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Corruption Watch: February 3, 2004

3 February 2004, Volume 4, Number 4
Assessing political and security risks for the private sector has never been easy, but it has arguably become more difficult since the 11 September 2001 attacks in the United States. The potential consequences of an erroneous prediction are enormous, regardless of how experienced or informed the analysts are that make it. Such effects can wreak havoc on sovereign states -- where an attack by an organized group or even a lone assassin can spark devastating chain reactions -- as well as the private sector through losses for individual companies or entire capital markets.

How do private security-risk assessments differ from their counterparts produced by government bodies? And do such analysts approach their task in the same manner?

Debate over the accuracy of intelligence estimates inevitably introduces the question of whether their authors are under undue pressure to tailor their conclusions to meet the political needs of their masters. Such pressure is arguably less likely to occur in the private risk-analysis sector. Control Risks Group is an international business-risk consultancy that has been in business since 1975, working with some 5,300 clients in more than 130 countries. In November it released a "Risk Map" that "forecasts opportunities and trouble spots for 2004," categorizing political and security risks into the categories "extreme," "high," "medium," or "low." Somalia is regarded as an "extreme" risk country in both political and security terms, while Albania is a "medium" risk state. Private-sector players like Control Risks claim that they are less susceptible to political pressure than government analysts when producing their assessments, increasing the value of their services and analysis.

Private companies might also be less averse to tapping open sources of information, utilizing resources that government intelligence analysts tend to disregard or downplay simply because they are not stamped "Top Secret." Even putting aside the difficulty, reliability, and cost of covert methods of information gathering, open-source materials are often as good -- if not better -- than covert sources. Private providers of risk assessments are forced to handle unclassified information in pursuit of their goals.

Quick Comparisons
That is not to say that assessments from within the private sector are uniform simply because they share some methodological traits. A quick glimpse into two respected groups' evaluations via publicly available sources might serve to highlight that point.

"Jane's Intelligence Digest," a highly regarded publication on security and intelligence issues, in its 16 January issue presented a brief overview of "key security assessments" for 2004 based on reports from its global network of analysts. One of the key countries featured in this assessment is the Kingdom of Saudi Arabia. "Jane's Intelligence Digest" gives it the following outlook: The security situation in Saudi Arabia "is set to continue to deteriorate despite recent (and long overdue) moves to crackdown on hard-line Islamic radical groups, some of which are linked to Al-Qaeda or share its aims."

The assessment states that rising domestic dissatisfaction and the spread of militancy had led to a weakening of the House of Saud, a condition that the authors claim might prove crucial: "A discreet internal palace coup d'etat to remove the more radical members of the Saudi family from positions may occur during 2004 in order to shore up the ruling circle."

Meanwhile, Control Risks Group's assessment of the Saudi kingdom is less dramatic. The company gives it a "medium" rating for both political and security risk. "Saudi Arabia has never looked so unsteady, especially after the bombing of residential compounds in Riyadh in 2003.... [H]owever, the kingdom's resilience should not be underestimated.... Saudi Arabia is troubled, but its sources of power and influence, at home and abroad, remain formidable."

Pakistan is another country for which both "Jane's Intelligence Digest" and Control Risks Group provided assessments. "Jane's" wrote: "We predict that Pakistani President General Pervez Musharraf will remain the main target for extremists within his own country. The two recent assassination attempts against the general suggest that the militants have access to reliable and detailed intelligence concerning his movements.... Negotiations with India will almost certainly be suspended and there is risk of significant unrest, leading to martial law."

Control Risks gives Pakistan a "medium" rating for political risk and a "high" rating for security risk. Its analysts wrote: "Pakistan will remain a difficult country for Western companies to operate in.... Musharraf faces...domestic threats and there are signs of discontent among some military leaders who are angry at the president's withdrawal of support for the Taliban and dilution of support for Kashmiri militants. Musharraf will also remain a key target for Al-Qaeda."

Analytical Tradecraft
United States government analysts working for the Central Intelligence Agency (CIA) are guided in their work by the multivolume "Compendium of Analytic Tradecraft Notes," a how-to book for analysts published by the CIA's Product Evaluation Staff of the Directorate of Intelligence. It lists five standards that apply to an objective National Intelligence Estimate (NIE), the product prepared by the Directorate of Intelligence that aims to provide policymakers with a reasonable assessment of a particular topic.

These five standards were discussed in a study by the United States General Accounting Office (GAO) as part of a GAO study titled "Analytic Soundness of National Intelligence Estimate 95-19: Emerging Missile Threats to North America During the Next 15 Years" ( The five standards are as follows:

1. An NIE should quantify the certainty level of its key judgments by using percentages or "bettors' odds" where feasible and avoid overstating the certainty of judgments. "For example, a 'small but significant' chance could mean one chance in a hundred to one person, for another it may mean one chance in five.... Words such as 'possibly' are not of much help to someone trying to make an important decision." This guidance provides that analysts should formulate such certainty levels as "chances are one in three" that a possible scenario might take place.

2. An NIE should identify explicitly its assumptions and judgments. "Critical assumptions, also known as 'linchpin assumptions' are defined by the CIA as analysts debatable premises that hold the argument together and warrant the validity of judgments.... A good analyst will clearly identify its key assumptions so that policymakers are aware of the 'foundations' of the estimate and can therefore judge for themselves the appropriateness of the assumptions and the desirability of initiating actions to hedge against a failure of one or more assumptions."

3. An NIE should develop and explore "alternative futures" less likely (but not impossible) scenarios that would dramatically change the estimate if they occurred. The GAO report quotes a former intelligence analyst as saying, "The job, after all, is not so much to predict the future as to help policymakers think about the future."

4. An NIE should allow dissenting views on predictions or interpretations.

5. An NIE should note explicitly what the Intelligence Community does not know when the information gaps could have significant consequences for the issues under consideration. RK

("Jane's Intelligence Digest" and Control Risks Group each provide more detailed reports for clients; the passages quoted in this article are from publicly available sources.)

In 2003, 561 "acts of terrorism" were registered in the Russian Federation, a 56 percent increase on the 2002 figure of 407, according to Yurii Demidov, head of the Interior Ministry's Department "T" aimed at combating organized crime, Rosbalt news agency reported on 20 January. Both figures represented an increase on the 339 registered acts of terrorism in 2001. What constitutes a "terrorist act" is not publicly defined by the Russian Interior Ministry, and the number of unregistered attacks remains a matter of speculation.

Of these registered terrorist acts in 2003, 400 were carried out in the Southern Federal District, including 386 in the Chechen Republic. Demidov offered the following explanation: "This is due to the ongoing subversive and terrorist activity of rebel groups, who gave up the struggle for an independent Chechnya a long time ago.... Now they are just carrying out the plans of international terrorists."

More than 200 people were killed and more than 600 others wounded in those attacks, Demidov said. Eighty-six of the terrorist crimes registered in the North Caucasus and Moscow were reported solved by the Federal Security Service (FSB) or the Prosecutor-General's Office, leaving 475 unsolved terrorist attacks.

Along with the dramatic rise in the number of such incidents, the Russian newspaper "Gazeta" on 21 January reported that there is evidence of a change in tactics by "terrorist groups" with an increased use of suicide bombers.

Department "T" was created as part of the Interior Ministry's Organized Crime Division on 12 August by then Interior Minister and now Russian Duma Speaker Boris Gryzlov. The newspaper "Vremya novostei" on 21 January reported that, among its other responsibilities, Department "T" deals with kidnappings, adding that there were 1,367 kidnappings in 2003, 580 of which were registered solved. RK

The Iraqi daily newspaper "Al-Mada" in its 25 January edition published a sensational list of companies, organizations, and individuals who allegedly were allocated crude oil in return for political support for the regime of Saddam Hussein. Organizations and individuals named in the article include, in Russia, among others: Zarubezhneft 174.5 million barrels, Rosneft 66.9 million (the article claims that the oil was destined for the Russian president's office and 1 million for Vladimir Titorenko, the Russian ambassador in Iraq), the Russian Orthodox Church (5 million barrels), the head of the Russian presidential administration (5 million), the Liberal Democratic Party of Russia (79.8 million), the Russian Communist Party (1 million), and Yukos (2 million). In Ukraine, the Social Democratic Party was allegedly allocated 1 million, the Communist Party (6 million), Naftohaz Ukrayiny (8 million), and the Socialist Party of Ukraine (1 million). In Belarus, the presidential administration allegedly received 1 million barrels, and the Liberal Party 1 million.

The former British Labor member of Parliament and longtime Hussein supporter George Galloway is mentioned in the article a number of times as an alleged recipient of some 17 million barrels of oil, according to "Al-Mada" funneled to him through a number of different companies. Galloway had been accused of receiving money from Hussein in 2002 by the British newspaper "The Daily Telegraph" and at the time vigorously denied the charges.

Other individuals named by "Al-Mada" include the son of late Egyptian President Gamal Abdel Nasser, former Jordanian parliamentarian Tujan al-Faysal, the current president of Indonesia, the son of the president of Lebanon, and the son of Syria's defense minister.

Iraqi Oil Ministry Undersecretary Abdul Sahib Salman Qotob told the AFP news agency on 27 January that documents belonging to the State Oil Marketing Organization (SOMO) "reveal how Saddam jeopardized the oil wealth of Iraq on personalities who had supported him and turned a blind eye on the mass graves and injustice he inflicted on the sons of the Iraqi people." According to AFP, the ministry is working with Interpol to recover the money "allegedly made by figures cashing in millions of barrels of crude oil they had received for free."

Spokesmen for both the Russian Orthodox Church and Vladimir Zhirinovskii's Liberal Democratic Party of Russia denied the charges, according to "Nezavisimaya gazeta" of 29 January. The paper noted that the Russian Orthodox Church had been involved in oil trading since 1990, when it became the co-owner of the International Economic Cooperation society and partook in government projects designed to help fund federal programs in Russia. A delegation from the church visited Iraq prior to the war, where the head of the delegation handed Hussein a letter of support from Patriarch of Moscow and All Russia Aleksii II.

The secretary of the Russian Communist Party, Oleg Kulikov, told "Nezavisimaya gazeta" that the article is "black PR" and that everything that has occurred in Iraq "was under the control of American special services."

Neither the Ukrainian nor the Belarusian press had reported the charges by midday on 29 January. RK

Lithuanian President Ronaldas Paksas is embroiled in a potentially politically fatal scandal involving alleged influence that Russian secret services and Russian organized crime might have had on the performance of his duties. Paksas faces possible impeachment on a range of charges that include allowing his actions to threaten national security.

Lithuanian and Russia media have reported that the Lithuanian State Security Department (VSD) revealed that it monitored conversations (with a court order) between a major donor to Paksas's election campaign, Russian businessman Yurii Borisov, and the president's national security adviser at the time, Remigijus Acas. Moreover, the VSD reportedly possesses recordings of Borisov conversing in Moscow with figures with suspected ties to organized crime.

According to a Rosbalt story of 10 November, "these figures include Ansor Aksentyev, who is better known by the surname Kikalishvili, the vice president of the 21st Century Association. For some time, Kikalishvili shared this position with Russian State Duma Deputy and popular entertainer Josef Kobzon. In December 2003, a Swiss bank confiscated 600,000 euros [$743,000] from Mr. Kobzon's account, charging that the money was linked to criminal activities."

Russian media reports have described the 21st Century Association as an influential criminal organization with dubious ties in the former Soviet republics. The 21st Century Association was created by the notorious Otari Kvantrishvili, and its members have included personalities like Givi Beradze and Vyacheslav Ivankov, better known as "Yaponchik."

According to a report prepared by the VSD and made public by a special parliamentary commission, Borisov, one of Paksas's campaign managers, was also the single biggest donor to his election campaign. The report also suggests that a Russian public-relations company called Almax, described in the report as having suspected ties to Russian intelligence, has been in contact with the president's office and attempted to influence political decisions in the country.

According to a 28 October report by BNS, Mecys Laurinkus, the former head of the VSD, told the Lithuanian parliament that "dangerous international organized-crime groups are making their way into Lithuania as the country integrates into European and trans-Atlantic structures." Within his statements concerning alleged ties to organized crime, Laurinkus mentioned one registered in the Czech Republic -- Falkon Capital, which Laurinkus suggested had "attempted to privatize Mazeikiai Oil." Other groups named by the outgoing VSD chief included the so-called Luzniki group and the 21st Century company. Laurinkus's tenure atop the VSD was ended with a parliamentary vote shortly after that speech.

The report made public by the parliament stated that Paksas's actions left him vulnerable to blackmail and other forms of pressure, and thus endangered Lithuania's national security. (Tereza Nemcova and Roman Kupchinsky)