July 1, 2009  

Where the money is

Cut off the enemy’s financial resources and he’s paralyzed

Even as the U.S. begins to draw down its counterinsurgency operations in Iraq, a host of nonstate adversaries will remain significant threats to the U.S. national security landscape. From Islamist terrorists to Mexican drug trafficking organizations (DTOs), such groups have proven to be a source of immense frustration for the U.S., which has struggled to construct an effective strategy to counter these asymmetric threats. The current approach of destroying these adversaries through the decisive employment of U.S. military, intelligence and law enforcement assets has produced, at best, mixed results. For all of the resources that have been brought to bear, total victory over these groups has been elusive, and its pursuit often has come at the cost of neglecting requirements to guard against other threats to national security.

If the U.S. is to prevail against these threats, it must reframe its strategy around the recognition that these wars will likely be protracted and often indecisive. Given its own resource constraints, the U.S. can no longer rely predominantly on solutions that require massive commitments of financial investments, valuable personnel and advanced technical capabilities. Instead, it must seize the initiative in the competition for resource efficiency and adopt measures that diminish the adversaries’ operational effectiveness through the targeting of their key personnel and resources. Just such a strategy of cost imposition was implemented in America’s last long war, and policymakers would do well to revisit those lessons in light of today’s challenges.

Deconstructing the adversaries

Despite pronounced differences in motives as well as tactics, techniques and procedures, Islamist terrorists and Mexican DTOs share similar functional characteristics. Fully cognizant of their asymmetrically disadvantaged positions, these adversaries have sought to avoid direct, conventional confrontations with the U.S. whenever possible. Instead, they challenge U.S. interests by relying upon their relatively small, dispersed nature and local connections to blend in with the indigenous environment and obtain support from host populations and, in some cases, governments.

These adversaries also share similarities in organizational structure, with each possessing a large echelon of foot soldiers, a relatively shielded senior cadre and a core of technical specialists. Their low-level operatives, treated largely as disposable assets, are responsible for executing tactical and “street-level” operations. While the U.S. and its allies have had success at inflicting serious losses to this element of enemy organizations, many asymmetric groups have proven remarkably capable of reconstituting these lower ranks with little interruption to their operational capability.

The senior leaders, on the other hand, tend to be removed from the direct involvement of their organization’s illicit activities and are considerably more difficult to neutralize. In the rare circumstances when these individuals have been killed or captured, the desired decapitating effect has frequently been fleeting. As witnessed in both Iraq and Afghanistan, a replacement for a slain leader is usually identified to fill the leadership vacuum within short order, resulting in minimal disruptions to the organization’s operations. In the case of counternarcotics efforts, arresting cartel leaders has often had similarly disappointing effects on the DTOs’ ability to function. In many cases, senior leaders are quickly replaced by their lieutenants or continue to function from prison with little diminished capacity. A 2008 Congressional Research Service study on Mexican drug cartels notes, for instance, that while imprisoned, the leaders of the Tijuana and Gulf cartels not only continued to oversee operations for their respective organizations but used their shared circumstances to negotiate an alliance with one another.

However, it is significant that perhaps the least expendable individuals are those who possess the technical expertise required for the continued operation of the organization. Within Islamist terrorist groups, these are the bomb makers and financiers, while in DTOs they are the money launderers and logistics specialists who provide supply-chain management for the billions of dollars of drugs flowing between the markets and supply sources. Without the services of these key individuals, the operational effectiveness of these groups would be severely degraded. The capabilities they provide separate a dangerous and sophisticated asymmetric group from one that is motivated but largely ineffectual.

Off the beaten path

Until now, the U.S. response to these nonstate, asymmetric threats has been to leverage all available resources and pursue total victory through the complete destruction of the adversary. In the military sphere, this has often resulted in frustrating and unproductive attempts to bring to battle enemies who remain acutely aware of the futility of direct force-on-force confrontation. In the intelligence space, the dominant approach has been to seek a killing blow by obtaining actionable information supporting the elimination of higher-echelon elements in the adversary’s command structure or network. In the realm of law enforcement, U.S. and partner authorities have tended to adopt a hybrid approach, targeting low-level operators en masse in support of building cases against senior leaders. As evidenced in a December 2006 study released by the Mexican Attorney General’s office, of the 79,000 individuals arrested in Mexico on drug trafficking charges from January 2000 to September 2006, 99.7 percent were street-level drug dealers. These efforts to rapidly secure a decisive victory by either decapitating the enemy or defeating his forces in conventional terms have produced profound misalignments between the U.S. resources brought to bear and the nature of these actors.

Inevitably, such disproportionality and excessively high victory requirements have proven largely ineffective and yielded, at best, mixed results against elusive and resilient adversaries. Moreover, even had these approaches proven more successful in terms of sheer efficacy, the benefits of achieving total victory against threats of this nature call into question the enormous costs that have been incurred. Nor do the relatively modest rewards always justify the risks of future blowback and distorting national security, foreign policy, and budgetary priorities for a generation. Most importantly of all, such exertions have severely constrained the U.S.’ ability to address the more vital challenges to its national security posed by the proliferation of weapons of mass destruction and the rise of potential near-peer competitors. In short, the preoccupation with hunting down snakes in the grass has permitted larger predators to roam unchecked.

Toward the road less traveled

Rather than continuing to muddle through wastefully, the U.S. should consider rebalancing its portfolio of responses to asymmetric threats. A more sustainable strategy would emphasize saddling the enemy with heavy costs and inefficiencies and targeting its critical resources rather than focusing almost entirely on its lower-level members. This indirect approach would necessarily require scaling back short-term victory requirements to more realistic levels. Strategies and policies should be optimized for the long-term management of threats through disruption, shaping the operating environment and more effectively capitalizing on U.S. competitive advantages at lower costs. Recognizing the impracticality of correcting the political, economic and social causes for the rise of many of these asymmetric networks and organizations in the near term, future U.S. efforts should construct a new policy regime to contain the threats they pose by denying them freedom of movement through the asymmetric battlespace and degrading their operational capabilities to acceptable levels.

New old thinking

Such a protracted competition with an adversary who cannot be feasibly overcome in conventional terms is hardly unique in the U.S. national security experience. Despite obvious dissimilarities in the types of adversaries provided by the Soviet Union and these asymmetric actors, the central dynamic of the Cold War involved exactly this type of resource-centric competition and long-term threat management. Appreciating the enduring nature of the bipolar competition and that ultimate advantage rested with the side which more efficiently leveraged its resources, Andrew Marshall, the founder of the Defense Department’s Office of Net Assessment, developed a conceptual framework structured around the notion of cost imposition. Inescapable resource constraints ensured that the U.S. could not afford to insist upon absolute dominance across all areas of competition. Instead, if the U.S. were to prevail, it would need to selectively invest in areas of enduring competitive advantage to favorably shape the terms of the competition and force the Soviets to expend resources unproductively on relatively benign capabilities and in areas of comparative disadvantage. As Marshall explained in his seminal study, “Long-Term Competition with the Soviets: A Framework for Strategic Analysis,” this would “force increased expenditures on the Soviet Union in specific areas, thus preventing their fixed resources from being spent on other things that may be more threatening to the United States.”

In a frequently cited example of a cost-imposing approach, U.S. defense planners had determined that the Soviets, for perhaps psychological or bureaucratic reasons, were disposed toward expending enormous resources on vast air defense networks across their territory. By pursuing a buildup of strategic bombers, the U.S. could, among other objectives, capitalize on this proclivity and provoke the Soviet Union into pouring an even greater proportion of their limited resources into air defenses. Given the relatively less-threatening nature of this capability, these Soviet investments were certainly preferable to more potentially destabilizing capabilities, such as additional conventional military forces in Europe or expanded strategic nuclear stockpiles.

Possessing far fewer operational requirements than the Soviet Union, these asymmetric adversaries nevertheless depend upon ready and discreet access to critical resources. Of these, finance has proven to be an especially important resource for these groups, without which they are effectively paralyzed. As Mustafa Abu-al-Yazid, a senior-level al-Qaida official, attested to in a recent interview, “As for the needs of the Jihad in Afghanistan, the first of them is financial. … There are hundreds wishing to carry out martyrdom-seeking operations, but they can’t find the funds to equip themselves.”

Having identified this vulnerability, the U.S. Treasury Department has successfully employed aggressive financial interdiction efforts to prevent suspected terrorists from safely exploiting the international financial system. While many of the Islamist terrorists have since resorted to alternative forms of finance — namely, hawala and couriers — these practices have resulted in increased operational risks and opportunities for theft and fraud by the individuals involved.

Beyond financial requirements, these entities also require access to materiel and personnel with technical, logistical and financial expertise. Equally important is the permissive environment that allows these groups to function with relative impunity, particularly financial systems that often lack transparency and territorial havens from which to operate. If access to these elements were to be more tightly controlled and the operating environment made less accommodating for safe refuge and free movement, transaction costs for basic functions would rise, and operational capacity and effectiveness would diminish. In this respect, a more cost-effective component of U.S. counter-IED operations in Iraq has been the effort to identify and target the financiers, suppliers and bomb makers within terrorist networks. With the latter becoming an ever-scarcer resource, for instance, less-competent personnel have resorted to constructing cruder versions of IEDs, reducing their effectiveness against U.S. military personnel.

Against the DTOs with whom the U.S. has already waged a decades-long conflict, the application of a cost-imposing, resource-centric approach would allow the U.S. government to more effectively and efficiently employ its assets. The current U.S. counternarcotics strategy, according to the White House Office of National Drug Control Policy, is to “disrup[t] all segments of the illicit drug market, from the fields and clandestine laboratories where drugs are produced, to the streets of our communities.” And, according to the 2008 CRS study, the key components for achieving these objectives have been the interdiction and eradication of drugs. However, neither of these elements is sufficient, given their limited rates of success. For instance, according to the Government Accountability Office, from 2000 to 2005, the interdiction rates for cocaine, heroin and marijuana entering the U.S. from Mexico averaged 13 percent, 5 percent and 30 percent, respectively.

A more effective, cost-imposing strategy against the DTOs would focus on hampering their ability to launder the money earned from the sale of drugs in the U.S. and elsewhere. According to the Drug Enforcement Agency (DEA), a key challenge to higher rates of success has been the lack of sufficient regulations and transparency in the Mexican financial system. While reforming Mexico’s financial regime — a key component of the U.S.-funded Mérida Initiative — should be prioritized, it is a complex pursuit unlikely to succeed in the near term.

As a more immediate solution, the U.S. should partner with Mexico and adopt a strategy against the DTOs similar to that used against banks that facilitated the laundering of North Korea’s money. Under Section 311 of the Patriot Act, the U.S. Treasury Department has labeled the Macau-based Banco Delta Asia (BDA) as a “financial institution of primary money laundering concern.” Without directly freezing any of North Korea’s assets, this public revelation of BDA’s dealings with Pyongyang was sufficient to convince the banks throughout the world to terminate their transactions with BDA, isolating all of North Korea’s money from access to the international financial system and preventing its laundering. The reason behind this successful action, as noted by Treasury’s terrorism finance czar, Stuart Levey, was due to the fact that “even the most reclusive government depends on access to the international financial system.” This same principle certainly would apply to Mexico’s DTOs. Given that these organizations are perhaps even more reliant on the international financial system, the U.S. could leverage its intelligence and law enforcement assets against their midlevel financiers and logistics specialists that have made their operations so successful.

Looking within

However, given the almost knee-jerk inclination of the U.S. to expend inordinate resources in shoring up its highlighted vulnerabilities, either real or perceived, it is perhaps even more susceptible than its adversaries to the employment of cost-imposing strategies. Regardless of whether the attacks of Sept. 11 were intended as components of a broader cost-imposing strategy, they undoubtedly produced cost-imposing effects. For instance, the U.S. government has responded by spending billions of dollars on shoring up aviation sector security. While this was certainly prudent, the investments often came at the expense of other mass transit sectors that possessed equal, if not greater, vulnerabilities.

Perhaps even more worrisome, even the suggestion that a nonstate actor could be attempting to develop a relatively low-cost WMD capability could prompt the U.S. government to spend vastly more in prevention and response preparedness. Indeed, as the Commission on the Prevention of WMD Proliferation and Terrorism noted in its recently published report, the anthrax attacks resulted in more than $6 billion in economic damage. While the victims of the 2001 anthrax letter attacks were believed to have been the perpetrator’s intended targets, a similar attack could be designed simply to provoke the U.S. to expend billions in response.

There is also evidence that Mexican DTOs have been employing cost-imposing strategies against the U.S. as a means of diverting the government’s attention and resources away from its more threatening counternarcotics activities. According to The Associated Press, the powerful Gulf Cartel seems to have become involved in the smuggling of illegal immigrants along the U.S.-Mexican border as part of an effort to “divert U.S. law enforcement attention away from drug routes.”

Redefining victory

As it enters the end of the beginning of the post-9/11 global security environment, the U.S. must learn to temper expectations concerning what can be practically achieved in the struggle against terrorist networks, DTOs and other asymmetric threats. Efforts to combat these types of nonstate enemies will not produce a final surrender on the deck of a U.S. warship in Tokyo Bay. Rather, the U.S. should steel itself for a renewed period of prolonged containment and risk management. While the destruction of enemy networks and organizations and the decapitation of their senior leadership will remain valuable components of any comprehensive strategy, their importance relative to more indirect and targeted alternatives must decline if this struggle is to prove sustainable. Remaining mindful of its own vulnerabilities to cost-imposing strategies, U.S. policy must identify relatively low-cost, low-risk strategies to degrade rather than defeat adversaries’ operational capabilities to levels of acceptable risk.

Joseph E. Lin is a senior consultant with Detica’s Strategy & Innovation Group. Jeffrey Arnett is also a senior consultant at Detica, a national security consultancy that is a wholly owned subsidiary of BAE Systems. The views expressed in this paper are the authors’ own and do not necessarily reflect those of Detica or BAE Systems.