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The effects and impacts of climate change are alreadybeing felt: over the past 30 years, global temperatureshave risen at a rate of around 0.2°C per decade andthey will continue to rise over the next few decadesbecause of past emissions. With the problem set toget considerably worse before it gets better, there isgrowing concern about the impact of climate changeon international security through the correlationbetween environmental degradation and socialdisruption. Food and water scarcity, changes in landuse, natural disasters and environmental migration willall play a part in escalating tensions and conflict.
Two other important factors are population growth andunequal resource distribution (invariably as a result ofpolitical decisions). Scarcity will therefore have itsharshest social impact where these factors interact. Inthe next decade, this is likely to result in two types ofconflict: either ethnic clashes arising from populationmigration caused by environmental scarcity, or civilstrife caused by scarcity that affects economicproductivity and thus livelihoods. As scarcity worsens,the social impacts of population movements,economic decline and weakening of states willbecome more apparent alongside propensity forconflict. Political risks relating to coups and regimescould also become more prevalent, making for a lessstable business environment.
The most vivid current example of the link betweenclimate change and conflict is Darfur, a region thathas suffered a 50%-70% reduction in rainfall since2003-04, as well as large-scale desertificationconsistent with climate change. With less farmlandavailable for crops and cattle, tensions betweenherders and farmers for access to both land and waterbecame increasingly violent. The stress caused byclimate change magnified existing political, ethnic andreligious tensions.
Where states attempt to mitigate and adapt to climatechange, this might also further stress weak andmarginal sections of the population, such asindigenous groups and ethnic minorities, increasingdiscontent and alienation. In particular, large-scalewater management and forestry projects in the pasthave displaced such groups, and without safeguardsare likely to do so as states expand 'mega projects'such as large dams as part of their national climateadaptation programmes. Such intra-state tension and
possible conflict over the distribution of 'winners' and'losers' in climate adaptation may spill-over intoregional conflicts, as already seen in the 1970-80saround the Senegal River Basin between Senegal andMauritania. Drought has also caused conflict betweenUgandan and Kenyan pastoralists, and has ledEthiopian troops to move north to stop Somaliscrossing the border in search of pasture and water fortheir livestock.
Water scarcity will be a key issue over the nextdecade and the weakening or collapse of treaties,such as those that govern regional water basinmanagement, could lead eventually to inter-stateconflict. In this light, other flashpoints to watch includethe Jordan, Tigris and Euphrates basins in the MiddleEast, as well as the Nile Basin, affecting East Africaand Egypt. Tensions in Asia are also likely to rise overuse of the Indus and Brahmaputra rivers. Tensions aremost probable when a downstream state is highlydependent on river water and is strong in comparisonwith upstream states, particularly when thedownstream country believes that it has the militarypower to rectify the situation.
Some of the links between environmental scarcity,climate change and conflict are already evident andwill become clearer in the next ten years. Others willmanifest themselves more in 2021-50 and beyond,putting further pressure on geopolitical systems thatare already vulnerable and incapable of adapting.
Climate change, resource scarcity and international security
Matthew Hulbert, Global Issues Analyst,examines the relationship betweenclimate changes and conflict.For more information about our tailoredpolitical and security risk analysis,please contact [email protected]
News and initiatives
Support for clients in VenezuelaIn response to the increasingly turbulent and uncertain business environment inVenezuela, Control Risks has established a dedicated team to support clients investingand operating in Venezuela. Offering political and security risk assessments and analysis,due diligence, security and fraud reviews, crisis management and business continuityconsultancy and crisis response support, the team consists of experts familiar withoperating in the country.
For more information contact the team on [email protected]
Enhanced forensic servicesControl Risks expanded its forensic capabilities in early June, with the acquisition of aspecialist biology and chemistry laboratory. The new facilities will be supported by atraditional scientific forensics team, specialising in product contamination, internal fraudissues and the internal mis-use of prohibited substances. Our team of experts, led by asenior scientist and DNA specialist, will play an important role in helping clients to solveinternal crime issues or abuse of company systems or property.
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New office opening in DelhiControl Risks' global presence will be enhanced further by the imminent opening of anoffice in Delhi. Following the success of our representative office in Mumbai, we areestablishing a permanent presence in New Delhi. We have decided to re-locate to NewDelhi because we feel it best serves our client base in the region. Steve Wilford, who iscurrently Business Development Manager for the south east Asia region, will take on therole of country manager. The office will open soon.
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Front page:Climate change, resourcescarcity and international security
Page 2:Control Risks’ news
Page 3:Client view: Standard CharteredBank: maintaining a healthy riskappetiteExpert view: Managing security inNational Oil Companies
Pages 4 and 5:Four-month focus
Page 6:Living up to Olympic standards
Page 7:Technology - the answer tocounter terrorist officers' prayers?
Back page:Pause for thought: First-handexperience of the oil and gassector in Egypt
Contents
Control Risks’ news
Page 2
Welcome to the July issue of Perspective. This month may mark the height of summer, the depths of winter orthe onset of the monsoon, depending on where you are in the world. Whilst the definitive facts around climatechange remain the subject of debate there is much first hand experience of a changing natural environment.Competition for natural resources has always been a fault line running through international relations and inthis edition we follow up a major talk that we gave at Chatham House with a lead article on the politicalimpact of climate change. We have a long track record in helping our clients manage social risks inherent intheir working environments but now we increasingly need to track and respond to the larger issues caused byclimate change. As ever, the risks for business mutate but the need to understand and to respond remains.
Despite the threat of rain, a seeming constant of the British summer, it was a pleasure to welcome so many ofour clients to our Summer Drinks party in London. Those of you that were there will have heard a fascinatingaddress from Sir Richard Dearlove, the former Chief of Britain's SIS and now Special Adviser to ControlRisks. The prediction of future threats will always be an inexact science but experience shows that insightfulassessment and analysis is an essential business tool. With that in mind, last year we ran a series ofseminars around the world to coincide with the launch of our RiskMap publication; we plan to do this again inNovember and I hope sincerely that many of you will be able to attend these.
We have experienced a busy start to our new financial year and my thanks to you for your continued supportof Control Risks.
Richard Fenning, CEO
Standard Chartered Bank: maintaining a healthy risk appetite
Managing security in National Oil Companies
Standard Chartered Bank has a long tradition of operating in difficult areas. We have more than 65,000permanent employees and are operational in 56 countries. In many of these countries security is a major risk tobe considered and factored into our planning and operational processes.
We have the advantage that our long established presence (over 100 years in most cases) in many of thesedifficult areas has developed strong local knowledge and the majority of our staff are local employees. In many ofthe more difficult locations we are one of only a few international banks in the country (in some locations, the onlyone) and our presence provides significant support to the local business infrastructure. Any decisions we make toclose or cease operations can have a significant impact on the wider business community and such action isnever taken lightly.
Depending on the location and the current situation, we conduct regular risk assessments (sometimes daily) andensure our crisis response plans are up to date and tested. Security reviews are conducted regularly. Our localmanagers are empowered to take necessary action immediately, without seeking further approval, if a situationescalates (this might include closing a branch or sending staff to a safe location). These types of decisions aremade based on our own intelligence and detailed risk assessments and forecasts from expert analysts.
Managing the security of such a large number of staff and assets requires a co-ordinated approach from fourregional security heads based in London, Dubai, Mumbai and Singapore, supported by country managers. Wehave clear security standards and procedures which are audited regularly. With such a large number of stafftravelling and working in unfamiliar areas it is a major challenge to keep them aware of the risks they face andmonitor their travel plans to ensure we can contact them in the event of an emergency.
Maintaining a strong constitution in the face of significant risks is important to help us grow our internationalpresence. This level of risk appetite can only be sustained through reliable, detailed macro and micro riskanalysis and thorough, regularly updated, plans, procedures and contingency measures.
Rising energy prices and renewed consumer concern about energy security have thrown a fresh spotlight on thegrowing influence of state owned oil companies. National oil companies (NOCs) control 77% of the world's oilreserves and account for 14 of the world's top 20 oil companies by production. The vast resources under theircontrol and the privileged position they enjoy in the major oil provinces of the Middle East, Latin America andRussia has endowed them with an influence surpassing that of many of their privately owned counterparts.
State ownership often dictates different management priorities and objectives for NOCs compared toshareholder owned international oil companies (IOCs).
One of the most important differences between the two types of firm relates to their management of security.The world's biggest IOCs have had to develop sophisticated business processes to identify and managesecurity risk across a wide portfolio of operations, including physical security, co-operating with otherstakeholders and managing related concerns around such issues as human rights.
For NOCs, the management of security is more complex. Their assets are often concentrated in their homenation or a small handful of countries and the threats they face differ. State ownership may distort managementattitudes to risk management. And because many countries consider hydrocarbons a strategic national asset,NOCs often share responsibility for security with a multitude of overlapping government agencies. Theseinstitutional challenges make it difficult for NOCs to manage security as comprehensively as they - and theirgovernment owners - would like.
However, this does not mean such companies cannot attain international standards of best practice. Promptedby host governments, many NOCs are taking a fresh look at how they manage security. With the help ofexperienced consultants, NOCs are discovering how to design solutions that provide a clear division ofresponsibility between company and government while empowering managers to deal with risk more effectively.As a result, NOCs improve operational efficiency for producers and boost energy security for consumers.
Chris Eriksen, Group Head ofSecurity for Standard Chartered,shares their recipe for dealing with risk.
Kevin Rosser, Senior ConsultantOil and Gas Risk & SecurityConsulting, explores the securityissues facing NOCs. For moreinformation about our experienceworking with the oil industry,please [email protected]
Page 3
CLIENT VIEW:
EXPERT VIEW:
Four-month focus -
Page 4
Sierra LeoneThe period around presidential and parliamentary pollsscheduled for 11 August is likely to see a spike intensions, higher levels of authoritarianism and renewedconcern among investors and donors about SierraLeone's post-war trajectory. However, a return to war isunimaginable and relative stability is unlikely to bechallenged. The candidate of the ruling Sierra LeonePeople's Party (SLPP), Vice-President SolomonBerewa, is likely to secure victory. His most likelychallenger will be Charles Margai, the founder of a newopposition that broke off from the SLPP and has astrong following, particularly among urban youth.Frustration with the administration is rising ascorruption remains rampant and improvement in basicservices and infrastructure is slow.
MoroccoParliamentary elections will be held on7 September. The Islamist-leaningJustice and Development Party (PJD)is expected to perform well and mighteven become the strongest block inthe next parliament. However, a strongelectoral performance by the PJD isunlikely to have negativerepercussions on political stability andthe business environment. While theparty is socially conservative, it is alsofavourable to economic reform andhas shown on repeated occasions thatit respects the decisive authority of themonarchy over all key policy issues.
EcuadorEcuadoreans will go to the polls in lateSeptember or early October to electrepresentatives for a national constituentassembly, tasked with drafting the country's19th constitution in roughly 180 years. Thestakes will be very high. Leftist PresidentRafael Correa will seek to gain an outrightmajority and enact radical political andeconomic reforms - mostly nationalistic andpopulist - that would dictate the future ofthe country. Fears are high over thepossibility that Correa may use theassembly to follow in the footsteps ofVenezuela's Hugo Chávez and concentratepower in the presidency.
Our regional experts provide daily analysis of political, security andtravel developments worldwide and tailored reports for clients onspecific regions and industries. For more information [email protected]
Control Risks’ regional analysts
Page 5
RussiaRelations with the West have deterioratedfollowing a series of disputes - with the UKon the Litvinenko case; the US on themissile defence system; and Estonia onthe removal of a Second World Warmemorial from Tallinn. These disputes willnot lead Russia, which is seeking greaterintegration within the internationaleconomy, to harm foreign investments, butthe chill in relations has deep roots and islikely to last. Within Russia, it fuels awidespread mistrust towards the West thatcan bolster the position of hardliners withinthe government, including at forthcomingparliamentary and presidential elections.
TurkeyThe ruling Justice and Development Party(AKP) appears set to win legislative electionsscheduled for 22 July. While another AKPsingle-party government currently appearslikely, a coalition is still possible because theparty is not guaranteed to secure an absoluteparliamentary majority. A coalition governmentwould likely lead to a slow-down in the pace ofreform and increase the potential for intra-governmental disputes. However, it could alsoreduce tensions between the government andTurkish secularists, including the military, whooppose the AKP's increasing dominance ofstate institutions. Such tensions could worsenshould the AKP achieve a large majority.
UkraineA prolonged government crisis ended withagreement between President Viktor Yushchenkoand Prime Minister Viktor Yanukovich toschedule fresh parliamentary elections for 30September. However, the vote is unlikely toproduce lasting stability because the division ofpowers between presidency and government willremain unclear. Moreover, no single party willwin a majority of seats, producing anotherparliament that will be dominated by fractiouscoalition politics. Yanukovich's Regions ofUkraine (UPR) is likely to emerge as thestrongest party, but the opposition forces couldjointly gain up to 40%-45% of the seats and formthe basis for a new ruling coalition.
ArgentinaIn the presidential election taking place on 28 October,Senator Cristina Kirchner, wife of current PresidentNéstor Kirchner, has been confirmed as thegovernment's official candidate in place of her husband.Despite the recent victories of opposition candidates inlocal elections in Buenos Aires and Tierra del Fuego,she is likely to secure a comfortable victory in the pollsgiven the government's popularity based on thebooming economy and the opposition's failure topresent a strong, united candidate to oppose them.
highlight areas of particular interest over the next four months
ChinaThe Chinese Communist Party (CCP) five-yearlynational congress will meet in October in Beijing. Thiskey political event will make clear some of the results ofthe intense political bargaining that has gone on behindthe scenes over the past year. The outcome will have amajor influence on the direction of politics and policyover the next five years. New appointments to some ofthe most powerful positions in the CCP hierarchy willreflect President Hu Jintao's consolidation of power, withhis supporters taking many of the posts set to becomevacant. However, their dominance will be curtailed bythe continued influence of other factions and the need toretain balance to promote party stability.
ZimbabweThe ruling party's decision in March to holdparliamentary and presidential polls within a yearappears to have set the country on course for anotherround of (probably fraudulent) elections, with embattledPresident Robert Mugabe standing for yet another term.This has not resolved the question of Mugabe's long-anticipated retirement and how to rescue the countryfrom the economic abyss. Runaway inflation, crumblinginfrastructure, deepening food insecurity, politicalrepression and restive security forces all mean thatpolitical wrangling will remain frantic. Western efforts areunlikely to produce constructive change, but SouthAfrica is under serious pressure to produce results.
The Beijing Olympics promises to be an event of epicproportions. Viewed domestically as an acute point ofnational pride, the Beijing Organizing Committee forthe Games of the 29th Olympiad (BOCOG) hasinvested an unprecedented $40 billion in infrastructureand planning to ensure that the event goes off withouta hitch. But, the Chinese record on hostinginternational events is limited at best - and non-existent for mega-events like the Olympics. At just overa year until the opening ceremonies, information fromofficial sources is scarce, and significant questionsregarding security and logistics remain unanswered.
Since the outset of the planning stages in early 2002,BOCOG has stated its commitment to a safe andsecure Olympic Games. Official sources have claimedthat Olympic security will comprise over 100,000police officers from the public and national securityforces and the armed police, as well as an unknownnumber of security volunteers; total volunteers alreadynumber more than 500,000. Security forces will alsoemploy many of the high-tech video and audiosurveillance techniques pioneered during the AthensOlympics in 2004. BOCOG has yet to release thedetails of its security plan however, raising questionsabout how effectively the police despite itsoverwhelming presence would be able to respond topotential threats ranging from petty theft to majorterrorist attacks. Questions also remain about how, inthe presence of international media outlets, policeforces would react should political or social protests,nationalistic riots or other forms of social unrest ariseduring the Games (scenarios which are unlikely butcertainly quite conceivable).
Logistical issues, namely the accommodation andtransportation shortages that are likely to plague theevent, are perhaps of more immediate concern.BOCOG will reserve approximately 80% of all 4 and5 star hotels, and several have been completely booked already. Likewise, BOCOG has alreadyreserved the entire fleets of all large car rentalcompanies in Beijing. The demand has produced anotable rise in room and car rental rates, and hassignificantly increased the risk of fraud throughdouble-bookings. Furthermore, traffic reductionpolicies will greatly restrict movement in and aroundBeijing, banning some vehicles from certain areasand banning outright all vehicles with non-Beijinglicense plates from entering the city centre.
Together these issues have the potential to greatlyaffect the normal business operations of companiesbased in Beijing and the surrounding regions, as wellas the personal security and travel plans of individualvisitors. But ultimately, the issues themselves mayprove a lesser concern than the Chinese response tothem. Although BOCOG has placed a significant effortinto equipping Olympic personnel, security forces andvolunteers with the language skills and resourcesrequired for handling significant numbers ofinternational visitors, the training has largely focused onscripted scenarios and does not teach staff to respondto unexpected situations. Given China's limitedexperience with truly major international events, theplaybook is likely to follow a domestic model wherethere is an instinctive preference for lockdowns andhard-headed responses. To be sure, China still has theopportunity to correct the current shortcomings. Withone year remaining before the world's eyes focus onBeijing, BOCOG has the time to incorporate lessonslearned internationally into the Olympic plan and benefitfrom the experiences of previous host countries.
Page 6
Living up to Olympic standards
Peter Commeyne, Director Crisis &Security Management - Shanghai,examines the preparations beingmade for the Beijing Olympics. For more information about ControlRisks' services to support clients inBeijing for the Olympics and ourcapabilities in China, please [email protected]
As I prepare to go out on patrol, slipping my x-rayspecs (courtesy of James Bond) into my shirt pocket,checking my phaser (set on stun, of course) has a fullcharge and lastly, clipping my personal force field ontomy utility belt, I can relax, secure in the knowledge that,literally, nothing can harm me. Fantasy? Of course it is,but in today's threat environment, technology for lawenforcement agencies is seen as the answer to all ourprayers; all seeing, infallible, indefatigable - if only.
The spectre of the suicide terrorist attacking targetshas created a whole new paradigm for lawenforcement agencies to address. The dilemma ofhaving to face a suspected suicide bomber, who willalmost certainly blow themselves up if challenged, hasplaced the security forces in an impossible position.
Prior to 9/11, the picture was clear and the equipmentrequired relatively simple. Technology was wellunderstood and the performance was mapped out.
But what now the situation has changed beyondrecognition? CCTV systems are a wonderful post-incident resource, but there are no instances wherethe system actually prevented the attack taking place.They may deter terrorists from choosing particulartargets, but if you are prepared to die, would you bedeterred by post-event pictures? And the resourcesrequired to monitor and analyse the amounts ofimages collected are huge. Control rooms operatingsophisticated CCTV systems generally have numerousmonitors, programmed to respond to movement, butthe level of resources required to maintain close anddetailed watch on the people visible to the camera isprohibitive. In any cosmopolitan city, distinguishingbetween the tourist taking pictures of iconic buildingsfor the family album and the terrorist planning anattack is virtually impossible.
Biometrics are hailed as the new solution to forgeddocuments and terrorist activity, but whattechnologists can manufacture, technology can forge.If teenage boys can forge driving licences to elevatetheir age and gain access to night clubs, imagine whatthe determined terrorist, sometimes with theresources of a whole country behind them, can do?And regardless of this, how would biometrics assistthe identification of a country national with alegitimately obtained passport? Again, biometrics areinvaluable for post-incident investigation, but areunlikely to identify the terrorist prior to an attack.
This still leaves the issue of new technologies andtheir contribution to counter-terrorism. The currentavenues of investigation (backscatter x-ray, thermalimaging, millimetre and terrawave technologies) allpromise a new generation of technologies that cancontribute to the identification of the terrorist. But
there are still significant issues that have yet to beproperly debated. The sums of money involved arevast and, in my experience, there is often adisconnect between what the technology can deliverand the operational requirement.
When developing new and often cutting-edgetechnology, there is no guarantee that a theoreticalmodel or prototype will translate into a useable,practical device. Few manufacturers will embark on thedevelopment or production of a brand new anti-terroristtechnology without some commitment, often in the formof seed capital, from the end user. But is it acceptablethat the police expend literally millions of pounds ofpublic money in developing a piece of equipment thatmay, at best be only 60-70% effective? And let's notforget, resting on the response of that piece of kit whentargeted at a suspected suicide bomber, a senior policeofficer may have to decide whether to shoot. Considerthe outcomes: the wrong decision could either leave aninnocent person dead or lead to a successful bombingmission. In today's litigious society, technologymanufacturers have to consider the likely outcome of amistaken decision based upon the response from theirpiece of cutting-edge technology. They could beforgiven for being risk averse.
Whilst there is no doubt that new technologies in thefield of x-ray scanners, biometrics and surveillancesystems can assist in the detection and disruption ofterrorist attacks, they are not the magic wand to solveall problems. Technology is seen in some quarters asa replacement for the human resource, being cheaperin the long term, more reliable and completelyinfallible. This may be the case in the future. However,for the present, human beings, properly trained andbriefed, assisted but not driven by technology, offer usthe best response to the threat of terrorism.
Technology - the answer to counter terrorist officers' prayers?
Page 7
Steve Swain, Seniorcounter-terrorism consultant,previously ran the MetropolitanPolice International Counter-Terrorist Unit - examines the roleof technology in preventingsuicide terrorism attacks. Forinformation about Control Risks'counter-terrorism consultancy,please email [email protected]
Pause for thought:First-hand experience of the oil and gas sector in Egypt
A detailed calendar of forthcomingevents is available on our website:
www.control-risks.com/events
To mark the launch in Novemberof Control Risks' annual RiskMap,publication which forecasts riskprojections and global hotspots forthe forthcoming year, we will beholding a series of conferences inthe following locations:
London (8 November)
Washington (13 November)
Johannesburg (13 November)
Stockholm (14 November)
Berlin (date to be confirmed)
Amsterdam (date to be confirmed)
Singapore (date to be confirmed)
Shanghai (date to be confirmed)
To register your interest in theseevents, please [email protected]
Egypt reported its highest ever levels of crude oil andnatural gas production in 2006, but can the country reallycompete with its more natural resource rich neighbours?
Despite a long and established history, the Egyptianhydrocarbons sector is not without its sceptics. Egypt'smature oil fields are seen to be in steady decline andthe latest bidding round by the Egyptian GeneralPetroleum Corporation (EGPC) was described as a'scrap heap tender'. Although Egypt's natural gas sectoris considered much more attractive, skyrocketing levelsof domestic use coupled with unattractive domestic gasprices have dampened investor enthusiasm.
Little of this scepticism was apparent, however, at theIntergas IV conference and exhibition in Cairo, whereoptimism ruled. A number of foreign oil companiesannounced new investments in the country, amongthem BG, Italy's Eni and BP. The Control Risks teamattending the conference found most companies in thesector, from the major international companies to thesmall operators, were broadly positive about theirprospects and the government's economic reformsaimed at encouraging greater investment in the country.
Despite the current optimism, Egypt is unlikely toattract major new investments into its hydrocarbonssector unless domestic gas prices are raised. Thisleaves Egypt in a conundrum as the government hasused low gas prices as a catalyst for growth in high-energy-dependent industries, such aspetrochemicals, cement, aluminium and
manufacturing. It has been the growth of thesesectors that have allowed Egypt to diversify itseconomy away from oil and gas dependence, attractgreater foreign investment, and provide employmentfor its burgeoning population of more than 70 million.
However, the cheap energy prices on which theseindustries are founded are heavily subsidised by thestate, making them difficult to sustain over the longerterm. The high demand for domestic energy cappedat a low rate also puts pressure on foreigncompanies, who are keen to take advantage of morefavourable export prices.
Oil majors are hesitant to invest in costly offshoreactivities, despite promising finds off Egypt'sMediterranean coast. Egyptian Petroleum minister,Sameh Fahmy, has acknowledged these concerns andpromised to negotiate higher domestic prices for someof the offshore concessions. The government is alsoaiming to invest in alternative energy sources, such aswind and solar power, and to encourage companies toimplement energy saving strategies. While these arepositive moves, they are unlikely to scratch the surfaceof Egypt's problems with energy demand.
Events
Control Risks’ officesAmsterdam, Berlin, Bogotá, Dubai, Houston, Jakarta, London, Los Angeles, Mexico City, Moscow, New York, São Paulo, Shanghai,Singapore, Sydney, Tokyo, Washington DC
Control Risks’ project and representative officesAlgiers, Baghdad, Copenhagen, Dallas. Erbil, Hong Kong, Kabul, Lagos, Mumbai
www.control-risks.com
Dr. Sarah Meyers, Consultant Middle East and NorthAfrica, recently visited Cairo and spoke at the IntergasIV conference.
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