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Financial Terrorism by BV Kumar

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Author: BV Kumar IRS (Retd)
Economic warfare implies adopting economic policies to deprive the enemy’s forces of those resources so that they cannot fight the war properly. In a total war apart from the armed forces of a nation it is necessary to mobilise a nation’s economy towards the war effort. When the economy of an enemy is subverted then it directly damages the enemy’s ability to fight the war.


So far conventional warfare involved land, naval and air warfare at different locations across urban areas, industrial hubs, strategic assets, including and not limiting to choking supply chains. Strategies in warfare include using inter-continental ballistic missiles with nuclear warheads as a deterrent. Conventional warfare implies destruction of the enemy’s military and industrial capability, loss of human life, strategic assets, destruction of property and attrition of opposing countries over long periods. It would take years of planning and full mobilisation of a country’s resources in a destructive war using resources which otherwise would be judiciously used for development. In contrast the fighting in a total war where nuclear weapons are used would be limited to a few hours if not a few minutes resulting in enormous loss of life and total destruction of cities.

 

Bloodless Warfare

Some of the rogue states and terrorist groups have subtly developed and adopted ‘financial terrorism’ as a strategy to subvert nations with the least amount of resources resulting in economic collapse and bleeding of nations and no loss of life to themselves.

Economic warfare implies adopting economic policies followed as a part of military and covert operations during war time. The objective is to capture critical economic resources of the enemy so that the military and the intelligence agencies can operate at full efficiency and deprive the enemy’s forces of those resources so that they cannot fight the war properly. In a total war apart from the armed forces of a nation it is necessary to mobilise a nation’s economy towards the war effort. When the economy of an enemy is subverted then it directly damages the enemy’s ability to fight the war. “Economic terrorism may be defined to indicate an attempt at destabilisation by a rogue state or a terrorist group. The Geneva Centre for Security Policy (2005) defined economic terrorism as being ‘Contrary to economic warfare which is undertaken by states against other states, economic terrorism would be undertaken by transnational or non-state actors. This could entail varied coordinated and sophisticated massive destabilising actions in order to disrupt the economic and financial stability of a state, a group of states or a society (such as market oriented western societies) for ideological or religious motives. These actions, if undertaken, may be violent or not. They could have either immediate effects or carry psychological effects which in turn have economic consequences.”

Methodology

Historically, financial terrorism is not unknown. For example, in 1958 Senator Dennis Chavez, Democrat of New Mexico, said on the Senate floor that the Swiss bank secrecy permitted ‘crooks and swindlers’ and even Communists to buy American defence stocks, implying that the managers of the Swiss banks would do anything the client desires for a profit. On 18th July 1958, the New York Times quoted the American ambassador to the Swiss Confederation, Mr Henry J Taylor, that ... “There has been a heavy increase in financial transactions in Bern in connection with the narcotic traffic from Communist China to the Western world and there is reason to believe that Communists send out an average of US$ 1 million a week from Switzerland, to finance provocateurs and contraband agents for their work in Western democracies”. In 1959, the French government angrily accused Swiss banks of financing major arms deals for Algerian rebels, using Egyptian and other Arab money, but because of bank secrecy not even the Swiss government could interfere. Newsweek announced that purchases of American stocks by Swiss banks acting as agents for anonymous clients had been US$ 30 million in 1950 and the annual amount had jumped to US$ 500 million by 1959. The press, governments and the intelligence bureaus of Western world have five major accusations against Swiss banks.

  • They allow Communists to buy control of free world defence industries.
  • They furnish the agencies through which Communist powers pay their spies and purchase forbidden strategic materials from Western nations.
  • They offer a hiding place for stolen or looted money.
  • They provide a screen for proxy raiders, stock manipulators and shady promoters.
  • They help tax evaders conceal both income and assets.


The above charges are true even today. In addition to the Communists, now terrorist and some intelligence agencies operate not only through Swiss banks but through other tax havens to achieve not only the above objectives but subvert the financial markets in transitional and developing economies. Even the fully developed economies have not been spared in the process.


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