East Africa - KCS Group

KCS Country Risk & Threat AdvisoryEast Africa: Terrorism, Security Threatsand the Risk of Africa’s Newest Oil WarJuly 19, 2012

East Africa: Terrorism, Security Threatsand the Risk of Africa’s Newest Oil WarCountry: East AfricaPopulation: 131,862,000Source: World Bank Report released in 2011East Africa has a Critical risk/threat rating of 45 Critical Incidents that pose significant risk to the life,health, security and safety to travellers.4 Severe Incidents that pose significant dangeror disruption.3 Substantial Incidents that pose localised danger.2 Moderate Incidents that may cause disruption: publicdemonstrations, airport, airline delays, etc.1 Low Informational based notification such as apolitical event, public holiday or public event.* See reference on Grey Area Dynamics - (GAD'S).

East Africa: Terrorism, Security Threats and the Risk of Africa’s Newest Oil WarEast Africa troubled by multiple sources of insecurityThe region of east Africa, including countries such as Somalia, Kenya, Uganda and Ethiopia in theeast, and Egypt, Sudan and South Sudan to the northeast, is an area of the continent experiencing anincreasing set of interconnected security challenges and concern over political stability.This rather large and porous ribbon of the continent, connecting sub-Saharan Africa with the Middle East,the Indian Ocean with the Sahel, remains a crossroads of multiple sources of insecurity, including crossborderterrorism, organised crime, piracy, illicit trafficking, hard hitting famine and problems associatedwith water security.The region includes a diverse group of countries ranging from those perceived to be relatively stable andwealthy (including British Commonwealth member states like Kenya and Uganda) to those most explicitlyassociated with state failure, violence and civil war (Somalia). Other countries in the area, such as Egypt,which is now increasingly split between prolonged military rule and the domination of radical-to-moderateIslamists, will remain prone to political instability for the foreseeable future. This state of affairs will havepossible knock-on effects generating further tension in both the Middle East and Africa proper.Somali Jihadists target Kenyan assets with little remorseA further area of concern is that recent border skirmishes between the militaries of the authoritarian-Islamist regime in Sudan and the newly sovereign former Southern part of the country could spillover into a more general conflict between the two states. That being said, border wars and externalmilitary intervention orchestrated by one country of the region against neighbouring states is hardlya new phenomenon in east Africa. Long standing civil war in Somalia has in the recent past drawn inneighbouring Ethiopia (itself having fought full-scale war with Eretria, once part of Ethiopia), while thethreat of Muslim extremism spilling over from Somalia into Kenya has called for measured vigilance fromNairobi’s security forces.Indeed, as reported in recent KCS security briefings, the conflagration in Somalia has for several yearsposed sizeable questions to Kenya’s national security.Moreover, there has been a trend during this period where Somali militias (particularly the militant Islamicgroup, Al-Shabaab) have been entering Kenya with relative ease in order to carry out hit-and-run raidsagainst security officials, kidnap aid workers or even casually walking into schools to lecture students

East Africa: Terrorism, Security Threats and the Risk of Africa’s Newest Oil Waron the virtues of jihad. Al-Shabaab, which is reportedly linked to Al Qaeda and is said to have largegroups of followers within Kenya itself, has at times called for full-scale orchestrated violence againstthe Kenyan state.This was particularly the case after Kenya handed over a suspected Al-Shabaab member to Ugandain 2010 following the twin suicide bombings in Kampala (Uganda’s capital) where 73 people died andnumerous others were injured. Al-Shabaab is widely believed to have carried out the attacks (allegedlythe first major act of terror by the group outside of Somalia), which targeted crowds of foreign andKenyan football fans who gathered to watch the final of the (football) World Cup in South Africa. Kenyahas continued to deploy thousands of troops on the border since. Border skirmishes have become allthe more frequent, while the security atmosphere has remained tense.Kenya’s patience with Somali Jihadists ran out…At the time of writing the situation appears to be only deteriorating further. A persistent cross-borderterror campaign waged by Al-Shabaab insurgents against multiple Kenyan targets, (predominantlyrefugees, tourists and employees of international aid agencies) drove Nairobi to undertake substantialmilitary intervention in Somalia last October.The fact that Kenyan foreign policy has traditionally shown reluctance towards physical intervention (inneighbouring or otherwise sovereign states) demonstrates just how serious the situation had become forNairobi. Operation ‘Protect the Nation’, which was reported to have included an African Union component,was touted by security analysts as Kenya’s largest military operation to date. Kenya’s military incursioninto Somalia appeared to demonstrate that Nairobi’s patience with the Somali jihadist has all but ranout, given that it was preceded by a crescendo of kidnappings for ransom perpetrated by heavily armedinsurgents infiltrating into Kenya from Somalia.... After a spate of brutal kidnappings which plagued East AfricaIn October 2011, the same month as Kenya went ahead with its military operation in Somalia, at leastfive foreigners were abducted. The victims including employees of Médicin Sans Frontiéres (two Spanishnationals) and two of the Danish Refugee Council’s de-mining unit (an American and a Danish national,rescued by US Navy Seals at the end of January 2012). One of the kidnapped, an elderly French womanwho was already confined to a wheelchair and suffered from grave medical condition, died in captivity.The gang of armed men who abducted the woman from her residence on the Island of Lamu (offshoreKenya) left behind her wheel chair and medications, precipitating her death in tragic circumstances.

East Africa: Terrorism, Security Threats and the Risk of Africa’s Newest Oil WarThe brutal death in captivity sparked fierce condemnation from Kenyan and international authoritiesfor the “total lack of humanity and the cruelty shown by the kidnappers.” The Kenyan navy, stationed inLamu, came in for criticism for the rather slow nature of its response to the incident, allowing the culpritsto flee to Somalia despite the fact that a local private plane had tracked them down before hand.The abduction and death of the French woman (identified as Mrs Dedieu) came only a few weeks afterthe kidnapping of Judith Tebbutt, a British national who was on holiday at the Kiwayu Safari Villageresort (north of Lamu Island) with her husband, David. Local police sources described how six gunmenburst into the couple’s cottage on the beach and Mr Tebbutt has been shot dead after trying to resist thecriminals, who were confirmed to be ransom-seeking Somali pirates rather than Al-Shabaab militants.Mrs Tebbutt was subsequently taken hostage and detained in captivity until March of this year, at whichpoint her son managed to secure her safe release after paying a ransom to the kidnappers through aprivate security company.Less than two weeks following Mrs Dedieu’s abduction, two further foreign nationals working withMédicin Sans Frontiérs (Montserrat Serra Ridao and Blanca Thiebaut) were kidnapped while workingat the Dadaab refugee camp in Kenya. The kidnappings resulted in the medical organisation puttingon hold any non-emergency projects in the Kenya-Somalia border vicinity due to the heightened riskassociated with spiralling kidnappings.Kidnappers willing to try their luck against Western security groupsDespite the armed incursion by the Kenyan military into Somalia last autumn, kidnappings continued intothe winter and show little sign of abating at the time of writing. The aforementioned incident occurringat the Dadaab refugee camp was soon followed by the abduction of American Jessica Buchanan andDane Poul Hagen Thisted, both working with the Danish Refugee Council’s demining unit in GalkayoTown (Somalia). The perpetrators were once again revealed to be Somali pirates.After some three months in captivity, in January of this year, the hostages were rescued in a militaryoperation undertaken by the same US navy seals unit that had killed Osama bin Laden in Pakistan in May2011. A former senior security officer with the Danish de-mining group, identified as Abdil Risaak MoalimDhere, was arrested on charges of conspiring with the kidnappers and taking part in the abduction. Ninekidnappers were reportedly killed in the US navy seals’ operation.

East Africa: Terrorism, Security Threats and the Risk of Africa’s Newest Oil WarDespite the precision-like effectiveness of their operation, however, the US navy seals (and the Kenyanmilitary) appear to be swimming against the rising tide of kidnapping occurring in the region. Forexample, Somalia’s Galkayo Town has become dubbed locally as a ‘kidnapping capital’, particularlyafter fifteen men in two Land Cruisers kidnapped American journalist, Michael S. Moore (in the arearesearching a book on piracy). Local sources suggest that in lawless Somalia, brazen kidnappers arewilling to “try their luck against US navy seals and other forms of foreign security intervention” and aregrowing increasingly violent, reportedly “amputating hostages’ limbs as revenge for the murder of thenine kidnappers following the recent (US seals) rescue operation.”Adding to the already dire situation, Al-Shabaab claimed responsibility for the killing of six people andthe abduction of three others in a refugee camp in the Wajir district (northeast Kenya), in a surpriseattack very early in 2012. At the end of last month (June 29), four Norwegian Refugee Council aidworkers (Norwegian, Canadian, Pakistani and Philippine nationals) were also abducted from the Dadaabcamp. The workers were about to board a vehicle displaying the colours of the UN Refugee Agency (theUNHCR) when gunmen shot the Kenyan driver and abducted the aforementioned victims.Kenya’s military misadventure backfiredWith Al-Shabaab insurgents and Somali pirates evidently running riot in south Somalia, aid agencypersonnel are now exposed to profound security risks and relentless violence as they continue providinghumanitarian and other forms of support for some half million Somali refugees in camps such as Dadaab,which is believed to be one of the largest refugee housing facilities in the world. The Al-Shabaab militia,reportedly loyal to Al-Qaeda since 2007 and actively engaging in guerrilla warfare, is increasinglyestablishing itself at the grass roots level of local population groups and is filling the political vacuum inwake of state failure in Somalia’s south.The situation is reminiscent of the manner in which the Iran-backed terrorist group, Hizbollah, penetratedthe fabric of war-torn Lebanese society during the 1980s, while continuing guerrilla operations against Israelin parallel. Middle East experts often refer to Hizbollah as having become Lebanon’s state within a state.Nairobi’s military incursion into Somalia last autumn (which was itself followed by a similar interventionfrom Ethiopia) is now being seen more of a misadventure than a successful operation. While it aimed tocreate a buffer zone in Kenya’s border space with Somalia, it has instead resulted in unbearable humancost and continuous vindictive attacks targeting foreign nationals providing humanitarian aid to the localpopulation in wake of endless civil war in Somalia and the drought that hit the area hard last year.

East Africa: Terrorism, Security Threats and the Risk of Africa’s Newest Oil WarAfrica’s new oil wars – why should Russia and Ukraine have all the fun?Looking to reinforce its new found sovereignty and shore up an independent external energy policy,South Sudan is currently scoping potential to launch a new oil pipeline project across Kenya, whichwould allow the country to export oil without dependence on existing pipeline infrastructure crossingSudan to the north. This has led to tension between Khartoum and Juba, South Sudan’s capital.The unravelling dispute between North and South has received much international attention sincelast year’s partition, reaching a crescendo this year, when Khartoum was accused of stealing SouthSudanese oil in transit to Red Sea ports (from where it is exported to international markets). In response,Sudan accused the newly independent South of not paying transit fees. The militaries of both countrieswere deployed to border regions last April and the risk of border incidents fuelling a more general chaosloomed on the horizon.While the risk of war does not, at present, appear imminent, South Sudan continues foraging foropportunities to build alternative oil pipeline infrastructure streaming through east Africa to the IndianOcean. Juba also plans to build a further pipeline through Ethiopia to the port in Djibouti – plans whichare clearly not well received in the North. Earlier this month, South Sudanese President, Salva Kiir, heldtalks with his Sudanese counterpart, Omar Al-Bashir, on the side-lines of an African Union Summit inAddis Ababa, Ethiopia, in an attempt to resolve an on-going dispute about how much South Sudanshould pay Sudan in transit fees in order to use Khartoum’s oil exporting pipeline infrastructure.No agreement has yet been reached between the two countries. If the recent experience of Russia’sdramatic shut downs of natural gas supplies to Ukraine is anything to go by, foreign investors planningto participate in Juba’s newfound plans to build oil exporting infrastructure should prepare themselvesfor a bumpy ride. Having fought out three so-called ‘gas wars’ (as they have been dubbed in Russia:gazoviye voyni) between 2006 and 09, why should Moscow and Kiev have all the fun?

East Africa: Terrorism, Security Threats and the Risk of Africa’s Newest Oil WarAPPENDIXGrey Area DynamicsOver the years, KCS has made it their business to find workable solutions to impossible problems. To dothis, KCS has sought to establish clearly the intelligence gap between perception and reality.In today’s market where terrorism, organised crime, cybercrime and government sponsored cyberespionage and war appear to confront us daily, we need reliable tools to identify the risks well in advance.It was for these reasons that KCS created and developed the analysis of risk by Grey Area Dynamics orGAD’s, as they are often referred.GAD’s are all the risks, weakness and threats that will, at one time or another, interfere, disrupt or atworst close down businesses. In the projects and work in which KCS have been involved in all over theworld, it has been evident that the GAD’s identified, can and do kill. This method of risk assessment andmeasurement goes well beyond standard due diligence and is a collective description of factors, whichcan be passive and non-passive, legal and illegal. Because GAD’s are difficult to quantify or assessfrom a purely economic viewpoint, these considerations do not normally feature in most credit ratings,investment and banking reports, which focus only on sovereign risk.The main categories of Grey Area Dynamics usually encountered are:Passive/Legal• Language & Dialects• Local Customs & Traditions• Local Staff – motivation and training• Tribalism and Integration• Cultural & Local sentiment• Regulations, Taxes and Duties• Currency & Capital exposure – payment methods and banking practice• Environmental Hazards• Pressure Groups• Media Relations

East Africa: Terrorism, Security Threats and the Risk of Africa’s Newest Oil WarNon-Passive/Legal• Industrial & Labour Relations• Absence or effectiveness of Legal Safeguards• Government Policy and Nationalisation• Overt and disguised/beneficial ownership• Bureaucracy and Local Government• Public or Media hostilityPassive/Illegal• Bribery & Corruption• Vested Interests and Cronyism• Patronage• Product diversion• Parallel Trading• Hidden Barriers to entryNon-Passive/Illegal• Counterfeit & Fraud• Pilferage• Unfair Market Competition• Product Piracy• Ethics and Corporate Espionage• Organised Crime• Threats to physical assets• Kidnap & Extortion• Religious Extremism• Terrorism• Civil Unrest• Product ContaminationFor a risk assessment to be thorough, it must encompass the potential for a broad array of economic,political and business situations that might affect a business venture. Evaluations limited just to politicalissues or financial factors may be completely misleading.The degree of severity of a risk portfolio will also depend on the origin of the investing entity; for example,European companies often face different risk profiles to American corporations considering the sameinvestment opportunity.

East Africa: Terrorism, Security Threats and the Risk of Africa’s Newest Oil WarGrey Area Dynamics pose a challenge of diagnosis.* The key to avoiding problems before they occur,or solving them after they have begun to take a toll on performance, lies in their early identification andevaluation. Ignoring the impact of GAD’s can be a costly business.* KCS won the European Service Provider of the Year, 1999-2000 at the European Risk Management Awardsmagazine International Risk Management for their work on GAD’s. In 2004, the company won an award for Productof the Year from StrategicRisk.