<nettime> FT: 'The military can't provide security'

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http://news.ft.com/s01/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1059480202976&p=1012571727126 

'The military can't provide security' 

By Thomas Catan and Stephen Fidler 

Published: September 29 2003 20:57 | Last Updated: September 29 2003 20:57 

For most private companies in the west, postwar violence in Iraq has been a
sore disappointment, hampering reconstruction efforts and frightening off
potential investors. But for one industry, Iraq has become something of a
latter-day Klondike. 

Businesses providing private military and security services, many of them
secretive and obscure, are finding that insecurity in Iraq is a money-spinner.
Contracts worth hundreds of millions of dollars have been handed out in Iraq to
private security companies, both by the US-run provisional government in
Baghdad and by the private sector working there. Some of the contract winners
are small companies, often little known even to their competitors. 

The US-led military occupiers are too stretched to deal with the poor security
that has plagued aid agencies and the private companies hired to rebuild the
country's shattered infrastructure. Halliburton, the oil services group, has
lost two employees to attacks since combat officially ended. The United
Nations, meanwhile, announced last week that it was pulling most of its staff
out of Baghdad following a wave of attacks. 

The private military and security companies that have stepped into this
security vacuum range from large, relatively well-known concerns - such as
DynCorp and Vinnell of the US which are training the new Iraqi police and army
respectively - to smaller operations such as Olive Security of the UK. "There
is quite a bit of business out there," says Harry Legge-Bourke, for Olive.
"From our point of view, it just gets better all the time." 

Foreign government officials travelling to Iraq are hiring armed escorts.
Control Risks Group, for example, protects UK Foreign Office officials as well
as those from the Department for International Development. Kroll, the US
corporate security firm, has secured a similar contract with USAID, the US
development agency. It has hired Aldwin Wight, a former head of Britain's elite
Special Air Service regiment, to take charge of its operations in Iraq. 

"No one expected the level of security threat to [aid agencies]," says Anne
Tiedemann, Kroll's managing director. "The US military can't provide security.
It had to be outsourced to the private sector - and that was our opportunity." 

Ms Tiedemann says there was something of a "gold rush" early on as many foreign
agencies inside Iraq realised the military did not have the manpower to protect
them. 

Private companies are also hiring guards for their travelling executives and
contractors. Bechtel, the US engineering company with the master contract to
rebuild Iraq's shattered infrastructure, initially hired Olive, which was on
the ground in Iraq early in the conflict serving British television news crews. 

The contract has since passed to ArmorGroup, a larger and more established
company that, among other things, provides security for US embassies in the
Middle East and its naval base in Bahrain. It currently has some 300 people in
Iraq. 

Global Risk Strategies International, another British concern, has shot from
relative obscurity to become one of the most important security providers in
Iraq. The company says it has a total of 1,100 personnel in the country,
including 500 Gurkhas - Nepali fighters who served in the British or Indian
armies - and 500 former Fijian soldiers, as well as a fleet of 100 vehicles and
several aircraft. 

Global was also on the ground early, and was used by the Office of
Reconstruction and Humanitarian Assistance (ORHA), the now-disbanded body
established by the US in the war's immediate aftermath, to plan and direct its
entry into Iraq. The company says it is similarly employed by ORHA's successor
agency, the Coalition Provisional Authority, as well as a wide range of other
agencies including the US Department of Defence, USAID and the UN. It has also
won the contract to distribute the new currency when it is issued, a job it
also carried out last year in Afghanistan. 

Meteoric, a little-known South African company, has landed a big contract to
train a private Iraqi security force to guard government buildings and other
important sites currently protected by US soldiers. Competitors say the
company, set up this year, also carried out work for ORHA. Meteoric could not
be reached for comment. 

"Everyone's jostling for position at the moment," says Christopher Beese, chief
administrative officer at ArmorGroup. "They see a market and they want a share.
But many are not altogether sure what the game is." 

Security companies are employing a range of different strategies to gain a
foothold in Iraq. Kroll's contract with USAID was seen in the industry as
slightly unusual for a firm which normally specialises in the more cerebral
work of corporate investigations and risk consulting. Indeed, the company had
announced a downsizing of its security business in the US and elsewhere (though
not, Ms Tiedemann stresses, in the Middle East). 

Its contract with USAID is therefore a measure of the importance many companies
are placing on gaining a "footprint" from which to expand their business. "We
had to be there," says Ms Tiedemann. Having established a base, Kroll hopes to
move into other lines of work. This could include due diligence work for
foreign investors seeking out Iraqi partners, or financial consulting. 

Some companies have enjoyed quite unexpected success. The CPA last month
awarded one of the largest security contracts - to defend oil sites and
pipelines in Iraq - to a little-known UK-based company called Erinys. The
award, worth some $40m, stunned Erinys's competitors. "These are the
hero-from-zero guys," says Patrick Grayson, a consultant for the corporate
security industry. "They won a huge contract from under the big boys' noses." 

Erinys's managers include Alastair Morrison, a former SAS officer who founded
Defence Systems Limited (DSL), a security company taken over by ArmorGroup in
1997. He and his colleagues, Fraser Brown and Jonathan Garratt, have experience
in guarding oil facilities in Colombia and Nigeria. Erinys's website also shows
Bill Elder, for 10 years the corporate security manager for Bechtel, as a
"board adviser". 

The Iraq contract calls for an audit of the security requirements of each
region, and the vetting, training and hiring of the estimated 6,500 guards
needed to do the job. To do so, Erinys has entered into partnership with
Rubicon International, a mid-sized British company that will handle its UK
recruitment and administration. Larger competitors, however, question whether
Erinys has the size to handle the contract. 

Indeed, executives at most of the private security companies admit that vetting
suitable Iraqi security personnel presents a significant challenge in a country
where few written government records have survived the war and its aftermath. 

But it is far from the only challenge: for many companies, insurance is an
expensive headache. Security companies are also exhausting the supply of
qualified short-term contractors willing to work in dangerous areas. Some are
hired and return home within days alarmed at the hostile environment. 

"It's going to be hard for all contracts to be done well, says Nigel Churton,
chief executive of Control Risks. "There's only a limited number of
high-quality people to go around." John Davidson, Rubicon's managing director,
agrees. Six months ago, there was barely enough work, he says; now, "there is a
shortage of manpower". 

In the UK, this shortage is driving up wages to such an extent that people are
being tempted out of the armed forces, he says. Demand is particularly high for
the highest qualified ex-military personnel, such as former members of the SAS,
who can earn £400 a day before tax in Iraq. "There are more ex-SAS personnel
in Iraq than serving at the moment," says Mr Davidson, a former member of the
regiment. 

By comparison, a serving SAS captain, earning extra allowances for special
forces service and overseas pay, will earn £40,000-£45,000 a year - about
£120 a working day after tax. 

Less qualified enlisted men are also leaving the UK military, tempted by the
£120-a-day offered by some of the larger security contractors. "People are now
making the decision to leave the armed forces because they see this is the way
forward. I think it's slightly naive," Mr Davidson says. 

Naive, because he and most other executives in the field say that within two
years much of the work now being done by foreigners will be carried out by
Iraqis. Expatriates will be left, they assume, to manage some contracts. Their
expertise will be called on in other areas, such as carrying out due diligence
on potential investment partners for foreign companies. But most of the
business will be done by Iraqis, and the boom for foreign security companies,
like all gold rushes, will come to an end. 

This is in large part because Iraqis will work for relatively low wages,
helping the foreign contractors to keep costs down. A private in the new Iraqi
army, for example, can expect to earn just $70 a month, described by Walter
Slocombe, the CPA's special adviser on security and defence, as "a perfectly
decent salary for an entry-level job". 

But there are other motives for using Iraqis, some businessmen say, such as
local resistance to foreigners, including the Gurkhas used by some of his
competitors. "One tribal leader said to us that if any Gurkhas come near to us,
we'll kill them," says David Claridge, a managing director of Janusian, a
private security subsidiary of The Risk Advisory Group. 

Most security companies are seeking to team up with local partners. Kroll is
already working with an Iraqi security company called Tigris, while ArmorGroup
is in talks with various contenders. Janusian has established a partnership
with the al-Bunnia family, prominent Iraqi merchants, to provide local
personnel for security contracts, says Mr Claridge. 

Other executives report that Iraqis exiled over the past 30 years see business
opportunities themselves in private security and have begun talks with a view
to taking over some of these companies. 

Until the Iraqis take over their own security, however, a big role will remain
in the hands of myriad privately-run armed groups, some of which are assembling
forces sizeable enough to resemble private armies. Yet the situation has so far
passed largely unnoticed outside Iraq. 

Some in the industry see this as an indication that the use of private military
and security companies in stabilising foreign conflicts has become increasingly
accepted. They say it does not make sense to use a highly-trained soldier to
guard a bank or a pipeline. 

Outside the industry, critics warn of a dangerous trend that marks the creeping
growth of private mercenary forces. They see it as an unintended, and
potentially dangerous consequence of an occupation force that cannot keep order
in Iraq. And they question how, to whom and through what mechanisms these
mercenaries are accountable. 

Even the private security companies see the limits to the expansion of their
businesses in Iraq. "Private security can't take over from the troops," says Mr
Churton of Control Risks. "Private companies will never have the remit to run a
private army." 

     --------------------- 
     Taking over from the troops 

     Kroll: Providing security for USAID personnel in Iraq 

     Armor: Providing security for foreign companies in Iraq,
     including Bechtel 

     Control Risks: Escorting UK Foreign Office teams in Iraq.
     Also running command and control centre on its behalf 

     Erinys: Hiring 6,500 armed guards to protect oil
     installations and pipelines 

     Rubicon: Partnership with Erinys on its oil contract.
     Protection for foreign executives, moving cash 

     Global Risk: Originally used by ORHA, the former Iraqi
     interim authority, to lead entry into the country. Now work
     for successor agency, the CPA, as well as several Iraqi
     ministries, the US government and the UN. Has contract to
     distribute new Iraqi currency 

     Meteoric: South African firm, hiring and training new Iraqi
     private security force to guard important installations 

     Vinnell/MPRI/SAIC: Training new Iraqi army 

     Dyncorp: Training new Iraqi police force 

     Olive: Provided security for Bechtel and other companies
     operating in Iraq. Started working for television news crews 

     Janusian: Providing close protection details for companies
     making assessments/setting up in Iraq 
     ---------------------

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