, and open a new head office in London (Euronews, “Amazon to add 15,000 jobs across Europe, 5,000 in Britain“, 20 Feb 17; Alanna Petroff , “Amazon hiring 5,000 workers in U.K. despite Brexit fears“, CNN Money, 20 Feb 17; Sam Shead, “Amazon shrugs off Brexit with plans to hire 5,000 more staff in the UK“, Business Insider UK, 20 Feb 17). Similarly, Facebook, Expedia and Snapchat hired staff, confirmed London as headquarters, opened or enlarged offices (Ibid.).

Trump, Brexit, globalisation, nationalism, populism, strategic foresight, scenario, liberalism, free trade. high tech, googleOn the contrary, in the U.S., the tension between the Trump government and high-tech firms flared over the immigration executive order  (Matt Drange, “Facebook, Google, Apple Lead U.S. Business Charge Against Trump Travel Ban“, Forbes, 3 Feb 2017). Actually, the relationships between the two sides are murky and cover much more than a temporary immigration ban, with issues related for example to encryption, anti-trust legislation or net neutrality (for an explanation on net neutrality: Investopedia,What Is Google’s Stance On Net Neutrality?“, June 2, 2015) (Melinda Biancuzzo and Jonathan Meyer, “Tech and Trump: What the Next Four Years Might Bring“, 8 Feb 17, Entrepreneur).

We are here in very different settings and dealing with very different objectives. On the one hand, as far as the U.K. is concerned, U.S. high-tech companies invest in a foreign country to develop their operations and platforms, which maybe seen as a direct application of the “nationalisation of globalisation” hypothesis identified above. Meanwhile, they take advantage of the low Pound and also develop a weight that they may use in the future to try influencing the U.K. government in their favour, including to boost globalisation, this time understood first through its social science meaning. This could have potential impacts on all aspects of globalisation, according to the way the British government and state respond, and anticipate.

On the other, in the American case, high-tech companies fight in their country, the U.S., for their interest. The impact on globalisation is inherent because of the very nature of these companies… which are all Americans. It does not seem indeed that any of them threatened to leave the U.S.. In both cases, we are here at a deeper level of complexity and understanding than expected from the initial free-trade and deregulation globalisation narrative, while the geopolitics of a technological globalisation, potentially in the new nationalised guise, largely led by high-tech U.S. companies, must be considered.

Diving deeper into the globalisation and anti-globalisation narrative regarding the Brexit and President Trump’s government allowed us to identify real and apparent contradictions, which led to sometimes unexpected questions and thus to new elements of understanding. As a result, uncertainty starts being reduced as we are developing the building blocks upon which to build a mapping of the issue at hand, which will then be used to develop scenarios.

We need now to turn to the other major explanation given for the Brexit and President Trump election, populism, as we shall see in the next (forthcoming) article.

———–

*To name only some major instances of political and geopolitical surprises, we have the 2010 – 2011 Arab Spring, enmeshed with the start of the Libyan and Syrian wars, the latter favouring the renewed rise from 2013 onwards of the Islamic State, the spread of non-violent opposition movements such as the 2011 Spanish Take the Square / Read Democracy Now followed by Occupy, the 2013-2014 Ukrainian Maidan revolution that led to the 2014 Crimea incorporation within the Russian federation, war in Donbass, polarized and tense relationships between “the West” and Russia (see), while Russia turned further East and worldwide, the planned, yet surprising for many, fall of oil prices starting in July 2014, with some difficulties so far to make it rise again substantially and its string of impacts, the potential rise of a new type of order in Eastern Asia involving a probably increasingly dwindling American power, etc (see Portals to a new opposition nexus; war in Ukraine; war in Libya; war in Syria; the war against the Islamic State; Helene Lavoix, “Lessons from the conflict in Ukraine” – (3) and (4), “An Isolated Russia? Think Again!“, 15 September 2014, The Red (Team) Analysis Society; Barbara Kollmeyer, “Oil prices push higher, lifted by decline in Saudi exports“, Marketwatch, 20 Feb 17; Jean-Michel Valantin, “Oil Flood? The Kingdom is Back“, 15 Dec 14 and among others The Warming Russian Arctic: Where Russian and Asian Business and Strategies Converge?, 23 Nov 16, The Red (Team) Analysis Society).

Featured image: Geralt via Pixabay, Public Domain.

About the author: Dr Helene Lavoix, PhD Lond (International Relations), is the Director of The Red (Team) Analysis Society. She is specialised in strategic foresight and warning for national and international security issues.

Evaluating Likelihoods for Libya’s Future – Scenario 1

Having detailed the various potential scenarios for Libya’s future over the next three to five years, we shall now evaluate the likelihood of the scenarios thanks notably to their indicators. We shall use the methodology developed by The Red (Team) Analysis Society, building upon Heuer (“Assessing Probability of a Scenario”, in Psychology of Intelligence Analysis, pp.156-157) and the capability given by indicators. This methodology allows us to obtain an estimated likelihood, which is considered not only as good enough for the purpose of anticipation through scenarios but also as remaining usable by analysts. Bayesian Networks (BN), using Pearl’s work (1985), would provide us with even more accurate estimates, but the use of BN for analysts, furthermore in the framework of issues which analysis is mainly qualitative, remains so far too heavy and time-consuming.

In this article, we shall determine the likelihood of the primary scenarios for a peaceful solution between the main Libyan actors (excluding Salafist groups), which we started to detail in “Scenarios for the Future of Libya – Scenarios 1: Towards Peace? (1).”

Organizing the Scenarios & Indicators

In order to mathematically deduce the likelihood of this scenario and its sub-scenarios, we organized the sub-scenarios in such a way as to correctly account for scenarios not detailed in our posts previously because they were not necessary in terms of narrative and understanding of the future of Libya – they were implicit (see graph below).

Click to access larger image

 

With the main scenarios now organized, we compiled all their indicators from their corresponding articles and selected the indicators that were absolutely necessary for that scenario to occur. There were two reasons for this approach: first, we wanted to be as accurate as possible with determining the likelihood; indicators like the creation of a Joint Arab Force would be far less significant than the Islamists’ view of General Haftar affecting their willingness to participate in peace talks. Although these ‘lesser’ indicators do indeed contribute to strategic foresight and warnings for Libya’s future, and will provide us, in terms of monitoring with indications regarding the evolution towards a scenario or another, they are not absolutely necessary for that specific scenario or sub-scenario to occur*. Second, only having ‘primary indicators’ allows us to more easily monitor their reality on the ground for assessing the likelihood, and thus let us update their likelihood between posts to maintain the accuracy of the final likelihoods at the conclusion of this series. Monitoring for warning once the likelihood of all the scenarios is established would however use also ‘secondary indicators’.

To ensure the reliability of the mathematical process, each scenario’s group of indicators is mirrored in its counterpart or opposite scenario, but the way each indicator is phrased is inversed to match that scenario’s likelihood of occurring.

For example, indicator 6 of scenario 1.3 [Peace Negotiations, Without an External Mediator, Lead to a Signed Peace Treaty] is “Do the Libyan actors agree on the role of Islam in the unity government?” Since the Islamists advocate for the use of Sharia, and the nationalists do not, their agreement on the role of Islam in a new government is necessary for this scenario to occur. However, in scenario 1.4 [Peace Negotiations, Without an External Mediator, Fail], indicator 6 states “Do the Libyan actors disagree on the role of Islam in the unity government?,” since this disagreement on the role of Islam would prevent a signed peace treaty.

After organizing the scenarios, selecting and grouping their primary indicators, we began to compare the ideal indication for each indicator to see the scenario occurring with the reality of the indication on the ground to determine the likelihood for each (for more on indicators and indications, see Helene Lavoix, “Evaluating Scenarios and Indicators for the Syrian War”, 10 March 2014, RTAS).

Evaluating the Indicators

*The likelihood of each indicator is based on the current reality on the ground, which may warrant a change of likelihood as we progress through each scenario in the forthcoming posts.

The following scenario and its indicators will show how we determined the numerical likelihood based on current realities. We use the following table for our likelihood levels:

Scenario: Libyan Actors Agree to Participate in Peace Talks Mediated by External Actors

Are Libyan actors willing to attend and participate in peace talks mediated by external actors? 50% (Improbable). Currently, there are major factions that are either refusing or delaying to participate in peace talks facilitated by UN actors or individual states (such as Algeria). The Steadfastness Front has refused to join such negotiations, and has opposed the UN-backed Government of National Accord (GNA) (Toaido and Fitzgerald, European Council on Foreign Relations). Meanwhile, General Haftar turned down Algerian-led peace talks between himself and the GNA (Middle East Monitor, January 3, 2017) and refuses to meet with UN Special Representative Martin Kobler (Fishman, The Washington Institute, January 19, 2017). However, other actors have already shown their willingness to participate in UN-led peace talks, as exhibited by those who have supported and joined the GNA. Furthermore, a group of members of the Council of Representatives (COR) have engaged in dialogue with Algerian mediators and a UN delegation regarding a peace agreement (Libya Herald, January 26, 2017; Libya Herald, January 17, 2017), although other COR members are still resistant to peace talks. Considering these realities, we gave this indicator a 50% likelihood to see the necessary indication happen, which rates as improbable.

Do the identities of the external mediator(s) have a minimal effect on the willingness of Libyan actors to participate? 30% (Improbable). The former UN envoy to Libya, Bernardino Leon, accepted a job in the United Arab Emirates (UAE) while mediating peace talks between the General National Congress and Council of Representatives (Al Jazeera, November 5, 2015). Because the UAE openly backed the COR, supporters of the GNC were enraged, which likely deepened mistrust of the United Nations. More recently, the plane carrying UN Special Representative to Libya Martin Kobler was denied permission to land as he was flying to Tobruk to speak with members of the COR – a government whose members are increasingly opposed to Kobler (Prentis, Libya Herald, January 18, 2017). Even Grand Mufti Sheikh Sadiq Al-Gharyani has expressed disapproval for UNSMIL and Kobler, saying, “The UNSMIL is cooperating with Satan, it has neglected the victory of Libyan people over ISIS, therefore, it’s time to call for replacing it” (The Libya Observer, December 7, 2016). Such distrust and disapproval of UN mediators has certainly had an effect on the willingness of Libyan actors to be actively involved in peace talks, thus we gave this indicator a 30% likelihood.

Do views on General Haftar have a minimal effect on the willingness of Haftar opposition forces to participate? 15% (Highly Unlikely). Considering the Islamists’ overwhelming opposition to Haftar and Misrata’s serious concern of a Haftar dictatorship (Saleh, Financial Times, January 25, 2017), we gave this indicator a 15% likelihood.

Are the armed coalitions facing a prolonged stalemate? 20% (Highly Unlikely). Based on the estimates of military strength and territorial control (see indicator below), we gave this indicator a 20% likelihood.

Are the armed coalitions relatively equal in terms of military strength and territorial control? 20% (Highly Unlikely). Although Misrata forces solidified their presence in central Libya by liberating Sirte from the Islamic State, Haftar’s forces control more territory and recently made significant gains in Benghazi against Salafist groups (Critical Threats, January 2017; BBC News, January 25, 2017). Furthermore, all the Misrata brigades under the command of the Misrata Military Council have joined the forces of the Government of National Accord (The Libya Observer, January 30, 2017), leaving the General National Congress and its coalition significantly weakened. As a result, we gave this indicator a 20% likelihood.

Have Libyan actors failed to secure military backing from external actors? 45% (Improbable). General Haftar and his nationalist allies have recently made gains in finding external actors who are increasingly stepping up their military support. Egypt has reportedly been caught sending arms to Libya in violation of the UN arms embargo (Saied, Al-Monitor, January 23, 2017), although it denies this accusation, and the UAE is speculated to soon deploy fighter jets in support of Haftar (Libyan Express, February 7, 2017). Russia, meanwhile, has made public shows of support for General Haftar and his forces (Daou, France24, January 25, 2017; Libya Prospect, December 1, 2016), including flying wounded nationalist fighters to Russia for medical treatment (Markey, Reuters, February 1, 2017). Considering much of this has not yet transitioned to concrete military backing, and considering that the other actors have not secured support from external actors, we gave this indicator a 45% likelihood.

Are external actors restraining the amount of pressure on Libyan actors to participate in peace talks? 25% (Improbable). External actors have incrementally increasing their pressure on Libyan actors to participate in dialogue and reach an agreement. Last year, the European Union imposed sanctions on Libyan politicians that were considered to be obstructing the Government of National Accord (BBC News, April 1, 2016). More recently, the EU suggested that it might lessen the sanctions against these Libyan leaders in order to facilitate a dialogue (ANSAmed, February 7, 2017). The European Union has also agreed to give the Government of National Accord a 215 million dollar package and funding for the Libyan coast guard in order to stem the migrant flows from Libya (BBC News, February 3, 2017). Such an action puts pressure on the GNC and COR, as evidenced by the COR’s condemnation of the deal (GeopoliticsAlert, February 8, 2017). Considering these realities, we gave this indicator a 25% likelihood.

Determining Likelihood

After calculating the likelihood of each indicator, we organized each numerical value in tiers with independent indicators standing alone and dependent indicators linked together according to dependency. Using scenario 1.3 again as an example, the likelihood of indicator 5 [Are the armed coalitions facing a prolonged stalemate?] occurring is dependent on the likelihood of indicator 4 [Are the armed coalitions relatively equal in regards to military strength and territorial control?].

We then took the first of each pair of opposed scenarios and multiplied the numerical likelihoods of each indicator to find the likelihood of that scenario. In our first scenario where Libyan actors agree to participate in peace talks mediated by external actors, the product of the indicators’ likelihood was .001134 – a less than 1% likelihood for that scenario. After finding the product of the first scenario, considering probabilities’ rules, we subtracted it from 1 to get the likelihood for its counterpart (1-x[sc 1 likelihood]=sc 2 likelihood). Thus, the likelihood of Libyan actors deciding to not participate in peace talks brokered by external actors is .9982, or 99.82%.

To determine the likelihood of their sub-scenarios, we followed the same process for each pair of scenarios and, because trees of scenarios obey to the rules of probability for dependent events, multiplied the product of each sub-scenario to their parent scenarios.

Click to access larger image

After evaluating the main sub-scenarios, as well as their primary indicators, we thus assess that Scenario 1 Towards Peace would be highly unlikely – less than 20%, considering current situation.

In our next post, we shall begin to determine the likelihood of the various 2.x scenarios.

*In terms of graph and network representing the future of Libya, they would be antecede the variables used for this specific scenario by more than two steps and/or be on adjacent paths.

Bibliography

Feature Photo: Row of Libyan flags in Tripoli by Ben Sutherland, [CC BY 2.0], via Flickr

“Algeria continues Libya peace efforts with visit of pro-LNA HoR group,” Libya Herald, January 17, 2017

“Anger at UN chief negotiator in Libya’s new job in UAE,” Al-Jazeera, November 5, 2015

Ben Fishman, “Shifting International Support for Libya’s Unity Government,” The Washington Institute, January 19, 2017

“EU may reduce sanctions to foster Libyan peace,” ANSAmed, February 7, 2017

Fighting Forces in Libya: January 2017 map, Critical Threats, American Enterprise Institute

“Grand Mufti calls for UNSMIL replacement; praises victory over ISIS,” The Libya Observer, December 7, 2016

“Haftar and Russia agreement…Where it goes?” Libya Prospect, December 1, 2016

“Haftar refuses peace talks with UN-backed government,” Middle East Monitor, January 3, 2017

J. Pearl, “Bayesian Networks: A Model of Self-Activated Memory for Evidential Reasoning,” (UCLA Technical Report CSD-850017), Proceedings of the 7th Conference of the Cognitive Science Society, University of California, Irvine, CA, 1985, pp. 329-334.

Jamie Prentis, “UNSMIL’s Martin Kobler refused clearance for Tobruk landing,” Libya Herald, January 18, 2017

“Libya And Italy Sign Migration Deal,” Geopolitics Alert, February 8, 2017

“Libyan Islamists lose Benghazi district to Haftar’s forces,” BBC News, January 25, 2017

“Libyan politicians hit by EU sanctions over new government,” BBC News, April 1, 2016

Marc Daou, “By supporting Marshal Haftar, Russia marks its territory in Libya,” France24, January 25, 2017

Mattia Toaldo and Mary Fitzgerald, “A Quick Guide to Libya’s Main Players,” European Council on Foreign Relations, June 15, 2016

“Migrant crisis: EU leaders agree plan to stop Libya influx,” BBC News, February 3, 2017

“Misrata brigades join Libyan National Army,” The Libya Observer, January 30, 2017

Mohamed Saied, “Egypt goes against international current with Libya support,” Al-Monitor, January 23, 2017

Patrick Markey, “Eastern Libya forces fly wounded to Russia in growing cooperation,” Reuters, February 1, 2017

“UAE on verge of sending Mirage 2000s to support Haftar’s looming war on western Libya,” Libyan Express, February 7, 2017

“UNSMIL team in Tobruk for talks with HoR,” Libya Herald, January 26, 2017

The Psychological Impact of the Islamic State Terrorist Attacks – Geopolitics, Uncertainties and Business (6)

This article is part of a series seeking to identify the impacts of the current and most probably forthcoming Islamic State and jihadist terrorist attacks and focuses on major socio-psychological consequences. It follows a first article, which started outlining a framework for impact assessment out of our current understanding of the economic consequences of terrorism, which notably pointed out the need to use mapping as methodology if the complex and cascading characters of these impacts are to be properly assessed. The larger aim of the series is notably to understand if businesses should or not neglect these aggressions and related geopolitical uncertainties, while finding out ways to foresee these risks so as to best design answers (see Helene Lavoix, “Businesses and Geopolitics: Caught up in the Whirlwinds? (1)”, The Red (Team) Analysis Society, 17 Oct 2016)

To find out which could be the psychological impacts of the ongoing string of terrorist attacks, we shall use articles related to 9/11 as well as studies following the second Intifada, which took place in Israel from the end of September 2000 until the beginning of 2005 and was waged by “Palestinian terrorism on Israeli society” (Dov Waxman, “Living with terror, not Living in Terror: The Impact of Chronic Terrorism on Israeli Society“, Perspectives on Terrorism, Vol 5, No 5-6 (2011). Each case will bring insights in what we could expect in terms of current and future socio-psychological impacts, although differences with the contemporary and forthcoming Islamic State’s and jihadist attacks should not be understated. Notably, 9/11 was a huge shock and a very large and spectacular multiple attack, but happened only once and only to one country. The Second Intifada, although targeting too a single country, taking place on a much smaller territory and aiming at a smaller population, compared with the current and probably near-future situation, should give us an insight into the consequences of attacks repeatedly waged over time and carried out in very various ways when, as outlined by Waxman, “once innocuous items (drinks, shoes, backpacks) can become the means of deadly attacks”.

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We shall first explain the disconnection existing between direct exposure to the attack, objective threat and socio-psychological impacts, i.e. how people are impacted psychologically even though they are not in the immediate vicinity of the attack and how this phenomenon takes place. This will allow us better envisioning who can be impacted. We shall then turn to the more individual harmful psychological consequences of terror attacks, from Post Traumatic Stress Disorder (PTSD) to depression and insomnia and their impacts on businesses through impaired professional life. This will notably allow us pointing out that a crucial stakeholder for the corporate sector in terms of considering the Islamic State’s and Jihadist terrorist attacks and thus related geopolitical uncertainties is the department of human resources, which must thus be primarily involved, besides other more obvious departments such as security, risks, or sales, marketing, operations and finance. Staff in charge of exports and supplies must also become involved as the companies with whom they are dealing could be impacted by terrorist attacks. Finally, we shall turn to socio-psychological consequences with collective impacts, which have various effects on companies and de facto societies and countries, from avoidance (not doing something anymore, e.g. flying, traveling by train, visiting some countries, investing in some sectors and countries, etc.) to the rise of collectively aggressive behaviour.

Disconnection between exposure, objective threat and socio-psychological impacts

The first crucial element to consider if one is to understand and take into account properly the socio-psychological impacts of terrorist attacks is the disconnection existing between personal direct exposure, objective threat and happenstance of effects.

This disconnection has been observed again and again according to research. Silver, Holman, et al. show, in the context of the consequences of 9/11, that “the psychological effects of a major national trauma are not limited to those who experience it directly, and the degree of response is not predicted simply by objective measures of exposure to or loss from the trauma” (“Nationwide Longitudinal Study of Psychological Responses to September 11“. JAMA. 2002;288(10)). This was confirmed by Bleich, Gelkopf and Solomon, in the framework of the second Intifada, as they found “no association between symptom criteria for PTSD,…  number or intensity of TSR symptoms or any of the other indicators of distress”, and level of exposure to terrorist attacks (“Exposure to Terrorism, Stress-Related Mental Health Symptoms, and Coping Behaviors Among a Nationally Representative Sample in Israel“, JAMA. 2003;290(5): 619). Gigerenzer, similarly, in his study on dread risk and avoidance (see below) notably after 9/11, show that more people chose to drive rather than fly after the attack, even though those people had not been directly exposed (“Out of the Frying Pan into the Fire: Behavioral Reactions to Terrorist Attacks“, Risk Analysis,  Vol. 26, No. 2, 2006).

Furthermore, Bleich et al. (Ibid.) found “no significant association … between objective threat (high vs low residency risk, urban vs nonurban, Jewish vs Arab Israeli), exposure and future orientation, or sense of personal safety,” apart from association that could be found only in the case of fear for friends and family. The only demographic indicator that could be identified as having an effect on the happenstance of psychological symptoms was that women were more susceptible (5.5 times more likely for Israeli women) to develop PTSD and TSR symptoms and to experience feelings of depression (Ibid.), which, of course, does not imply that men do not develop these symptoms. This means also that neither the level of education nor age, nor social class etc. have an effect on the development of psycho-social impacts after a terrorist attacks, but, on the contrary that everyone is affected.

The explanation that is most often given for these disconnections is first that people are actually exposed to the attacks through media coverage (e.g. Vaxman; Daniel Antonius, “When fear is a weapon: how terror attacks influence mental health“, The Conversation, 5 Dec 2015, updated March 23, 2016;  Schlenger et al., “Psychological reactions to terrorist attacks: findings from the National Study of Americans’ Reactions to September 11.“, JAMA. 2002 Aug 7;288(5):581-8); for a review up to 2007, Marshall et al. “The psychology of ongoing threat: relative risk appraisal, the September 11 attacks, and terrorism-related fears“, Am Psychol. 2007 May-Jun;62(4). This does not mean that media should not provide coverage of the attacks, on the contrary, or, to anticipate on what is explained below, the factor of “unknowability” which mediates our distorted appraisal of risk would be heightened.

As far as the current Islamic State’s and other jihadist attacks are concerned, the rising spread not only of media access and exposure but also of direct access to witnesses’ videos, pictures and accounts through social networks, from Twitter to Facebook, through Instagram and YouTube may only heighten this characteristics of the socio-psychological effects of terrorist attacks.

Once people are exposed to attacks through media, individuals would interpret the information received through what Marshall et al. (ibid.) suggest to call “relative risk appraisal”,  a “multidimensional process that mediates the relation between environmental events and the individual’s meaningful appraisal of them.” Interestingly, we may note that individuals, when they evaluate the terrorist risk they face (ibid.) are prey to exactly the same biases as analysts trying to foresee future events (see online course, module 2).

As explained by Marshall et al. (Ibid.), this appraisal process is notably influenced by three elements, as identified by Slovic (“Perception of Risk”, Science, 1987 Apr 17;  236(4799), and Slovic P, MacGregor D, Kraus NN, “Perception of risk from automobile safety defects”, Accid Anal Prev. 1987 Oct; 19(5)). First, we have the “catastrophic, uncontrollable, and inequitable” aspect of danger, called “dread risk”. Second we have the unknowable character of the hazard, notably in terms of timing (when waiting for a plane, at a cafe, in a restaurant, when shopping, when commuting, any time and any place actually), and specificities (a suicide bomber, a knife stabbing, a lorry ramming a crowd, etc.). Finally, these characteristics must have “signal potential”, i.e. they must be interpreted as a warning of an existing danger, “which has entered the environment” (Slovic et al., 1987, ibid.).

As far as the Islamic State and other jihadist attacks are concerned, we definitely find the characteristics of uncontrollable as well as inequitable dangers, while the catastrophic element is sometimes present in terms of scope, as with the Bataclan, Stade de France and restaurants attacks in November 2015 in Paris, and often emphasised in repeated signal potentials, such as, for example, references to nuclear risk in Belgium (Debra Decker, “ISIL’s next Belgian target could be a nuclear plant“, USA Today, 24 March 2016), or regular mention of the potential use of Weapons of Massive Destructions (WMD) by the Islamic State (e.g. Associated Press, “Chemical weapons found in Mosul in Isis lab, say Iraqi forces“, The Guardian, 29 Jan 2017;  Rob Merrick, “Isis wants to carry out a chemical weapons attack in Britain, the national security minister warns“, The Independent, 1 Jan 2017).

Similarly the wide variety of modus operandi for the attacks, the inherent element of surprise found in terrorist attacks, added to the stress put by politicians, governments’ and states’ officials on the impossibility of zero risk, show that Slovic second factor is also present in the current string of attacks. Furthermore, the rising suspicion against the ruling establishment (as evidenced by President Trump election in the U.S., or shown by the degrading OECD index of “trust in government, with only 40% citizens continuing to trust their government in 2016), the willingness of governments and media to sometimes hide the terrorist character of attacks by initially favouring explanations in terms of psychiatric unbalance (e.g. Mark Mazzetti and Erik Schmitt, “In the Age of ISIS, Who’s a Terrorist, and Who’s Simply Deranged?“, The New York Times, 17 July 2016) may only heighten the feeling of “unknowability” of the population, while the signal potential has not been lowered. Finally, the signal potential may only remain as long as the Islamic State’s and Jihadist threat exist.

As a result, we may expect the disconnect to take place currently and in the near future, potentially leading to an even more distorted relative risk appraisal compared with previous episodes of attacks, considering current specificities.

The disconnection and the way it is taking place through relative risk appraisal process not only allows for the occurrence of pathological symptoms within individuals, but also favours harmful behaviour at collective or aggregate level (Marshall et al., ibid.). It is first to these different pathological symptoms in individuals  we shall now turn.

Harmful individual socio-psychological impacts: from PTSD to lower work quality and burnout

Acute Stress Disorder, Post Traumatic Stress Disorder and Traumatic Stress-Related Symptoms

Without entering into the clinical details, best left to Medical Doctors, these disorders are now gathered in a single category, “Trauma and Stressor-Related Disorders“, and are the most painful and incapacitating range of symptoms that an individual may experience after a terrorist attack.

Acute Stress Disorder (ASD) usually appears immediately after the trauma and may last from 3 days to 1 months, while the others last for more than a month (MSD Manual).

A precise model of estimation would be necessary here, but without it, we can at least obtain a rough estimate of the number of people who are potentially concerned by these disorders out of previous instances. In the case of the second Intifada, Bleich et al. (Ibid.) report that 76.7% people suffered from at least one Traumatic Stress- Related (TSR) symptom, 9.4% suffered of PTSD and 1 person from ASD.

In the case of 9/11, two months after the attack, “the prevalence of probable PTSD was 11.2% in the greater New York area and 4.3% across the United States as a whole” (Marshall et al.). Note the difference of results between the U.S. and Israel in terms of exposure. It could stem from numerous variations, such as size of country and would justify further research. Indeed, understanding the various variables leading to variations would be crucial to better estimates for the case of the attacks at hand: for example we could test the hypothesis that the further away not only in geographical terms and exposure but also feeling of “imagined community”, to borrow from Benedict Anderson, the least likely the relative risk appraisal would operate to favour the happenstance of TSR disorders (TSRD) (Benedict Anderson, Imagined Communities. Reflections on the Origin and. Spread of Nationalism, 1983, 1991, 2006).

The number of people suffering of these disorders drops after 6 months but does not disappear. Studies found that 6 months after 9/11, between 3.4% and 5.8% of people indirectly exposed through media experienced PTSD symptoms (Ibid.). In the New York area, the six-month prevalence of PTSD in the directly affected subgroup of New-Yorkers was 12.0% … and in the indirectly affected group, 3.7% (Ibid.). Always in New York, one year after the attack 4.2 % people had PTSD and the following year this number fell to 3.3%(Joseph A. Boscarino, Richard E. Adams, and Charles R. Figley, “Worker Productivity and Outpatient Service Use After the September 11th Attacks: Results From the New York City Terrorism Outcome Study“, Am J Ind Med. 2006 August ; 49(8).

The repetition of attacks, although potentially allowing for desensitisation (Bleich et al., Ibid.), also obviously multiplies the number of people who can suffer from TSR disorders, thus spreading over time adverse consequences within the very fabric of everyday life of a society.

Operations within businesses may be impacted inasmuch as the staff is psychologically hurt, which can virtually hit almost anyone, with various consequences according to whom develops TSRD and to the size of the company: a small company with, for example 10 employees, which sees one crucial member of its staff suffering of PTSD may see its overall activity more hurt than a very large company employing thousands of people, when someone can more easily be replaced.

The findings from Israel regarding less severe “suffering of one symptom of TSR” let us expect that three quarters of the population may be impacted (Bleich et al.) Thus,  pretty much all companies will have to deal with negative symptoms and, as a result, impacts on operations. The impact of the psychological trauma is not only limited  to the few months following the attacks, but could last much longer, as seen. For example, Boscarino et al. document a loss of productivity (measured through work loss and lower work quality), especially through lower work quality stemming from PTSD, notably during the second year following 9/11.

Human Resources Offices and related services should thus pay a particular attention to the potential for terrorist attacks as stemming from related geopolitical uncertainties. Meanwhile clients and suppliers may also be impacted, and this should be kept in mind by all staff dealing with them.

Depression and impaired productivity

Depression is another symptom that has been observed following terrorist attacks.

For New York residents, a study found that 11% of workers had depression during the first year following 9/11 and 10% during the second year. Depression was found as a major cause of work loss and lower work quality during the first year following 9/11, mitigated by self-esteem (Boscarino et al., Ibid).

In the case of the second Intifada, Bleich et al. (Ibid.) find that “58.6% [of respondents] reported feeling depressed or gloomy and 28% that they felt “very” depressed or gloomy.” Yet, the authors also point out that “the majority of participants (82.2% [421/512]) stated that they felt optimistic about their personal future and 66.2% (337/509) that they felt optimistic about the future of Israel.” We thus are presented with strange results, as one of the characteristics of depression is “pessimistic thoughts” (DSM-IV Criteria for Major Depressive Disorder – MDD). Further research would be needed to investigate this phenomenon, all the more so that it is used to outline the resilience of society (e.g. Vaxman, Ibid.).

Considering the impact on work quality, again, human resources offices, as well as those staff dealing with clients and suppliers which may be likewise, impacted should pay attention to terrorist attacks and to uncertainties leading to them.

From Insomnia to Burn-out

Also working on the Second Intifada, researchers found out that fear of terrorist attacks heightened the probability to develop insomnia two years after the attacks. In turn, the tiredness generated by insomnia led to heightened odds to see the impacted people experiencing job burnout “two years after insomnia increased” (Sharon Toker, Gregory A. Laurence and Yitzhak Fried, “Fear of terror and increased job burnout over time: Examining the mediating role of insomnia and the moderating role of work support“, Journal of Organizational Behavior, Volume 36, Issue 2, pages 272–291, February 2015; George Watson, “Fear of terrorism hastens path to burnout for Israeli workers“,  Texas Tech University, 19 Feb 2015).

Note that insomnia may be part of PTSD and TSRD, as well as of depression (see MSD Manual and DSM-IV Criteria). It may also be experienced without PTSD, TSRD or depression.

As previously, human resources offices, and staff dealing with clients and suppliers, are most concerned here. Interestingly, Toker et al. study also points out that co-workers’ support but not management concern had a mitigating impact and suggests that the creation of a work environment conducive to this adequate support could be key (Ibid.). Assuming the current campaign of terrorist attacks continues, as the December 2016 attack in Berlin or the February 2017 Louvre attack in Paris (e.g. The Telegraph) indicate, we are thus faced here with the possibility to have to fundamentally re-design work spaces and possibilities for employees relations, assuming companies do not want to see their operations impacted because of adverse consequences of terrorism on staff, including management and senior executives.

Socio-psychological symptoms with negative collective impacts:  avoidance and aggressive behaviour

Impaired sense of safety and avoidance

People living in societies victims of terrorist attacks tend to experience an impaired sense of safety, which lasts for a relatively long time. In the 2002 survey in Israel, 60.4% people feared for their own safety and 67.9% for the lives of family and friends (Bleich et al, Ibid).  After 9/11 in the U.S. we find a similar impact: six months after the attack 40 to 50% of Americans “feared for their safety and that of family members” (Marshall et al.). One year after the attack, in New York, up to 73% people feared for their own safety and 75% for the lives of family and friends (Ibid.).

As fear for safety leads, besides notably the fear to relive painful memories, to avoidance behaviour (Marshall et al.), this psychological impact is particularly important.

Avoidance behaviour, which is not always considered as pathological, means that affected people will avoid places and situations where they feel their life can be threatened, considering the previous terrorist attacks. For example, after 9/11 people avoided flying:  airlines’ passenger traffic in the U.S. dropped by 20% for September to December 2001 (Marshall et al.; Gigerenzer). This avoidance led to an increase in driving at least for the next three months and, also, unfortunately to more death out of car crashes (Gigerenzer, Ibid; Ropeik D, “The consequences of fear“, EMBO Reports, 2004 Oct; Spec No 5). After the March 2004 Madrid attacks, for the two following months, people in Spain reduced train travel, however less significantly, and there no increase in driving-related death was observed (Gigerenzer; López-Rousseau, “Avoiding the death risk of avoiding a dread risk: the aftermath of March 11 in Spain“, Psychol Sci. 2005 Jun;16(6) ).

For the current string of attacks, a similar avoidance phenomenon seems to be observable in Paris, although comprehensive and detailed studies focusing on avoidance for these attacks are not (yet) available: following directly the November 2015 attacks, cafés and restaurants saw a drop in attendance of 44% and 58% respectively, while hotels saw their occupancy rate lowered by 51% (Sondage Synhorcat auprès des adhérents, 20 novembre 2015 in “Rapport au Premier Ministre sur la Destination France après les Attentats“,  Rapporteur M. Sharon Elbaz, Prime Minister Office, Sept 2016: 25). Avoidance continued, although less starkly, in the following months (Ibid, p.26-31)*. The attack in Nice and St Etienne de Rouvray in July 2016, again led to touristic avoidance not only in the Cote d’Azur (region of Nice) but attendance and occupancy rate remain bad in Paris, at least until September. At the end of the first semester 2016, the number of tourist in France had fallen by 7% since january 2016 (Ibid.). The sector of tourism for the region Ile de France (region around Paris) lost 1 bn euros for the first semester. We may note here that the recurrence of attacks appears to lead to a much longer avoidance compared with flight avoidance and 9/11.

Considering the very direct impact of this specific psychological consequence on business operations, it seems obvious that the corporate sector should definitely consider terrorist attacks and the geopolitical uncertainties from which they stem. As attacks are varied in their modus operandi, the way forward would be to start wondering where and how the activity of a company could become victim of terrorist attacks, considering understanding and knowledge available on the perpetrators, i.e. in our case the Islamic State and other similar Jihadist groups such as Al Qaeda. Contingency plans to face and mitigate avoidance could then be developed peacefully in advance and only activated if the threat materializes. Planning in advance would be even more important in the case of terrorist attacks that CEOs, managers and staff being human beings, they are as susceptible as others to be hit by the various psychological symptoms following terrorist attacks, which may then not be very conducive to think peacefully and strategically. Furthermore, in such dire circumstances, having a plan ready could contribute to a much-needed safety feeling for staff and management.

Rise of aggressive behaviour

Finally, research on the socio-psychological consequences of terrorist attacks points out a probably less known but as important impact: “the impulse to respond aggressively” (Marshall et al., Ibid.) going hand in hand with a “sense of victimhood” (Vaxman, Ibid.)

As a result, at least three interactive collective consequences may be observed.

First, in the case of Israel, a “brutalization of interpersonal relations” was observed through the proxy of school violence and proliferation of firearms (Simha Landau, “Societal Costs of Political Violence: The Israeli Experience“, Palestine-Israel Journal 10, no. 1 (2003); Vaxman, Ibid.).

Second, and relatedly, “violent crime (homicide and robbery) and property crime” increased in a way that is found related to the stress generated by terrorism, as well as to potentially increased hardship as generated by the impact on the economy: between 2000 and 2001 in Israel, criminal homicides increased by 28% and robberies by 11%(Simha Landau, Ibid.; Vaxman, Ibid.).

Finally, it has been showed that terrorism leads to a “hardening of  attitudes” against the group responsible, or perceived as such,  for the terrorist attacks (Nehemia Friedland and Ariel Merari, “The Psychological Impact of Terrorism: A Double-Edged Sword“, Political Psychology, Vol. 6, No. 4 (Dec., 1985). Indeed, as explained by Vaxman, “terrorist attacks increase negative beliefs about and hostile attitudes toward the opposing group the terrorists claim to represent” (Daniel Bar-Tal and Daniela Labin, “The Effect of a Major Event on Stereotyping: Terrorist Attacks in Israel and Israeli Adolescents’ Perceptions of Palestinians, Jordanians and Arabs,” European Journal of Social Psychology 31, no. 3 (2001); Vaxman, Ibid.). This, added to the rising aggression and thus societal brutalisation, as well as to the feeling of “victimhood”, may only lead to a rise in hate crimes, as was also observed in the case of 9/11 (Marshall et al., ibid.).

As far as 9/11 was concerned, the increase in hate crimes seemed to have mainly occurred within 10 days following the attack (Ibid.), which corresponds to the impulsive aggressive reaction. However, in cases where attacks are repeated, then the impulsive reaction might be transformed into the more pervasive brutalization pointed out by Landau (Ibid.).

As a result, we may wonder if the Islamic State’s and other jihadists’ string of attacks does not participate in the contemporary rising polarization of society, which is observable notably throughout the Western world, as is evidenced by the brutality at work during the 2016 U.S. presidential campaign and its aftermath, as well as by the extreme reactions of the media and of the losing side after Mr Trump came President, as again shown by the very controversial cover page of the German magazine Der Spiegel on 4 Feb 2017 (BBC News, “Der Spiegel: Trump beheading cover sparks criticism“, 4 Feb 2017). It is most probably not the only cause, as explained in Lessons from and for the Brexit – Geopolitics, Uncertainties, and Business (2) (Helene Lavoix, The Red (Team) Analysis Society, 22 Nov 2016),  but it cannot either be ruled out that it does not play a part. Feelings of victimization and its corollary of sentiments of entitlement and self-righteousness added to brutalization of societies are certainly not conducive to composed and wise democracies.

As far as violent crime is concerned, businesses should foresee them and take adequate preventative measures. As for the more general brutalization, this should also be considered in details, according to the activity of each business, while a better understanding of the processes at work and how they can evolve in the future should be promoted before policies are decided. Indeed, it may well be that decisions taken too rapidly or without proper analysis were themselves taken under conditions of “aggressive response and victimhood feeling”. Adequate related lobbying could also be endeavoured.

To conclude, studies on 9/11 and the Second Intifada also point out the resilience** of both the American and Israeli Society to terrorist attacks (e.g. among others, Marshall et al.). In the case of the Second Intifada, resilience suggests that a phenomenon of de-sensitisation could take place when terrorism occurs repeatedly and on a long period (Vaxman, Ibid.; Bleich et al., Ibid.). However, first, this potential  de-sensitisation does not consider the brutalization pointed out by Landau (Ibid.). Further research would thus be needed.

Second, since 2001 for 9/11 and 2000-2005 for the second Intifada, eleven years have gone by.  The world and the international system, as well as all the countries targeted and threatened by the Islamic State’s and other jihadists’ terrorist attacks are caught in the unsettling times of transition.  To this should be added the variety of targeted countries in the case of the current and potentially near future attacks, with different societies, values and belief-systems, political systems and interests, compared with past attacks on single countries, heterogeneous yet each being unified by values and beliefs. Thus, the very resilience that was displayed then should not be taken for granted now, but on the contrary cautiously checked. Targeted societies may be now and in the near future more or less resilient to the attacks, terrorism becoming then one of the causes that contribute to the transitional changes, besides potentially feeding polarization as pointed out above. The possible absence or lowered resilience of the victim societies, in turn, would heighten the importance of the socio-psychological impacts of terrorism on society as a whole, as well as, de facto, on its actors, making it even more important to foresee them and to feel concerned by the issue.

*Note that the report to the French Prime Minister does not consider the psychological aspect of avoidance and thus does not take into consideration corresponding measures that could have also been designed to face this specific impact.

**We use here the definition of resilience given by B. Walker, C.S. Holling, S. R. Carpenter, A. Kinzig Resilience, 2004, “Adaptability and Transformability in Social–ecological Systems,” Ecology and Society, 9(2): 5: “The capacity of a system to absorb disturbance and reorganize while undergoing change so as to still retain essentially the same function, structure, identity, and feedbacks.” Note that the choice of the definition will greatly influence what may be seen or not as a resilient behaviour to terrorism.

Featured image: Battling PTSD, Marines, May 24, 2010, United States government work, Public Domain.

About the author: Dr Helene Lavoix, PhD Lond (International Relations), is the Director of The Red (Team) Analysis Society. She is specialised in strategic foresight and warning for national and international security issues.

The Impact of the Islamic State Terrorist Attacks – Geopolitics, Uncertainties and Business (5)

Since the Islamic State declared a Khilafah on 29 June 2014, it carried out, worldwide, 6 attacks or series of attacks in 2014, which killed 2 and wounded 12 people, 23 in 2015, which killed 1020 and wounded more than 2171, 36 in 2016, which killed more than 1455 and wounded more than 3505 and so far 3 in 2017, which killed more than 109 and wounded more than 169 people, assuming all attacks are known and referenced as such (WikipediaList of terrorist incidents linked to ISIL“). As a whole, we thus faced 68 attacks, during which more than 2586 people lost their lives and more than 5857 were injured.

Prospects for the near future look no less grim as reminded by Europol as far as Europe is concerned in its report Changes in Modus Operandi of IS revisited (2 Dec 2016 – main points here). Indeed, a weakening if the terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, Berlin attackIslamic State in Syria and Iraq is most likely to imply a heightening of terror attacks elsewhere (Europol, Ibid.), as we warned here repeatedly considering the global character of the so-called Khilafah of the Islamic State (see Helene Lavoix “At War against the Islamic State – A Global Theatre of War“, 23 Nov 2015 and following articles, The Red (Team) Analysis Society).  Furthermore, Europol also points out that the weakening of the Islamic State may see a strengthening of its competitors such as Al Qaeda, which are also likely to carry out terror attacks (Changes in Modus Operandi…, Ibid.). This forward looking assessment would be reinforced by one of the latest declaration of Al-Qaeda’s leader al-Zawahiri stressing “the call to our nation and the mujahedeen to raise the jihad against the current idol, and its allies as their priority as long as they can make it” (Sheikh Ayman Al-Zawahiri, “Brief messages to a victorious nation; Part 5: Letter to our nation. For Allah we will not kneel”, 5 Jan 2017 – message and translation shared by Expect Consulting, specialist on jihadist groups, notably in Africa, in the Red (Team) Analysis partner network).

Intuitively, we would expect such numerous attacks, notably by a single (if distributed over territory) player trying to achieve a terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, Bangladesh, Dhakasingle aim, a Khilafah, to have a deep and wide impact not only on states and societies as a whole, but also on one of their actors, businesses.

This impact would stem from the specific character of terror, which aims at causing not only bodily harm while targeting civilians or non-combatants, as suggested by the 2004 description of terrorism of the High-Level Panel on Threats, Challenges and Change of the Secretary-General of the United Nations (U.N., A more Secure World, par. 164, p.52), but also to disrupt the system perceived as enemy (see, for example, for the plethora of official definitions, “Definition of Terrorism by Country in OECD Countries“).

Yet, terrorist attacks only made it to the top five risks of the “Global Risks Perception Survey” of the Global Risk Report 2017 (World Economic Forum) in Autumn 2016*, and only for large-scale attacks (see also report pdf, p.68). Similarly, the terrorist threat is mentioned neither in the May 2017 survey “Geostrategic risks on the rise (Drew Erdmann; Ezra Greenberg; and Ryan Harper, McKinsey & Company, 2016) nor in the latest “McKinsey global survey” (December 2016) regarding potential risks to businesses, even though we may surmise it is implicitly part of “geopolitical risks”.

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Does that mean that businesses do not care about terrorist attacks, beyond, of course, humanitarian concern? Should the corporate sector, whatever the size of the businesses involved, pay more attention to these geopolitical threats or, on the contrary, neglect them as not likely enough or not impactful enough to deserve consideration? Should only some sectors feel concerned, such as obviously tourism? But in that case, which are these sectors and what could be the depth and scope of impacts? These are the questions that this article and the following ones intend to address.

We shall start with seeking to identify the impacts of terrorist attacks, because being able to estimate the full range of potential impacts for uncertainties is a fundamental necessary condition if we are to do a useful thus actionable strategic foresight and warning. Starting with older studies on the economic impact of 9/11, we shall use them to single out potential types of impacts, while beginning to bring in elements of comparison with the current string of attacks. Indeed, 9/11, considering the very characteristics of the attack and the shock it created, may not easily compare with the current Islamic State’s attacks, which are globally distributed but with some countries being more hit than others (when furthermore each country has its own specificities and conditions in terms of stability), which occur over a relatively long time-span and display wide-ranging types of modus operandi, from the murder by stabbing of policemen to killing people in festive gathering by ploughing the crowd with lorries through mass shootings or more classical bombings.

We shall notably point out that the use of confidence indices may not be adapted to the current attacks and to those which are likely to happen in the near future. We shall also outline that states’ policies and answers, thus feedbacks, must fully be integrated in any such impact assessment, thus demanding  an adapted approach. This initial assessment will give us a general framework that we shall refine and further explore with the next articles.

Immediate, short-term and direct impacts

The OECD in its 2002 study (Patrick Lenain, Marcos Bonturi and Vincent Koen, “The Economic Consequences Of Terrorism“, Economics Department Working Papers No. 334) adopted a time-bound framework, distinguishing between immediate and short-term consequences on the one hand, and medium-term impacts on the other. A similar framework was used by a March 2005 IMF Working Paper (R. Barry Johnston and Oana M. Nedelescu, “The Impact of Terrorism on Financial Markets“), unsurprisingly as it grounded its work in the 2002 OECD study. There, the short-term effects are seen as direct economic impacts and medium-term effects as indirect.

Immediate impacts include the destruction of life and property, responses to the emergency, restoration of the systems and the terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, 9/11infrastructure affected, and the provision of temporary living assistance (OECD: 6; IMF: 3-4). They were evaluated for 9/11 in 2002 to USD 27.2 billion (Ibid.). This figure is lower than what was assessed by the more recent New York Times assessment (Shan Carter and Amanda Cox, “One 9/11 Tally: $3.3 Trillion“, September 8, 2011), which, using a survey of multiple damage estimates,  gives a figure of USD 55 billion for the immediate toll and physical damage (which does not appear to include restoration of systems).

This shows first that impacts evaluation changes over time and may increase. Thus, for the current series of attacks we shall probably need to wait before a full evaluation is available. Furthermore, the fact that we are facing an ongoing series of attacks multiplies the work needed to obtain an estimate.

The OECD study then identifies that short-term general impacts are loss of confidence, potential instability of financial market and “self-fulfilling depression”. It points out that the shock was truly short-term, and emphasises that the major negative impacts were, in a large part, avoided thanks to proper liquidity management integrating “financial support to any sector or industry … [through] short-term loans or guarantees”, while  only some sectors were truly impacted. We see here emerging a crucial point if we are to properly evaluate impacts of terrorist attacks: we must also consider state policy answers to these attacks, as we shall detail further below.

If we take confidence indices as a first element of measure for impacts, and apply them to the current string of attacks, we would expect to see confidence dipping over the period (mid 2014 until today) or right after each attack. However, none of the most commonly used statistics as provided by the OECD (consumer and business confidence indices, see graphs below), shows in an obvious way such a reaction. As far as consumer indices are concerned, Germany, and Turkey appear as displaying the most obvious downward trends, while Belgium, although appearing to have registered the attacks that hit it on 22 March 2016 (see Wikipedia for a summary), shows for the period following the attack a dip which is less strong than what is displayed for the end of 2016.

terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, consumer index

If we look at the Business Confidence Index for the same countries, the attacks appear to have been even less registered.

terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, Business Confidence Index, BCI

Surprisingly, France, which has been one of the worst hit countries by the attacks, shows no major dip in confidence.

terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, Business Confidence Index, BCI

When shown on the longer term, for all countries, the periods following terrorist attacks appear to register less loss of confidence than other events, notably the financial crisis.

terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, Business Confidence Index, BCI

These curves could thus confirm a lack of corporate interest as well as a disinterest by citizens. We may hypothesise, cautiously at this stage, that a mix of absence of awareness of the threat, including as a result of psyops operations by governments of hit countries, added to the low probability to be hit by an attack contributed to this result. It could also be that the very short-term impact on confidence pointed out by the OECD study is sufficient, furthermore considering the small size of each Islamic State terrorist attack compared with 9/11, to imply that the current string of attacks has no effect on confidence.

However, we should also consider that such indices as confidence may not be suited to measure the real impact of the types of terrorist attacks we are currently facing.

Indeed, assuming that the statistics communicated by each country are trustworthy, it is, first, particularly difficult to attribute a terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, Turkey, Istanbulsingle cause to an indicator meant to indicate confidence in general. For example, Turkey knows so many upheavals, that imputing a loss of confidence solely to terrorist attacks would be most probably wrong, even though the multiplication of these attacks participates in the evolution of the Turkish situation. A single statistical measure cannot follow such complex dynamics.

Furthermore, on top of the very short-term effect of attacks on confidence pointed out above, as far as 9/11 was concerned, the attack was much larger than each of the attacks we now face, and can be seen as the first in a long series continuing nowadays, hence the shock and thus the fact it registered on confidence index. As far as the current attacks are concerned, the specific character of the distribution of the attacks, may stop any confidence index to register them. We may however wonder why there is not, to the least, a slow degradation of the confidence overtime.

Let us thus compare the confidence measures to a survey investigating relations to the European Union carried out by RedC and Win Gallop International (25 Nov – 7 Dec 2016), which also asked the question: “In general do you think that things in your country are heading in the right direction or the wrong direction?” To this, 78% of Belgium people, 82% of French people and 62% of German people answered that they thought their country heads in the wrong direction.

This does not sit very well with the confidence expected from the confidence index, unless we should also consider some fatalism at work, including a measure of desperation and feeling of terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, Paris, Bataclan, Sidney, Opera House, Australiapowerlessness. Thus, in our case, the terrorist attacks would participate in an overall negative outlook, which is not expressed through purchasing plans for consumers and “assessment of production, orders and stocks” for businesses (the confidence indices), but could be expressed during elections, as we showed in the case of the Brexit for the U.K. (Helene Lavoix, “Lessons from and for the Brexit – Geopolitics, Uncertainties, and Business (2)“, 7 Nov 2016, The Red (Team) Analysis Society). This implies that the impact of terrorist attacks should be seen from a dynamic point of view, through complex and cascading effects, and not through a single aggregate index. For the corporate sector in general, it is these nth order cascading impacts that should be taken into account as highly likely to largely upset the whole framework within which they operate.

The OECD report then points out that a direct negative impact hit airlines and aircraft manufacturers, the insurance sector, tourism-related industries, the upscale retail sector and U.S. postal service, whilst businesses in security and information technology were positively impacted. The negative impacts are constituted by business interruption and business reduction, evaluated by The New York Times for 9/11 to USD 123 billion, notably for airlines, to which should be added other costs such as interests to finance all activities related to the impacts of the attacks (estimated for 9/11 at $185 billion), and social costs (between $300 billion and $400 billion, including immediate damage) (NYT, Ibid, “What’s not shown in this tally?“).

This outlines the importance of the target and of modus operandi of the attack(s) to identify those that will see their operations impacted. We may also point out that little foresight is used by those reacting to terrorist attacks and contributing to business reduction (for example avoidance of some places or activities). Indeed, the highly likely possibility that future attacks may take various forms – as terrorists also follow a learning curve – obviously is not considered in the reaction. This is all the more important in the Islamic State attacks’ case, as we have here a series of diverse attacks and not a single large one. We shall look more in detail to these specific impacts for the current Islamic State – or more generally jihadist attacks –  in the next articles.

Medium term and indirect impacts

According to the OECD report, on the medium term, first, insurance premiums were raised while coverage was lowered.

Second, as transportation systems were disrupted and border controls were tightened, the “just-in-time supply chain management system” was threatened (Ibid. pp.23-27). As pointed out by the terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, Belgium, Zaventem, Germany, Brandenburg, BerlinOECD, a trade-off between security on the one hand, costs on international trade on the other thus appears. Interestingly, the authors stress that terrorism through this cost estimated to 1 to 3 percent ad valorem re-introduces tariffs that globalisation and liberalism strove to abolish (Ibid. p. 25). Seen from the point of view of 2017 and not anymore 2002, after the Arab Spring, which is also a child of globalisation, among other causes (for a review, Ella Moore, “Was the Arab Spring a Regional Response to Globalisation?” July 2012, e-IR students), with the U.S. of President Trump and the post-Brexit U.K. now actively looking for new models of socio-economico-political developments beyond pure liberalism, it might be worth reflecting if thinking in terms of a trade-off between security and international trade is still possible or relevant. As a result, supply-chain management might change or need to be reassessed.

Finally, the OECD underlined that public and “private sector spending [was] likely to be on the rise … to improve the security of premises, employees and information”, with still debated economic consequences, as far as military spending is concerned. The New York Times (Ibid, What’s not shown in this tally?) estimates this cost for 9/11 at “$200 billion in increased state, local and private security spending”, which may also constitute a profit for security companies.

At business level, this last impact will depend first upon the sector of activity. Second it will depend upon the answers designed and implemented by the state hit by terrorist attacks, to which we shall now turn.

Integrating state answers and related impacts

We progressively saw emerging that, in the case of terrorist attacks, it was impossible to neglect answers given at state level as they were having a large impact. This is confirmed in the case of 9/11 by the estimates given by the New York Times (Ibid.):  the overall cost of the 9/11 attacks to the United States ̋for all actors did not only include, as we saw, USD 55 billion for toll and physical damage and USD 123 billion for economic impact (business interruption and business reduction, notably airlines), but also USD 589 billion for homeland security, USD 1649 billion for war, and USD 867 billion for future war and veterans’ care, for an overall cost of USD 3,3 trillion. Hence, the cost of answers is far higher than the rest.

The impacts related to answers are numerous and far-ranging. The OECD report (Ibid: 13-16) pointed out the importance of the management of liquidity in facing the most immediate impacts of terrorist attacks. Further, we had the implementation of border controls impacting the supply chain management, as seen.

We must also consider all the anti-terrorism and counter-terrorism legislations (e.g. for a worldwide list Wikipedia “Anti-terrorism legislation” )terrorism, terrorist attack, Islamic State, scenarios, strategic foresight, warning, geopolitics, uncertainties, political risk, anticipation, sanctions, impact, political impact, forward looking information, forward looking statement, G20, and the compliance measures they entail, which deeply impact business activities, notably in the financial sector. Anti-terrorist financing obligations will then impact all companies and citizens through the regulations banks and financial institutions must follow. Each successful attack is highly likely to prompt legislators to review laws and regulations and possibly to change them, with new consequences added to previous obligations.

Furthermore, and in an even more complex way, if we have, as the New York Times did, to look at supplementary public spending generated by the answer to attacks, and from there deduce an overall cost, which is then born by tax-payers, we cannot limit ourselves to this. For example as far as military spending is concerned, the overall impact will also depend upon the capability of the state – where business operations are based and taxes paid – to ripe dividends from the novel insecurity, not only in showcasing thus selling more arms, which may lower the overall cost of security spending (and even allow for surpluses), but also in acquiring or losing international influence. This may be considered as being the case in terms or arms sales for Russia and its Syrian campaign (e.g. Mansur Mirovalev, “How Russia’s military campaign in Syria is helping Moscow market its weapons“, Los Angeles Times, 25 Nov 2016), while a rising Russian influence in the Middle East is debated (e.g. Joshua Landis, interviewed by John Judis, “America’s Failure — and Russia and Iran’s Success — in Syria’s Cataclysmic Civil War“, 12 January 2017, Syria Comment; Anna Borshchevskaya and Philip Gordon, “Putin’s Middle East Policy: Causes and Consequences“, March 23, 2016, The Washington Institute; Nikolay Kozhanov,Arms Exports Add to Russia’s Tools of Influence in Middle East“, 20 July 2016, Chatham House; Walter Russel Mead, “Russia Re-Emerges as a Great Power in the Middle East“, 12 Sept 2016, The American Interest).

As another example, the ability of the host polity to let emerge through its policies a new and adapted model of socio-political organisation able to win against the aggressor carrying out the terrorist attacks  will also have important consequences on impacts. Indeed, societies that will be able to reorganise themselves, from systems of values and beliefs to political authorities through economic interactions and adequate regulations as seen previously, to win against the enemy carrying out the terrorist attacks, will be stronger, more influent and wealthier and those actors inhabiting them will benefit from these favourable conditions.

To be able to identify precisely and then estimate these multiple impacts, we need to adopt a complex framework, which allows us to address feedbacks and cascading effects. We must be able to include the various impacts identified for previous attacks, yet not become dependent upon frameworks that may have been adapted to these attacks but are unsuited to what we face now and are highly likely to face in the future. Considering the needs, the approach to the evaluation of impacts will most probably be best done through mapping the network of impacts, which will allow us to look at first, second, third and nth order effects and at feedbacks in a multi-disciplinary way, as we practice and recommend (e.g. “Assessing Future Security Threats” series;  online course “From Process to Creating your Analytical Model for Strategic Foresight and Warning, Early Warning, Risk Management and Scenario-building“).

Considering the multiple impacts we have started identifying, it seems obvious that businesses indeed should feel concerned by terrorist attacks. Building upon these initial findings and identification of impacts, with forthcoming articles, we shall turn to more specific cases such as the tourist and transportation industries and wonder if and how strategic foresight and warning, anticipation and risk management may practically help actors and notably businesses in addressing current and future terrorist threats.

*conducted between early September and mid-October 2016 (GRR 2017, p.65)

About the author: Dr Helene Lavoix, PhD Lond (International Relations), is the Director of The Red (Team) Analysis Society. She is specialised in strategic foresight and warning for national and international security issues.

Featured image: Before the start of the G20 summit. A minute of silence to honour the memory of the victims of the terrorist attacks in Paris. 15 November 2015 – Russian Presidential Press and Information Office – Kremlin.ru [CC BY 4.0], via Wikimedia Commons.

Strategic Thinking in the Russian Arctic: When Threats Become Opportunities (2)

This article is the second part of our series focusing on the current development of the Russian Arctic region, while explaining and demonstrating the importance of using strategic thinking for governments as well as for business actors to understand current dynamical changes and to develop adequate strategies to face related geopolitical uncertainty.

In the first part, we established that the paradoxical logic of strategy turns threats into opportunities, while constraints become drivers and systems of challenges are transmuted into powerful attractors.

Here, continuing using strategic thinking, we shall see first how the implementation of the Arctic Russian strategy triggers different kinds of resistance: i.e. Clausewitz’s “friction”. The way this friction is absorbed, or not, by the implementation process determines the future degree of success of the strategy.

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Then, we shall explain how the Russian authorities are redefining the Russian national interest in a time of climate change – an evolution that is here to last – thanks to the understanding of the paradoxical logic of strategy as developed in part 1 and of the dialectics between the implementation of the Russian strategic project and the friction it triggers.

A strategic imperative: thinking friction

As Edward Luttwak (Strategy, the Logic of War and Peace, 2002), following Carl von Clausewitz (On War, 1832), points out, there is strategy when will is applied against a resisting and reacting object, as during a war. Hence, the strategic nature of the Arctic endeavour is also revealed by the way the adverse, resisting and reacting Arctic extreme environment triggers different levels of “friction” through the building of the infrastructures End less Franz Joseph Land for energy extraction, as well as for transport, and shipping on the Northern Sea Route and from the Siberian coast to Central Asia. This friction comes from the systems of difficulties inherent to the region, which always threaten the material organisation and implementation of the Arctic development. As a result the different operations constituting the development of the Arctic are forced to be able to absorb a very high level of friction to avoid disruption.

For example, in the Yamalo-nenets province, the Siberian heat wave of the 2016 summer melted dead carcasses of reindeer, infected with the dangerous, and potentially deadly Anthrax bacteria. More than forty people were infected, and, sadly, a 12 years old child passed away, while 2300 reindeer also died, triggering a major health alert and sanitary response. This alert was particularly important, because an epidemic in the north of Siberia would be both dangerous for the people and the animals and disruptive for the Russian Arctic strategy through the disorganisation of the workforce used to build the infrastructures necessary for the creation of the Yamal LNG plant, and for the related railways and ports (Rebecca Joseph, “”Zombie” Anthrax not only deadly disease that could re-emerge as Siberia permafrost thaws”, Global News, August 16, 2016).

The violent storms, which interact with the multiplication of icebergs coming from the melting and breaking of the ice cap, are another major driver of friction, at sea this time. This is the case, for example, for the vastly expensive Prirazlomonoye offshore oil rig in the glacial Pechora Sea (Michael Klare, The Race for What’s Left, 2012). TafeleisbergHowever, the Russian scientists and engineers have found two categories of answers to this challenge. First, they have studied ways to divert the icebergs by towing them. Second, they have invented floating barriers able to protect the infrastructures (Atle Staalesen, “Rosneft Moves 1 Million Ton Big Iceberg”, The Independent Barents Observer, October 11, 2016).

Furthermore, the friction known by the Prirazlomonoye operation is not only environmental, but also political: in 2013, during a media campaign aimed at raising international awareness about the industrial development of the Arctic, Greenpeace activists attempted, without authorisation, to climb on the rig in order to protest against the industrial exploitation of the pristine Arctic environment (“Freed Greenpeace Arctic detainees home from Russia”, BBC News, 27 December, 2013).  Activists were arrested and detained in Murmansk for three months by the Russian authorities, after having been condemned for piracy (Ibid.).

Since then, Rosneft has emphasised that the rig has not only been designed to be protected from the “friction” imposed by its extreme environment, but also to protect this very environment (“The Prirazlomonoya rig details – part 1″, Marine Technology news, December 27, 2013; Gazprom, “Environmental and occupational safety of Arctic shelf development“). This is done through the invention of a system of absorption of the industrial Igor Sechin wastes on the platform, which are recycled and reused in the industrial process in order to avoid any spill in the fragile ecosystem. This system is also much more cost-effective, because the wastes do not have to be shipped on shore. As a result, the Prirazlomonoye platform is the first Russian “zero emission” oilrig. (Trude Pettersen, “Prirazlomnoya “zero emission” system launched”, The Independent Barents Observer, April 12, 2016).

As such, “friction” becomes a driver for innovation and thus a support for marketing the new Russian energy technology, when, at long last, ecological issues have become a real international concern as well as an economic imperative (Charles Emmerson, A Future History of the Arctic, 2010).

Thus, this new generation of Russian oil rigs not only overcomes the environmental and political friction it triggers with an extreme and fragile environment, but is also a political and media tool to reinforce the legitimacy of the Russian Arctic strategy on the international scene, in a period of evolving tensions between Russia, the European Union and the United States. Advertising the technological response to industrial-environmental friction is strategically used to ease some of the geopolitical and commercial frictions triggered by the international political situation while supporting the marketing of the Russian innovative technology.

Understanding the strategic nature of the Russian Arctic development and how it absorbs the friction engendered by the contact between its operations and an extreme environment leads us to the third level of strategic understanding: the nature of the political and economic project that is being implemented and its time-scale.

Developing the Russian Arctic: an emerging “Russian grand strategy for a warming world”

The combination of the warming of the Arctic and of the Russian political, industrial, military, infrastructural, and commercial projection of power in order to develop this region has a multitude of national and international consequences, notably through the multiplication of Chinese investments, and the signature of high-level technical, commercial and energy partnerships with India, Japan, South Korea, Vietnam, Thailand, and Singapore (Atle Staalesen, “Japanese, French credits for Yamal LNG”, The Independent Barents Observer, 02 December, 2016).

The international impacts of the Russian Arctic project unfold at the international level, in the political, industrial and business spheres and interact with each other. For example, the Chinese shipping convoys of the COSCO Company or of South Korea have led the Indian government to sign investment deals in the Arctic with the Russian government (Atle Staalesen, “A Role for India in Russian Arctic”, The Independent Barents Observer, October 18, 2016 and  President of Russia, Russian- Indian Talks). A similar phenomenon is at work with Japan (Wrenn Yennie Lindgre, “Energising Russia’s Asia Pivot: Japan-Russia Relations, Post Fukushima, Post-Ukraine“, Norwegian Institute of International Affairs, 4/2015).

Arctic Circle

The immense Russian Arctic endeavour projects its influence on the whole of Asia and Europe, while turning Russia into a power base in the age of global warming. Our analytical strategic approach makes us understand that, through its Arctic project, Russia installs itself as an essential driver of the Asian development and growth (Jean-Michel Valantin, “The Warming Russian Arctic: Where Russian and Asian Business and Strategies Converge?“, The Red (Team) Analysis Society,  November 23, 2016). In other terms, the integral nature of the Russian Arctic development makes it a “grand strategy”, allowing its supporters to wield geopolitical influence. Russia works at becoming one of the great world powers by using the current planetary crisis as a power and economic basis.

For those political, industrial, financial and other business actors (Anne Ackerley, “Long term thinking in a low return world”, Black Rock, October 17, 2016), which are looking for new, sustainable and long-lasting “success frontiers” in a world of growing uncertainties, this is an essential point to understand. This is all the more important that these rising uncertainties are generated and intensified by the rapidly shifting state of international political and economic current conditions and by their interactions with the changing planetary conditions (Jean-Michel Valantin, “Planetary Security, or the Subversion of Collapse”, The Red (Team) Analysis Society, October 26, 2015).

So, the Russian Arctic is becoming a region where these extreme changes and risks are being strategically turned into conditions for industrial and business success for Russian actors. Furthermore, this is also highly likely to be true for Russia’s partners, as these are going to partake not only in the costs but also in the benefits of the medium and long-term effects of this grand strategy. In fact, industrial and business success is now the very glue of the Russian strategy for a long-lasting success in terms of national interest, which integrates political, strategic, economic and business interests in a common grand strategy (Jude Clemente, “Russia’s Oil Production Won’t Falter“, Forbes, June 29, 2016).

This can be seen, for example, in the case of the Yamal LNG plant, developed by the Russian Novatek, Rosneft and Gazprom, French Total and the Chinese CNPC and Silk Road Fund. These industrial actors are all confronted with the friction triggered by the specific conditions of the Arctic. The frozen ground – the permafrost – is rock solid in winter but melts during summer. The technological answer to face these changing conditions, in normal Arctic weather, i.e. not considering climate change, is the installation of the plant on metal poles, which will partly sink in the melting permafrost during summer, thus allowing for maintaining the stability of the structure (Anne Feitz, “Dans le grand nord Russe, le projet gazier géant de Total sort de terre”, Les Echos, 22/05/16).

However, climate change must now be considered. The Novatek company, in charge of the implementation of the project, has thus willingly launched itself into a race against time: its executive officers are perfectly aware that the warming of the region will warm the permafrost too much and that the infrastructures will not be able to maintain their integrity, while the rising of the sea level will put the flat peninsula under water and the industrial operation will not be technically sustainable anymore. Thus, in order to prevent these emerging risks, the industrial operations will have to be operational before the new impacts of climate change develop. Meanwhile, in order to see the operations remain sustainable, executives will certainly have to engage in important adaptation measures (Atle Staalsen, “Climate change could jeopardize Yamal gas development, Government fears”, The Independent Barents Observer, September 15, 2016).

Arctic year long anom HR

In other words, the Yamal project is a part of the Arctic – i.e. territorial – Russian strategy, which is also now a climate change-based strategy. Hence, the gas operation must be implemented and its benefits must be reaped before the next phase of the climate destabilization. Time – and not any time – becomes a crucial element. Indeed, this project is developed according to a time frame which is dependent upon the very conditions of the project: before the moment when the friction due to climate change will make it unsustainable. This anticipation supports the Russian power of attraction because it turns the current degree of climate change into an opportunity for the Russian industry and for Russia, as well as for their numerous Asian and European partners.

Here again, a strategic analysis points out how the Russian authorities identify and use the current phase of climate change as an industrial window of opportunity and how they behave accordingly, in order to make this project profitable for its national and international investors.

However, the Arctic – as well as the entire Human-Earth system – is still highly likely to evolve quickly. In other words, the success of tomorrow must remain sustainable, while its original conditions are highly likely to keep changing.

For example, the way the accelerating melting of the Arctic polar pack ice is going to create more and more icebergs could generate such a new potential danger, which would need to be analysed in-depth through scenario analysis. These icebergs, through their sheer number, would be highly likely to threaten the security of the offshore drilling operations, as well as of the shipping convoys using the Northern Sea Route. This would imply that, for example, a LNG ship leaving the Yamal peninsula for China, Japan or India could be slowed, and the energy supply chain of entire countries could be under pressure. This would paradoxically turn the success of the Russian Arctic development into a new risk for Russia and for its partners.

To prevent such a type of dangers, as well as the related uncertainties, it is necessary to think strategically, thus to recognise how the friction created by an endeavour can turn a success into a failure, or, more precisely, into a system of cascading failures. To achieve this kind of thinking, it is of paramount importance not to deny reality, but on the contrary, to fully accept it.

That is why, for example in answer to the risk evoked above of multiplying icebergs, the Russian Gazprom and Rosneft, as well as Chinese and South Koreans, are building new generations of nuclear icebreakers, which will be able to protect the shipping convoys of the “friction” induced by changing sea conditions (Atle Staalesen, “Aiming for Year Round Sailing on Northern Sea Route”, The Independent Barents Observer, December 14, 2015, RT, “Russia Floats Out Arktika Icebreaker, set to be world’s largest”, 16 June, 2016, Atle Staalesen, “COSCO Sends 5 Vessels Through Northern Sea Route”, The Independent Barents Observer, October 10, 2016, and Jean-Michel Valantin, “Arctic China (1) – The Dragon and the Vikings”, The Red (Team) Analysis Society, 24 May, 2014).

As we have seen, the strategic analysis of the Russian Arctic development is a thinking that is absolutely necessary to be able by integrating it within the proper methodology to produce diagnostics that integrate the new dynamics enforced on government and business actors by the current planetary crisis.

These methodological tools allow us to anticipate major uncertainties, which are currently happening through the combination of historically powerful environmental, political and economic factors, and which have a very high potential of disruption for governments as well as for business. As a result, the best possible adaptation to survive and even to thrive may follow.

About the author: Jean-Michel Valantin (PhD Paris) is the Director of Environment and Security Analysis at The Red (Team) Analysis Society. He is specialised in strategic studies and defence sociology with a focus on environmental geostrategy.

Featured image: “During a staged naval performance to mark Navy Day.” President of Russia Trip to Severomorsk. Navy Day celebrations – July 27, 2014 Severomorsk.  Kremlin website.

Strategic Thinking in the Russian Arctic: When Threats Become Opportunities (1)

This series of two articles focuses on the current development of the Russian Arctic region, while explaining and demonstrating the importance of using strategic thinking for governments as well as for business actors. Indeed, the international dynamics of geopolitical and environmental changes, including their interactions, are becoming so rapid and powerful that political and business actors have to integrate them, in order to be, or to remain, successful. In this first part, using strategic thinking, we shall notably establish how threats can be – and are – turned into opportunities, while constraints become drivers and systems of challenges are transmuted into powerful attractors. This approach dramatically alters the way actors could and should handle issues and uncertainties so far perceived as mainly negative.

For that purpose, we shall study the current development of the warming Russian Arctic through the perspective of strategic thinking, i.e. by using the tools devised to understand the way strategic choices are implemented in the geopolitical arena, the opposition they meet and how the related counter-actions make them evolve (Edward Luttwak, Strategy, the Logic of War and Peace, 2002).

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Understanding what is at stake with the current massive industrial, military, infrastructural, and commercial development of the warming Russian Arctic is a particularly good example of the crucial importance of strategic thinking. In effect, nowadays, our world is changing very rapidly, because of the permanent interactions between the domestic and international political, economic, social and technological situations and planetary climate change, while furthermore natural resources are overused (Jean-Michel Valantin, “The Planetary crisis Rules, part 1 and 2”, The Red (Team) Analysis Society, January 25 and February 25, 2016).

Red (Team) Analysis Society, strategic foresight, strategy, Russian Arctic, paradoxical logic
Circum-Arctic Resource Appraisal: Estimates of Undiscovered Oil and Gas North of the Arctic Circle – USGS [Public domain], via Wikimedia Commons

This change can appear as unexpected if one does not use an efficient methodology to anticipate the coming changes (Helene Lavoix, “Business and Geopolitics, Caught up in the Whirlwinds?”, The Red (Team) Analysis Society, November 23, 2016). Strategic thinking allows us to understand the consequences of these new combinations to anticipate, adapt and, most importantly, to do so successfully.

Strategic thinking allows us to understand how and why the Russian political, military, industry and business authorities are turning the current and rapid warming of the Arctic ocean and land into a massive strategic opportunity for themselves and for their Asian and European industrial, financial and business partners (Jean-Michel Valantin, “The Warming Russian Arctic: Where the Russian Asian Business and Strategies Converge?fifty years of victory at North Pole, Red (Team) Analysis Society, strategic foresight, strategy, Russian Arctic, paradoxical logic”, The Red (Team) Analysis Society, 21 November 2016). With these partners, the Russians are transforming Northern Siberia and the Arctic Ocean into an immense attractor for international trade as well as for energy companies, despite and thanks to the massive risks emerging from the current planetary geophysical destabilization (Jean-Michel Valantin, “The Russian Arctic Oil: a New Economic and Strategic Paradigm?”, The Red Team Analysis Society, October 12, 2016).

Given the sheer scale and complexity of this massive endeavour, it is necessary to use strategic thinking to understand what it means for governments, as well as for businesses, to be able to anticipate how the uncertainties, risks and opportunities related to the development of the Russian Arctic, are getting combined on the short and the middle term by the Russian political and business authorities, in order to achieve success. This understanding is necessary for, among others, energy, trade, shipping and trade industries and companies that are attracted by the new Russian Arctic potential, which emerges from the industrial and commercial transformation of what used to be an extreme and deeply hostile environment but is today profoundly altered by climate change, if these actors are to successfully operate.

This first part focuses on identifying and using the paradoxical logic necessary to assess strategic situations, thus  building upon the interactions between the main levels of strategic thinking.

Thinking strategically: turning climate change into an opportunity

First of all, to understand the Russian Arctic development from a strategic point of view, we have to realise that this development is literally immersed in the paradoxical logic of strategy. Indeed, developing a project, be it political, commercial, military, or of any other nature, creates the emergence of situations that are driven by a paradoxical logic: the implementation of a given project attracts opposing forces, which can even use violence, or difficulties, which threaten the very project that created them with failure (Luttwak, ibid). Understanding this attraction of the opposites and the necessity to use them in order to attain success is the very essence of the strategic approach.

In the case of the development of the Russian Arctic, this paradoxical logic is revealed by the fact that an immense industrial and commercial project is implemented because of, and despite, its particularly adverse environmental and economic context.

To be precise, the whole Arctic region is deeply destabilised by its rapid warming stemming from anthropogenic climate change, which is triggered by the global emissions of greenhouse gas resulting from the use of coal, oil and gas. Climate change is currently warming the whole planet and, in particular, the NASA Arctic temperature change 1981-2007, Red (Team) Analysis Society, strategic foresight, strategy, Russian Arctic, paradoxical logicArctic (Charles Emmerson, A Future History of the Arctic, 2010). The warming of that region, one of the coldest on Earth, involves the melting and breaking of the ice pack. The excess of accumulated heat in the atmosphere warms the ocean and the land during the summer months. Thus, it drives a disruption of the winter ice pack and weather patterns, hence the emergence of geophysical conditions in this region, so far unknown by humans (Joe Romm, “Arctic Death Spiral Update: What Happens in the Arctic Affects Every Where Else”, Think Progress, May 3, 2016). However, what must be very clearly understood is that this warming does not turn the Arctic into a “less” extreme region. On the contrary, it adds a new diversity and complexity to the environment and accelerates the evolution of its geophysical conditions.

Nonetheless, the current warming makes now possible to reach and exploit the enormous oil and gas reserves of the region, because of the relative retreat of the ice. Thus, the fact that the whole Arctic region could have reserves of almost 90 billion barrels of crude and a staggering 1669 trillion cubic feet of natural gas (Energy Information Agency « Russia », July 28, 2015), comes to mean that the development of the warming Arctic could add new and major reserves to the existing Russian diminishing ones. Because of the relative, but accelerating, retreat of the ice, it also opens up a new passage between the Bering Strait and Norway, along the Siberian coast: the “Northern Sea Route”.

In strategic terms, this creates a paradoxical situation, because the Russian Arctic industrial project is in fact defined by the interactions of the very Russian Arctic industrial project with extreme and changing environmental conditions, which are both at the origin of the project, while putting it under extreme pressure (Valantin, The Warming Arctic: a hyper strategic crisis, January 20, 2014).

Thinking strategically: turning economic constraints into a strategic driver

In terms of adversity, from the point of view of Russia, the geophysical change of the Arctic is combined with the fact that, since 2014, the U.S. and the European Union have imposed economic sanctions upon Russia, because of the incorporation of Crimea in the Russian federation and of the tensions in Ukraine (see our series, Hélène Lavoix, Crisis and War in UkraineThe Red (Team) Analysis Society). The sanctions also forbid technically advanced Western oil companies to develop industrial partnerships with Russian companies (Colin Chilcoat, “Is Russia the King of the Arctic by Default?”, OilPrice.com, Oct 22, 2015 and Andy Tully, “Western Sanctions Halt Exxon’s Drilling in Russia’ Arctic”, Russia Insider, 19 September, 2014) .

These sanctions combine with the simultaneous dramatic plummeting of oil prices, which results in diminishing the vital Russian oil and gas revenues (Jean-Michel Valantin, “Oil Flood (2)- Oil and Politics in a (Real) Multipolar World”, The Red (Team) Analysis Society, January 12, 2015). This blend of economic adversities is impacting the Russian economic growth, when the Russian political and economic authorities decide, against these environmental and economic odds, to develop the Russian Arctic.

In other terms, one can identify, thanks to and through the use of the paradoxical logic of strategy, that the economic and political pressure exerted on Russia is, in fact, a key driver of the Russian decision to reinforce and accelerate the development of Northern Siberia and Prirazlomnoye tanker, Red (Team) Analysis Society, strategic foresight, strategy, Russian Arctic, paradoxical logicof the Arctic Ocean (Irina Slav, “Why Arctic Oil is Crucial for Russia’s Future”, OilPrice.com, September 2, 2016). By doing so, the Russian authorities may find another way to reinforce the security, power and economic attractiveness of their country. Thus appears the fully strategic nature of the Arctic project, i.e. a project decided and supported by a (geo)political will that is exerted “against a living and reactive force” (Clausewitz, On War, 1832). In our case, it means that the Russian political will is exerted to bolster its Arctic project despite, and against, the adverse political and economic forces of the sanction regime and of the “natural” difficulties inherent to a changing and extreme Arctic… as well as because of them.

In terms of strategic foresight and warning, including monitoring, this means that we have here identified crucial indicators, and how they are dynamically related, which will allow for a better anticipation and thus navigation of uncertainty.

The result of the paradoxical strengthening of this political will by the opposing forces that it encounters takes the form of a geopolitical project defined by one of the most extreme and destabilised regions of the planet’s industrial development, notably through the offshore oil and gas platforms, the opening of the Northern Sea Route along the Siberian coast, from the Asian side of the Bering Strait to Norway, and through the building of maritime infrastructures, and of the giant the LNG Yamal project (Thomas Nilsen, “Arctic Russia Warms 2.5 Times Faster Than the Rest of the Globe”, The Independent Barents Observer, November 29, 2015, Atle Staalesen, “No Pause in Arctic Exploration – Igor Sechin”, The Independent Barents Observer, July 18, 2016, Atle Staalesen, “Moscow invites Beijing to take part in Arctic sea route project”, RT, 7 December, 2015), “Aiming for Year Round Sailing on Northern Sea Route”, The Independent Barents Observer, December 14, 2015). To these must be added the new north-south railroads network that connects the various Northern Sea Route vs Southern Sea Routeindustrial projects to the railroads networks of Russia and of Central Asia, and thus to Europe and China (“Russian Railways to Complete Latitudinal Railway project to the Arctic”, Think Rail Ways, November 19, 2015, Atle Staalesen, “Grand Railway Deal for Yamal”, The Independent Barents Observer, October 20, 2016). In the same dynamic the Russian military Navy has been put in charge of the surveillance and monitoring of the whole region and its projects, and installs bases all around the Siberian coast as well as on the islands of the Russian Arctic Ocean.

As the paradoxical logic of strategy let us expect, the environmental and economic constraints outlined previously have driven the Russian authorities to facilitate the emergence of industrial and human resources’ innovations, through the recruitment of young Russian engineers in the energy sector. Those are tasked to compensate the brutal loss of western technological know-how since 2014 and the start of the sanctions regime. Those engineers are encouraged to be innovative and thus to reduce quickly the gap between the technological needs of the Russian companies and their capabilities in the Arctic (Irina Slav, ibid). Thus, the new potential for the energy exploitation of Northern and maritime Siberia, which emerges, is so attractive that, despite the sanctions regime, some western companies, such as Total and BP, have continued or reactivated their partnerships with their Russian counterparts (Jean-Michel Valantin, The Warming Russian Arctic: Where Russian and Asian Business Converge?”, The Red (Team) Analysis Society, 21 November, 2016).

Thinking strategically: turning a system of constraints into power (of attraction)

Once again, the Russian political and business authorities have been able to harness the “power of attraction” of Northern Siberia, literally reinforced by the very pressure that are exerted upon them.

In other terms, analysing these dynamics in strategic terms leads us to realise that Russia is projecting a staggering amount of political, economic, industrial, military and business power in Northern Siberia and upon the Arctic Ocean. This projection of power reaches such a scale, because it is aimed at creating what we call the “Russian arctic power of attraction”, which is felt throughout Central, South and Eastern Asia.

This attraction is expressed, for example, by the multibillion dollars Chinese investments in the Yamal peninsula and in the Arkhangelsk port, or by the sales of Siberian LNG to Japan, or by the use of the Siberian ports and railroads by South Korean Tor icebreaker, Red (Team) Analysis Society, strategic foresight, strategy, Russian Arctic, paradoxical logicshipping and industry companies to export industrial machines in Kazakhstan (Jack Farchy, “Chinese Lend $12 Bn for Gas Plant in Russian Arctic”, Financial Times, April 29, 2016, (Atle Staalesen, “Grand Railway Deal for Yamal”, The Independent Barents Observer, October 20, 2016, (“First Chemical reactors shipped to Kazakhstan from South Korea”, The Astana Times, 26 July 2016).

This strategy is grounded in the political, economic and strategic history of Russia, which has built the bulk of its industrial base between the end of World War I and the 1930s, during the immensely violent period of the Soviet A battery of Katyusha during the 1941-1945 Great Patriotic War, Red (Team) Analysis Society, strategic foresight, strategy, Russian Arctic, paradoxical logicrevolution and of the installation of Stalinism (Moshe Lewin, The Soviet Century, 2005). Then, during the savage German onslaught of 1941, Russia moved its western industrial capability to the Ural and Siberia, where it was reassembled, before overwhelming the Wehrmacht and the Nazi military industry with its sheer production capability and strategic sense (Adam Tooze, The Wages of Destruction, 2006).

Then, came the long years of reconstruction. Finally, during the 1990s, the end of the Soviet Union saw the terribly destructive economic crisis that ravaged entire sectors (Stephen Kotkin, Armageddon Averted – The Soviet Collapse 1970-2000, 2008) of the Russian industry, before the beginning of the 2000s witnessed the starting of the Russian industrial rebuilding.

The current Russian Arctic endeavour seems to be a new phase in the industrial development of Russia, led by a strategy that is aimed at renewing the status of Russia as an international economic power at the time of climate change, which combines itself with the energetic needs of Asia and the tensions with Europe and the U.S. (Anna Andriovana, Elena Mazneva, “Japan makes Arctic gas Move with $400 million Yamal LNG Loan”, Bloomberg, September 2, 2016).

This capability to implement a project despite the fact that it attracts and trigger opposite political and environmental forces is the very essence of the paradoxical logic of strategy.

Continuing building upon and using strategic thinking, we shall turn to the inner workings of the Russian Arctic development with the next article. We shall notably see how the latter’s different aspects, mainly the industrial operations and the changing environment, are interacting, creating a certain level of “friction”, an essential dimension of strategy. This level of friction is a crucial element for the successful dynamics of this mammoth project. Then, we shall study how the Russian authorities identify and use the current phase of climate change as an industrial window of opportunity and how they behave accordingly, in order to make this project profitable for domestic and international investors.

About the author: Jean-Michel Valantin (PhD Paris) is the Director of Environment and Security Analysis at The Red (Team) Analysis Society. He is specialised in strategic studies and defence sociology with a focus on environmental geostrategy.

Featured image: МЛСП «Приразломная» на карте российской Арктики, 2014 by By Krichevsky (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

Lessons from the Conflict in Ukraine – Geopolitics, Uncertainties and Business (4)

This article identifies lessons we can learn from the impact of the conflict in Ukraine on businesses, as presented in the first part, to continue enhancing our understanding of the way businesses and the corporate world could usefully anticipate or foresee geopolitical and political risks and uncertainties.

From the way to identify which crises and geopolitical uncertainties can be – sometimes unexpectedly – of concern to a company (Lesson 1) to the best timing for starting the anticipation  process (Lesson 2), the need to think outside the ideological box (Lesson 3) and multi-dimensionally (Lesson 4) and to understand “national interest” and its evolution (Lesson 5), the impacts of the war in Ukraine bring us a wealth of understanding and points out many necessary if not crucial improvements that may be endeavoured. These will thus be added to the points previously identified in “Lessons from and for the Brexit – Geopolitics, Uncertainties, and Business (2)”, after a general framework was defined in “Businesses and Geopolitics: Caught up in the Whirlwinds?” (1).

Continue reading Lessons from the Conflict in Ukraine – Geopolitics, Uncertainties and Business (4)

Impacts of the Conflict in Ukraine – Geopolitics, Uncertainties and Business (3)

With this article and the next one, we shall use the instability and conflict in Ukraine and the related impacts on businesses to continue enhancing our understanding of the way businesses and the corporate world could usefully anticipate or foresee geopolitical and political risks and uncertainties.

Here we shall review two major impacts of the war in Ukraine. First we shall look at the surprising cost of sanctions related to Ukraine on businesses of sanctioning countries. Second, we shall move to the multiple impacts of the downing of Malaysian Airlines flight MH17. With the forthcoming second part, wondering how a firm could have avoided or to the least mitigated  these impacts, we shall use what we learned to identify main lessons to improve strategic foresight and warning, anticipation and risk management of geopolitical and political risks and uncertainties for the corporate sector. These will thus be added to the points previously identified in “Lessons from and for the Brexit – Geopolitics, Uncertainties, and Business (2)”, after a general framework was defined in “Businesses and Geopolitics: Caught up in the Whirlwinds?” (1).

Continue reading Impacts of the Conflict in Ukraine – Geopolitics, Uncertainties and Business (3)

Lessons from and for the Brexit – Geopolitics, Uncertainties, and Business (2)

On 24 June 2016 morning, the U.K. announced the results of the referendum on the Brexit: 51.9% of the population voted to leave the EU against 48.1% wanting to remain, while the turnout reached 72,2% (BBC Referendum Results). This vote triggered among the media, financial and European political elite a “shock”, consternation, and a host of predictions of Geopolitics, Uncertainties, Business, Brexit, scenarios, warning, riskimpending doom, while markets plunged worldwide (BBC News, “Brexit: What the world’s papers say“, 24 June 2016). It also set off a series of events and dynamics still unfolding nowadays with far-ranging consequences, globally, for the future. Continue reading Lessons from and for the Brexit – Geopolitics, Uncertainties, and Business (2)

How to Read a Large Amount of Information

The first part of this article can be accessed as libre open access, the second part is exclusively for members and registered participants to our courses.

The incredible and growing amount of information available nowadays presents us with specific challenges we need to overcome first, if we want to be able to understand, foresee, warn about, and finally adequately answer accumulating dangers, threats, risks or more broadly changes and uncertainties. Our information age is indeed characterised by what Martin Hilbert called the “global information explosion” (“Digital Technology & Social Change” University of California Course, 2015), when we constantly face “information overload” (among many others, Bertram Gross, The Managing of Organizations, 1964; Alvin Toffler, Future Shock, 1970; also Stanley Milgram, “The experience of living in cities“, Science, 167, 1461-1468, 1970).

Google estimated in 2010 that 129,864,880 books had then been published (Leonid Taycher, “Books of the world, stand up and be counted! All 129,864,880 of you.” 5 Aug 2010). Wikipedia estimates that “approximately 2,200,000” books were published each year across the world. Meanwhile, it is almost frightening to look live at the constantly growing number of internet website: 1,080,387,230+ on 15 Sept 2016 (internet live stats). 

Those are general figures, but they are also representative of what we must face when we work on a specific topic, because we have to Continue reading How to Read a Large Amount of Information