Murphy Martin. Small Boats, Weak States, Dirty Money. Piracy & Maritime Terrorism in the Modern World
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maritime terrorism
Major ports are potentially more vulnerable. ey, too, are effectively
chokepoints.
320
e trend has been to concentrate trans-oceanic trade in
bigger and bigger ships of all types—oil tankers, gas carriers, bulk cargo
vessels and container ships—that can only dock in a small number of giant
“hub” ports from which goods are then shipped in smaller vessels to sur-
rounding satellite ports. Although the terrorist threat is largely hypothetical
at the moment, ports do present terrorists with the opportunity to inflict
the combination of physically inspired but psychologically destructive vio-
lence that they look to achieve.
321
e “hub” ports would be the obvious
targets and whatever the extent of the physical damage, the press would be
close at hand to magnify the psychological impact.
is greater concentration on larger ships and “hub” ports gives rise
to what the insurance industry calls “accumulation risk”. To give one ex-
ample: when the 5,500 TEu Hyundai Fortune caught fire off Yemen in
March 2006, 850 out of 3,100 containers were affected, giving rise to a
potential claim of $200 million for just one third of its load. In the next
320 A ‘hub port’ is a port capable of handling the new generation of large container
ships that are now entering service. Because they ‘collect’ numerous trades at a
single concentrated point they possess similar attributes to a chokepoint. See
Daniel Y. Coulter, ‘Globalization of maritime commerce: e rise of hub ports’
in Tangredi, Globalization and Maritime Power, pp. 133-41.
321 In order to achieve their enormous throughputs these ports are dependent on
information technology. A ‘cyber-attack’, while offering less dramatic pictures,
could potentially be more disruptive than a bomb: ibid., p. 139 and Cordner,
‘Maritime terrorism: the next ‘soft target’’.
Map 1. SLOCs, chokepoints and areas of pirate activity Source: OECD 2003, http://
www.oecd.org/dataoecd/63/13/4375896.pdf
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small boats, weak states, dirty money
five to ten years, container ships will be built that are capable of carrying
between 12,000 and 18,000 TEu. is accumulation risk at ports will rise
commensurately. hong Kong, the world’s second busiest container port,
can accommodate more than 250,000 TEu, meaning that goods valued in
excess of $5 billion could be sitting on its wharfs at any one time.
322
What the direct and contingent economic costs of port shutdowns
might be as a result of an attack is the subject of lively debate. e practi-
cal example that is cited most often is the 2002 shutdown of uS West
Coast ports as a result of an employers’ lock-out. e pacific Maritime
Association (pMA), which represented the port employers, commissioned
an economic consultancy firm, Martin Associates, to undertake an impact
study. is concluded that a 10-day shutdown would cost the uS econo-
my $1.94 billion per day, a figure that has been quoted widely.
323
Yet al-
most as soon as the dispute was settled, other commentators were suggest-
ing that the figure was an overestimate. e Martin study suggested that
if a shutdown continued for 20 days, the cost to the uS economy would
be $48.6 billion. Anderson, however, suggested a figure of $4.669 billion
for a four-week shutdown, commenting that figure of $1-2 billion per day
would be closer to the economic impact of “sinking the ships rather than
delaying them”.
324
e Anderson report also contended that the effect was
not constant but would grow geometrically over time: only about ten per
cent of the impact would be felt over the first ten days but the effects
would become progressively more serious until after 30 days this growth
could tail off as shippers found alternative routes. Substitution, in other
words, would begin to take place.
e idea of substitution is central to the argument of another critic,
peter hall.
325
After making clear that he shares the criticisms of others with
322 Gordon Fry and Michael ompson, ‘e bigger the ship, the greater the risk’,
Lloyd’s List, 9 June 2006
.
323 Martin Associates, ‘An assessment of the impact of West Coast container opera-
tions and the potential impacts of an interruption of port operations, 2000’,
Lancaster, pA: Martin Associates, 23 Oct. 2001. e pMA also commissioned
a report focusing on the effects of the trans-pacific trade which also made use of
the Martin Associates figures. Stephen S. Cohen, ‘Economic impact of a West
Coast dock shutdown’, university of California at Berkeley, Jan. 2002.
324 patrick L. Anderson, ‘Lost earnings due to the West Coast port shutdown–
preliminary estimate’, Lansing MI: Anderson Economic Group Working paper
2002-10, 7 Oct. 2002, pp. 1-2.
325 peter V. hall, ‘‘We’d have to sink the ships’: Impact Studies and the 2002 West
Coast port Lockout’, Economic Development Quarterly, vol. 18, no. 4, Nov.
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regard to the problems associated with impact studies—their inability to
deal with long-term changes in industrial organisation, demand, macr-
oeconomic conditions, production and transportation technologies
326
—he
argues with regard to substitution, first, that one of the reasons why the
Martin study figure was so high was the lack of substitution options avail-
able to shippers moving goods through West Coast ports. e impact study
assumed that all West Coast ports would be closed because the relevant
labour contract covered all the ports from Seattle to San Diego and was
designed precisely to prevent shippers playing one port off against another.
Secondly, hall argues that while the Martin methodology, based on a con-
tinuous monotonic function, accurately reflected job and other impacts
in the vicinity of the ports it became less reliable beyond that because it
worked on the incorrect assumption “that existing spatial-organisational
production structures are fixed…(and did) not adequately address the
possibilities for substitution within and between sectors even in the short
run”.
327
he continues:
structural changes in the transportation system mean that port impact studies
are more accurate in estimating the relatively unimportant and declining direct
employment and other benefits of cargo-handling activities, but are increasingly
unreliable at estimating the much more significant and growing economic contri-
butions that are represented by the cargo itself…e only way to get an amount of
$1.94 billion per day is to turn to the port-dependent impacts of the shutdown, but
this is precisely where port impact studies are least reliable.
328
e conclusion hall reached, based on the reasoning that most eco-
nomic value is not lost as the Martin study assumes but is substituted or
delayed, is that the cost of shutdown should be no more than $390 million
per day, about one fifth of the Martin estimate.
329
hall and the Martin study both assumed that shippers would be in a
position to anticipate a shutdown and take at least some diversionary action
or arrange some degree of substitution at a relatively early stage. e Con-
gressional Budget Office (CBO) for its 2006 study was asked specifically to
2004, pp. 354-67.
326 hall, ‘‘We’d have to sink the ships’’, p. 360.
327 Ibid., p. 355. e CBO in its study (see below) also points out that if Martin
Associates had used the more reliable ratio of GDp to wages and salaries rather
than business revenues to wages and salaries the impact of the shutdown using
their methodology would have gone down to $470 million per day.
328 hall, ‘‘We’d have to sink the ships’’, p. 359.
329 Ibid., p. 363.
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small boats, weak states, dirty money
evaluate unexpected disruptions, an approach that more accurately reflects
the circumstances that would pertain after a terrorist incident.
330
In the two
scenarios they examined only the ports of Los Angeles and Long Beach were
affected directly. All other West Coast ports remained open as did ports
elsewhere in the united States. e first scenario posited a one week closure
and assumed the backlog of shipments would take one month to clear. us-
ing the LIFT (Long-Term Interindustry Forecasting Tool) model, the CBO
researchers concluded that such a shutdown would reduce GDp by $150
million per day but that once the problem had been resolved GDp would
return to where it would have been.
331
In the three-year scenario the pattern
of losses would vary over time as shippers found alternative routes and cus-
tomers adopted substitutes but GDp losses would not be recouped. e net
effect would be a reduction in real GDp of between 0.35 and 0.55 per cent,
that is to say between $45 billion and $70 billion per year, which translates
to between $125 million and $200 million per day. Real GDp, however,
reflects only domestic production and consumer and business expenditure
would fall more substantially because less would be spent on both domestic
and imported goods. Inflation would increase by two per cent in the first
year and might trigger an increase in interest rates. Available jobs would be
about one million fewer on average over the three-year period.
332
e CBO also attempted to put these figures in perspective. It pointed
out that according to the Federal Reserve Bank of New York, the 9/11 at-
tacks cost New York City an estimated $33-36 billion but whereas GDp
was forecast to drop sharply in 2002 from 2.7 per cent just prior to the
attacks to one per cent, it actually grew by 1.6 per cent. hurricanes Katrina
and Rita led to the loss of physical capital of between $70 and $130 billion.
e storms slowed GDp growth by about 0.5 per cent in the second half of
2005 but CBO estimates suggested that growth in 2006 would have been
boosted by a similar amount as oil production resumed and reconstruction
work began.
333
330 Congressional Budget Office (CBO), ‘e economic coasts of disruptions in
container shipments’, Washington, DC: e Congress of the united States,
Congressional Budget Office, 29 March 2006.
331 CBO, ‘e economic costs of disruptions in container shipments’, p. 14. CBO
also cite a report prepared by the economic forecasting firm DRI-WEFA (now
Global Insight) which suggests a lower figure of $65 million per day.
332 Ibid., pp. 18-21.
333 Ibid., pp. 12-13.
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maritime terrorism
Nonetheless, large figures continue to be discussed: “Recent analysis of
a coordinated terrorist attack against four major uS economic ports indi-
cates that there would be in the order of $400 to $800 billion in long-term
direct and indirect economic impacts to the united States.”
334
Figures of
these magnitudes suggest that WMD attacks are being contemplated or
ports with hard-to-replace infrastructure are being assessed.
While the temptation to exaggerate must be resisted, no one is suggest-
ing that the effects of port shutdowns would be anything less than seri-
ous. Looking beyond the ports to the modern global shipping system as
a whole, its success is based on four attributes: speed, integrity (i.e. goods
will not be lost through damage or pilferage), reliability and low cost. To
work efficiently as a system each attribute depends on the other and they
all, in turn, depend upon ready access and minimal in-transit security. e
erosion of any one of these attributes could degrade the system’s perform-
ance. e system would slow and costs would rise, which in turn would
undermine customers’ confidence and affect how they used it.
Security is not necessarily a numbers game, nor is strategy. A low
number of attacks does not necessarily signal a low-level threat. Terror-
ism is predicated on generating a disproportionate effect from minimal
resources. e physical security of key points in the system is, of course,
essential as these are the places where attacks will take place. however,
such point attacks do not need to be either numerous nor spectacular in
order to degrade the performance of the system as a system with its reliance
on strict timetables, short turnaround times, maximum utilisation, nar-
row financial margins, widespread dependence on information technology
on ships to minimise crew sizes and in ports to maximise cargo flow, and
sensitivity to fluctuations in shareholder and customer confidence, all of
which make it vulnerable to disruption.
335
Attacks on the global maritime
334 Scott Truver, correspondence with author, Jan. 2008.
335 A point illustrated by the nervousness in the oil markets following the attacks
Al Qaeda carried out in 2004 on oil installations in Saudi Arabia. e first at-
tack on the Red Sea port of Yanbu (which took place one week after the suicide
boat attack on the Iraqi oil terminal at Basra) elicited relatively little response.
however, the price of oil increased sharply after the second attack in Khobar, as
did the level of rhetoric about the likelihood that Al Qaeda was pursing a policy
of ‘oil terrorism’. On the Yanbu attack see, for example, ‘Al Qaeda strikes at uS-
Saudi oil’, DEBKAfile Special Report, 4 May 2004. On the Khobar attack and the
subsequent oil price rise see, for example, Robin Gedye, ‘Al Qaeda rampage ends
in bloody gunfight’, Daily Telegraph, 31 May 2004 and David Litterick, ‘petrol
soars to £1 a litre amid fears of oil terrorism’, Daily Telegraph, 2 June 2004.
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small boats, weak states, dirty money
transport network would fit Robert Bunker’s concept of “bond relationship
targeting”, which he describes as an end state that rather than being char-
acterised by “gross physical destruction or injury…is a tailored disruption
within a thing, between it and other things or between it and its environ-
ment by degrading, severing or altering the bonds and relationships which
define its existence”.
336
Loss of confidence in the system would most likely be expressed through
the price mechanism, particularly through increases in commodity prices
and rates for insurance and shipping, which would affect productivity.
337
338
e global maritime transport system’s sensitivity to attack is untested
but aspects of it, such as the “just-in-time” (JIT) inventory system, appear
potentially vulnerable to shocks such as terrorist assaults. Around 90 per
cent of the world’s maritime trade now moves in containers.
339
While the
proportion that are carrying JIT goods is unknown, it is nonetheless evi-
dent that a significant number of international manufacturers and retailers
now use JIT because it enables components to be delivered to a production
line, and products to stores, just at the time they are needed, rather than
being held in stock. Its economic benefits led buyers and sellers to demand
more from the transportation system that links them. Improvements in that
system increased confidence in the system’s ability to deliver goods safely
and cost-effectively, which meant that more companies in more countries
adopted JIT. As confidence spread, so did increased trade. As confidence
increased, companies were prepared to rely on the security of their goods
in transit; ships, in effect, became warehouses. Stockholdings throughout
the system fell dramatically, releasing working capital, which, in turn, led
to sharp rises in productivity. But JIT systems work most effectively when
336 Robert J. Bunker, ‘Battlespace dynamics, information warfare to netwar, and
bond-relationship targeting’ in Robert J. Bunker (ed.), Non-State reats and
Future Wars, London and portland, OR: Frank Cass, 2003, p. 104.
337 e terror threat already places burdens on industry. Yonah Alexander and Tyler
Richardson in ‘he who commands the sea…’, Jerusalem Post, 19 Dec. 2002
comment that ‘the added costs placed on oil companies and insurance brokers
reduces the flow of oil into the global market, far outweighing the cost accrued
from (any) physical damage to the vessels’.
338 historically, routes which showed the most marked decline in piracy and pri-
vateering prior to 1800 showed the highest increases in ship ton per man, with
insurance rates dropping by two thirds between 1675 and 1770 and continuing
to drop during the nineteenth century: Douglass C. North, ‘Sources of produc-
tivity change in ocean shipping, 1600-1850’, Journal of Political Economy, vol.
76, no. 5, Sept.-Oct. 1968, pp. 959-60.
339 Van de Voort and O’Brien, ‘‘Seacurity’’, p. 1.
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markets are stable and less so when they are volatile.
340
If exogenous activ-
ity were to exacerbate known vulnerabilities in the international trading
system for any reason, it could mean that stockholdings throughout the
system could rise again as buyers responded to the increased uncertainty,
tying up working capital, space and labour. productivity would fall. Eco-
nomic performance would decline which would erode that elusive eco-
nomic driver, confidence.
341
A study by David Closs of Michigan State university in 2002 revealed
that large uS manufacturers held an average of 1.57 months of stock in the
early 1990s. By 2001 this had fallen to 1.36 months. Closs expected this to
increase to 1.43 months in 2002 in response to the events of 9/11, as what
has come to be called “just-in-case” inventory was raised. In other words,
in just one year, the fear of terrorist disruption might have halved the lo-
gistic chain productivity gains made over the previous decade and could
have added between $50 and $80 billion to business costs in the uS alone.
Sensitivity to this issue meant that, although immediately following 9/11
the united States closed its ports, it opened them again two days later, not
because the authorities had a better understanding of the real level of the
threat, but because the absence of components would have forced manu-
facturers at all levels of the economy to close production lines and lay off
workers. ese costs would have been in addition to the new supply-chain
security measures put in place since 9/11, which, estimates suggest, cost the
uS $65 billion annually.
342
at this scenario did not in fact come about
is attributable to other, benign, economic factors including lower demand
for fuel.
343
e OECD when making its calculation admitted that working
340 Cranfield School of Management, ‘Supply chain vulnerability’, p. 5.
341 Damian Reece, the City Editor of the Daily Telegraph, has written that confi-
dence ‘is like oxygen...You only really appreciate its importance when it is not
there. Business is all about confidence. When its there in abundance economies
grow, wealth is created and employment expands. When confidence dissipates
so does growth, economies go into reverse and people lose their jobs’: ‘Business
comment’, Daily Telegraph, 10 Aug. 2007.
342 p. Damas, ‘Supply chains at war’, American Shipper, 1 Nov. 2001.
343 Bernasek, ‘e friction economy’, pp. 104-10. See also OECD, Security in
Maritime Transport, p. 20 and Richardson, A Time Bomb for Global Trade, p. 67.
In Aug. 2004, Closs pointed to the figures collated by Robert Delaney for the
Logistics Institute’s annual ‘State of logistics’ report, which showed an increase
in stockholding, but added the clarification that while ‘his numbers don’t reflect
increases to the degree that we expected, a major source of the differences are
due to lower demand for fuel (reduced transportation expense) and his assump-
tions regarding inventory carrying cost. e actual interest rates turned out to
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small boats, weak states, dirty money
out what level of “just-in-case” inventory companies would be comfortable
with would be difficult. For purely illustrative purposes, it pointed out that
returning inventories to 1990 levels in relation to GDp would consume ap-
proximately $300 billion of OECD working capital and increase inventory
carrying costs by about $75 billion per year (0.7 per cent of GDp).
344
In other words, the fear of attack has already meant that some of the
bonds that hold the system together are no longer trusted wholehearted-
ly and have been supplemented by a range of regulatory and operational
measures, including an attempt to build a surveillance scheme to track in-
ternational ship movements, that have added a substantial layer of direct
and indirect cost.
345
While the chances of multiple attacks (or even a single
attack) of sufficient magnitude to inflict tangible damage on the system
are remote, the concern must be that if these were to be successful, and
therefore the current arrangements were to be found wanting, the cost of
additional security measures, perhaps driven by demands for levels of secu-
rity that are unattainable, might prove to be so prohibitive that businesses
would start to repatriate their operations. is could trigger a gradual de-
cline in worldwide trade which could, in turn, have ramifications for inter-
state relations and global security.
Multiple targets and multiple problems
It has been argued that the sheer expanse of the oceans, which amounts to
almost two and half times the land surface of the planet, coupled with the
anarchic state that prevails over the high seas (and, as argued earlier, can
extend right up to the coast in the case of weak or failed states), “offers
terrorists virtually unparalleled opportunity for “strategic reach” and “geo-
graphical flexibility” in terms of range of targets, the freedom to manoeuvre
and the ability to disperse and deploy assets.
346
Moreover, that “given the
sheer volume and vitality of global seaborne trade…the large number of
crucial ports, transhipment nodes and…trading links, the maritime envi-
ronment offers an almost limitless range of tempting, high pay-off targets,
be much lower than most of us expected.’ David Closs, correspondence with
author.
344 OECD, ‘e economic consequences of terrorism’, Economics Department
Working Papers no. 334, 17 July 2002, p. 26.
345 See, for example, Alan Erera, et al,. ‘Cost of security for sea cargo transport’,
e Logistics Institute–Asia pacific, 26 May 2003, which describes real and
potential costs without attributing values to them.
346 herbert-Burns, ‘Terrorism in the early 21
st
century maritime domain’, p. 157.
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many of which are fringed by densely populated urban conurbations.”
347
eoretically, this is the case. When such thinking, which is essentially na-
valist, is overlain with the observation that “contemporary warfare is indeed
non-spatial and multidimensional…where geographic, legalistic and juris-
dictional fields of operation lose their meaning”,
348
then the potential and
the suitability of the sea as a medium for insurgent and terrorist operations
appears to be all too plain. however, while it is sensible to remain alive to
possibilities, this approach runs the risk of over-emphasising the combative
aspect of the threat and downplaying insurgents use of the sea for mundane
logistical purposes, in much the same way that the naval missions of trade
protection and blockade have taken something of a back seat in the era of
expeditionary war and power projection.
erefore, the caveat that these combative opportunities in the mari-
time domain are open only to those groups with the necessary and relevant
skills and motivation is crucial,
349
because these opportunities have been
matched, in many cases, by countervailing obstacles. On the other hand,
while law enforcement agencies have recorded some resounding successes,
terrorist or insurgent use of the sea for logistical operations has probably
proceeded with little hindrance.
e purpose of this chapter has been to illustrate the range of opera-
tional opportunities that have been engaged or considered by waterborne
terrorists and insurgents. e next chapter will examine how terrorists and
insurgents have actually made use of the sea. While terrorism is a phe-
nomenon with shared characteristics, the threat is not from terrorism as a
concept, or the sea as a theoretically anarchic space, but from the aims and
capabilities of specific terrorist groups (and even sub-groups) as far as these
are known and understood, and their ability to exploit the freedom that
that anarchy provides.
347 Ibid.
348 Stephen Sloan, ‘Responding to the threat’ in Bunker, Networks, Terrorism and
Global Insurgency, p. xxiii.
349 herbert-Burns, ‘Terrorism in the early 21
st
century maritime domain’, p. 157.